Traditional value chains are in many industries being replaced or complemented with flexible value networks. When companies increasingly are seeking external resources and capabilities, or rely on complementary products and services for their business models to be successful, there will be increased competition for assets and talents. Why should a promising start-up collaborate with you and not your competitor? Why should software programmers develop applications for your platform and not competing platforms? Why should a university or research center develop new knowledge in your field? Why should innovators share their ideas with your company?
Global connectivity of organizations has reduced old barriers and enabled new ways for companies to access external resources and capabilities. I often argue that if a company is creating and capturing value for customers today, the probability that the same company has assets and capabilities valuable to non-customers is incredibly high. You might have very loyal customers, or customers with high switching costs, information on customer behavior and needs, strong brands, partnerships with leading value chain actors, superior processes, unique technologies, patents, trademarks, low cost production, quality programs, etc. all of which could be potential sources of business model innovation.
Philips, one of the largest electronics companies in the world, is not only providing its consumer electronics, healthcare and lighting products, but technology and IP which has the potential to cannibalize on the company’s markets. At the company website, visitors can browse, access and license technologies and other innovation assets, and the company also provides knowhow, training, services and support to realize or support other businesses. Philips is selecting and sharing assets that are potentially valuable for non-customers to the extent that the “side-business” is becoming substantial. Does your organization even know what you have that could be potentially valuable for others?
Isn't this taking focus from the core business?
It is known that companies with a few highly focused core businesses historically have accounted for the majority of sustained growth companies. Spin-offs usually create more focus and value, something private equity companies know, often achieving their greatest success by buying orphan businesses from scattered conglomerates. Also, an undeniable lesson from observed transactions in the past is the higher success rate of acquisitions made for the purpose of expanding scale, than acquisitions to diversify and expand scope.
But what is your core business? Perhaps it’s not what you deliver but how you deliver it that makes people buy? – Perhaps you should deliver something else as well given your superior way of delivering things? – Perhaps it’s not the gadget you sell but the software interface that people like? – Could other gadget manufacturers need your superior software interfaces? – Perhaps the reason someone wants to collaborate with you is not your own qualities, but your existing customer relationships? – Could other companies be interested in getting access to the same customers?
My point here is not to diffuse company activities and focus, but to illustrate hidden value within your existing organization that is often overlooked, and which could be a source for business model innovation. What you choose do with the new insights, with newly identified valuable assets and capabilities, is something completely different. You may choose to do nothing, change your core business model, spin-out new companies, create external business development groups, out-license technology and patents, have visitors on your webpage browse and access your assets to find areas for collaborations, create joint ventures in new business areas, etc. What I ask you to do is to consider available options and make informed decisions.
Business model innovation can take its starting point in external factors such as trends in technology, society, culture, or from responses to actions by suppliers, partners, customers, or competitors. It can begin in the existing business model, starting with “what-if” questions such as: what if we segmented our customers in this way, what if we offered this for free, or what if we delivered our products and services in this way instead? However, as I’ve demonstrated here, business model innovation can also take its starting point in looking at creating value for non-customers, and in this way your firm can uncover hidden value, enter new markets, or simply support and maintain your existing core business.
Anders Sundelin is VP of Business Operations at CIP Professional Services, a development and consultancy firm owned by Chalmers Industriteknik and the University of Gothenburg in Sweden. CIP PS specializes in knowledge- and technology-based business development and in particular intellectual asset and property strategy in development, commercialization and collaboration initiatives. Anders Sundelin, who has consulted for multinational corporations, institutes, SMEs and universities, is a frequent speaker and workshop facilitator in a number of executive educations and corporate training programs on the topics of intellectual asset and property strategy, business model design, business modeling and valuation.