What has been the most revolutionary change in the automotive industry in the last decade? You might think Tesla, Chevy Volt or Honda’s FCX Clarity. I don’t think so. It’s been the introduction of Zipcar. A completely new business model based on human insights and understanding where the world (and each customer) is going. BMW is latching on to that trend by developing a “DriveNow” sharing system in Munich.
While the iPhone was a major disruption, I would argue the App store is the real disruptor by introducing a new, innovative business model. Apple integrated the hardware with a crowdsourcing model for the apps in such a brilliant way, that it was something materially different from just being a phone, but from how phone manufacturers make their money.
The formula for survival: Innovate your business model
Whether threatened by classic disruption or not, companies have a tough time innovating their business models. In fact, they don’t change them significantly. Companies that do manage to adopt whole new business models do it by creating entirely new business units that have new business models. They don’t do it by taking an existing business unit and turning it on its head. So, I don’t expect Honda (and other automotive companies) to get out of the automobile business. But I expect them to start a new unit that focuses on a highly efficient car-sharing system. (And, in the decades to come, I expect all car companies to shift focus from the car-building business to the people-transporting business.)
By exploring new, disruptive business models entire companies will become more resilient to economic changes by better defining and focus the core business. Business model innovation is so important because it allows enterprises to experiment with something that might work out, then filter it back throughout the whole company. It helps brands to better understand where the world is going and what you as a brand need to do to address a specific customer demand, independent from your company’s existing systems and structure. It requires from a brand to understand and focus on where the customer is going, where the opportunity is, and then build the right business system to support that.
Advanced enterprises will be able to compare how different the new business model is from their current one (particularly in terms of margins, overhead, and success metrics), they can get a clear picture of what they will need to do to grasp the new opportunity. Would it be easy because it dovetails well with their current model, or would it require to marshal different resources and processes? Knowing that, if the world really is going that way, then they can be flexible and respond effectively because they’ve already experimented with and built a business model that will take advantage of that shift.
There are many industries ripe for business model innovation
Let’s start with the obvious one: Media. Newspapers need to redefine their business model, not just putting a silly “The Daily” on an iPad. That’s not a disruption, it’s applying the old business model to the new world of content sharing.
Healthcare – how can we take out real cost and create greater value? Healthcare reform didn’t pay any attention to changing the business model. We need to make better sense of all the health data available to us and increase efficiencies.
Defense – we try to fight WWII over and over again. Enemies have changed. Our response needs to change.
Energy – we need better systems that reward people to save energy, give them options in using energy (Should my house be powered by coal, gas or solar energy – with a different price for each energy form) and energy companies need to explore new revenue drivers to get out of the pure consumption model.
It used to be enough to innovate by increments. Product 2.0.
The time is ripe to innovate through bigger dreams. Business Model 3.0