When Bill Gates says, “Microsoft is always two years away from failure,” he”™s expressing the competitive reality of the new age. The world is increasingly divided into two kinds of companies: those that can get no further than continuous innovation and those who embrace radical change.
Are you prepared to blow up your old business model and create a new one? An organization evolving slowly is already on its way to extinction. Between 1994 and 1999, the number of mobile phones sold annually exploded from 26 million to 300 million. At the same time, technology shifted from analog to digital.
”¢Â   Motorola, the world leader in the cellular telephone business until 1997, missed the shift to digital wireless by just a year or two.
”¢Â   In those few short years, Nokia, an unknown company headquartered on the edge of the Arctic Circle”¦making snow tires and rubber boots”¦exploited digital wireless and became the new world leader.
Everyone must realize that the 21st century challenge is not to compete for the future, but to create it. As worn-out business models fail, revolutionary businesses are redefining every industry across the globe. Revolutionaries include such firms as eBay, Cisco Systems, Ariba, and Apple.
In the 21st century, change is abrupt. In a single generation the cost of decoding a human gene dropped from millions of dollars to under a hundred bucks and storing a megabyte of data shrunk from hundreds of dollars to essentially nothing.
Millions of small businesses as well as giants such as Compaq, Nike, Novell, Westinghouse, DEC, Kodak, Kmart, and GM are struggling to stay relevant to today’s increasingly demanding customers.
Buying insurance on the Internet is a radically different business model than going to a physical agency. You can instantly compare policies and be sure that you are getting the lowest price. Meanwhile, Fidelity, E*TRADE and Charles Schwab have taken over half of all U.S. household financial assets from banks.
IKEA invented a high-volume business model for selling affordable home furnishings that is quite unlike that of a traditional furniture store. It allows customers to pay low prices for trendy designs and to take the furniture home with them.
Revolutionaries blow up old business models and create new ones. Many believe that innovation is only driven by technology. In many cases that’s true. Yet, think of IKEA, Old Navy, Virgin Atlantic, Starbucks, Southwest Airlines, and many other innovators that are not technology pioneers.
Even revolutionaries like America Online are vulnerable to radical new business models.
”¢Â   For years, AOL UK reigned as the largest Internet access provider in the United Kingdom.
”¢Â   In September 1998, Freeserve launched free Internet access service in Britain and in 15 months, won 1.5 million users.
”¢Â   Its innovation was to take a small percentage of the revenue of each user’s phone connection charges for its profit.
If you went to any large telecommunications company and looked up its strategic plan a few years ago, you wouldn’t find a single reference to Qwest, Verizon, Sprint or Cisco. Each one ate part of the lunch of the then existing Tel-com giants.
Established companies often think that their only competitors are their historic rivals. Freeserve was an offshoot of Britain’s leading electronics retailer and Nokia was in the rubber business. Are you, like Microsoft, always just two years away from failure?
Questions for discussion:
How can we become a radically innovative organization while continuing to make daily incremental improvements to better serve our customers? Â
What great ideas could we uncover from further study of organizations like IKEA, Starbucks, Southwest Airlines, eBay, Ariba and Apple?
Joe Murtagh is The DreamSpeakerâ„¢, an international keynote speaker, meeting facilitator and business trainer. For questions or comments Joe@TheDreamSpeaker.com , www.TheDreamSpeaker.com or call 800-239-0058.
