Meet the Expert
Partner, Business Model Innovations, LLC
- 33 years as CEO, consultant, in R&D management
- CEO of three startup technology companies
- Partner and Global Innovation Practice Leader at McKinsey & Company
- Closed seven financings, $250M in licensing deals, $500M in M&A deals and created three large joint ventures with Fortune 500 corporate partners.
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Business Model Innovation
Partner, Business Model Innovations, LLC
- Technology and business model life cycles are becoming shorter.
- Not only are technology and business models changing rapidly but the average life cycle of any given technology or business model is getting shorter as well. For example:
- Netflix outflanked competitors such as Blockbuster by offering the same product via an innovative delivery method. Then Netflix moved in to streaming content and is now becoming a content provider in its own right.
- Vinyl records dominated the music marketplace for 40 years, before they were replaced by CDs, but the reign of the CD ended after a much shorter period, having been replaced by MP3s. Now, MP3s are being challenged by streamed, customized apps like Pandora, Spotify and GrooveShark.
- Companies are slowly accepting that business model innovation, and not just traditional new product development, is a viable opportunity for growing a core business.
- Most companies still conceive of innovation in terms of traditional product development or they think of acquiring companies that have already developed promising technologies.
Slowly, however, incumbents are realizing that smaller upstarts have the ability to outflank them through business model innovation, even with modest financial resources. The idea is taking hold that new technology is not the only means of innovating and staying ahead of the marketplace. The same or similar technology may be leveraged in a number of different ways to create powerful business model innovations.
- When new technologies appear there is increasing uncertainty as to which will emerge as a new standard.
- Remember Betamax vs. VHS? Those who do will recall a battle over which technology standard would prevail.
As technology life cycles become shorter, the battle for creating the new standard becomes more acute. However, if outflanked by business model innovation, the cumulative investment in that standard will generate little revenue.
- Big winners and big losers are becoming more and more common.
- In a world where technology and business model life cycles are become shorter and where even small players can disrupt whole industries, expect more big winners and more big losers.
For example, the established leaders in the pesticide business could not have anticipated the challenge of Monsanto. Monsanto was in the herbicide business and not the insecticide business. Fortifying a plant's immune system was not only a new technology, it was a new business model. Monsanto has leveraged its success to become one of the most talked-about companies of the 21st century, while the pesticide companies were blind-sided and out of business in a very few years.
The rapidity with which big winners are becoming big losers is increasing.
- Business models are evolving far more rapidly than the regulatory frameworks, which are usually established to prevent last year's crisis.
- Regulatory bodies are naturally reactive. Calls for regulation often follow a crisis in which some constituency calls on the government to step in.
With the rapid pace of technological change, regulatory bodies tasked with ensuring product safety have difficulty keeping pace. Their regulations are intended for last year's crisis, and not for technologies and product applications that they cannot possibly foresee. This means that business model and technology innovation is always several steps ahead of the regulatory bodies.
Business Model Innovation: Key Trends