According to Mark Bertolini, CEO of Aetna; ‘Creating new business models is a leadership challenge. In order to create those new businesses in any organization, I don’t care how old it is, you have to start to look at what is going to be the operating model that’s going to make that new business commercially viable and sustainable for the long run’.
By definition, working on BMI means working under uncertainty. The ideas and thinking that got you to where you are today is not the same thinking that will get to where you need to be tomorrow. Traditional strategy processes built on industrial economic thought are much less relevant in a world of competitive arenas, transient competitive advantage, and eco systems. Firms must be cautious not to conflate current digital initiatives with business transformation. In the fitness industry we are seeing a flood of on demand and live content, move to e commerce platforms to benefit from consumer demand driven by COVID, investment in apps etc, but none of this is BMI. According to Leinwand and Mani (HBR, March 2021):
‘Companies need to step back and fundamentally reconceive how they create value. They need to reimagine their place in the world, rethink how they create value through ecosystems, and transform their organizations to enable new models of value creation. The bottom line is companies need to shape their own future, recognizing that the world has fundamentally shifted, and that they must find their purpose in it. If you can’t answer the questions “Why are we here?” or “What unique value do we add for our customers?” then you are likely at best just staying in the game’.
They go on to say that organizations must:
- Reimagine your place in the world, instead of focusing on digitizing what you already do. Companies that transform for success in the digital age define their reason for being in terms of the bold value they create for their customers (and their customers’ customers), and why. They take advantage of new technology not to copy what everyone else is doing, but to advance their own missions by investing in the differentiating capabilities that allow them to deliver on their purpose. Filling their new place in the world with life often requires them to shed old business models, assets, and beliefs about value creation.
- Create value through ecosystems, rather than trying to do it all alone. Successful companies in the digital age recognize that the way to remain relevant comes from working together with an ecosystem of players in order to deliver the ambitious value propositions that customers want and to quickly innovate and scale up the incredible capabilities that are needed. Operating in this way requires leaders to think about value creation more boldly, question what their organization must truly own, and be prepared to open up to competitors and give up traditional sources of revenue in order to address some of the most fundamental customer needs.
- Re-imagine your organization to enable a new model of value creation, rather than asking people to work in new ways within the confines of the old organizational model. Winners in the digital era break up old power structures so that new ideas and capabilities can be scaled more collaboratively. They put in place outcome-oriented teams tasked with collaborating across the organization and work with their ecosystem partners to deliver the differentiating (and often cross-functional) capabilities they need to win.
In traditional organizations and theory, strategy has been considered the domain of top management and that their job is to strategize and once developed, sell the strategy and get buy in from the rest of the organization. There are problems with this type of approach. Firstly, top management are themselves immersed in the day to day management of the organisation and hence have limited capacity to scan and interpret the market. Secondly, an increasing number of industries are driven by knowledge workers, these highly intelligent and independent workers do not take well to what they perceive as undue top down influence and control. David Maister (ex Harvard Professor), an expert in working with knowledge intensive firms, suggests that organisations take a bottom up approach to strategy meaning that people at all levels have a major say in the strategy process.
There are many concepts and tools that can aid in bringing this new approach to life including lean start up, innovators method, agile, design thinking, bossa nova, the fifth discipline, systems thinking, cybernetics, complexity thinking, scenario planning etc. There are some great tools available now such as those developed by Strategy Tools and Strategyzer. Again, without the right culture and structure, none of these are likely to make much impact.
As Steve Blank points out in his frequently cited article in HBR, often organizations know they need to change but play a game of organizational ‘whack a mole’ in a futile attempt to swat every problem that pops up without understanding the root cause. He calls this innovation theatre. He goes on to say that organizations must build a mind set, culture and process that becomes innovation doctrine. In their article (How Leaders Delude Themselves about Disruption, MIT Sloan Management Review, 2020), Scott Anthony and Michael Putz describe the 4 lies that leaders tell themselves including that their organization is immune (we are safe) and that their people are not up to the task. Cognitive bias affects leaders as much as it does anyone else. Assuming people are not up to the task creates a self-fulfilling prophecy. Leaders, and organizations, need to become much more self aware in order to create strategic clarity.
Critically, organizations need to stop thinking along the lines of everything is knowable and get used to less than concrete concepts that do not fit in with arbitrary yearly budgets, targets, or hurdle rates that have nothing to do with the future sustainability of the business.
Strategy & Competitiveness 