The Point by Buyers Meeting Point
Book Review: Radical Business Model Transformation
“Companies that dominated the national market for decades are suddenly confronted with new competitors that are redefining entire industries and hence restricting the incumbents’ strategic freedom to shape their future.” (p. 6)
Radical Business Model Transformation: Gaining the competitive edge in a disruptive world by Carsten Linz, Günter Müller-Stewens, and Alexander Zimmermann (Kogan Page, 2017) presents readers with the same challenge question the authors asked each other during the writing process: ‘Are we being radical enough?’
In a world focused on risk monitoring and mitigation, this book encourages business leaders to take an honest look at the potential of their company’s current circumstances and take ‘radical’ steps to improve them if necessary. The idea of transformation, which the authors define as a fundamental shift in mission and value proposition – even away from what initially led to the company’s success if necessary – is different from innovation (although transformation can certainly be innovative). The primary difference is that innovation may occur at any point in a company’s journey, while transformation can only accompany a change in direction.
Key to their study of transformation are two trends that we are very familiar with in the procurement and supply chain community. The first is digitization and the second is service orientation (or the ‘as-a-Service’ movement). Combined, they not only reduce the costs associated with creation and delivery, they also redefine the distribution of profits. By allowing business models to be ‘content heavy’ but ‘asset light’, it is possible to achieve bi-directional communication with customers. This, in turn, leads to increased ‘stickiness’ and product or brand loyalty.
According to my reading, there are three identification points that are critical to the transformation process. Companies must identify 1. The need to change, 2. The new business model they want to pursue, and 3. The valuable DNA of their company/solution that should be preserved. While all three of these points are equally relevant, it is the first that keeps me awake at night. I think of this both as someone watching a defined space for trends as well as a business owner in my own right. If the external ‘writing were on the wall’ as it were, how long would it take me to recognize the shift? As much as focusing on core activities is critical, we actually create risk by keeping our heads down for too long.
Radical transformation requires three categories of change in order to be successful. There must be a redesign of the front end (customer facing), back end (internal and supplier facing), and in the monetization of the value proposition.
Although Linz, Müller-Stewens, and Zimmermann constantly push the true meaning of radical change and what is required to effect it, the book provides a multitude of options for planning or carrying it out. There are many business models to come from and move to and many ways to complete the ‘crossing’. If you are bold, ambitious, and externally aware enough to see the incentive associated with making a significant change to the structure of your company, Radical Business Model Transformation will provide the framework and thought leadership required to make it a reality.
Dear Kelly, thanks for this insightful review of OUR book!
Still too many companies focus on efficiency gains and automation and hence run into the risk of optimizing or these days digitizing the past instead of innovating for the future. The radical business model transformation manoeuvres outlined in Radical Business Model Transformation make innovation the instantion of the business transformation by changing radically in the front-end (value prep and value delivery), the backend (value creation, e.g. new agile manufacting, see Tesla) and the monetization mechanics (subscription models, e.g. in software, outcome-based pricing models, e.g. in consulting). Hence it is a change in direction in all three domains - to be precice a radical one each.
Best, Dr. Carsten Linz (author of Radical Business Model Transformation)
Well put Dr. Linz - and thank you for sharing your comments here. One of the other points that comes to mind - a dynamic that clearly played out successfully in the process of writing your book - is that we must all work more communally if not collaboratively. Just as you and your co-authors challenged each other, each of us needs someone to push us to leave our comfort zone, see the world more clearly, and make bold (but pre-qualified) decisions. We should also be willing to challenge others the opportunities arise, creating a virtuous cycle of improved results and open minds.