The Right Business Model: Get Digital to the Core

Over the course of the 20th Century, business models were largely static. It’s only a recent phenomenon that leaders began to question their traditional paths. In fact, just 11 years ago the Harvard Business Review published an article on The Four Principles of Enduring Success – describing how best-of-the-best global corporations separated themselves from the rest of the pack.  Two of the findings continue to resonate: learn from mistakes and diversify across suppliers.  The other two, however, now give pause. They suggest foregoing the exploration of new opportunities and be conservative about change. Definitely not the disruptive, agile, philosophies by which today’s leading organizations operate.

Today’s innovative business models were defined by a new ensemble of best-of-the-best companies. These businesses live by a new set of principles—SMAC (social, mobile, analytics and cloud). With this new recipe for market dominance, digital organizations have experienced super hero growth, increasing revenue by 10-fold in 10 years and achieving market value 3-6 times their assets.  It has set a new standard. Legacy companies simply cannot operate with a legacy business model and hope to succeed in the digital world.

Achieving optimal program monetization necessitates changing the principles by which legacy companies operate. This requires organizations to fundamentally rethink how they conduct business. The name of the game is now flexibility, to align with the fickle digital customer’s expectations for digital services—on demand access to what they want, anytime, anywhere and on any device. The transition often starts with replacing infrastructure for increased service agility and operational efficiency. Though this is a step forward, it is just one piece of the puzzle.  Those that completely re-engineer their business for their customers will remain competitive.  With 32 percent of customers willing to leave a brand they love after just one bad experience, it’s imperative for survival.

But which business model is right for your organization?  In a recent CSG webcast, live polling revealed that for 40 percent of organizations, finding the right business model is one of the biggest issues they are facing.  As vast as the digital economy is, so are the options.  There is no right model, no one size fits all, but there are fundamentals to laying a solid foundation for success:

  • To become a software-driven operation, organizations must move away from slow, bureaucratic structures and align with the principles of lean, agile operations that focus on delivering unsurpassed customer experiences.
  • Legacy organizations must learn to be comfortable exploring and experimenting with innovative models developed not only within their own walls, but across other industries that embrace the evolved customer. They must amass and unite a diverse ecosystem of partners. Having the right partners can make or break the ability to create unique competitive differentiation, augment operations and further increase service speed and agility. They must also embrace and use the power of cloud to its fullest with the ultimate goal of continually adapt to new strategic initiatives.
  • Whichever model is chosen it must be extremely lean, provide uninhibited flexibility and be implemented and respected across the entire organization. Allowing for rapid addition, modification and configuration of new or modified products and services.
  • Compete and deliver products and services. Putting the right structure, strategy and operational processes in place supports increased speed of product and services development and delivery while reducing the cost to serve. Providing a powerful combination that accelerates first mover advantage. A tremendous value-add in an era where borders are dissolving at unprecedented rates and competitors are no longer easily identified or detected.

It’s clear legacy organizations have a lot to tackle when it comes to transitioning to not just a digitally minded organization, but one that fully transforms and embraces a digital business model at every level.  As overwhelming as it may sound, it doesn’t need to be.  Those businesses that engage with managed services to put the right foundational pieces in place, develop a solid framework for transition, adopt a digital culture as well as a digital mentality of continuous learning that encourages experimentation of customer centric experiences will position themselves as a competitor not to be reckoned with in the digital era.

To read more in my series of blogs in The Four Pillars of Digital Excellence, visit the CSG Insights blog.

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