Do sports teams get better by practicing all the time, or by only practicing when they think they have been losing? Everyone who has played on a winning team knows that regular practice is very critical for improving the group's performance. Working on improving business models is no exception. The idea is to be constantly reexamining, improving upon, and replacing your business models. As you do, be sure to also constantly reexamine the process you are using for this innovation. Most organizations gain by varying the process at least in terms of the questions that are being asked in order to stimulate improved ideas, rather than further development of old ideas down a overly worn track. After you have begun continually developing new business models, you need to establish measurements of your organization's effectiveness in business model innovation and implementation compared to key competitors and challenges. How are we doing? Many companies answer based on current profits. That financial performance tends to be a function of the business environment and past actions. Answering the question of how you you are performing in business innovation compared to competitors in gaining future competitive advantage is very difficult. The difficulty is similar to answering questions about what will be the most successful new products of five years from now. But the question is critical for creating the ultimate competitive advantage through continuing business strategy innovation to improve performance. In such a highly conceptual area, organizations often lose their way. What is the right direction for one time is often the worst for another time. That is what happened to Polaroid when it measured business model innovation in terms of technology rather than by a customer result. Examining which measurements to use can help aim you in the right direction. Linear Technology has benefited by trying to continually make power supplies of its customers products work longer and better. At some point, however, improving the power supply on portable electronic devices will no longer be the best use of Linear Technology's attention in developing new analog semiconductors. The company could shift instead to establishing a measure of the value it is adding through solving that problem that could be compared to the value of solving other important problems. Then, as other problems rose to challenge power supply management as its primary focus, Linear Technology would see the need to adjust its business model to reflect these other areas. Copyright 2008 Donald W. Mitchell, All Rights Reserved
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