The Xconomy San Diego Forum on the Human Impact of Innovation offered a window into how information technology and science, marching hand-in-hand, will shape healthcare. “IBM’s Watson is not the only breakthrough game in healthcare,” was the best summary of the afternoon. Today’s unpredictable markets demand that as you maximize performance from your current business model, you must in parallel be designing and developing new business models to disrupt the current cash generators. Otherwise, start-ups will turn your company into a dinosaur. In doing this leadership work, consider four key trends highlighted in the conference. Each one alone portends major changes for a number of players in the industry and the combined effect of which will surely reinvent the entire sector. 1) Advances in “micro” medicine Healthcare technology is increasingly leading to a better understanding of what’s happening at a genetic level. For…
Be prepared for transformative change as the Next Revolution in Information Technology spreads
Mark McDonald, a year-after-year favorite WTN Fusion speaker, created a compelling case for Information Technology’s next revolution at the recent Fusion 2017 conference. Mainframe computers, the first innovation, made Information Technology (IT) a specialty that enabled organizations to scale their operations. Client Servers, the next innovation, and the software they deployed allowed processes to be dramatically improved and automated – think ERP systems, on-line purchasing, and Human Resource systems. Next came mobile computing and the digital transformation of businesses that greatly enhanced customer experience. All of these stages were ones of mechanization, with hardware and software replacing previously manual activities. The next wave of IT-related change brings widespread adoption of Artificial Intelligence (AI), transforming IT’s focus from managing processes and experiences to managing outcomes. Large database tools, cloud computing, machine learning, interpreting text, and affordable storage and computational power have collectively moved AI…
The Returns and Risks to Niche Business Models
Niche businesses are terrific until they are not. If you run a business with a narrow target market or far more-focused offering than your competitors, you are in a niche business. Just look around the Madison, Wisconsin area: Placon focuses on heat-treated plastic (thermoformed) packaging – not cardboard, glass, injection-molded plastic, or other types of packaging. All Placon investments advance excelling at thermoforming packaging; none are diverted. First Business Bank serves businesses and their owners, not businesses and consumers. “They know business” is a terrific brand promise. American Girl sells to pre-teen girls and their doting moms, not boys. You get the picture. Because they are more narrowly targeted than broader businesses, niche businesses can tailor their offerings, investments, and operating systems to deliver differentiated customer value—allowing them to build a very solid customer base. There is a reason Duluth Trading does not…
Macy’s slow demise
P&G leader Arthur Jones once said, “All organizations are perfectly designed to get the results they get!” This truism should be tattooed on every leader’s chest so that one glimpse in the morning mirror reminds them of the CEO’s responsibility. If they don’t like their organizational results, they must change the underlying design that created them. After closing 40 stores last year, Macy’s recently announced it plans to shut down another 100 this year. Its CEO blamed a change in the retail environment, taking no responsibility himself for Macy’s poor showing. Hmm. A CEO that increased Macy’s borrowings to buy back its stock, as the corporation did last year, has a lot of explaining to do. Frankly, I am mad at Macy’s. The company pursued an acquisition strategy that rolled up iconic regional department stores to leverage advertising, purchasing power, and back…
KOHL’S: Will Another One Bite the Dust?
