Module 5: Business Modeling
Overcome Corporate Challenges
Why should you consider corporate challenges?
It’s a mistake to believe that big companies can behave like large startups. Unlike a startup that is designing their first business model, an established company has already designed and scaled one or multiple business models. This difference between searching for a new business model and executing an existing model has many implications for why large companies cannot — and should not — simply mimic the behavior of startups. The large company is focused on executing the business model which can make the process of business model innovation more difficult than in a smaller, less established company. As a result, business model reconfiguration is rarely successful unless steps are taken to address unique corporate challenges.
What are corporate challenges?
There are several challenges for established companies in business model innovation:
Incentive Structures: managers have greater interest in ensuring an existing model succeeds rather than encouraging the development of a new innovative business model.
Minimum viable product: existing manufacturing and quality-controlled processes can make prototyping new products difficult.
Customer discovery: organizations with a dedicated sales team may regard this as dangerous both to the company's sales in the current quarter or year and to their own sales commissions.
Procurement: in a large company, the procurement function is measured on its ability to cut costs, improve delivery times, and manage key suppliers. This may be contracting the essence of quick and iterative learning, where new suppliers are needed and decision processes should be fast.
How can you address corporate challenges?
1. Create a dedicated innovation team
An innovation team should have insights into different parts of the company. Most importantly, the innovation team should have unique incentives that are not tied to an established business model. This will encourage your team to experiment and push forward new business models. There should also be unique communication channels for an innovation team so that they can prototype and run tests quickly without needing to go to the top of the company for approval.
2. Treat the MVP as an artifact for learning
An MVP may not reach the same standards as established company quality-controlled processes require; however, it is an essential part of low-cost testing for a new business model. Brainstorm possible avenues for development outside of the typical manufacturing pipeline. These could include contracting to outside manufacturers or developing an MVP under a different company name.
3. Explore low stakes avenues for testing and implementation
New business models cannot be verified without testing and implementing different elements of it. Brainstorm company resources that could be utilized for testing. You may need to work to resolve the conflict between the sales force who might feel threatened by new products being tested with possible or existing customers.
4. Identify potential conflict areas between new and old business models
Before pursuing business model reconfiguration or adding another business model to your company, understand where possible conflict might arise between the existing business model and the new business model. Work proactively to address these conflicts to reduce risk for stakeholders.
What’s Up Next?
Understand what unique challenges your organization may face by performing a Business Health Check. Learn about solutions for Managing 2+ Business Models and Business Model Reconfiguration.