The Initiator Gene. How to generate new sustainable and profitable business models as time goes by?

This is a post that deals with business models; it does so from a ‘start to finish’ viewpoint of every business activity; it DOES NOT do it from the process or its optimization; it focuses on its origin, which is called the ‘initiator gene’, the DNA that will determine its success or failure. It is not a methodological process of how to define the DNA, it aims to give clues to how to pursue and detect it, to understand the basic elements that make it up, divided into 11 points which are all related to one another:

1-From shortage to abundance… at great speed
2-Business model: The origin and the end
3-Defining the DNA. The great practical and methodological gap
4-The market: Constant pressure on the model
5-From market’s pro activity to business reactivity
6-Technology is not enough. Business sustainability as a goal
7-A few new needs,
many ways to satisfy them
8-Knowledge: Prospecting it, as important as generating it
9-Reconsidering the size
and time of opportunities
10- The digital: Easier to be sold, harder to keep
11-An ecosystem of value

1-From shortage to abundance… at great speed:
Probably the word that best defines the time we live in is ‘Speed’; today everything happens rapidly; our society has become a consumption machine: we consume religions, philosophies, trends, styles, time, relations, people, objects, etc.
We have undergone a transformation of a world based on shortage and production for ‘the mass’ to a world of abundance, over supply and one in which the market tends to treat the consumer as an exclusive client. In order to withstand this evolution, we have ‘burnt’ huge amounts of knowledge: A long etcetera of economic models, management techniques and philosophies, companies, occupations, executives, concepts, products, services.

2-Business model: The origin and the end:
Today, we have begun to observe the ‘business model’ as the last link of competitive improvement; it has become the companies’ ‘Holy Grail’, the origin and end of every activity; even today efforts are focused on optimizing and enhancing the process of business model construction.
Academic definitions of business model describe it as ‘a system of activities designed and authorized by a focal company; it comprises the activities carried out by the focal company or its partners, clients or suppliers so that it goes beyond the company itself and exceeds its limits’ (Zott and Amitt). Most of the existing literature and studies are based on optimizing and adapting the original business model as time goes by. It is worth highlighting Alex Osterwalder’s work (who absolutely strives for freshness and contextualizing) in his book Business Model Generation, which reflects the last state of the art involving optimizing, providing guidelines and developing a practical method for the definition and introduction of business models.
As a result of the essential nature of the model, companies have rarely needed to define it. In most cases, they continue using and surviving as a result of the foundational model created around the original idea of the company.

3-Defining the DNA. The great practical and methodological gap:
However, most works and studies are not focused on the most important part of the business model: The DNA of the model, the ‘initiator gene’. So far it has been in the hands of ‘charismatic founders’, chance or the continuous improvement over another existing model. It is in the appropriate development and in the strategy of introduction where differential advantages lie.

4-The market: Constant pressure on the model:
We have talked about the speed at which we live and the consumption hustle-bustle it causes exerts such pressure on the markets that it has reached the level of generating new business models.
The frequency of the need of defining new models derives from market needs and the current concept of business based on the exploitation of the opportunity. The speed imposed outweighs the degree of response that current suppliers of business models can give: charismatic founders, chance, the improvement of other existing models, even those derived from R&D.

5-From market’s pro activity to business reactivity:
Business models generated as a result of improving existing ones are not sufficient facing the demand for new models required by the market. The pro activity with which we face the market (on the basis of the current dynamics of model identification) appears inefficient; it is necessary to respond in a reactive way, basing ourselves on market demands; or, in other words: We cannot leave the creation of new business models to inspiration, it is necessary to establish routines and processes that will ensure and make a protocol of the definition of ‘initiator genes’ on the basis of the need to be satisfied; most methodologies and practices start from the fact that the DNA, the ‘initiator gene’, is already defined.

