Here are five questions that will help you ensure that you are continually improving your business model in the most profitable ways.
1. Where has your current business model made you the first to offer an important stakeholder benefit?
You will have to look back in time to locate this. In the case of American Woodmark, it was providing fast delivery for customers who bought at home centers. If you are not sure what you were the first to provide, ask your customers why they first selected your company. You should begin to notice patterns of what you did better and differently than others.
2. Are you still the only organization to provide this benefit?
If you made your innovation more than ten years ago, the chances are that someone else has either duplicated or surpassed you in this area. The closer competitors are to matching or surpassing you, the more urgent is your need to make the next business model innovation.
3. How can you build on your initial business model innovation in ways that greatly expand benefits to customers, allow you to provide fundamentally more attractive pricing, and reduce costs?
Although you have looked at these areas in detail in chapters three through ten, you may well find that focusing on where you innovated in the past will stimulate new ideas. This dimension is especially important because your customers in many cases will have retained needs and preferences that favor further innovation in those same areas.
4. If you have not been changing your business model in fundamental ways at least every five years, what has held you back?
Most companies find that they could have made their most successful business model innovations many years before they did. Usually, the reason why this did not occur is that business model innovation was put as a lower priority than expanding the last innovation. That’s usually a major mistake, because the growth associated with the next innovation will normally be much more substantial than is achieved from optimizing the last innovation.
Also, by moving faster, you cut off the opportunity for someone to get there first. If you assume that in the worst case you will either be put out of business by the competitor’s innovation or have to acquire that rapidly growing, profit-margin-expanding company at a high price, you can see how quickly your innovation can leave you way ahead of where you would otherwise be.
5. How can you accelerate the rate of business model innovation you are doing to build on places where you innovated first?
Immediately, you should realize that more focus is needed on this question. Most people realize that they are conducting a small fraction of the experiments that they could be doing. Can you use recognition and financial incentives as part of a solution to shift attention? What else has worked well for your firm in the past to create more attention and innovation?
Copyright 2008 Donald W. Mitchell, All Rights Reserved