Business Model Transformation: 5 Mistakes That Companies Keep Making

Business Model Transformation: 5 Mistakes That Companies Keep Making

Business model transformation has been getting an increasing amount of attention and media coverage in recent months. It isn’t hard to figure out why with companies like Uber, Netflix and Spotify attracting new users each day while earning record profits. As a result, the business world is facing a challenge like we haven’t seen since the industrial revolution. This challenge comes with an important choice: Adapt or be left behind.

Yet change is always hard, and the bigger a company is, the slower it moves. Reactions to the emergence of transformative business models have ranged from outright denial to the kind of political lobbying that can destroy a public image.

Here are 5 mistakes being made by companies around the globe and advice on how you can avoid them:


Mistake #1: Treating transformative business models like threats instead of opportunities.

When new business models gain popularity, traditional business practices tell us to label those models as competition and snuff them out. However, in his recent article Stop Treating Business Model Innovation As Change Management, Saul Kaplan points out that the dogged resistance of the television and transportation industries has done little to slow the increasing popularity of Netflix of Uber. Transformative business models are coming whether we like it or not, so smart companies need to stop stalling progress and start making it.


Mistake #2: Stagnating in the absence of new model competition.

Fear of competition isn’t the only reason to innovate and transform business models. Stagnation can still cause a company’s demise. A recent article from Planys Cloud entitled Business Model Transformation in Action- Real Life Application outlines the way a board game miniature company with a dedicated audience used an innovative transformation of their online presence to fight their lagging sales. While their industry and products exist firmly in the analog world, transforming their business model to meet the expectations of digital-age consumers was essential for their continuing success.


Mistake #3: Transforming the business model without changing the rules for research and development.

In Saul Kaplan’s aforementioned article he explains that a failure to transform the structure of research and development is one of the reasons core companies struggle to transform their business models. He suggests that companies allow their new business model sandbox to function with “connected adjacency” alongside the core business model. Instead of thinking about how a new model can improve the core model, companies need to consider whether the new model is truly a better way to deliver product or content. By allowing business model R&D to follow independent guidelines and operate on a smaller scale during development, companies can spur innovation in their field.


Mistake #4: Poor problem definition that leads to a lack of transformative direction.

Once a business begins a transformation there are a whole new set of mistakes to make. In an article titled How Transform Your Business With Program Management, Skip Pritchard interviews Satish Subramanian, who is an expert on the subject of successfully managing organizational transformations. Subramanian explains that one of the most common and avoidable mistakes made during the process of transformation is a lack of defined goals. More specifically, a failure to define the original problem before looking for solutions. The result is an unorganized program that’s doomed to fail. The first step is the most important one, so businesses must be sure to define the problem prior to any transformative move.


Mistake #5: Poor program management during implementation.

As Satish Subramanian points out in the aforementioned article, business model transformations are heavily reliant on strong leadership to make them successful. Part of this leadership role involves a clearly established strategy for change that defines a step by step process for transformation into the new model, which our expert outlines thusly:

  1. Set the stage: This step involves formulating a strategy and creating a clear roadmap.
  2. Decide what to do: This step entails the definition of a program’s goals and the creation of a concrete plan for implementation.
  3. Make it happen: Execution and close monitoring are required during this stage of the transformation program.
  4. Make it stick: Once a program has been executed the transformative elements can be transitioned into an operational mode and focus can be shifted to sustainable outcome delivery.

These steps are ingenious in their fluidity, allowing them to be applied to any kind of business model transformation in almost any industry.
Is your company making any of these mistakes right now? If so, it’s time for a change because the transformation of our world stops for no-one.

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