It’s time to push the fast-forward button for your business model transformation

The corona crisis has brutally highlighted both strengths and weaknesses of business models but also revealed opportunities for the acceleration of transformation. Companies that draw the right conclusions can use the momentum to excel and to soar above the competition.

Although virologists have been warning about an impending pandemic for years, its scope and impact were unpredictable for companies around the globe. While the crisis has brought the world to a standstill, it has at the same time pushed the fast-forward button – for the renewal of business models that had already been set in motion, as well as for the demise of companies already in trouble.

Just a few examples for the leap in development over the past few months:

• Exponential growth in demand for digital technologies: Because traditional business models suddenly stopped working when travel was banned, and personal contact was massively restricted.
• Tangible sustainability efforts instead of mere lip service: As the crisis has put into perspective the real problems plaguing our environment and society.
• A renaissance of nationalism: When supply chains became fragile and countries, even within the European Union, developed different concepts both to reduce the spread of the virus and to stimulate the economy.

While some companies remained in pause mode during the peak of the crisis to digest the developments, smart companies used the opportunity to be a flap ahead of the curve. The things that made the difference are not specific to the corona pandemic. What is specific to the crisis, however, is its potential to be a wake-up call – maybe even the final one – for all those who have so far slept through the necessary transformation.

Three thoughts about how to successfully shape your business model renewal:

• First: Bring your transformation strategy to life
• Second: Shift your focus from products to ecosystems, and from competition to collaboration
• Third: Be a leader, not a manager

First: Bring your transformation strategy to life

In 1964, the average tenure of companies on the S&P 500 was 33 years. By 2016, it was down to 24 years, and the forecast is that in 2027, it will be just 12 years. This calculation does not even take the current crisis into account, e.g. with Lufthansa being demoted to the MDax index.

That said, in an ever-dynamic world, transformation must be a pillar of every corporate strategy and the business model must be put to the test – over and over, especially when things are going well. Companies that rest on current successes lose their wings for future high-flying maneuvers.

Most German companies have understood the importance of this in theory and have already aligned their strategic setup accordingly. Looking at their operative business, however, we often see that “agile”, “swarm”, “crowd” and Co. are just buzzwords that are not lived. The problem lies in practice. The biggest challenge for many companies: to break with tradition and legacy.

In order to bring their strategic setup to life, companies need to stop optimizing their current bestsellers and focus on designing the future ones. How? Take a white sheet and start over. Sort your current products and services in three columns: “Future USP”, “Nice to have” and “No longer relevant”. Even if the last column contains the products that have made the company successful so far. And even if it means changing tack completely.

Second: Shift your focus from products to ecosystems, and from competition to collaboration

Successful transformation of business models requires new forms of collaboration. Coopetition is not only ‘nice to have’ – it is essential. Take the automotive industry as an example: It is no longer a question of focusing on the car, but on the ecosystem of mobility. The winners will be those who no longer try to build the best car under their own brand label but join forces with others to develop the best solution for customers.

But many companies have not yet managed to fully exploit the potential of collaboration. I see two major levers here.

The first lever: the right focus. In Germany, many companies still think in terms of products, not ecosystems, and invest in bricks and mortar instead of ideas and concepts. And many of them have learned the hard way in the past that this is the wrong approach. I see a great need to catch up here, even keeping in mind that it is not easy to protect intellectual property. Amazon shows us how it’s done: Instead of focusing on questions of IP protection, they have concentrated on expanding their platform. And they have made the latter so attractive that sellers prefer to forego part of their margin instead of building their own platform.

The second lever: culture. Digitalization has dissolved the boundaries of traditional industries, and new players are displacing established companies. Banks, car manufacturers and the like will not be able to stand up to Google, Apple and Amazon on their own. To keep pace, German companies must stop seeing coopetition as cooperation between competitors and start accepting their partners as exactly that: equal partners. Whether a partnership is fruitful is (also) a question of the right mindset.

Third: Be a leader, not a manager

Crises reveal true strength – not only of companies but also of their executives. They show who leads the company and who merely manages the business. The distinction? Without meaning to sound trite: Take our founding fathers as role models. Artur Fischer, Adolf Würth, Carl Benz – leaders are people with a vision, with a pioneering spirit, and with the ability to motivate others.

A look at the profiles of successful leaders quickly reveals a common pattern: they pursued their vision with conviction. To the brink of (private) insolvency and back again. They were willing to break with all old habits, pursue a trial-and-error approach, and make courageous decisions.

Today, very few managers have that kind of entrepreneurial spirit, or are prepared to shoulder the responsibility and the blame for failure. In traditional German industries, our products have been performing so well for so long that there was no need to disrupt them. In our country, which developed powerful wings with dedicated leaders in the past, success in the last century has caused our entrepreneurial spirit to wither – and that spirit is what we need to revive now.

We have to unlearn our inertia and relearn entrepreneurship. It takes people with a vision, with a pioneering spirit, and with the ability to motivate others.

Corona has demonstrated how quickly companies and even entire industries can get into trouble overnight. Some through no fault of their own, others not entirely unexpected. Some more, others less.

But companies can use the momentum if they draw the right conclusions – and if they have enough courage to question their business model, to make far-reaching decisions under the greatest possible uncertainty, and to push the fast-forward button.

Whether companies have that courage is ultimately a question of the right mindset. And that is what we have to develop asap: Uncertainty will continue to be our companion. Waiting it out cannot be the answer.