Key learnings from our journey of business innovation
In March last year we announced our launch of Patrikson Borgstrom. With the experience we had, we knew how tough it can be for established companies to design and scale new growth engines. We decided to make this the call for our journey, to support others in their success.
Since we thrive in the unknown and believe in iterate the way to success, we have taken the time also to reflect on our first year. We have put our learnings into practices and updated our focus in a re-launch. In this short paper we share our key reflections.
The business landscape is about ecosystems
The business environment today is more connected, integrated, and faster than ever. To define competition and focus on traditional markets and industries will not be enough. Customer expectations and behaviours are changing, and they consume products and services from an ecosystem of solution providers rather than a single company. Companies that want to strengthen their competitive position in future, needs to evaluate what ecosystems they want to take part and collaborate in, understand what customer needs the ecosystem fulfil, as well as their value-add and position in the ecosystem.
Value creation in businesses from physical assets will change
In businesses where a physical asset is core for value creation, the market forces drive towards a digital value-add layer. This digital layer customises and deliver an exceptional experience to meet customer needs. It enables new way to consume the physical asset and utilise data to do so. This moves the asset itself backwards in the value chain. We call this phenomena Phygital. Coexistence of new business models in a digital value-add layer and core business of the asset itself.
To decide on a position is crucial for companies. Either focus only on the physical asset operations and take the consequences in moving backwards in value chain. Or master a new digital business that can create new business value and futureproof the value of the company.
Futureproofing calls for business innovation rather than feature innovation
A successful transformation into master of phygital businesses calls for innovation.
When talking about innovation, we do not mean functional innovation that improves experience in existing products. We do not have in mind service innovation either, innovation that takes place when combining several functionalities that creates new products or services. Business innovation is the approach to radically change experience for customers. It uses data and emerging technology in combination with new business models, for ex. on-demand rather than ownership, to mature into a new business. It always consists of ecosystems to develop and scale the value.
Business innovation is the way to protect core business from disruption and meet shifts in customer behaviour, but it needs a tool set and an approach different than core business today.
Business models for the future must be based on circular economy
Today innovation that is not sustainable is not innovation. Outstanding business innovation opens for product experimentation with input from customers and other different sources. To be a competitive company sustainability must be a natural part of the business model not only showing results in environmental accounting. Circular economy can help companies being an active part of moving towards a digitalised, waste-free production and consumption model for a sustainable and decarbonized world.
Sustainable inputs, recycle and reuse, product-as-a-service, sharing platforms and product life extension are the five principles of a new, circular development model that creates opportunities for the future. By including models for circularity in business innovation it will be a transformative potential for people, businesses, and cities.
Most established companies struggle to succeed in business innovation
To succeed in business innovation, a different approach than for core business is essential. The digital business needs to be protected like a venture long enough to be able to explore, learn and scale up the business before being interlinked with the practices and governance of core business.
At the same time, risk mitigating is essential when departure in the unknown. There is one big risk in building a new business, the decision to build it. After that it is all about de-risking. A toolset and framework to iterate the way to success, learn and validate customer needs, design business models and market positioning as early as possible before scaling up the new business is the core of success.
Designing new business models and scale up growth engines in established companies is challenging. The learnings from our journey and the clients we have supported during our first year have been the basis for our calibrated focus. Together with our tech and analytics partner, we look forward to helping new clients in their journey to master business innovation of new business models to futureproof and grow their company.
Read more on: patriksonborgstrom.com