3 6 0 ° Business Model Review & Securing of Future

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WE CAN’T GO ON LIKE THIS. EVERYTHING MUST CHANGE. BUT HOW?
About setting up distinctive new business models and their successful implementation

by Christian Bachmann, Managing Partner, CreValon AG, Basel

 

Omnia mutantur. Nihil interit.
Everything changes. Nothing disappears.

Ovid, Metamorphoses.

 

IN VOLATILE TIMES OF CHANGE like these, a serious question moves up the agenda of executives and board members: the question of the future viability of their company.

  • Who are our core customers in the coming years? What core needs will drive them?

  • What role can and do we want to play in this? With which business model? Which competencies and priorities?

  • How do we have to redesign our previous way of working, our organization and culture?

  • What does it take to master our «quantum leap into the future», with distinction, from our current state?

The best corporate leaders have the courage, the ambition, and the personal ability to fundamentally question the current business model. 360°, in the jargon of this article. In volatile times of upheaval, this triggers the necessary revolutionary changes and points the way forward.

Complex markets and dynamics require well-thought-out answers. These cannot be summarized under one keyword. Robotization, internationalization, digitization... We agree: Digitization initiatives, for example, are necessary and innovative. But not really distinctive in the competitive landscape. Especially when it digitizes what you are already doing. On the edge of previous operating models.

 

The best business leaders, on the other hand, put everything to the test. Even themselves, by the way, the current management team. No stale continuation of success stories, no cosiness with self-satisfied tacticians. Constructively, but with the burning desire and expectation - in the service of tomorrow's customers - to actively engage in 360° discussion, in the here and now. With reference to the concrete challenges and design elements of the future, e.g.:

  • Value shifts across supply chains, customer offerings and markets

  • Megatrends and the resulting need for solutions

  • Modification, transition, or re-evaluation of customer needs

  • Redesign of the relevant ecosystems, their participants, conditions of access and functioning

  • The uniqueness of the value proposition that will be in demand in the future, in contrast to today's

  • Faculty of using proprietary, defendable competitive advantages

  • Ground-breaking innovations and new enablers for entire markets and industries

  • New technological possibilities, standards, and convergencies

  • Fundamental requirements for energy and eco-balance, for compliance and proof of performance

  • Guidelines and regulations, resulting in opportunities and barriers.

In all the jumble of actors, data, assumptions, and scenarios, it is key to set the cornerstones, to position oneself in them and to locate one's own entrepreneurial place there, with well-founded confidence:

  • We believe in that because […]

  • This is what we will exactly stand for: […]

  • We are appreciated for this: […]

  • This is the way we want to get there: […]

So, it's about nothing less than the veritable establishment of a new business model. In this way, the company secures the key to the binding favor of tomorrow's customers. The new business model shows how defensible competitive advantages and high-performance returns can still be achieved in the future. Possibly also along with its own fundamental repositioning in the structure of markets, value 

chains, and needs. With the targeted expansion of new core competencies required for this.

Your own active part in the future ecosystem can be fundamentally different from today:

  • What level of vertical integration will we have in the future, with which products and services?

  • Strengthened by which new partnerships and synergies?

  • With which paradigm on risk and quality?

  • Delimited based on which exclusion criteria and preferences?

  • Strong through which unique distinction, through which selective access and channels, that link up with Talents, Partners, Customers, and Markets?

  • Positioned with which selling proposition will allow us to gain solid customer favor - not necessarily exclusively on our own, or under our own control?
     

Sustainable business models must be easy and plausible to convey. It is quite complex, however, to create the conditions for this and to bring a solid, functioning new interaction of all actors into being. What the previous considerations already show about the procedure, applies even to a greater extent to the requirements for the management team of tomorrow. This requires the right calibers, skills and working methods. The strategic decision for the future business model alone is not enough. Strategy excellence lies in its skillful implementation. Onboarding of the right management team, and the selection of the right path is an important first milestone.

In the following, we outline 5 guidelines that we have found to be critical to success for the implementation of a strikingly new, future-proof business model. At first glance, these may seem intuitive and obvious. Nevertheless, practical experience shows that insufficient attention and clarity is directed right for this purpose, in many cases. This can then lead to considerable frictional losses during implementation.

