The document discusses the importance of business model innovation for companies to remain competitive. It argues that most companies are "stuck in the middle", neither large enough to dominate nor differentiated enough to find a niche. It then outlines four key areas that determine company success: the markets it serves, its products/services, operating model, and cost structure. It stresses the need to re-examine these areas and be open to reinventing one's business model to create new value for customers and shareholders in a sustainable way.

1. Business Model Innovation: a new “buzz word” – <br />Or the foundation of future competition?<br />Today competition in most industries is rife. Cost pressures exist everywhere. Consumers are more empowered than ever before. Information on products and services are readily available. Technology changes fast. Product and brand life cycles have shrunk. Amidst these changes, the pressure on companies to grow and remain profitable, are even greater than before. <br />Most industries have a few dominant players today – whom by now have exhausted savings within their cost structures and are not able to cut these any further. We have gone through the era of competitive benchmarking and incurred the savings we could. On the flipside of this coin, most industries also have their clearly defined niche players - or highly differentiated companies - in the second tier, which means that the vast majority of companies are “stuck-in-the-middle”: not large enough to matter and remain dominant because of critical mass, but also not exceptional enough to focus or find a relevant basis for differentiation. On top of this, most companies are followers when it comes to innovation and customer service, thereby eliminating other bases for competitive advantage. <br />The nett-result of the above is many mediocre companies, with low value proposition differentiation and mediocre returns to shareholders. Companies that are “stuck-in-the-middle” are lost opportunities - where managements were unable to outperform their rivals in any significant way: and these kinds of companies constitute the vast majority of companies in all industries. <br />Even if you are expanding strongly into emerging markets, cost pressures are still there in most markets, and even in emerging markets, competition is increasing fast and efficiencies are becoming important. Many established companies try and operate in exactly the same way in emerging markets – this means that many of them are not successful in these markets. Companies like Microsoft and Unilever have demonstrated operating differently in these markets is hugely successful. Proctor & Gamble (as reported in Fortune, January 28) has established a research and development centre that specifically focuses on product development for poorer consumers within emerging markets. It taps local talent with the drive and energy to succeed (it is able to attract the very best students) – and it operates far more like a technology “upstart” company than a multinational stalwart. P&G also uses input from the outside extensively in its new product development. Gillette Guard is a product developed specifically for men in emerging markets like India who have no access to running tap water. <br />Highly successful companies also have to change the way they operate from time-to-time to remain agile, dynamic and adapt to changing markets and operating conditions. Business model innovation therefore equally applies to them, as they need to stay ahead of the curve if they want to remain relevant and retain their leadership. If a business fails to reinvent itself in time, it will find it difficult to recover (Olson & van Bever of Accenture states that their ongoing research reveals that companies that stall in their growth, have a less than 10% chance of recovering – two thirds of such companies are later acquired, go bankrupt or revert to being privately owned). They state that successful companies are the one’s that “fix things before they are broken”.<br />The famous and controversial strategist Gary Hamel states that 90% of what a company needs to know today, will come from outside of its industry!<br />In the Harvard Business Review of January/ February 2011 Nunes & Breene claims that the following are important ways to prevent stagnation in a company and to ensure forward thinking is high on the agenda:<br />Renew the top team earlier than it seems required.

2. Investigate and track the basis of competition in their industries.

3. Balance short-term and long-term thinking within management.

4. Ensure that the workload at the top is effectively distributed.

5. Have more talent available than what seems necessary for the normal operations of the business.

6. Ensure that new hires fit into the culture of the company.