My dad had it easy. The IRA almost blew up his factory, the economy tanked, Globalisation killed most of his competitors (and then customers), the silver market was cornered, there were three day weeks, power cuts and he couldn’t get the employees he needed.
Throughout it all, his business model remained the same. Find customers who needed electrical contacts made out of precious metals, manufacture the product to specification, manage costs so that the business was profitable.
The Golden Age of Business Model Stability
He ran that business from 1980 to 2010. My grandfather ran it the same way from 1960 to 1980. My great grandfather ran it the same way from 1930 to 1960. (I’ve rounded the years a bit). For the whole time, the business model remained the same even as products evolved.
Along the way, they built new factories, invested in Japanese machine tools, adopted ISO 9001 early and suffered just in time. Three generations of my family worked incredibly hard to create a small industrial enterprise.
The business now is long gone. Sold and amalgamated into an FTSE100 company. If it still existed, for all the love and sweat that was put into it, it would be doomed.
The period from 1950 through to 2000 saw remarkable business model stability in many industries. What managers needed to do to succeed was to maximise the effectiveness and efficiency of existing business models. The world changed hugely, but that change helped business models mature. They didn’t need to be replaced because new technology came along.
As part of this golden age of business model stability, most industries condensed into using very few business models. Business model diversity decreased. Milk was sold from floats. Books were sold from bookshops and libraries.
The Business Model Revolution
About 2000 (and I am painting in very broad strokes here) that all changed. We started a new business model revolution.
A business model revolution when you take away all the fancy words means.
If you keep doing what you did before you will die or become a relict
(in Loughborough we have the world’s largest bellmaker. A relict. there’s no money in bells so no one else makes them)
That industrial revolution runs on technology. It runs on creating and using data in very different ways. In just the same way that the electrical and internal combustion revolutions of the early 20th century changed everything, this revolution is killing off all the old companies and creating new ones.
I’m stuck in the middle. I’ve spent a lifetime working with startups that have been at the forefront of creating this new business model revolution. I’ve helped them chop down, break and disrupt old business models and old ways of doing things.
In almost all cases what we have created is a better way of doing things, when it worked. Along the way, there have been a huge number of failures.
Trying to figure out something new is a lot harder than making something better.
Can existing businesses survive?
At the same time, I come back to businesses like my Dad’s. Are they dinosaurs doomed to die? Should they be abandoned and left behind?
And this is where I am unhappy.
In these old businesses, far behind the cutting edge of technology, there are millions of jobs. Hundreds of thousands of families, even more futures that will be bleaker if they don’t survive.
Survival, as they are, is not an option.
Who wants to be a fish in a desert artificially kept alive by flown in Evian showers.
That’s good for no one.
What’s needed instead is a pathway that all the managers, leaders and owners, like my Dad, can take. A bit like the migration in the movie Ice Age. The animals tried to move to a better land away from the approaching glaciers.
Of course, they can
Traditional businesses face two choices faced with the business model revolution.
- Keep doing what they are doing, but better
- Change what they do.
The evidence is that most businesses can’t compete in their core strengths. In huge areas of business, competitors can now offer faster, better and cheaper. Traditional business knowledge has spread – for example, the Toyota Production System – so that it conveys no advantage.
This increasingly limits sales, profits and the ability of companies to survive. Niching down into a small defensible market, bell making, is possible for some. For most, the choice will be when to exit.
But they have to change business models
The alternative is to change.
But how do we do that? There has been so much stability, for so long, that Managers are not agile. Their training wasn’t in agile or creative strategy – but in operational efficiency and effectiveness
When I did my MBA 15 years ago almost every module, at one of the world’s top 10 business schools, focused on efficiency and effectiveness. Managers and leaders have not been trained on how to change companies, on how to conceive new types of companies to move forward.
This is the goal of this blog, and indeed all my thought. How can we build a framework that enables millions of SMEs, smaller businesses, who cannot afford the big consultancies or dedicated strategy teams, to see new futures and then transform their companies to exploit them?
Digital Transformation is a Mirage
A quick aside on digital transformation. Many larger companies talk about digital transformation but in most cases, this seems to be a similar efficiency and effectiveness play to implementing ISO9001 30 years ago, lean 20 years ago and digital marketing 10 years ago. It is a way of making the company ‘better’, not fitter.
Business Models Must Fit the Environment
Everything that I write, is designed to do one thing.
- How can companies make good conscious decisions about what business model(s) will make them fitter?
- How can they change their business models to become fitter?
- How can they use that fitness to become market leaders in their industry?
Because I straddle the fence, much of what I write applies equally to new ventures as to existing ones that want to change. That’s ok. We need both to change the world.