1 New convergence and backing through collaboration.


A must for the successful start into the new business model: closely networked, integrative working methods. This improves mutual understanding, strengthens trust, and inspires synergies. This not only applies at the operational level but above all to the executives. In this context, diva airs, dividing lines or political games are toxic patterns that should be avoided at all costs. The customer example in the following framework article shows how the integration of executives can be vitalized in practice, using unconventional measures in a future-oriented manner.

  • Will our customers buy our future products and services because of their new functionality?

  • Or because it represents an efficient solution to one of their difficult or costly challenges?

  • Because it addresses new or - compared to our previous program-related needs?

  • Conquer the market via new channels, in new combinations?

  • Address additional benefits with the use of new technologies or applications?

  • Which decisions and delivery scope do we, therefore, keep tight in our self-determined domain?

  • What do we share with partners? From what do we transfer the lead to selected suppliers?

  • What are we eliminating entirely from our value proposition?

  • Which variants and scenarios should we expect?

  • What is the opportunity cost of our flexibility? What do we cover these about?

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An unconventional case study.

 

A successful Retailer wanted to dissolve encrusted structures that had become isolated from one another and clumsy over the course of time. The aim was to strengthen cooperation, realize efficiency potential, and enable significant scalability of core operations. All board members were therefore given a dual role. With immediate effect, each of them also assumed commercial responsibility for one of the sales regions – in addition to their own board department. They were therefore still committed to the functional excellence of their board area - marketing, procurement, branch network development, IT, legal, etc. At the same time, however, they were all in the same boat as the commercial regional managers. And not only did the effects of their own board area shine there, but also those of her other board colleagues. With the result that each board area moved much closer to the core business: to the real customer benefit generated. To feasibility and overarching implications in the interaction of all areas of responsibility and sales. A new culture soon moved in, in which problems were less delegated and instead simply solved together. The implementation of the new strategic business model was only possible through collaborative approaches of all networked areas: the responsible performance targets in the sales regions, and - transversely - the support of the functional board divisions,  region by region. With the previous silo mentality and isolation, the newly set goals would have been definitely out of reach. Yet with tangible consequences for those responsible.

2 No perspective without a clear benefit.


Only clarity about the benefit enables meaningful, sustainable mobilization of those who are supposed to generate it. Decisive for the successful implementation of the new business model is a shared understanding of its actual advantages by both, employees and business partners: of the rationale that leads us to believe that the future value proposition will allow us to achieve profitable growth and attractive market share. This requires consistent answers to a series of questions, such as:

  • Will our customers buy our future products and services because of their new functionality?

  • Or because it represents an efficient solution to one of their difficult or costly challenges?

  • Because it addresses new or - compared to our previous program-related needs?

  • Conquer the market via new channels, in new combinations?

  • Address additional benefits with the use of new technologies or applications?

  • Which decisions and delivery scope do we, therefore, keep tight in our self-determined domain?

  • What do we share with partners? From what do we transfer the lead to selected suppliers?

  • What are we eliminating entirely from our value proposition?

  • Which variants and scenarios should we expect?

  • What is the opportunity cost of our flexibility? What do we cover these about?

  • How will we position ourselves successfully and with foresight in the new business model? Upgrade ourselves to be able to deliver this at all?

  • Do we also have valid fallback options for possible turmoils or paradigm shifts?

3 First the model, then the result.


Radically new results are best achieved with an intermediate step: building a working new performance model. With the acid test of the model itself. In our experience, the best strategic repositioning doesn't immediately jump to the bottom line. Beforehand, they deal intensively with how the future products and services should be developed. The first thing to do is to design the new business or operating model of the future. Not already about concrete prototypes or releases of the fundamentally innovated product or service package. Model before result.

The implementation of the «Project Future» begins with testing target-oriented paths, measured against the guidelines of the future success model. Precision landings with detailed delivery items are not required at this point. But the demonstration of the actual functionality and delivery capability in this new interaction mode. Critical to success is therefore the solid organizational ability of the teams to define and implement customer solutions from situational requirements. Custom-fit for these very needs. An answer to the question: does it even work? can we do that at all? It is delivered while using a set of standards, tools and competencies. Packaged in delivery and service models that distinguish the company from the competition.

The 360° approach does not reduce itself to free-floating collaboration, in erratic interplay. What is meant by 360° is the best possible release of all the skills of our company in a concrete new future context. Together with partners and in ecosystems that should strengthen our radiance and value. In this stage, the new business model and its impact on our thoughts and actions become increasingly concrete. For example, the following questions are addressed:

  • What do the products, services and solutions of our value proposition stand for? What does that mean for our cooperation in the new business model?

