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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  • What is polycentrism and how can this be a source of competitive advantage?

    Your business might have an obvious center and a far distant periphery, but it also might be organized like a network of many “centers” (research centers, competence centers, supplier networks), where many places of equal importance need to be coordinated. This is an analog to a federation of cities, where different cities were specializing around different craftsmanship or industries. I use the word “center” as representative of a place shaped by strong beliefs about its own success. The strong belief structure makes innovation so hard. If you have a company with many such centers, there is a higher chance that newideas might enter, because the walls are usually not so high across the centers and the inhabitants of these centers know that there are many other options around, so the mindset is more open. However, each center will struggle with its own belief structure.

  • Does the ‘center and periphery’ perspective apply to British manufacturing’s competitiveness, where Britain lost its competitive edge in industry after industry— first it was textile industry, then it was the turn of movie industry, then motorcycle industry (remember, the famous BCG report commissioned in 1975), automobile industry, financial services industry, etc.?

    I would not trace back the loss of competitiveness of entire industries in a country to a single dimension. Take the British car industry, it had never gained any real significant stronghold outside Britain and just missed global competitiveness. When TATA finally picked up Jaguar and Landrover, it was not by attacking the British market from the periphery, rather rescuing the two companies. The center/periphery analogy works best, I believe, in explaining disruptive innovations which by definition means applying an outside method/approach/ technology to a different (distant) business (software to music). Please observe, using words like “outside”, “periphery”, “distant”, I have been back to the spatial world.

  • You have observed that, “as the history of great innovators such as Apple, Google, and Microsoft demonstrates a business might begin at the periphery and, as it increasingly enjoys success, end up at the center. Then, once it occupies the center, it will soon face new competitors at its periphery.” Therefore how should ‘center’ players guard their market positions against the imminent ‘periphery’ threats? It’s definitely a never-ending game.

    You are (fortunately!) right, innovative businesses are a neverending game. Your competitive advantage is only valid as long as nobody else is able to erode your margins and your share. All businesses start lean, small, flexible and entrepreneurial. On maturing they gain share, get larger and larger to become complex, fat, change-resistant and often dominated by managers instead of entrepreneurs. This cultural metamorphosis is not due to bad will or neglect. The more successful you are the more you must believe that you do the most things right (actually you do) and you believe (here starts the evil) that you can rely on just continuing your successful path. You lose the critical reflection. Your success becomes your biggest enemy from inside. As managers we get paid for delivering success, so we look (rightly) for sources of success, but, unfortunately, we often ignore the consequences of our own success.

  • What according to you is a business model (with elaborate and differing definitions apart)? What do you think are its critical components?

    A business model is a company’s unique value architecture creating customer value and sustainable competitive advantage as the foundation of lasting financial success.

  • Is there any difference between a business model and a business plan? Few mistakenly suggest that for entrepreneurship courses, it is business plan and for strategy course it is business model. Surely the truth is something else? Can you elaborate on the differences between a business model and a business plan?

    The business model is the architectural design; the business plan is the development or the creation of a market for that business model over time.

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