Seizing the White Space - PCC - ebook

Business model innovation is the key to unlocking transformational growth—but few executives know how to apply it to their businesses. In Seizing the White Space, Mark Johnson gives them the playbook. Leaving the rhetoric to others, Johnson lays out an eminently practical framework that identifies the four fundamental building blocks that make business models work. In a series of in-depth case studies, he goes on to vividly illustrate how companies are using innovative business models to seize their white space and achieve transformational growth by fulfilling unmet customer needs in their current markets; serving entirely new customers and creating new markets; and responding to tectonic shifts in market demand, government policy, and technologies that affect entire industries.  He then lays out a structured process for designing a new model and developing it into a profitable and thriving enterprise, while investigating the vexing and sometimes paradoxical managerial challenges that have commonly thwarted so many companies in their unguided forays into the unknown. Business model innovators have reshaped entire sectors—including retail, aviation, and media—and redistributed billions of dollars of value. With road-tested frameworks, analytics, and diagnostics, this book gives executives everything they need to reshape their businesses and achieve transformative growth.

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Many companies struggle to succeed when they enter into“white space”activities—new commercial operations that are notably outside their existing core business and current competencies. They may recognize that there is a viable commercial opportunity there, but almost invariably companies try to serve new customers using their existing business models. More often than not, these expansion efforts are a failure.

To move into and harness a white space opportunity to grow your enterprise, start by developing a business model that will work for that new space. Don't expect your old business model to be transferable. Specifically, you have to rework the four building blocks of any viable business model:

1. Your customer value proposition—or the job you're trying to do.

2. Your profit formula—how you will make money.

3. Key resources—which you will need to make the right things hap-pen.

4. Key processes—which you will need to get right to achieve customer results.

Trying to make your existing business model stretch to include a white space opportunity is asking for trouble. It rarely, if ever, works. But develop a new business model that better suits that white space first and you stand a much better chance of success. When it comes to moving into white space, it's the business model you use that counts.

Part 1

Commercial White Space & the Four Box Business Model Framework

White space arises whenever a company becomes aware of a commercial opportunity that is outside its core business market. It is beyond adjacent markets and is therefore an opportunity to serve new customers in radically new ways. The key to seizing a white space is not to try and serve that new market using the established business model. Instead, a new business model is required—a new and tailored combination of a customer value proposition, profit formula, key processes and key resources. Get the new business model right and you can conquer that white space opportunity.

Established companies always have markets in which they are comfortable and successful. Typically, these markets are a good fit with what the company does best. They have spent years finding customers for what they offer.

Most companies become very good at progressively growing and expanding their core businesses over time. They may even move into adjacencies successfully—perhaps offering similar products to different market niches. A white space commercial opportunity is something different again. A white space is the opportunity to move into uncharted territory. To succeed here, the company has to decide whether or not it can adopt a new business model—a different formula for making money, for harnessing different expertise and new ways to coordinate resources and activities.

To give an example of successfully seizing a white space opportunity, consider Apple Computer:

■ Apple started as a major player in the personal computer market, but during the 1990s its market share fell from 20 percent to less than 3 percent.

■ When co-founder Steve Jobs returned as interim CEO of Apple, he rolled out some upgraded computers. But then, in 2001, Apple introduced the iPod, which it trumpeted as“the world's first digital music player”despite the fact that Diamond Media had launched a comparable MP3 player in 1998.

■ What made the iPod work, however, wasn't its technology, but the fact that Apple wrapped the new product up into a great business model. Apple launched the iTunes store eighteen months later to offer legal downloadable music at a great price point. Apple almost gave away the music at cost, and instead made its profits on selling the iPod player.

■ In just three years, the iPod/iTunes combo became a $10 billion product, generating 50 percent of Apple's revenues. Apple's market capitalization went from $2.6 billion in 2002 to $133 billion in 2007 on the strength of that revenue stream. This move also redefined Apple from being a computer maker to a leader in the world of lifestyle media.