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This is part 3 of a multi part article. Read earlier parts here - https://bit.ly/3s2T7PH and https://bit.ly/3dMGvqG
Every organization wants to innovate and the boards are very supportive of innovation efforts. But how good are you at recognizing the smoke that indicates that innovation is now a priority?
An analysis of the great organizations that have failed to survive disruption in their industry, will show that even great organizations can fail to see the danger signals or grab disruption opportunities.
The early warning signs that you should be innovating, is there waiting for you to recognize and can be classified in 3 buckets
Tough to differentiate between products or offer
Offers have become too complex and customers are struggling to use them
Under or overpriced markets
In this part, we look at the situation where the offers have become under or over-priced.
In 2008/09, two industries got disrupted. The taxi service was overpriced, had a reputation for poor quality and service and was fragmented. The hotel industry was dominated by big players and even though quality and service were good, they were overpriced. Both industries never seemed to have enough capacities when they hit peak demand. The need for innovation was visible to everyone.
Unfortunately, the industry itself never took the initiative, two outsiders, Uber in the taxi space and AirBnN in the hotel space, came up with totally different business model, disrupting the industries.
The Indian telecom industry on the other hand, has seen innovations as a consequence of being under-priced. It was clear to all participants that the market will be very large number of users, but at low revenue per user.
Innovations in this space has seen players like Bharti Airtel outsource everything that’s non-core and convert capex to opex. It saw competitors coming together to create an infrastructure company, Indus Towers, that provides all passive telecom assets and create efficiencies. Reliance went on to change the profit model and generate revenue through data rather than just calls. Today, India has some of the highest data speeds, lowest costs and largest customer base for telecom industry, despite the organizations struggling from legacy challenges.
What Uber, AirBnB or Reliance Jio did were create new business models. Business model shift involves creating new value through innovative use of process, structure, network and profit model. The new business model also ends creating better customer engagement models.
The Business model innovation starts by examining the profit model and explore how the model can be changed for the benefit of the customers and the organization. These include opportunities for scaling transactions to significantly higher volumes, creating subscription models, freemium models, bundled or disaggregate pricing, creating marketplace, enabling micro transactions and many more such approach
A second type of innovation is to examine how the network creates value. This include creating alliances, mergers, coopetition with competitors, supply chain integration, complementary partnering, franchising, creating secondary markets etc.
A third type of innovation is to focus on structure; can you create value through the way assets are structure? Key innovation opportunities would include outsourcing non-core activities, asset standardization, creating competency centres, off shoring, organization design etc. Structure innovation becomes critical element of most profit model and network innovation efforts.
The fourth critical type of innovation is process innovation; how does the organization deliver the offering? A business model shift would normally take different process to deliver as compared to delivering just the offer. The organization would have to leverage it’s unique delivery capabilities, process automation, artificial intelligence, strategic design etc.
Are you examining opportunities to create business model shifts?
Do reach out to me for help in building a sustainable innovative organization.
Krishnan Naganathan
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com
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