Business Case Studies, Executive Interviews, John C Camillus on Business Model Innovation

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Executive Interviews: Interview with John C Camillus on Business Model Innovation
May 2009 - By Dr. Nagendra V Chowdary

John C Camillus
Donald R. Beall Professor of Strategic Management, Joseph M. Katz Graduate School of Business and College of Business Administration.

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  • Mark W Johnson and his coauthors in their recent article (Reinventing Your Business Model, HBR, December 2008) observed, “an analysis of major innovations within existing corporations in the past decade shows that precious few have been business-model related.” Why do you think there are so few business model innovations coming from the existing companies?
    Businesses that have achieved success by employing a particular business model are prone to fall victim to the “winners curse.” Their frame of thinking, their organizational architecture and their power structure are all tailored to their existing model. Change and innovation are resisted in such situations. The threat of imminent demise is a force that can overcome this inertia, as is currently evidenced by the US auto companies. Alternatively, visionary leadership is essential for such change to occur.

  • Just like the way in which venturing into a new business model is important, is it also not important to bid goodbye to an old business model? What are the signals/triggers that the companies should look at to decide to divorce from the existing/ old business model? (Are there any illustrative examples of companies that have successfully abandoned their old business model before inventing, adapting and nurturing the new business model?
    This is the billion-dollar question. Organizations are constantly faced with the question of whether continued investment in an existing business model and strategy is preferable to radical change and innovation. There are occasionally strong signals of the need for radical change, such as continuing and significant decline in performance, the emergence of disruptive technologies or newly-dominant approaches developed by competitors. It is the “weak signals,” as Igor Ansoff called them that are both important and difficult to spot. Organizations that do well at spotting weak signals tend to engage in continuous environmental scanning directed at potential sources of disruptive change, such as technological and regulatory developments.

    A willingness to experiment continuously, dealing with ‘failures’ in a learningmode is highly desirable. A healthy acceptance of the unpredictability and, indeed, “unknowability” of the future helps organizations recognize the need for creating rather than trying to anticipate the future. Robust actions identified through possibility scenarios and Pareto analysis offer a reassuring foundation for change in response to weak signals and an unpredictable future.

  • A few existing companies come out with a steady flow of innovations. For instance, Virgin, Google, P&G, Apple, etc. How to distinguish a product or process innovation from a business model innovation?
    That is a difficult question to answer. What is a process innovation in one context could be viewed as a change in the enterprise model in another. Cumulative process and product changes can result in changed business models. Classifying these changes is perhaps not as important as making them happen.

  • Through its “Design Thinking” initiative and other initiatives, P&G was able to instill a new innovation DNA in its organizational culture. How should companies go about fostering an innovation culture, wherein innovation is no longer the prized prerogative of only the R&D department and it can come from any corner of the company?
    Innovation can and should come from everyone in the organization. For instance, Solectron Centum in India requires every employee from the CEO to the newest person on the shopfloor to propose and document at least one improvement every month. It should also be recognized that “chance favors a preparedmind.” The perceptive and painstaking research conducted by Gaurab Bhardwaj, who has been interviewed by you, revealed the importance and basis of the insightful recognition of serendipitous developments that resulted in billion-dollar drugs at DuPont. He describes the “moving, anchored” nature of the formal search processes that supported innovation in DuPont’s industry models as well as in its products. Companies such as 3M and Google readily provide resources and time outside the formal channels to encourage employees to experiment. And the organizational culture should value and reward initiatives that do not work out, if they have been well conceived and executed. GE, in its newsletters has lauded employees who have taken calculated risks and not succeeded. In Fujitsu, there is no such thing as a major project that is deemed a failure. An “unsuccessful” experiment, if carefully analyzed can provide valuable knowledge and learning and motivate real-time responsiveness to developments.

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