Competition is a drag on earnings. Darn, but welcome to life. The key to success comes from reducing or eliminating competition legally. Some companies eliminate competition by being the very lowest cost to meet requirements to be considered by a customer group. High-end bed linen and mattresses are pursuing this strategy with a direct-to-consumer business model, displacing high-end brands sold through retail stores. An approach beyond competing on price is to offer something no one else can do as well. You may be more expensive, but you are worth it. Think of a plastic surgeon with the best reputation in a city. Build loyalty with the customer base you target and then get them to buy more things from you. Independent bookstores have taken this approach in light of Amazon, with Barnes and Noble stuck in an unattractive middle, especially as Amazon opens…
Black Friday Retail Blues
The big day – post Thanksgiving Black Friday shopping – starts a holiday shopping season that makes or breaks many retailers’ year. Black is likely a better description of most retail leaders’ moods, as their market environment has only gotten harder year after year. From the days of Sears being the only store or catalog in town, we have moved to a world where the consumer is king. Expectations are merciless, prices are transparent, and consumers benefit from intense competition on-line and in-stores. Success will only come to brick-and-mortar retailers who have a clear view of their target customer, offer a brand promise that is relevant, high value and hard for others to copy, and create in-store experiences that make it worthwhile to go to the store. JC Penney (JCP) is a best-case example of what not to do. It added appliances—and subsequently…
Online Marketplace Business Models
Marketplaces as physical gathering sites have a long and rich tradition in all economies. There, buyers and sellers meet to exchange goods for money. Public Markets are especially noteworthy. Madison’s Farmers Market, The Milwaukee Public Market, Boston’s Haymarket Square, Seattle’s Pike Place Market, and The Brooklyn Flee Market come immediately to mind as current examples. So do the local markets I’ve encountered biking through small European towns. The Internet, however, has changed our notion of a marketplace. Markets used to require a physical space and, in the case of Public Markets, were created to advance a public good. Walking around Madison’s Capitol Square on Farmers Market Saturdays reinforced the Capitol as the physical heart of Madison and advanced the slow food, local small farming and buy local movements in Madison. Today, online markets pull us away from our communities in the same what…
Business model excellence from Badger Coach Bo Ryan
A sports fan, I am not. So why was this otherwise buttoned up intellectual screaming (and at times uncharacteristically swearing) while watching the Badger’s win Saturday’s battle against Arizona? Because I love Bo Ryan’s leadership and my spirit is awakened by what his system represents. In a culture that increasingly celebrates individual excellence, Bo’s business model is centered on teamwork as its competitive advantage – unselfish, disciplined, focused and motivated by a deeper purpose. Bo wants to make an enduring, positive difference in the lives of young men. I challenge anyone to identify a corporate or political leader as gifted. Ryan, interviewed minutes after his team’s victory, had just achieved a lifelong goal he shared with his recently deceased dad – mentor, role model, and source of hope after heart-breaking NCAA losses. Yet the first thing Bo does is to thank his team…
Five practices to sail successfully in the unrelenting waves of disruption
The pace and magnitude of disruptive forces crashing against the seawalls of our businesses and personal lives only grow stronger. The power of 1975’s fastest super computer is now captured in a $400 Apple iPhone. A $100 genome will be feasible in the next decade. These and other examples are cited in a 2013 McKinsey&Company report, “Disruptive Technologies: Advances that will transform life, business and the global economy.” Here’s the global consultancy’s list of the most disruptive technologies (out of 100 considered): Mobile Internet Automation of knowledge work The Internet of Things Cloud technology Advanced robotics Autonomous and near-autonomous vehicles Next-generation genomics Energy storage 3D printing Advanced materials Advanced oil and gas exploration and recovery Renewable energy Why did these technologies make the cut? They are advancing rapidly and have broad reach – touching many industries and leading to new products, equipment and…
Business model success demands strategic leadership, societal consciousness and civil cultures
I wonder if the editors of the January-February, 2013 issue of Harvard Business Review connected the dots among their articles. As a reader I did. “The 100 Best CEOs in the World” is the cover story for an issue that also includes the article “Strategic Leadership: The Essential Skills.” Too many CEOs and their C-Suite teams invest too much of their time in operational management. They fail in the role only they can perform: designing a winning portfolio of business models and the hard-to-copy company capabilities, processes, culture, and ecosystems that they leverage. Strategic leadership is all about this work. I am not saying that operational work is unimportant. Indeed, it is vital. No customer will pay your business for inefficiency or quality issues, and competitors will likely use them to seize advantage. But the leadership team’s role is to establish the measurements,…
What JC Penney didn’t understand about the role of price in business models
Wizard of Oz protagonist Dorothy captures the shock of her post-tornado world in the memorable line, “Toto, I’ve a feeling we’re not in Kansas anymore.” Ex-Apple retail wizard Ron Johnson, now CEO of JC Penney (JCP), must be saying “I’m not in Cupertino, California [Apple’s headquarters] anymore” as he discovers the challenges of transforming his new employer’s retail stores. The first head has already been chopped: merchandising and marketing leader Michael Francis left JCP after less than a year on the job. We’ll now see if Johnson, who created the “shabby chic” value promise at Target and the stellar shopping and learning experience at Apple, has the chops to fix a troubled company in a category with excess supply. I thought Johnson had a great idea – reinvent the department store, which had offered wonderful shopping experiences when local high-end stores dominated the…
Blueprint Health inaugural class of start-ups reinforce business model lessons
I had the pleasure of being one of about 400 people attending Blueprint Health’s “Demonstration Day.” Angel, venture capital and corporate investors from across the US listened to investment pitches from the nine start-up companies that Blueprint Health selected (out of 300 applicants) for its inaugural accelerator class. I am an advisor to NEEDL, one of the nine. Blueprint Health’s out-of-the box success deserves a shout-out. It serves as the hub of healthcare technology innovation in NYC by bringing together a collaborative community of entrepreneurs who build businesses and learn from each other in a co-work space that offers a broad array of educational classes. Companies that want accelerated help can apply for a 3-month program of support (in exchange for an equity share) from Blueprint’s network of healthcare entrepreneurs, investors and industry mentors, the largest in the country according to Blueprint. These…
How do customers experience your business models?
My only experience with AT&T is as a customer. But even as an outsider I can tell that the company has huge organizational silos (albeit with a workforce that finally understands customer-friendliness). Every transaction for each of my multiple AT&T services appears to require interfacing with a completely separate information system and likely business unit that often has no record of what’s happening in the other accounts. For examples: I get three bills. When I ask for one bill I am told, “All your services have different cycles and that would be a mess.” After moving to a new residence, I returned the U-verse device (which enables TV, wireless internet and the land line connection) from my former address to the AT&T wireless store, where I was told, “We don’t accept U-verse returns here. You have to go to the UPS store.” In…
A winning crusade to slash healthcare costs
Want to build a more competitive business model by lowering labor costs? “Why then are you leaving management of healthcare benefit costs to outside health benefits administrators?” John Torinus, Jr. might ask. Torinus, chairman of Wisconsin-based Serigraph Inc. and former business editor at the Milwaukee Journal Sentinel, views health insurers as “middlemen with a busted business model.” With “a foot in both the provider and payer camps,” health insurers fail to extract best value from provider care networks that insurers need to win business. Torinus understands the value of proactive management, which may explain why the printing, in mold labeling and custom industrial graphics company he purchased in 1987 has grown more than three-fold to 1000 employees, with plants in the US, Mexico, India and China. By reinventing his company’s approach to healthcare, he’s avoided the dramatic increases in employer and employee benefit…