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Lack of Focus Among Large Company CEOs Will Drive Accelerating Business Model Innovation

May 18, 2008
How many times have you been told about a new "unstoppable" trend, only to see the trend totally disappear soon thereafter? The dot-com boom was based in part on a surplus of venture capital and business models that assumed that advertising could be sold to new dot-com start-ups. That approach obviously wasn't going to last. In assessing how important business model innovation is for you, you should look to see how deep and well-established the roots are of this new activity.

Lack of Awareness of the Opportunity

I have interviewed lots of CEOs and senior executives from companies of all sizes. Almost never does an executive tell me that business model innovation is one of the company's largest opportunities, except in our perennial CEO stock-price leader group.

What does this mean? Are these executives right . . . or just vulnerable?

A number of years ago, I tested this perception by interviewing executives in companies that were being negatively affected by companies that had successfully changed their business models. In almost every case, the executives pursuing the old business models talked disparagingly about the new business model.

The executives usually could see no advantages to the innovation. This was particularly true in they were in a high technology business. Such executives wanted to win with "best" technology solution rather than the best business model solution.

There's an old saying that to a carpenter, the world looks like a nail. Almost no senior executives today won their rank through business model innovation. As a result, they look for opportunities like the ones that worked well in the past in their own careers . . . until they discover what business model innovation can do for them.

The counterweight to this trend is, of course, the venture capital community. Above all, these investors are fascinated by new business models. As a result, a lot of business model innovation comes from start-ups. Unfortunately, many of these ideas are not very good and fail in the marketplace.

That tends to give business model innovation a bad name. For example, the bust of the dot-com companies in 2000-2002 will be viewed by many as meaning that new business models are a bad idea.

Instead, the lesson should be that venture capitalists and investment bankers need to get a lot better at checking out new business models before funding them with venture capital and IPOs.

Unfortunately, too often the business-model-innovating new company never thinks about how others may obsolete its model. As a result, many start-ups are more rigid about their business models than established companies are.

Interestingly, the bulk of the repetitive business model innovating companies were originally funded with venture capital. If venture capitalists make the next logical leap and begin check out ventures for their potential and ability to continually improve business models, a torrent of small tigers will soon be unleashed staffed with executives who used to work for business model innovating companies.

Will you be ready?
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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