How to use innovative thinking to create or revise a business model that drives growth and profits
This is one of the volumes in a series of anthologies of articles that first appeared in Harvard Business Review. Having read all of them when they were published individually, I can personally attest to the high quality of their authors’ (or co-authors’) insights as well as the eloquence with which they are expressed. This collection has two substantial value-added benefits that should also be noted: If all of the articles were purchased separately as reprints, the total cost would be at least $60-75; also, they are now conveniently bound in a single volume for a fraction of that cost.
Those who aspire to rebuild the business model for their organization will find the material in this HBR book invaluable. Authors of the ten articles focus on one or more components of a process by which to determine the CEO’s role during the process by which a business model is reinvented, how to complete that process before it’s too late, what specifically that process should consist of, why business models matter, trends that must not be ignored when “shaking up” a business, how to create new market space, how to build breakthrough businesses with an established organization, how to determine the next core business, how and when to “catch the wave” of disruptive technologies, and finally, how to map innovation strategies.
I now provide two brief excerpts that are representative of the high quality of all ten articles:
In “Why Business Models Matter” (Pages 67-85), Joan Magretta asserts that powerful business models must pass two tests: The Narrative Test tells a logical story (characters, sequence of developments, conflicts, and resolution) when offering something that satisfies an unmet need and will be promoted in innovative ways; The Numbers Test ensures that the story told ties assumptions about customers, markets, and competition to sound economics. “Failing either test can prove fatal,” Magretta notes. “Models passing both tests clarify how your business’s various elements fit together.”
In “Finding Your Next Core Business” (Pages 173-200), Chris Zook offers these guidelines for deciding when it’s time to redefine a core business.
1. Assess the Need for Change: “Periodically ask whether or not the current strategy is exhausted. It may be if the company targets a shrinking profit pool and/or a new rival has entered the field unburdened by your cost structure and/or your growth formula isn’t sustainable.
2. Recognize the Makings of a Core: “If your business is losing potency, remake your core gradually.
3. Harness Your Hidden Assets: “Hidden assets can spur fresh growth from your new core IF they provide clear, measurable differentiation from competitors; tangle added value for customers; and a robust profit pool.” Hidden assets can be undervalued businesses, untapped customer insights (e.g. their previously unidentified unmet needs), and underexploited capabilities.
Other articles in this anthology I especially enjoyed include “Creating New Market Space” (W. Chan Kim and René Mauborgne, co-authors of Blue Ocean Strategy), “Disruptive Technologies: Catching the Wave” (Joseph L. Bower and Clayton M. Christensen), and “Mapping Your Innovation Strategies” (Scott D. Anthony, Matt Eyring, and Lib Gibson).
Understanding Michael Porter: The Essential Guide to Competition and Strategy
Harvard Business Review Press (2011)
Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers
Alexander Osterwalder and Yves Pigneur
John Wiley & Sons (2011)
What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation