Under the premise “Attention. Future”, the Berlin PM-Camp has invited us to publish thoughts on the future development of business, economy and new work. For us, this is a welcome occasion to share our conviction about how organizations must change strategically and organizationally in order to be successful in the long term.
The half-life of companies and their business models has fallen steadily in recent years. Where market leaders used to be successful for decades with the same business model over and over again, today a few years are enough to make them disappear completely. The lack of digitalization is often cited as the reason for this. But that is not the whole truth.
Digitization is only half the battle
For decades, Kodak dominated the market for photography with their photo films. With the world’s first digital SLR camera and the first digital camera ever, the company laid the foundation for today’s digital photography – but still had to file for bankruptcy in 2011. Likewise, Blockbuster Video, for many years the central point of contact for all those who did not want to buy films, planned a video-on-demand platform as early as 2000 – a full 7 years before Netflix began to conquer the streaming market. However, both companies decided not to pursue their innovations any further.
However, neither of them could be blamed for turning the back on digitization: Kodak replaced the classic film roll with the PictureDisc and established itself as a pioneer in the digital photo sector. In response to Netflix’s DVD rental service, Blockbuster introduced an online rental service that allowed customers to conveniently rent and return their films by mail.
Ultimately, Kodak and Blockbuster did not fail because they did not digitize. They failed because they were still generating a lot of revenue with their business models. Therefore, they did not ask themselves whether their customers really wanted to buy a picture medium and rent films, or whether they really just wanted to take pictures and watch films in an uncomplicated way.
A new way of measuring success
It is undisputed that technological progress and increasing connectivity help to shape the success of companies. However, it is just as decisive whether the business model itself is still up to date. If certain processes do not create any real value, it is irrelevant to what extent they have already been digitized.
Young digital companies are also successful because they understand what their customers want and are able to tailor their offerings accordingly. Long-established large companies, on the other hand, have grown around a business model over many years. As a result, their organizational structure is also aligned with this model. In order to keep up with young companies and today’s rapid market developments, they must first develop an understanding of their customers’ expectations and be able to flexibly adapt their structures to new value chains. This means breaking up the hierarchical organisational structure in favour of a network of different teams that can organise themselves to meet new objectives.
New metrics are needed to establish this agility in the long term. A high number of products sold and the resulting turnover is only a snapshot without long-term relevance. In the future, the strategy must therefore be geared more closely to market developments and customer needs in order to check whether the business model still meets customer requirements
Conclusion: Tradition is no guarantee for success
Success has always been measured by the extent to which companies’ offerings can meet customer expectations. In order to remain successful in the future, companies must rethink, because technological progress is changing these expectations ever more rapidly. For this reason, success can no longer be measured in terms of sales, but rather in terms of how closely the offering still matches customer expectations. After all, if Blockbuster had not asked itself in 2000 how many films they distribute, but which way customers would like to watch films, we would probably be using Blockbuster streaming service today.