6-Technology is not enough. Business sustainability as a goal:
The concept of sustainability, understood as the capacity of keeping the value in the market, becomes essential. Today we can say that in order to get a successful and sustainable business model, technology is not enough. Technology is a cornerstone but it is not definitive; on many occasions it is ‘the initiator gene’ of the model, but it does not guarantee its success and sustainability.
We must think of new models from a holistic viewpoint with respect to technology, with a more elevated vision of human knowledge; the key point lies in the hybridation of technological and scientific knowledge with social and cultural knowledge, along with the evolution of economic knowledge. Today successful models are hardly vertical as regards knowledge. We live in the time of hybridation (La alquimia de la Innovación. A. Cornella, A. Flores) (The alchemy of Innovation), the success of the model will depend on its transverse aspect with respect to knowledge, sector and product / service mix aspects.

7-A few new needs, many ways to satisfy them:
John Mullins, professor in London Business School, tells us in a brilliant phrase ‘If you want great benefits, you should solve great problems’, corporate business models are thought out to generate the highest possible amount of profit; with this purpose we submerge in a sophisticated world of proposals, approaches and subject matters that will solve the consumer’s life.
Reality, as Mullins points out, is simpler: ‘Solve great problems’. Human beings do not have new needs to meet or new problems to solve, as time goes by we solve the same problems in a better-adapted way. It is the knowledge we as human beings generate that evolves, instead of being the needs or problems that increase.

8-Prospecting knowledge; as important as generating it:
If we assert that the focus to generate new models is on adapting knowledge generated by the humankind to solve the usual problems, then the concept of knowledge prospective acquires great importance. Focusing on the problem to be solved and prospecting the evolution of knowledge toward it will give us some clues to possible solution scenarios, its dimension (the size of the opportunity), the necessary tempo for its maturity and, most importantly, the time we will have to exploit the solution with relevant margins.
Modelling business on the basis of prospecting the knowledge around a problem allows the solution found to be really within the latest state of the art of human knowledge; the direct consequence will be the detection, assessment, development and exploitation of authentic virgin opportunity territories; or as W. Chan Kim and Renée Mauborgne would say, ‘blue oceans’ to exploit.

9-Reconsidering the size and time of opportunities:
Drawing a simile with the title of Chan Kim and Mauborgne’s book, new opportunity territories must be blue, but no longer oceans, seas or lakes with any luck. The time in which we had huge profits with the same business model during a long time period has gone down in history. We are no longer faced with a market of consumers clustered in big economic targets and generalized behaviour standards, we are facing a market which tends to the exclusive and personal consumer instead. The market has become a world market but the targets have been reduced to the personal dimension.
As Chris Anderson points out in his book, The long tail economy’, consumers respond to the market supplies in two different ways: Under the concept of ‘head cutting’, in which consumers act as a collective and acquire the assets that the industry offers massively and for a short period of time; under the concept of ‘long tail’, in which consumers act as individuals with criteria, in which we are the ones who request the assets we need and acquire from the industry, in a unitary, personal way and during a long period of time.

10. The digital: Easier to be sold, harder to keep.
This pro active, personal and sensible consumption on behalf of the consumer is possible as a result of (among other causes) the massive digitalization of our consumption environment. The code has taken hold of our lives, we live within a dynamics in which ‘the product is digitalized and the service is productivized’.
The digital environment has reduced the time for developing new products and services, has shortened the existing space between the consumer and the supplying company favouring the direct relation in a naturalized way; this gives us the possibility of treating the client ‘from you to you’ in its relation with the company and customizing the product / service to his/her specific need.
One of the resulting changes is the commercial treatment of the client; before digitalization, the client was someone to be attracted at the proper time to sell a specific item; after digitalization, the client is someone to whom we attract to cultivate loyalty in a business model with which he/she will relate in the long term, beyond the proper product of the moment.

The digital phenomenon makes it possible to face the creation of business models by generating ecosystems in which the business model is integrated by an ecosystem of product, service and consumable. This strategy makes it possible to maximize the value and the contact with the consumer; with the three of them we generate the value of every business model, but just with one of them we bill creating a commercial relation.
In this article, we have aimed to establish the principles of the business model as the basis for the relation with the client; it is no longer based on the products or services on which they depend as the commercial speed in which we are immersed has turned them into mere consumables of the relation with the consumer.
It is the affiliation to the model that will guarantee a sufficient base of consumers for its survival and it is in the constant creation of business models where we will find the survival technique of the company.

 

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Mª Luisa Vives – Jaime Gross

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