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A Narrowed Focus Can Concentrate Business Model Innovation Success

Apr 25, 2008
Business model obsolescence is the major unperceived threat to and opportunity for all businesses. Yet most companies are ignoring their business model choices.

Have you ever discovered that you were ignoring an important daily business task? You probably never made that mistake again, but the damage from the cumulative omissions was expensive.

Perhaps you failed to perform preventive maintenance on expensive equipment that had to be prematurely replaced. Or maybe you installed new software, but never helped anyone learn how to use it.

You probably wish that you had known about the issues you ignored before they became costly. It's what you don't know you are missing that can cost you the most.

Right now you are probably ignoring a competitive vulnerability that can literally put you out of business in the next few years. Existing business models in most companies changed only after decades, if ever. Yet when I examine the successful innovations that companies make to profitably improve their business models, I usually note that the change could have been made decades earlier.

What's missing to succeed with business model innovation is imagination and commitment, not opportunity. As a result, acceleration in the frequency and rate of successful business model innovation is just beginning.

Let's consider an example. Few early cases of continuing business model innovation came under CEOs who were not a company founder. The most impressive example came at EMC, with Mr. Michael C. Ruettgers as CEO from 1992 to 2000.

EMC was the fastest growing stock on the New York Stock Exchange during the 1990s.
Revenues grew from $132 million in 1989 to over $7 billion in 2001. The company went from a loss of $16.6 million in 1989 to a profit of $183 million in 2001.

During the 1990s, EMC passed long-time industry leaders IBM and Storage Technology by making mass computer storage faster and easier to use through a series of four business model innovations.

In one of Mr. Ruettgers' first actions as CEO, he focused the company on competing for storage IBM mainframe computers using inexpensive, off-the-shelf hardware. Prior to 1992, EMC had a broad product line and market direction.

In 1995, the company began to provide mass storage that could connect to almost any kind of computer processor, whether an IBM mainframe or someone else's server.

Later, the company began to offer proprietary software that made it easier to run a data center. Since the software only worked on EMC equipment, this innovation pushed along hardware sales.

After that, EMC became a leader in helping customers tie together existing storage in their networks to get higher capacity utilization with high speed access.

In response to the recession of 2001, EMC under its new CEO, Mr. Joseph Tucci, expanded its proprietary software for use with other vendors' storage hardware, yet another business model innovation.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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