Kohl’s Corporation, headquartered in Menomonee Falls, Wisconsin, started with a unique business model: just the soft goods. It offered consumers a comfortable buying experience at lower-than-department store prices. Some people, especially Midwesterners, swore by the brand. My sister-in-law— born, raised, still living in Milwaukee, and likely never to leave — visits Kohl’s regularly for good deals and an easy shopping experience. As it grew, Kohl’s extended its geographic reach to about 1,200 stores, creating a publicly traded stock that made for a good story until it wasn’t. Along the way, the company added more design-driven merchandise, deploying its design center located in the heart of NYC. Kohl’s became omnichannel, as all good retailers must. (Read this report on the retail industry.) Kohl’s. Macy’s. JC Penny. Is there a difference? How can you win in an environment of too much retail for a…
Apple’s winning business model keeps winning
“Apple is finally getting serious about pushing into our living rooms,” according to New York Times reporters Kate Benner and Brian X. Chen. Apple’s already in our bedroom, bathroom, subway ride, vacations and, if we’re not diligent, meals with family. Why not the living room? What else is left? Apple might not be in everyone’s living room, but it’s already in mine. It’s a box that sits next to my cable box that transforms my TV screen into something equivalent to my iPad screen, full of apps such as Public Radio podcasts, movies, TV shows, the HBO channel, etc. (Amazon and Roku are competitors.) Because Netflix streaming has very few of our favored old movies, my husband and I opted for Apple TV as our streaming solution. I will also use Apple for my music once I take the time to download my…
Lessons on scaling a business
You’ve started your business and survived. Now, what? How do you move from struggling to established to growing consistently and profitably? The answer is scaling, a concept very different from lean thinking. The latter pulls out costs that do not add value. Scaling allows you to reduce the costs of processes that do add value thereby sustaining competitiveness and enhancing profitability. Here’s one man’s story, that of Barry Fleck, CEO of Patterson Precast Concrete Supplies with whom I recently caught up. Fleck joined Patterson in 1982 when it was largely a manufacturers’ representative organization for manufacturers serving the precast-prestressed concrete industry. This industry designs builds and erects huge Lego-like structures for commercial buildings and concrete sidings that mimic real stone. Years back, I worked with 40 CEOs in this industry, Fleck included. Fleck acquired the company in 2004 and has since increased its…
Retaining brand relevancy through business model evolution
McDonald’s new CEO, Steve Easterbrook, accepted a huge problem as his to solve. The former darling of the fast food industry is losing customers. First quarter revenues fell 11 percent. And unlike IBM, which uses share buybacks to maintain earnings per share (EPS) growth in the face of declining revenue, McDonald’s EPS plunged over 25%. Meanwhile, McDonald’s ingredient costs, wages, and healthcare expenses are rising, thus making a quick turn-around challenging. As worrisome, franchise owners are rightfully upset. So what happened? McDonald’s failed to stay relevant to consumers, forcing the behemoth into catch-up mode. But being late to the party extracts a price. Former customers who had ruled the chain out as it fell behind might consider McDonald’s as a meal option again. But winning new customers’ will require more than closing gaps. McDonald’s is curbing antibiotic use in chickens, for example. It’s…
A winning membership business model
The woman wore brown leather hot pants, a beige silk blouse, dangly earrings and over-the-knee black heeled boots. Thankfully, she was thin. Her partner, also in his late 20s, wore grungy jeans and an expensive leather jacket whose collar hit his rock-star-length locks. Next to them was an elderly Hispanic grandmother trying to keep tabs on three grade-schoolers, most likely children of her working daughter or son. An elderly blond women, her face the work of a terrific plastic surgeon, stood comfortably in very high-heeled shoes. Her Channel sunglasses matched the color of her Fendi handbag. Added to the mix was a teenage male covered in tattoos, wearing black flannel Turkish pants and a sleeveless matching top, despite the 72-degree weather. Each shopper’s cart was brimming, all with very different mixes of merchandise and groceries. Welcome to Costco where you feel you are…
Does the breadth of your offering create or steal customer value?
I just spent 10 minutes thinking unkind things about Eddie Bauer. I even shouted an anguished swear word, piercing the silence of my otherwise quiet home. My husband Nick had an overnight guest – our toddler grandson – while I was away and had forgotten to fold up the Eddie Bauer portable crib. Trying to be serious in my home office with a baby crib in my eye’s sight was not working for me, so I decided to take on Nick’s assigned chore and put the crib away. The task should be straightforward I thought. (It’s not IKEA furniture after all with one page of instruction containing no words.) It seemed like I should have been able to unlock the crib’s sides by squeezing plastic handles to collapse the unit, and then put the far-more-compact unit into its zippered case. But as I…