Read for you: “Re-Inventing Business” – can your business model still cut it?

by Proximus Bizz teamBe inspired11/04/2016

Read for you: “Re-Inventing Business” – can your business model still cut it?

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The business environment for companies is changing ever faster: competition is now truly global and the customer is more empowered than ever. That’s why smart companies regularly review their business model. In “Re-Inventing Business”, Professor Henk Volberda explains how to do just that.

This is how companies tackle change

 “Re-inventing business” is based on large-scale research by Volberda and his colleagues with hundreds of managers in small and middle-sized companies, and on a dozen or so in-depth case studies for companies such as TomTom and Roche.
The research shows that companies typically handle innovation in one of three ways, when it comes to their business model:

  1. Fixation or status quo (so: doing nothing)
  2. Replication (adapting and finetuning their business model)
  3. Radical change

About a third of the companies research does little or nothing to keep their business model up to date. Others adapt their model to fit new or changing circumstances. Only a minority of companies is truly into radical change and a complete company makeover.

The best results, research shows, are for companies who adopt a double strategy: they adapt their existing strategy and, at the same time, are actively looking out for new models. For example, an existing retailer who also develops an online shop. 

Four signs of an ageing business model

Volberda identified four signs that should alert managers that it’s time to adapt their business model. Those four signs are not financial, but rather:

  1. Competing products entering the market,
  2. Bigger turnover in staff,
  3. Slower growth,
  4. The realisation that innovation is something that other companies do. At this point in time, a change in business model should already be ongoing, argues Volberda.
The best advice? Careful innovation!

Completely changing a business model is not always the best strategy, Volberda warns, because it calls for determination and patience, and because it often has significant financial implications. Investments are seldomly recovered short term, and sometimes even: never. And a radical change isn’t always necessary. In the case of Nestlé, for instance, they kept Nespresso as an autonomous division within the group for nearly 20 years to prevent the brand from being crowded out by existing business models in the company.

Volberda concludes that smaller companies should regularly check their business models to ensure it’s still going strong and they are still doing the right things. But radical or continuous change has its dangers. The financial and organisatorial implications are often simply too big to digest.

BIO

Prof. Dr. Henk Volberda (°1964) is professor of Strategic Management and Business Policy at the Rotterdam School of Management, Erasmus University. Previously, he was also associated with Wharton Business School and Duke University, a.o. 

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