Strategic Renewal in the Business Model

IStrategic Renewal in the Business Modeln a world where the pace of change has gone hypercritical, today’s most important race is the race for strategic renewal. It is the race to change as fast as the environment is changing around you; the race to invent new sources of profit before the old ones disappear; and the race to reinvent your strategy and your business model before they become obsolete. Most companies tend to postpone this work of strategic renewal based on the old notion that “If it ain’t broke, don’t fix it.” Yet we’re finding out that long-successful business models can now get broken almost overnight. Recent examples would be Kodak, Nokia and RIM.

So what exactly is strategic renewal? It’s the act of dynamically adjusting business models and strategies to the deep changes at work in the external environment. Above all else, this requires innovation. In a 2003 article in Harvard Business Review entitled “The Quest for Resilience”, Gary Hamel wrote, “Strategic renewal is creative reconstruction.” It’s about taking your traditional business model apart and looking for imaginative ways to reconstruct it to create significant new value for your customers and your company. This becomes all the more urgent in our fast-changing times, when customer needs and market conditions swiftly and dramatically change. A good example is Netflix’s rapid shift from DVD rental to streaming, which was covered excellently in an article on this site posted last week by Adam Hartung (And the Winner is – Netflix!).

What every company can and should do – right now! – is organize a serious, high-level strategy forum to start rethinking their business from the customer backward. IBM expressed this best in a fantastic advertising slogan they used a few years ago:

“Stop selling what you have. Start selling what they need!”

The absolute worst thing your company can do is to assume you can just continue to sell the same old product or service to the same old customers in the same old way – and at the same old price. Instead, you need to get busy working out how your customers’ priorities may be changing, and quickly realign your business model to address their new needs.

In my keynote speeches and strategy workshops, I teach companies to unpack their business model into five components:

– who you serve

– what you provide

– how you provide it

– how you make money

– how you differentiate and sustain an advantage

Then I show them how to radically rethink each component using the ‘Four Lenses of Innovation’ – the cutting-edge ideation methodology outlined in my book “Innovation to the Core”. So I get the strategy teams to:

1. Challenge deeply-held orthodoxies about who their customers are, how they interact with them, how they define their products or services, how they configure the value chain, and so on

2. Harness emergent trends and discontinuities to substantially change the way things are done in their industry

3. leverage core competencies and strategic assets in novel ways to generate new growth

4. Understand and address deep customer needs that are currently going unmet

Isn’t it time you subjected your own business model to some ‘creative reconstruction’, aimed at making it better suited to today’s shifting customer needs and new economic realities?

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Rowan GibsonRowan Gibson is widely recognized as one of the world’s leading experts on enterprise innovation. He is co-author of the bestseller Innovation to the Core and a much in-demand public speaker around the globe. On Twitter he is @RowanGibson.

Rowan Gibson




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No Comments

  1. tejasvi on February 7, 2013 at 11:09 am

    I liked the way innovation has been combined with strategy. Though all strategic teams go for analysis on value chain and external environment something as you stated they miss is the rapidly changing needs of customers. Once this is adressed in an innovative way, they hit the sweetspot but revisions must be ensured to maintain that.

    Thanks for the article.

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