Eighty-seven percent of senior business leaders say digitalization is a company priority and 79% of corporate strategists say it is reinventing their business — creating new revenue streams in new ways. But so far, digital change has been slow and disappointing.
Companies using the discontinuous approach [to business model change] achieved 2.25 times the progress of typical firms
"The good news is that some companies are achieving above-average progress against their transformation objectives," says Marc Kelly, Director, Team Manager, Gartner. "When studying the success of these organizations, we discovered they had a unique approach to managing business model change — one that inevitably accompanies digitalization and differs significantly from approaches large firms have adopted in the past." Gartner outlines what these progressive companies have learned and how you can apply those learnings to your organization.
Business model transformation is an amalgamation of 4 major changes
To effectively reinvent your business, consider carefully and then synchronize change along four major aspects of their business model — value proposition, customer base, business capabilities and profit model. The whole organization needs to understand what investments and initiatives are needed as you tweak each element of the business model and pursue your digital future.
Your current business model will hold you back
In considering business model change, most organizations prefer to take small incremental steps away from their current business model and target a set of initiatives that still falls close to their existing position. This won’t work in the digital age, which calls for shredding some very basic assumptions about an organization's current path. Learn how to identify and pursue initiatives that will deliver competitive advantage in the future — whether they fall far from your existing business model or not.
To speed business model transformation, think discontinuously
Progressive firms recognize the incremental approach takes too long and more often than not fails to achieve the desired impact. Try to learn about the changes necessary for transformation in new ways. Run a broad range of initiatives that explore potential future states simultaneously so you can accelerate your understanding of what will and won’t provide the potential for sustained business advantage. Gartner calls this approach ‘discontinuous learning,’ because ideation is free from the constraints of current business.
Read more: CHROs: Are You Up To the Digital Challenge in 2019?
It's not a free-for-all
The discontinuous approach forces the business to rethink the basis of its business model design and expands the number of future-focused initiatives being run simultaneously across the enterprise. That may seem potentially costly and risky, but progressive companies adopt a range of tactics to help blunt potentially negative effects:
- Anchor business model change on future differentiators. Focus on initiatives that can help the organization determine whether it will be able to build a competitive advantage. This eliminates initiatives that could otherwise be too far-flung to be cost-effective.
- Break up business model tests into discrete initiatives. Disperse business model tests to avoid the potential disruption that a wide range of simultaneous initiatives can cause to current operations.
- Help the organization learn at scale. Build processes and programs to disseminate learning throughout the enterprise and avoid the potential chaos of sharing knowledge across multiple teams exploring disparate innovation initiatives.
"We found that when it came to business model change, companies using this discontinuous approach achieved 2.25 times the progress of typical firms," says Kelly. To drive transformation effectively in your own organization, be prepared to challenge and validate your assumptions and choices.
Take the discontinuous learning approach to identify and launch a wide variety of future-focused initiatives, using the entire organization as an engine for discovery — and garner much-needed clarity into the transformation path with the most potential to create value and move your organization quickly to seize competitive advantage.