While it is necessary to strengthen and extend the core of an established business, it is equally important to grow new business. The simple reason is because industry sectors are not stagnant.
That is the opinion of Innosight's Mark Johnson as expressed Oct. 20 in a presentation at SAE Convergence 2010 in Detroit.
Think of new growth opportunities as the white space, said the Co-Founder and Chairman of the strategic innovation consulting and investing company with offices in Massachusetts, Singapore, and India. "It's white space for you as a company because you have to change the whole way you turn a profit, which is very difficult for companies to do," said Johnson.
White space activities should follow a business model that is tailored to white space activities.
One of the keys to formulating a white space business model entails a true understanding of the agendas of customers, he said. "What job are they trying to get done? What is the most important, unsatisfied job? What are the experiences that they want with your product or service, and how do you provide that?"
The companion to creating value for the customer is creating value for the company.
"Sometimes that means changing the way you make a product, and sometimes that means fundamentally changing the overhead structure," said Johnson, author of the 2010 book Seizing the White Space: Business Model Innovation for Growth and Renewal.
Missteps are very common when a company decides to create business in the white space.
The traps that sink most attempts at new growth, transformation, or renewal fall into three broad categories: failing to allocate resources, cramming new technologies into old business models, and being impatient for growth.
Johnson's roadmap for new growth development involves defining the customer value proposition, blueprinting the technology and business model system, and building and integrating the new system in the right way.
With a new business model, an adaptive approach is especially beneficial. "New business models require a 'test and learn' approach," he said.
The life span of businesses is changing faster than ever.
In 1958, the average life of a company on the Standard & Poor's 500 was about 75 years. In 1983, it went down to 25 years, and by 1998, it was 18 years, according to Johnson.
Business models may also have a life span.
"We have to be capable of not only changing product and technology but [also be capable of changing] how we do business if we're going to stay around for the next 100 years," Johnson said.