Organisational Change Management Volume 1

Framework 22 Business Concept Innovation

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Introduction

Business concept innovation starts from a premise that the only way to escape the squeeze of hyper-competition, even temporarily, is to build a business framework so unlike what has come before that traditional competitors are left scrambling. When it's most effective, business concept innovation leaves competitors in a gut-wrenching quandary: if they abandon their tried-and-tested business framework, they risk sacrificing their core business for a second-place finish in a game they didn't invent, with rules they don't understand; yet if they don't embrace the new framework, they forgo the future. "Damned if they do and damned if they don't" - that's the effect on competition that business concept innovation has at its best.

Business concept innovation isn't strictly about competitive strategy. It is not a way of positioning against competitors, but of going around them. It's based on avoidance, not attack. Here's the key thought: what is not different is not strategic. To the extent that strategy is the quest for above-average profits, it is entirely about variety - not just in one or two areas, but in all components of the business framework. Business concept innovation often falls short of this lofty goal, but that's the objective. Consequently, a capacity to first identify, then deconstruct and reconstruct business frameworks lies at the heart of a high-performance innovation system. If your organisation is not experimenting with radically different business frameworks, it's already living on borrowed time.

A business concept comprises 4 major components :

1 Core Strategy

2 Strategic Resources

3 Customer Interface

4 Value Network

organisational development change management

Underpinning the business framework are 4 factors that determine its profit potential :

1 Efficiency

2 Uniqueness

3 Fit

4 Profit Boosters

organisational development change management

Core Strategy

The first component of the business concept is the core strategy. It is the essence of how the firm chooses to compete. Elements of the core strategy include the business mission, product/ market scope, and basis for differentiation.

Strategic Resources

Every competitive advantage worthy of the name rests on unique, firm-specific resources. Dramatically changing the resource base for competition can be a source of business concept innovation. Strategic resources include core competencies, strategic assets, and core processes.

Configuration

Intermediating between an organisation's core strategy and its strategic resources is a bridge component called configuration.

Customer Interface

The third component of the business concept, customer interface, has 4 elements: fulfilment and support, information and insight, relationship dynamics, and pricing structure

Customer Benefits

Intermediating between the Core strategy and the customer interface is another bridge component - the particular bundle of benefits that is actually being offered to the customers

Value Network

The fourth component of a business framework is the value network that surrounds the firm, and which complements and amplifies the firm's own resources. Today many of the resources that are critical to a firm's success lie outside its direct control. Elements of the value network include suppliers, partners and coalitions.

Organisation Boundaries

Intermediating between an organisation's strategic resources and its value network are the firm's boundaries. This bridge component refers to the decisions that have been made about what the firm does and what it contracts out.

Wealth Potential

There are 4 factors to consider in determining the wealth potential of any business concept:

1 the extent to which the business concept is an efficient way of delivering customer benefits;

2 the extent to which the business concept is unique;

3 the degree of fit among the elements of the business concept; and

4 the extent to which the business concept exploits profit boosters that have the potential to generate above-average returns.

organisational development change management

Unique

The goal is to create a business framework that is unique in its conception and execution. Of course, the goal is not uniqueness for its own sake.

Fit

Consanguinity is a word that suggests "fit": a business concept generates profits when all its elements are mutually reinforcing.

Profit Boosters

These profit boosters can be grouped under 4 categories:

1 Increasing Returns

2 Competitor Lock-Out

3 Strategic Economies

4 Strategic Flexibility

Competitor Lock-Out

Really slick business frameworks lock competitors out through pre-emption, choke points, and customer lock-in.

Strategic Economies

Unlike operational efficiencies, strategic economies don't derive from operational excellence, but from the business concept itself. Strategic economies come in three varieties: scale, focus, and scope.

Strategic Flexibility

Strategic flexibility comes from portfolio breadth, operating agility, and a low break-even point.

(source: Gary Hamel, 2000)

Framework 23 A Framework for Change


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