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The Era of Re

November 14, 2012

Many companies can generate creative new products and services, but those rethinking and reshaping their business model in novel ways are the bigger winners, says Andrew Campbell, head of the Ashridge Strategic Management Center. Indeed, over half (54%) of the 4,000 global business leaders surveyed by the Economist Intelligent Unit (EIU) believe success is more closely linked to business model innovation than to improvements in products and services. Amazon is the typical example of business model innovation. It didn't change its business, but changed the way it did it, killing two birds with a stone by making customers happy (bringing goods right to their door), while benefiting from significantly lower costs. It achieved this by harnessing the power of a new technology, Internet.

So how can companies transform their business model? Campbell sees five ways. One is to change the revenue model and mix, to find different and new sources of revenue, such as the shift London newspaper Evening Standard made to a "free model dependent on advertising" from a "pay-per-copy model supported by advertising". The second area of innovation relates to how much a company invests in activities (such as sales, marketing) and assets (factories, working capital). So the innovator here would ask what would happen if investments grow or shrink in size?

A third aspect concerns the borderline between a business and its suppliers and raises the question of which activities to hand over to third parties and how relations with suppliers would change? The fourth dimension involves the organisational model (centralised or decentralised) and the selection of human capital (what would happen if we bring different kind of people on board). Finally, the fifth area includes changes to business processes and use of technology that would help achieve significant cost and time benefits.

We here at the Center for the Future of Work talk about "re-thinking", re-inventing", and "re-wiring" the way enterprises operate and work gets done. With so much to fix and so many exiting opportunities ahead we might call this the era of "re".