  • How do we measure its quality and level of performance?

  • What are the decisive drivers for quality, costs, availability, and ability to deliver? How do we control this in the new business model?

  • With which assumptions do we evaluate our unique selling proposition?

  • Where are we in the lead? Where do we use upstream services from partners or downstream structures or services from others? How do we manage the most important interfaces, processes, data, and systems?

  • How do we structure our grip on the entire relevant ecosystem? Even those aspects of performance and delivery that are eventually out of our direct control?

4 Disruption shaping managers.


Breaking into fundamentally new business models requires managers with creative DNA for targeted mobilization and organizational development. Disruption begins in the mind, in the attitude. This is not about activism and curt slogans. Also, not necessarily about one’s previously managed team size, achieved diplomas, line position, or proof of success from the previous business model. It's about how teams are most effectively mobilized to participate in the radically new business model. Blessing them with convergence and backing through the new collaboration mode. Helping them make the benefit perspective their own. Understanding of how the new business model works, and how their role fits in it.

In consequence, new skills and personalities must be staffed at most management boards. Such management teams that are pursuing a drastic change in direction must distinguish themselves in a special way:

  • Proper understanding of one's own collaborative role in the leadership team

  • Inherent willingness to learn and the ability to role-model this masterfully

  • Skilful acceptance of far-reaching ambivalence

  • Clarity and constructive conflict attitude for the sake of basic values, goals, roles

  • A firm view of achieving perfection and uniqueness in meeting future customer needs

  • Highest quality standards: in thinking, speaking, feeling, and acting

  • Orientation today towards a fundamentally different, still diffuse, but tomorrow required performance record

  • Designing of new evaluation models as an explicit link between colleagues and teams, not as an exclusion

  • Value-creating detours, second attempts for clear understanding and for anchoring

  • Proceedings according to a well-founded goal, not loose slogans, and experiments

  • Redesigning of partnerships and dealings with suppliers, with win-win perspectives as its guiding star

  • Consistency and assertiveness for the company’s core requisites, access rights, procedures, methods, and value chain

  • Mirroring of the new business model on the relevant industries, sales markets, countries, and technologies.

5 Phasing-in: There is no second chance for a first impression.


It may be true that the profits of our current business model may soon dry up. Yet they are essential for survival, on the way to the new one. Working on our future must not spoil our ongoing bread-and-butter business.

At this point, typically, all kinds of fundamental questions are debated in the company:

  • Can «run» and «develop» be possibly done by one and the same team?

  • Or does it need separate units for this, and with which transfer points?

  • How many and which resources do we use when developing and implementing the new business model?

  • Can we at the same time also keep up the performance of our ongoing business?

  • In what mode and under what conditions do we phase in the new business model?

Whichever approach the company decides to take, these four course-setting aspects must be reconciled, and are mutually dependent:

  • Integrative way of working

  • Benefit perspective

  • Functional proof of the new business or operating model, and

  • Disruption-skilled leaders.

In practice, quick transitional periods have proven their worth, in which the old and the new world coexist. Dedicated resources for support and stabilization must be provided for this. Also, a closely guided transition to the «new world» as the guiding model, and completion of the «old world».

The benefits case must also be consistently substantiated before the new business model goes live. It includes measurement routines, standards, and hurdle rates. Only then the intrinsic value of our future strategy can be proved.

Of course, the smooth operation of the new business model must also be tested beforehand: everyone knows their roles, processes are clear and do work, interfaces included. The system support and data world are designed to be high-performing, and priorities are clarified. Necessary buffers and contingencies are provided to control deviations and risks. Monitoring and fallback plans are solidly tested.

The management has empowered itself and the teams to bring this «new world» to life: they are enabled do this, they want this, all the necessary talent is on board and the governance is functional for the new business model put on.

What is decisive for the performance of the new business model is its valued recognition by customers. Customers need to be prepared for this. We have to be solidly prepared for it. Quick fixes at the last moment can have fatal consequences, as prioritizing of desirable milestones over real limitations has. Despite all the bold willingness to innovate, the down-to-earth attitude should be likewise maintained. Massively disruptive business models are introduced through massive campaigns. As usual, there is no second chance for a first impression.

31.05.2022, © CreValon AG, All rights reserved – christian.bachmann@crevalon.com