A major challenge for any established company is digitization. Digitization can take an otherwise successful business by surprise because it moves in quickly and changes rapidly. Smaller and more streamlined digital-first startups become stiff competition in markets that have taken larger and more traditional companies generations to carefully cultivate. Overnight, it can seem, you've lost the very thing you helped create.
Taking your turf
Encyclopedia Britannica is a common example. Publishing since 1768, Britannica was the king and keeper of facts. Respected around the world, it was the go-to source for learning and knowledge. Its top-down, B2B business model had served it well for centuries.
Then came the internet, flattening hierarchies and encouraging greater parity between the company and customer. In a matter of years, Britannica saw its share of the market shrink, along with its revenue. Soon, hundreds of millions of people around the world were turning instead to Wikipedia -- free, open source and easily accessible.
Don't deny change, act
"It's imperative to recognize that these changes do happen," says Peter Brugger, a BMI Lab innovation consultant. "You have to act proactively before new entrants come into the market."
The threat posed -- and opportunity presented -- by digitization is a key reason to approach business model innovation (German only). The two -- BMI and digitization -- go hand in hand. "They are really two sides of the same coin of digital transformation," Brugger says. Digitization is about the technology behind digital transformation; BMI is about how business handles digital transformation.
It may seem daunting. In fact, it is totally doable. An unlikely success story is a major manufacturer of white-label personal care products. For decades, the company had gotten on fine with a rigid, B2B business model. Its physical product sold in brick-and-mortar shops or on third-party online shops. This afforded a layer of protection from digital threats that other industries and markets don't enjoy.
Digital transformation success
Still, the company wasn't satisfied. So it teamed up with BMI Lab to develop innovative business models. Company management was interested in harnessing the power of digital as a driver of additional revenue. For that, a new business model was required.
"Digitization is transforming customer behavior," Brugger says. "There is more interaction between the supplier, the producer and the consumer. And the consumer is more proactive. He wants to take part in the decision-making."
The company analyzed how it could grow closer to its end customer. The result was a radical change in company culture: No longer merely a provider of products, but of solutions. Rather than only produce the detergent for another company to sell to the customer to wash clothes at home, now the company would offer a laundry service direct to customers. With an app, customers can schedule pick up and provide washing instructions. Clothes are taken away, washed and returned in a prompt and reliable fashion.
Same dog, new tricks
Long-time B2B, now also B2C, and it has been a huge success. The company's laundry service is among a very few that are financially viable. Here, an established company holds a significant advantage over a startup: Whereas a startup often burns through money in a race against time to get bought up and cash out, an established company can direct its considerable resources, experience and industry know-how towards making new business models actually work for the bottom line.
BMI Lab consulted on design and implementation aspects of the business model innovation. The next, and final, step of successful BMI is up next: scalability. Digital transformation will be complete as the laundry service expands.