Creating successful new business models is a lot like chess: You have to plan several moves in advance. In this article, you will learn how a core insight can drive continuing business model innovation in the way that a chess strategy helps crown a champion.
Quite a few people will tell you that it is all but impossible to move a company from focusing on one technology to another. How much harder must it be to do so when you also have to shift business models at the same time?
Undaunted, those are the kinds of challenges that today's business model innovators are taking on in switching both technologies and business models. Having a profound understanding of what needs to be done provides a core insight to guide those rapid shifts of focus.
When Tony L. White joined Perkin-Elmer (a so-so instrument maker) in 1995, he quickly shifted the company into a highly focused enterprise working on DNA sequencing. Even the corporate name was sold, along with most of the company's operations. By 1999, the company was comprised of two units with public stocks, one that made DNA sequencing machines (PE Biosystems) and the other its biggest customer (Celera Genomics), which led the race to finish decoding the human genome.
Pushed by Celera's progress, others bought more sequencing equipment. PE Biosystems' sales, profits, and value soared. Celera would sell its research to other companies to provide its on-going source of profitability.
With the human genome decoded and available for free from the U.S. government, how could Celera now earn a profit? The company quickly pivoted into taking the newly available genetic data and turning it into useful information for developing gene-based medicines. Under genetic problem-solving pioneer Craig Venter, Celera began to simulate how relevant genes and proteins will interact with potential drugs to predict effectiveness and side effects.
Similar to the race to decode the human genome, Celera was aided by protein-analyzing machines from Applied Biosystems. The new process operated much faster than the old technology, and offered the potential to locate many disease-causing proteins that would not be uncovered solely by looking at genes.
To gain a base of potential products to develop, the company acquired existing biotechnology firms at a time when the values of such stocks were often low and alternative funding was limited. The company aimed to improve the success rate in expensive clinical trials from 1 in 10 to as much as 1 in 3.
The switch to the next business model occurred with very little delay, which indicates that advanced thinking must have been focusing on this opportunity for some time. "We plan to be one of the major health care companies in the world in not too many years. We're going to give it our best shot."* Interestingly, it soon became clear that new leadership skills were needed for Celera's new business model, and Venter was replaced in early 2002.
The underlying core concept of each of Applera's (the parent company's new name) business models is a focus on faster and cheaper ways of finding new information about what causes and prevents disease. The company uses improved mathematical models, new equipment development, and the interaction of biological factors (including genes and proteins -- and probably including enzymes at some point) to constantly find faster and better ways to prevent and treat disease.
The company wants to get full use out of its development activities. This strategic approach has included selling equipment, licensing data, and providing medicines. In the future, new value-adding methods will probably be added. For example, at some point the company may well be among the first to take an individual's mix of genes, proteins, and enzymes and turn that information into ways to improve quality and length of life, as well as healthfulness, without using medications.
What is your core business model insight?
Do you have the next three versions in mind?
Copyright 2008 Donald W. Mitchell, All Rights Reserved
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