This article looks at the sequence by which company leaders learn to produce continuing business model innovation to expand their profits exponentially.
I observed that the following sequence was used by CEOs whose whose companies grew the fastest in stock price in order to achieve that great success:
1. They learn how to do business model reinventions.
2. They decide to do a second business model reinvention and need to expand the scope of what they consider and where they get help.
3. They decide to turn business model reinvention into a repeating activity, which requires a shift in corporate priorities and attention.
4. Their continuing business model reinvention success propels them beyond the boundaries of their original marketplaces. They need new targets of opportunity for their subsequent reinventions and must begin searching for them.
Here's a brief example of such a sequence by a one-man business to help you grasp what I'm describing:
Mr. Ray Hughes is a native of the Isle of Man, located in the Irish Sea. There he learned to be a remarkably good golf caddy. He served up to two golfers at a time by carrying their bags and providing advice.
Based on how much they liked his service, he could hope to get additional jobs from the same golfers. If one pair of golfers wanted to start early and another pair late, he could potentially carry four bags a day.
Unfortunately, the winter weather in this native land is bad enough to deter golfers, and work is scarce then. This way of serving golfers on the Isle of Man was his original business model.
Mr. Hughes decided to improve his business model. He realized that if he could find a place where there were lots of golfers and good year-round weather, he could earn more money. He decided to move to the Monterey peninsula in California, home to many famous golf courses including Pebble Beach. The temperature is moderate there year round, and winter weather brings mild rain in which golfers will often play.
Because of the quality of these courses, golfers fill them from dawn to dusk. As a result, he could work more often. Further, the prices for playing on these courses are very high. Golfers are interested in having a good experience and value their caddies more highly than on the Isle of Man.
As a result, his income from each golfer also rose. The main drawback was that the cost of living is very high in that area, especially for housing.
The pro shops on the Monterey Peninsula often receive requests for caddies, and encourage golfers to make their own arrangements. The pro shops usually refer such requests to caddies who have been praised by other golfers. Because so many players told the pro shops they were delighted with Mr. Hughes, his name was often given out.
These introductions became the basis of his next business model innovation. Many of the callers wanted to have more than one caddy. Could he help them?
Mr. Hughes is a fine judge of golfers and caddies. He inquired about the golfers who would be visiting and matched the golfers with compatible caddies. For instance, an inexperienced golfer might be helped by a caddy who had a low-key personality and experience as a teaching pro to help the duffer navigate the course more pleasantly and successfully.
After helping other caddies get jobs, they also favored him with referrals in turn. That change further increased the number of bags he could carry in a year.
Also, those who liked the caddies Mr. Hughes had assembled for them would often pay him extra for the service, even though he asked for no more pay. The pro shops heard favorable comments about these services as well, and referred larger parties to him.
Mr. Hughes is a very intelligent, inquisitive, and interesting man to converse with, and he quickly learned a lot about and from the golfers who visited these courses. Many of the golfers were attending business conferences at the Pebble Beach resorts. Almost all of the conference sponsors used travel agents and meeting planners to arrange for meeting and sleeping rooms, meals, and other resort services.
Mr. Hughes asked the golfers and the resorts whether they would be willing to let him play the role of travel agent for these occasions. The resorts and many conference sponsors who had played with him were happy to do so.
Naturally, Mr. Hughes still organized the caddies, while adding a major source of income. At this point, he overcame the high cost of living in the area through expanding his role from being a person solely providing a physical service to someone who was also helping make business conferences more successful.
Copyright 2008 Donald W. Mitchell, All Rights Reserved
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