Radical Business Models– Rule Breaking, Pushing Boundaries, Transform: Power of Different…

Radical business models are all about– rule breaking, transformation, innovation… It’s about turning a market or industry upside down, changing the business landscape, doing something completely different and unexpected to gain a competitive advantage.

Developing a ‘rule breaking strategy’ for your business means defying the business rules in force, choosing new paths, shaking up old habits… It’s about differentiation and becoming the market leader by changing the rules of the competitive game– ‘play the game’ in a way ‘no-one’ in your market, industry has done before…

In rule breaking you develop new rules that sets you radically apart from the competition… the challenge for business is to be creative enough to invent a business model that is radical enough to gain significant advantage in their market, industry… Hence, don’t just copy what others do; create something different, radical,  innovative, transformative…

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According to Tapio Järvenpää; *Rule Breaking = Same Game Played With New Rules*…  seeing things differently requires a mindset of rebellion, curiosity, perseverance… When a business is asked the question: What is your business model? They really want an answer to a much more basic question: How do you plan to make money? Behind that question is a lineup of other questions: Who’s your target customer? What customer problem or challenge do you solve? What value do you deliver? How will you reach, acquire, and keep customers? How will you define and differentiate your offering? How will you generate revenue? What’s your cost structure? What’s your profit margin?

According to Alexander Osterwalder; companies that put more emphasis on radical business models experienced significantly better operating margin growth (over a five-year period) than their peers… Radical business models are key to unlocking transformational growth, but few executives know how to apply it to their businesses…

In the article Radical Business Model Innovation by Greg Fisher writes: Abandon old thinking and embrace new innovative models of value creation… Once upon a time, all business models were relatively similar and relatively simple. You bought low and sold high. The more you could repeat this simple recipe, the richer you would grow. But the world has become more complex and more competitive…

New technologies have opened up many different ways of doing business and most companies are no longer competing just with the business down the road, they are competing with entities from across the globe. In this environment of increased complexity and heightened competition, a firm’s business model has become a critical source of competitive advantage…

The business that have taken the time to understand what a business model is and how to innovate around their own business model have found new sources of profit, growth… By contrast, those who have failed to adapt a thoughtful business model are languishing and giving way to their more inventive rivals…

In the article Managing the Unmanageable: Radical Innovation by David Küpper, Markus Lorenz, Andreas Maurer, Kim Wagner write: In recent decades, companies have greatly improved the efficiency of new-product development and managers have drawn on a variety of processes, methods, tools to maximize their return on R&D investment… Unfortunately, these advances have had the unintended consequence of discouraging radical innovation, i.e.; technical breakthroughs that render existing products obsolete or create new markets altogether… Unlike incremental innovation, radical innovation involves a great deal of uncertainty– the quality that’s not tolerated by most management techniques…

As a result of this intolerance for uncertainty, companies have been undertaking less and less radical innovation… A recent study found that radical innovation accounted for only 10% of an average company’s innovation portfolio, down from 21% in 1990. As the new productivity measures gained traction, managers naturally gravitated to projects that succeeded under the incremental constraints. Hence, more breakthrough projects with potentially higher failure rates and less predictability lose out when investment priorities are set…

Breakthroughs are an important source of competitive advantage. Although incremental improvements help maximize returns on existing investments, radical innovations are vital to long-term growth, profitability… While challenging to carry-off, they can deliver great value… Radical business models are essential for progress in society at large…

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In this Era of Rampant Change and New Business Models by Vadim Kotelnikov writes: The old principles no longer work in the new economy. Business has reached the old model’s limits with respect to complexity, speed… The real problem is– a ruinously dysfunctional mismatch between today’s business environment and classic business models… Quite simply, the wrong model may transform a business into the vehicle of its own death…

Great shifts– genuine and radical transformation– have been shaping the economy and business environment in recent decades. Technology has radically altered requirements for building and managing a successful business. In this new business climate, although the basic command-and-control business model still survives, it has lost its effectiveness significantly…

Hence for business to grow and prosper they must shift focus to more relevant issues, such as; how to build capabilities for faster growth, how to attract and retain best people, how to develop leaders at all levels in a company, how to manage knowledge effectively, how to become a true learning organization, how to be more effective globally… The new radical business model has much stronger focus on the basics of what ultimately creates value today– people, knowledge, coherence… It fosters creation of value and ensures that each piece of the business contributes to system-wide value. It also goes beyond the workplace and the interface between government and business and looks into building a favorable social climate within and around the business…

In the article Reinventing Business Model by Mark W. Johnson, Clayton M. Christensen, Henning Kagermann write: Most established companies don’t understand their current business model well enough to know if it would suit a new opportunity or hinder it, and they don’t know how to build a new business model when they need it… Successful companies already operate according to a business model that can be broken down into four elements: customer value proposition that fulfills an important job for the customer in a better way than competitors’ offerings do; profit formula that shows how a company makes money delivering the value proposition; key resources and processes needed to deliver that proposition…

Game-changing opportunities deliver radically new customer value propositions: They fulfill a job to be done in a dramatically better way, solve a problem that’s never been solved before, or serve an entirely unaddressed customer base… Capitalizing on such opportunities, however, does not always require a new business model… A new model is often needed, however, to leverage a new technology, or when the opportunity addresses an entirely new group of customers, or when an established company needs to fend off a successful disruptor…

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In the article Rethinking Industry Logic: Cross Industry Business Model Innovation by Norbert Haehnel writes: The phrase– Our industry is unique and should not be compared with other industries! is often used by business executives; but is it true? Strangely enough the most successful companies become prosperous not by excluding but by leveraging other industries success factors and applying them in a new context. Many companies that just innovate within their own industry boundaries and their current industry logic often struggle to stay competitive… When designing/redesigning a business model a business must overcome the current thinking patterns or dominant logic within their industry…

Successful leaders often apply business models from a different industry and combined them with a new approach that breaks the dominant industry logic… Companies should always look beyond their traditional industry borders to learn, e.g.; could you learn from ‘Nespresso’s’ direct sales model? Could you learn from ‘Ikea’ and outsource some core activities to your customers? Could you learn from ‘Gillette’ and their ‘razor and blade’ model? Could you learn from the ‘newspaper industry’ with their subscription model that makes customer pay you in advance before they get the product?

To succeed in the digital age; business must know how to delight customers: What excites them? What moves them? According to John Kay; economic success comes not from doing what others do well, but from doing what others cannot do, or cannot do as well… According to radical; a disruptive business model occurs when a business chooses a commoditization level not conventional to the industry, e.g.; Uber is utility, whereas BMW is exclusive.

A disruption would happen when premium cars of BMW’s nature are available on hire and on demand (more commoditized). That may sound weird, but when one figures out how that could be, they just invented a new business model! Radical business models are about transformation…

According to Robert Glass; it’s useful to think of transformational business change as profound, fundamental, irreversible… It’s a metamorphosis, radical change from one form to another… Transformational change is distinguished by radical breakthroughs in paradigms, beliefs, behavior…

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In transformational change; what are seen as obstacles may morph into opportunities,  irreconcilable opposites seen as creative change that is improbable… Transformational change is all about appreciating interdependence and working in partnership with others– people, organizations, social trends, unseen forces…

According to Patrick Stähler; most people think that radical business models are only about new technology and bringing new things to the market… but radical business models are also about being different in the way you delight customers… Radical is about being different, e.g.; it’s when you see the ‘telephone’ not as a device, but as a gate-way to whole new world…