The Digital Leap to your new business model
Every industry is built around long-standing beliefs about how to make money. In telecommunications, customer retention and average revenue per user are viewed as fundamental. Success in pharmaceuticals is believed to depend on the time needed to obtain approval from the food and drug regulators. Assets and regulations define returns in oil and gas. In media, hits drive profitability. And so on.
These beliefs are considered inviolable – until someone comes along to violate them, almost always, from outside the industry. But we believe that industry insiders are well positioned to play this game too.
This is how DigitalMindZ will take you through the process:
- What is the dominant business model in your industry?What are the long-held core beliefs about how to create value? For instance, in financial services, scale is regarded as crucial to profitability.
- How do notions about customer needs and interactions, technology, regulation, business economics, and ways of operating underpin the core belief? For instance, financial-services players assume that customers prefer automated, low-cost interfaces requiring scale. Because the IT underpinning financial services has major scale advantages, most of a provider’s cost base is fixed. Furthermore, the appropriate level of risk management is possible only beyond a certain size of business.
3. Can a digital technology turn an underlying belief on its head? Formulate a radical new hypothesis, one that no one wants to believe—at least no one currently in your industry. For instance, what if a financial services provider’s IT could be based almost entirely in the cloud, drastically reducing the minimum economic scale? Examples of companies that have turned an industry belief on its head include the following:
- Palantir: What if advanced analytics could replace part of human intelligence?
- Philips Lighting: What if LED technology puts an end to the lighting industry as a replacement business?
- Amazon Web Services: What if you don’t need to own infrastructure yourself?
4. Does your reset pass a Sanity-test to adjacent industries? Applying a reset that has already proved itself in another industry greatly enhances your prospects of hitting on something that makes business sense. Business model innovations, unlike product and service ones, travel well from industry to industry: Airbnb inspires Uber inspires Peerby. So look again at the resets described in step three above. All of them have broad application across industries.
5. Can you imagine a transition of your company towards a business model based on the reset belief? Typically, once companies arrive at a reset, the new mechanism for creating value suggests itself—a new way to interact with customers, organise your operating model, leverage your resources, or capture income. Companies then need to transition from their existing business model to the new one, and that often requires considerable nerve and sophisticated timing.
6. Can you reset Maker capabilities around your new business model? To turn the new business model into action, various scenarios of governance for delivery need to be evaluated. Given the current state of your organisation and the technologies enabling your new business model, what route is preferred?