How to Handle Having Too Many Successful Business Model Innovations to Implement
By :
Donald MitchellCategoryBusinessPopularity
Date Published :
2008-06-06 10:03:50
Number Times Read :
6
Congratulations! That's the ideal problem to have. In interviewing dozens of companies that have regularly improved their business models, the authors found no one with this problem though.
If you do your home work well and are good at testing innovations, there is no reason why you should not have more successful innovations to implement than the time and resources to pursue them . . . particularly if your organization is a new or smaller one.
Interviews with companies that implemented large numbers of innovations revealed a common practice that may help you. The firms usually set a limit on any innovation they implement that the new method must be put in place within six months without affecting the availability of implementing any other innovation (whether in business models, technology, or new products/services).
In practice, this approach meant that the roll-out of the innovation was cut back to putting in place less than what was learned in the successful test. In subsequent six-month increments, improvements on the initially implemented innovation were provided until the whole value-enhancing innovation was finally available to customers.
CEOs often reported that they could get 70-90 percent of the increased sales and profit benefits from the innovation by providing only 20-60 percent of the total package of customer or end user benefits. Obviously, this is a judgment call based on what the testing team assesses will encourage the best responses. You can go back and interview customers to find out what parts of the tested change were significantly adding value, and which parts were merely nice-to-have.
Another approach can entail putting the whole innovation in place, but limiting it to a subset of customers. If you have a global company, this might mean starting at different times on different continents or countries. If you have a local company, this might mean selectively expanding the benefit to a few customers as the first step.
A better idea is to examine what you perceive to be the limitation to fast expansion, and to see if it has to be one. For public companies, providing steady earnings' growth can be such a perceived, but not real, limit. Innovations are seldom so successful that you recover all of your expenses in the first year.
Instead, the expenses are usually heavily loaded into the first year, and the benefits show up geometrically in the second and subsequent years. Yet, there are special circumstances where investors will happily watch their profits drop temporarily in search of larger gains soon to follow down the road. Find out how current and potential investors would react before assuming a lack of support.
On the people side, more and more companies are outsourcing project management for all kinds of one-time activities. Many of the companies that provide these services are flexible about the method and timing of when they charge for their services. As a result, you may have more flexibility than you think about when the costs will affect your financial results.
Also, your implementation plan may be gold-plated for what you need. Check with your suppliers and partners about what they think of your plans. Be honest in sharing your concerns about limits, and ask them to help you find alternatives. Often, they will be willing to pick up some of the burden in exchange for getting more of your business in the future. If you were planning to tilt in their favor anyway, this help may not cost you very much.
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