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.
About Len Ferman
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
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