Business Model Innovation: How to Embed it in Your Organization

Blog_43.pngIf associations are to break out of their current market positions of eroding relevance, they must learn to think differently. Leaders must transition their organizations from incremental thinking that cannot disengage from mental habits, entrenched assumptions and the status quo, to strategic thinking that goes beyond symptoms and existing categories to re-invent and create new categories.  In our research, for example, we found that most association leaders and professionals have low aspirations for relevance and are unable to re-imagine their associations in different roles and value propositions. Instead, they settle for goals like increased attendance and participation. This is because they look at their associations through the lens of their existing products and definitions—the “inside-out” lens. This is a serious limitation to leading for the future.

 

Thinking within categories severely limits your ability to identify opportunities and solutions that do not fit within them and may look nothing like what you thought of as a “program” or “benefit.”  Innovative thinking that reinvents categories and develops new business models rather than new products, starts with the ability to look at your assets with fresh eyes, from the customer’s perspective–from the outside-in–rather than in terms of how they are currently deployed in specific programs, benefits and procedures.

In his book, Re-Organize for Resiliency, Harvard Professor Ranjay Gulati cites Best Buy as an example of a customer-centric company that built a new architecture from the outside-in as a strategy for increasing its competitiveness.  As a result it survived recession and thrived when its competitors fell by the wayside.

Best Buy did not look for ways to modify its own products and operations to survive recession. Instead it looked to its markets and customer to uncover solutions, investing in understanding how customers thought, defined value and behaved.  Their focus was on uncovering roots causes rather than remedying symptoms.  As a result they were able to reach conclusions that they would never have arrived at by extrapolating from their existing product lines and customary paths to solutions.  They realized as early as 2000, for example, that the nature of the consumer electronic marketplace—increased competition, margin erosion, shortened product life cycles, maturing market etc.—had resulted in buying patterns that were becoming increasingly transactional.  They believed that providing value to customers through solutions rather than product-based transactions would give them a competitive advantage.  As a result, they re-conceptualized their business around customers transforming both the company and the customer experience. This shift in focus put them on a sustainable trajectory for continuous learning about and with customers that drove new product development and value delivery. For example, by realizing that customers wanted them to provide them one-stop shopping solutions for all their computer needs, rather than only sell them a computer, they added the Geek Squad service. Through this service, Best Buy has expanded the buying experience from transaction to on-going relationship, helping customers maintain and repair the computers they purchase. By refocusing itself around customers rather than products, Best Buy grew rather than decline as a result of the recession.  

Their success , like the success of other market leaders today, was not the result of a single bright idea, technology or strategy. It came about by adopting an open, strategic and entrepreneurial mode of thinking that develops through action and engagement with the market rather than through conventional, bureaucratic models of formal planning and committee-driven product development; and it assessed and quickly applied knowledge to results that looked nothing like their traditional product lines. 

There is a great deal of talk about new membership and business models among association professionals but not real understanding about what it is and what it entails.

This is how Wikipedia defines business model innovation:

The Business Model Innovation (BMI) refers to the creation, or reinvention, of a business itself. Whereas innovation is more typically seen in the form of a new product or service offering, a business model innovation results in an entirely different type of company that competes not only on the value proposition of its offerings, but aligns its profit formula, resources and processes to enhance that value proposition, capture new market segments and alienate competitors.

Associations, for the most part, lack capabilities for creating businesses around customer-driven value propositions and reinventing the nature and terms of the very business they are in. Until they are able to question and re-invent, as needed, the basic DNA of their architecture, they will be playing at the margin and remain stuck at the status quo.  Innovating at the margins is when associations make the common mistake of thinking of business model innovation as importing a new structure or new pricing and financial model. Ad hoc plug-ins of new “models” fail and do not result in innovation, new market positioning and increased value. Strategy guru Gary Hamel defines true innovation as constant and pervasive. He believes that achieving innovation continuously “lies outside the performance envelope of today’s bureaucracy-infused management practices.” It will require “major changes in mind and heart,” new values and culture.

For those contemplating new membership, business and organizational models and your next big idea for the future, the se references will be invaluable:

What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation

The Wall Street Journal recently ranked Gary Hamel as the world’s most influential business thinker, and Fortune magazine has called him “the world’s leading thinker, and Fortune magazine has called him “the world’s leading expert on business strategy.” This the most recent book by Gary Hamel one of the foremost strategists of our day, about what it takes to compete today and how to reinvent outdated management systems and build new organizations. A highly influential and fascinating book that is a must read for leaders

Forbes

Steve Denning, What’s Your Mental Model Of Innovation? Discusses Gary Hamel’s new book and the concept of mental models for business model innovation

Creating Value through Business Model Innovation

This article explains what business model innovation is and how it works in practice. It explores the benefits of business model innovation as alternative to the usual product and process innovation and the reasons it has become a new trend. It provides criteria for determining whether this scale of innovation is right for you and walks you through models, options and processes for executing business model innovation.

The first step in business model innovation is to enable your association to think in terms of root causes rather than symptoms; outside existing categories and assumptions and from the perspective of customers rather than the association.


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