Patterns: Effecting Multiple Industries for Extended Times
cutting across multiple industries for extended times can be referred
to as "Mega" patterns. Here we explore:
Profit Back to Profit
of the Middle De Facto Standard
most prevalant business pattern is where once profitable businesses
have become profitless. Two preconditions lead to the no profit
overabundance of the same business design within an industry with
every player competing in the same way.
profit crutch has been removed, resulting in the normal action
of commoditized business design: driving all the profit away.
conditions for no profit have been increasing due to three facors:
of competition has eliminated the possibilities for price management.
are more aggressive and knowledgeable, creating more effective
and innovative business models attack industry leaders by "cherry
picking" the profitable customers, leaving the unprofitable
do you do when you're in a No Profit pattern?
away or invent a new way to do business.
it occurs less frequently than the no profit pattern, it succeeds
when business design innovation brings the business back to sustained
profitability. In the back to profit model, at least one player
changes the rules of the game and creates new kinds of value in
businesses generally assume a sameness about their customers, under-recognizing
the variability in what is important to different customer groups.
do you do when you want to create a Back to Profit pattern?
hard at your customer base to identify their unmet needs.
Build a new business model to meet those needs.
from previously distinct industries start competing for each other's
customers. What convergence battles may you be facing?
convergence Occurs when regulatory change or a customer
desire for bundling enables suppliers to create one stop shopping.
convergence The functionality of two different products
or technologies evolves over time to the point where they overlap
and address the same customer need.
convergence Cross-industy alliances that drive out competitors
you find yourself in a convergence pattern:
your radar to see the full set of competitors who are starting
to compete for your customers. It will be far larger than your
and exploit a new formula for competitive success since the way
to win in a convergence contest will be different than the way
to win in your home market.
do you do when you're in a Convergence pattern?
the new rules of competition, define your best opportunity
space and become it's leader.
If you partner, act early and aim to partner one step higher
than your rank in the nonconvergence world;
and put the high-end partner in charge of significant parts
of the new business.
Seal your space off by consistenly improving the deal you
deliver to your customers.
of the Middle
migrates away from the middle ground toward the extremes. Two trends
performance-based differentiation is shrinking.
performance-based differentiation is growing.
product-centric business design, no matter how soundly positioned
in product terms, is beaten by low-cost, high-customization business
designs on the one hand, and superior solutions on the other. The
information extremes beat the information middle. What does that
mean for your business model?
must employ customer-level customization. This requires customer
priority information management.
solutions require customer process information management.
do you do when you're in a Collapse of the Middle pattern?
new value propositions which are made possible by information
economics and utility.
Organize your company business design around an information-based
Be the first to go to the extremes.
role of standards in business have changed. Today they tend to serve
a much more useful role for the customer:
assure customers of quality.
provide performance levels.
give customers product interoperability across suppliers.
give customers a medium that fosters usage-related productivity
for the industries that adopt them, they tend to commoditize the
suppliers who adopt them, freeing customers from the performance
side of the price/performance equation to focus solely on price.
When a de facto standard enters an industry, it becomes critical
for companies who want to maximize their value growth to own or
partially own industry standards rather than to simply produce products
according to those standards. The key skill for profitability becomes
the art of optimal coalition building.
about whether you could create a standards coalition around:
reference performance that only your product can achieve.
capital on how products could become interoperable across suppliers.
your standard can be shaped to facilitate cross-user productivity
a company establishes its technology as the de facto standard; customers
enjoy the economic benefits of compatibility, past investments retain
future value, and competitors start to write their business plans
around the strategy of the company that owns the de facto standard.
do you do when your products face a De Facto Standard?
the standard or align with the emerging standard early.
Work on creating the next standard.
inventions bring increased functionality, better costs, faster cycles
and innumerable other benefits to customers and companies. However,
some new technologies change the strategic landscape in ways that
fundamentally reshape the business playing field, moving all players
out of their accustomed positions. The current fundamental technology
shift is being triggered by the Internet.
do you do when you're in a Technology Shift?
to where the power will be.
Explore the information capabilities of your business enabled
by the Internet.
is based upon Profit Patterns, written by Slywotzky, Morrison, Moser, Mundt
and Quella, published by Times Business, Random House, copyright © 1999 Mercer
Management Consulting, Inc.