By Len Ferman
Change is the one constant that we can always count on. And as part of the process, you can either be a change-agent or you can be on the receiving end of that change. For businesses, this often means the difference between life and death. Don’t believe me? Run down to your local Blockbuster and grab a movie? Go for a run on the beach and take your state-of-the-art Kodak camera. Once you find a way to do either of those things…give me a call on your Blackberry.
The truth is the struggle for survival in the business world is real. The average corporate lifespan of an S&P 500 company is only 18 years, that’s down from 61 a half-century ago. It’s hard to fathom that companies of such magnitude can come and go so quickly. The message is clear – companies must innovate in order to position themselves to continue winning customers in the future. The rapid pace of technological progress now impacting all markets is shortening the window for existing business models to operate profitably. Simply put, how you make money today, and your existing customer value propositions, will not work forever. They may not even work two years from now. Only the companies that are working now to develop their next business model in their industry will survive. While companies that focus all of their energy and resources on current business models, will eventually find their customers will have gone elsewhere. It generally happens quicker than they ever thought possible.
A great example of rapidly changing business models happened in the DVD rental market. Just a few short years ago, most consumers rented videos by driving to a local Blockbuster retail store. Blockbuster was one of the great startup success stories in American history, growing from scratch in the mid-1980s and topping out at more than 9,000 retail stores in the last decade. Netflix, however, usurped Blockbuster by introducing a superior business model based on renting DVDs by mail. Blockbuster initially saw Netflix as a tiny startup with no potential to make a significant dent in their market share. As a result, Blockbuster chose not to invest in the mail rental business. Netflix continued to grow and refine the mail rental business in ways that Blockbuster never anticipated. When Blockbuster finally realized they needed to compete in the mail rental business, it was too late. Netflix had perfected that business model and was already working on the next generation business model – streaming video. Today, Blockbuster is gone by way of bankruptcy. Meanwhile, Netflix has a market cap of more than $40 billion – or five times higher – than Blockbuster at their peak. Netflix is an unusual success story, not only did they dethrone an industry giant, they are one of the few large companies that have been nimble enough to migrate from one successful business model (DVDs by mail) to a completely different business model (streaming video). In doing so, they retained the dominant #1 market share. As a result, Netflix stands up as one of the greatest innovation success stories.
Companies that want to thrive - not just survive - must learn how to have the nimbleness of Netflix. They must learn to become great innovators. That means they must have the foresight to invest some of their resources today, to identifying and testing future business models. They must constantly monitor the market they serve, to understand changing customer needs and new industry best practices. Then generate ideas that satisfy those needs and go a step beyond those best practices. They need to shape those ideas into prototypes that can be tested with their customers. By doing so, they are constantly designing their future and forecasting the direction of the market. When they notice the market condition changing, they’re ready to seize the opportunity by launching their prototypes. Companies like Netflix are excellent examples of this today.
On November 1, Len will teach a one-day, class at UNF Continuing Education, Innovating for Your Company’s Future. This interactive class will feature a combination of classroom learning and hands on skill development. The class is designed to provide mid and senior level managers and business leaders with the tool set and skills necessary to enable their companies to innovate and grow.
As a teacher, speaker and consultant, Len Ferman helps organizations in the area of business innovation.
Ferman has 28 years of experience in innovation with some of the world’s largest companies. Prior to founding Ferman Innovation, he led the front end of innovation and was head of ideation at Bank of America. He is a frequent speaker at conferences, including:
- 2012 World Future Trends Summit
- 2013 Market Research Event
- 2014 Customer Experience Leaders’ Summit - keynote speaker
- 2015 Corporate Researcher’s Conference
- 2016 CSX Fusion Conference