Be Ready for Much Tougher New Business Models

The current pace of business model innovation is new. Prior to the 20th century, business models often remained unchanged for centuries.

In the first part of the 20th century, business models usually lasted for longer than a decade. In the 1990s, we suddenly saw a few dozen pioneering companies successfully innovate new business models every two or three years under the same CEO.

In the near future, we can expect to see business model innovation become continuous as more than one company in an industry becomes adept at this critical activity. As a result, many skills that used to be very important like continuously improving existing processes and reengineering processes will become less valuable because frequent business model change will permanently eliminate most existing processes.

This acceleration of shifts presents an important challenge for companies of all sizes, in all industries, and in all countries. Being outstanding at what is important today will no longer be enough to prosper. Business model innovation followed by rapid implementation must be added to your company's strengths.

Here's an example that shows how these generations of business model innovations impact companies. After World War II, companies made a business out of providing economic data.

Most people who needed these data bought hard-bound books that were consulted by hand when information was needed. Next, the formats were redesigned to make them easier to use, and paperbacks with supplements arrived.

Then, you could get the same information faster through time-sharing services where you paid by the hour. The next step was to make these data compatible with customer computer models so that electronic updating was automatic.

Next, to get customers for value-added services, the computer data providers offered the data for free. When the Web came along, the data became more extensive and were coupled with free software to allow you to answer any question you had. To that was added the opinions of many leading experts about the data.

The next business model will probably apply the data to improve your business for free. Obviously, there has to be some economic benefit for the service provider.

Increasingly, that benefit is further and further removed from the original reason the product was sought. This trend will undoubtedly continue because service providers can improve what they do for you in every area as they learn more about you.

These changes raise a question: Will your company still be operating in its current form in seven years? The odds are against it.

Chances are that your industry will experience three significant, business model improvements in that time. These business model improvements have the potential to help you when you make them first or best soon thereafter, and to hurt you when others do.

As a consequence, your company will either have to become a leader in developing these improved business models, create fast improvements in these models after they occur, almost instantly emulate new ones, be harmed by the success of those who use them or be acquired by someone whose business model is stronger.

The choice is yours. What do you choose?

Copyright 2008 Donald W. Mitchell, All Rights Reserved