In the quest for business growth, the focus often shifts towards creating business models that not only enhance the prosperity of the company but also contribute to the overall growth of the industry. This article delves into the importance of such business models and how they can be developed and implemented effectively.
Many businesses operate with a surplus capacity to cater to their customers, as the cost of losing a customer often outweighs the cost of maintaining idle resources. However, the profitability and morale of an organization could be significantly improved if it operates at its maximum capacity. The key to encouraging efficient resource utilization lies in aligning the core business model with the pursuit and stimulation of significant new trends. This approach provides a competitive edge and leads to higher resource use.
While it is beneficial to have a steady supply of readily available resources, it is even more advantageous to have a rapidly growing demand for these resources. This scenario presents more opportunities to serve customers and receive ample rewards for the services provided. The most successful business model innovators are those who identify powerful trends and specialize in facilitating their rapid evolution.
Consider the example of Bob Swanson, CEO of Linear Technology. The company's business model has always been based on specialization, with a focus on having more application knowledge than competitors in the field of analog semiconductors.
Swanson realized that this expertise could be further leveraged by providing high-performance chips that would replace the commodity chips being used. To justify the higher cost of these chips, Linear Technology would have to offer significant benefits that the commodity chips did not provide.
Swanson's insight led him to focus on adding benefits that would accelerate the growth of the markets the company served. This approach would provide more economic benefits from the innovation to the company's customers and other stakeholders.
Linear Technology identified that better power management would increase the value of cellular phones and other portable electronic devices to end users by extending the battery life. With the potential for a significant amount of Internet traffic to switch over to wireless battery-driven devices in the future, Swanson believed that his company could play a crucial role in this transition.
With the implementation of Linear Technology chips, battery life was significantly improved. This advancement allowed designers of portable electronic products to either pack more features into the same sized package or offer smaller packages with the same functionality. As a result, portable devices quickly became more functional in many dimensions.
The technical improvements led to a surge in device volume and stimulated demand for improved models. Consequently, Linear Technology had to modify its business model to perfectly align with its customers' frequent new-product-launch windows, following shorter development cycles. Failing to meet deadlines could cost the company and its customer over 90 percent of the potential profit from a new product.
The company's success has enabled consumers and companies to share information more rapidly and accurately than ever before. This capability has created a greater potential for prosperity across society. As a result, the economy will grow faster, and Linear Technology should also indirectly benefit from this increased prosperity as more people can afford the better performing, ever less expensive portable products that its technology enables.
How does your current business model contribute to general prosperity? How could a future business model do more to increase prosperity? What key problems could your organization solve that no one else could? How can you turn that problem-solving into a continuing competitive advantage?
Copyright 2008 Donald W. Mitchell, All Rights Reserved
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