How long can your current business model survive?

Screen Shot 2014-02-11 at 14.16.03The life expectancy of the average company is becoming shorter by the year. Last year there were a record number of bankruptcies. This rapid changing of the guard is due to the fact that technology is evolving at an ever faster rate. Recent events have made it obvious that past success is no guarantee of future success. I’ve tried to come up with a story to motivate companies to re-invent themselves. Here’s a summary of some of the key points, or you can click through to a longer version.

Have the courage to let go
Large companies are often afraid to lose what they have. As a result, they do everything in their power to protect their current source of revenue and their modus operandi. Logical but not without risk. The music industry fought long and hard to safeguard its old organizational structure and the same is true of the travel industry. Most struggles to save old models have failed. History teaches that all major revolutions are won by the people and it’s always the masses that are responsible for far-reaching changes. This also applies to the business world and the adoption of new business models. Regardless of a company’s success, you should always assume that today’s model may change tomorrow. A company’s survival depends on its willingness to let go. Darwinism is back and with a vengeance: the new Darwinism is much more fast-paced and often crops up unexpectedly.

A pre-mortem
Stanford professor Baba Shiv advises companies to perform a ‘pre-mortem’. Analysts are great at analyzing what went wrong after the fact. The real soccer experts preach their gospel after the game, if you catch my drift. They always seem to know what the right tactic would have been once the game is over. Obviously it’s much harder to make the right choices beforehand. Hindsight is always 20/20.

A pre-mortem should be carried out while your company is still on top of its game. Trust me, performing a pre-mortem just before you die is no laughing matter. A pre-mortem of a healthy company can provide a number of key insights. Try to identify those factors that might cause the downfall of your current business model. Try to assess which factors represent a genuine risk and determine which offer the greatest opportunities. Once you’ve identified the possible causes of death, you can start to anticipate.

Attack yourself
At a certain point a company must be prepared to ‘attack itself’. Building a new business model often implies attacking the existing one. A company like IBM has re-invented itself time and again. IBM made its fortune selling computers in spite of the fact that they didn’t believe in the computer market at first (remember the famous quote by an IBM board member who thought there was ‘a world market for maybe five computers’). After their hardware success story, their transformation into a services company came at the right time. The computer business was sold to the Chinese and IBM bought a number of service companies to facilitate their transition. Meanwhile IBM keeps evolving and they are now an important player in the data business. The purchase of, amongst others, SPSS and the development of the Watson super data computer in particular should be seen in this light. IBM has always remained a strong and successful brand.

Take micro trends seriously
Keep an eye out for emerging trends. New start-ups with unusual business models can be interesting. Maybe there’s a small group of consumers somewhere that has come up with a novel purchasing process. Maybe the writing is on the wall? Little signs like this could be the first indications of imminent change.

The future will be different
The key message of this article is the fact that ‘past success is no guarantee of future success’. We are living in an age of rapid change. We owe it to our organizations to prepare for the future with every new dawn. I wish you the best of luck on this fascinating journey.

Here’s the full slide show: