Business Case Studies, Executive Interviews, Dr. Bolko V Oetinger on Business Model Innovation

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Executive Interviews: Interview with Dr. Bolko V Oetinger on Business Model Innovation
April 2009 - By Dr. Nagendra V Chowdary

Dr. Bolko V Oetinger
Senior Advisor, The Boston Consulting Group.

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  • Firstly, a word about BCG’s illustrious strategy legacy. BCG, from the days of Bruce Henderson, had been synonymous with high-end strategy making with its powerful tools becoming standard strategy lexicon. How do you reflect on that legacy?Do you think it lost some of its sheen when compared with its heydays of 1970s and 1980s?
    Not at all! one should not confuse tools with strategic thinking. The tools have become standard textbook knowledge. The hallmark of strategy are not tools, the hallmark is critical thinking and that, by nature, should never come to an end. If it does you have given up your responsibility as an entrepreneur or as a manager. BCG has continued to develop ideas, processes, approaches and even modalities of strategic thought. I hope we will get a chance to discuss them further.

  • What is the mandate for Strategy Institute at BCG? What does it focus on?
    The Strategy Institutemission is to get ahead of key developments which influence business and society and to enrich BCG’s strategic thinking by transferring strategy insights from other fields to business. So, it emphasizes ‘transfer’ innovation. When I founded the Institute in 1998 itwas clear in mymind that business, academics and even consultants had trivialized the field of strategy into a simple toolbox of “how to…” tools. I wanted to give back to strategy its richness, breadth and endless creativity which drive business at its best. By the way, this is the reason why we always discover new business models. You do not find a new business model with a new tool. Please do not misunderstand me. I am not against tools. Tools are terrific for stable business situations. You will always use the existing tools and new tools to improve your existing business model. However, the mind that discovers new business models needs different stimuli.

  • And now spatial thinking. What is the relationship between spatial thinking and strategy? What has contributed to this new way of looking at strategy?

    Let me answer this using a backward logic: Once a new business model emerges, take as an example the iPod with iTunes, you realize that the existing business model (music sold via CDs) is only one particular formof distributing music. Over decades the industry somehow assumed that is the only one. However, CDs occupy only one particular area in the larger space of music distribution. The space is designed by various variables like content, mobility, convenience, choice, communication technology, web technology, artists, etc. It might be a 10 dimensional space which might be empty for 99%. But somewhere might be (not must be) a combination of variables that can be financially exploited. Spatial thinking makes you aware that all our existing business models are small areas of land in a vaster space of broader options. So, there are potentially a lot of new business models waiting for entrepreneurs, also in the music industry: Think about how Madonna makes money.

  • In one of your very interesting and concise pieces—Center and Periphery—you have observed that center and periphery are not theoretical concepts and they are true sources of strategic action. Can you elaborate on ‘center and periphery’ perspective highlighting the strategy connotations?

    By the way, I like to point out “center and periphery” is a spatial concept. The distance (again a spatial connotation!) between the two visualizes their difference. If you watch incumbents in mature markets you observe again and again that dangerous assaults are not coming from their direct competitors, their “colleagues”, but from unknown companies with different business models and sometimes even from outside the “industry we are in”. Apple was far away even from the periphery of the CD business, Ryanair started as a strange airline far away from the mighty “hub and spoke” flag carriers like Air France or Lufthansa. Toyota was completely underestimated by any of its US competitors, as are Chinese cars today in Europe and the US for the same reasons, lack of quality. In history you have similar phenomena: Rome got raided by Germanic tribes from the North, September 11 was a cruel attack from the periphery into the center of the Western financial world. Even the buildings were chosen as targets in the center. We usually underestimate these far distant attackers, claiming that we should not confuse apples with oranges. The apple/orange quote is the worst service we do to our strategies. Very successful attackers from the periphery enjoy our misunderstanding. They even do not need to hide behind bushes. The incumbents’ mind will ignore them anyway. As business people we mostly underestimate how fast an apple becomes an orange. Strategy requires regular visits of the center at its periphery! The border is a very fertile ground of strategic insights.

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