Reinventing your business for digital

reinvention signIt is often said that you need to reinvent your business for digital. But what does that actually mean and why is it necessary? Reinventing your business means taking a step back and looking at everything your company does and how it does it; from its business model, products and services through to its culture, leadership, skills, processes and systems.

But the need for an organisation to review and redefine its business model is not new. All markets eventually mature or become saturated; competitors launch alternatives to existing products and services, and revenues level off or decline as a result. To survive over the long-term a business has always needed to reinvent or renew what it does. And it needs to do this proactively – when markets are at their peak – instead of waiting until revenues and profits start to decline. Corporate history is full of examples of established and previously successful organisations that have either left it too late to reinvent what they do, or simply clung to an out-of-date business model and refused to change.

So, whilst the need to reinvent your organisation is not new, it is even more relevant in the digital era. Digital markets move quickly, they are more dynamic than traditional markets and they can be disrupted more easily. New (technology-enabled) business models can be developed and launched far more quickly than has previously been possible. And they can be scaled-up to meet a surge demand in a matter of days or even hours. The brand, scale and resources of an established company do not necessarily provide the protection they once used to when a disruptive new competitor or business model appears on the scene.

And the technologies that are driving the digital revolution are enabling new business models that were impossible to conceive let alone implement in the pre-digital era. The platform-based business models developed by Facebook, Uber and AirBnB are only possible because of technologies such as cloud, mobile and analytics. Netflix reinvented itself from a business with a physical product to one that provided an online service. Its new model relies on many technologies that did not exist 10 years ago.

Reinventing your business model has never been a one-off activity. But in the digital age it is something that organisations have to do more frequently; whereas business models used to last 10-20 years or more, they now have a life of 5-10 years.

But reinventing an organisation is not easy; inventing a new business model is hard enough but trying to redesign a company that already has revenue streams, products and services, assets, capabilities, skills, processes, systems and people is far more difficult. It is hard not to be constrained by what already exists in the organisation and there is of course the constant distraction of managing the day-to-day business. Creating the time and mental space to step back and challenge your business model can be very difficult.

This is why start-ups have a clear advantage when it comes to business model innovation: they are not constrained by the need to protect existing revenue streams and they do not have an existing business to manage. They are free to focus on the new model, try new things and be flexible about the direction their business takes. It is no coincidence therefore that many of the recent examples of markets being disrupted involve a start-up.

And you also need the right people. Most executives and managers in established organisations are unlikely to have the skills and experience required to reinvent a business. Many of them will have spent their entire careers within stable organisations and have progressed within those companies as a result of their ability to operate effectively within an existing business model, and to manage and control people and processes that produce a consistent output with little variation.

Some large organisations are addressing the need to reinvent by creating labs, incubators and other programmes that give them access to ideas and solutions created by start-ups. For example, Coca Cola has a mentoring programme through which it provides technology start-ups with advice and guidance on how to market their businesses to investors and customers. Coca Cola also introduces the start-ups to its partners and customers, and in return it gets exclusive access to the start-ups’ solutions for the seven-month period that they are in its mentoring programme.

But not every organisation can provide the level of support to start-ups that large businesses such as Coca Cola can offer. The majority of organisations do not have the budget to create a dedicated facility for use by start-ups. And neither can they provide funding on a speculative basis. And while working with start-ups may provide an idea for a new business model, the real challenge – that of transforming the rest of organisation to deliver this new model – remains.

Designing and implementing new business models is rapidly becoming a core skill for all organisations. That means businesses need to recruit and/or develop their own people with the skills, experience, and perhaps most importantly, mind set to challenge the status quo and generate new ideas.

It also means giving these people the freedom, space and support to be creative, and not constraining them within the organisation’s existing policies, processes and ways of working. In addition the company’s leadership team will need to resist the temptation to overly control or influence the creative process and they need be open to new models even if they may impact an existing revenue stream. Boards will also need to be comfortable trying out new ideas to see if they work and to accept that some will fail. And, once a new model has been proven, they need to be able to quickly deploy it across the entire organisation to maximise the return.

Organisations have always needed to proactively evolve their business models to stay relevant. But digital makes this more of a priority and new technologies have opened up whole new opportunities for business model innovation. To survive and succeed in the digital age an organisation has to develop the capabilities required to reinvent itself on a regular basis and to quickly implement new business models.

If your organisation wants to develop a vision and strategy for its digital transformation, or reinvent its business model for digital then please contact me or visit my website, axin.co.uk.

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