Time for disruptive innovation?

I was asked lately, when it is time for a disruptive innovation or a business model innovation? When should a company try to steer away from sustaining innovations toward a blue ocean of less competition.

Well, I would like to open this question to all of you. Please, tell me when you think it is time for change. Do we need a crisis or can we do it deliberately?

Please use the comment function for the discussion.

Diversity and Mental Models

Diversity in teams helps to overcome mental models that frame and impedes fresh thinking. The solving of a case study gives an interesting example who diversity helps.

I gave recently a lecture on business model innovation for managers of a large German corporation. During the session they had to prepare a case study on Bosch Power Tools.

Bosch Power Tools faced at the beginning of the Millennium a crisis. China entered the market, trade and no-brands gained markets share, Bosch’s share decreased, the market stagnated and the business was loss making. So the division faced the choice of ‘fix it, sell it, or close it‘. Continue reading Diversity and Mental Models

How large companies react to the crisis

The current crisis could be a great start to rethink your business, but large companies do the opposite. Besides the usual and essential task to save cash they push their business units into more controlling and reporting of the existing business.

Today, I had a long chat with an executive from a business unit in a large company. We talked about the reaction of the headquarters to the financial crisis which is hitting his business hard. He is very busy in the moment to cut unnecessary costs and to save cash wherever possible. At the same time he is spending a lot of time with customers to find new projects. Besides pressure on the margin customers have canceled orders but his position is still better than of his competitors due to his excellent customer relation.

At the same time he feels that his business model is too similar to the strategies of his competitors. Continue reading How large companies react to the crisis

What is the purpose of your business?

Beginning of the week, I had a long discussion with Dr. oec. Susan Müller and  Prof. Dr. Thierry Volery, two researchers at the University of St. Gallen. They want to figure out how high the excess return is earned by business model innovators. They want to know which kind of business innovation like value innovation or architectural innovation leads to what kind of über return or excess return.

Very interesting question in particular since most researchers including myself are still using case studies to make our point.

What made the discussion even more interesting was that we discussed what a business model is. There are several technical definitions like mine but for us more interesting was why the term became so prominent in the last years. With the term business model the word business returned to prominence in the conversation on strategy. Continue reading What is the purpose of your business?

Amazon’s Kindle and new business models

Amazon recently introduced the new Kindle 2, a wireless reading device for books or an e-reader. While the German publishing industry at best sees the Kindle as a new distribution channel [update: link no longer available] for its current content and some even complain about the high cost of ebooks the Americans start thinking about what new things you can do with the Kindle.

That is a typical reaction for a technology that might change the existing business model, in this case the book publishing industry. The traditional way of thinking is how does the new technology perform compared to the existing technology. And from that point of view the Kindle is not as good as the paper book. Continue reading Amazon’s Kindle and new business models

Business Model Innovation and the Red Queen Effect

The blog is about business model innovation or innovation in strategy, some name it strategic innovation. The point is very simple. Most companies try to differentiate themselves from their competitors by better products or improved processes leading to a better cost structure. The problem is that their competitors do the same thing at the same time so after a firework of new products the situation is pretty much the same. You moved forward but your competitor also moved forward. If you do not move you fall behind.

This effect is also called the Red Queen effect. The term is taken from the Red Queen’s race in Lewis Carroll’s Through the Looking-Glass. The Red Queen said, “It takes all the running you can do, to keep in the same place.” That is the typical situation most companies find themselves in. You move, you move but you gain no competitive advantage. Continue reading Business Model Innovation and the Red Queen Effect