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Integrating old and new business models

How do you integrate old and new business models and technologies into your existing services?  In this blog, I discuss several options and compare these with how architects revamp old buildings.

Different business models

In today’s technological revolution of social media, big data, artificial intelligence, blockchain etc., firms are looking for ways to take advantage of the new opportunities these technologies offer.

However, just focusing on the technology is rarely sufficient. Now in its 7th year, the annual Deloitte – MIT Sloan Business School surveys show over and over again that firms have to adopt new business models and embrace a culture for innovation in order to incorporate today’s digital technologies successfully.

The implementation of knowledge management systems in the past is a nice illustration of why adopting technology alone is insufficient.

Many firms adopted a knowledge management platform, yet very few were able to truly reap the full benefits. Why? Because for these systems to work, knowledge sharing needs to be valued.

Most firms did nothing to change the incentives or silo cultures of their firms, thinking that the knowledge management system would solve these problems. However, since knowledge equals power, just installing a system to share knowledge turned out ineffective. Those who possessed the knowledge were not suddenly going to share their knowledge, just because there existed a fancy and user-friendly knowledge-sharing platform.

As a result, these firms found out the hard way that technologies don’t change organizations. A costly lesson.

Technology pull

There are better ways to achieve your strategic goals instead of pushing technology onto the organization.

It starts with defining the strategic goal, such as better cross functional collaboration, moving from practice to industry groups, or serving a new market segment.

Then, thereafter, select the information technology solutions as a means to achieve these strategic goals. That way, the likelihood of adoption of new technology is much higher. Instead of pushing the technology onto the organization, you let the business units pull the new technologies into their workflows to achieve these goals.

However, how do you go about integrating these technologies and business models and make them part of your current operations?

There are three ways to do so. Architectural examples are a nice illustration of the three options.

Just leaving the facade

One option is to keep the old facade and put the novel business model behind it. Like the move from practice to industry groups.

To the outside world, the firm, its offerings, and its reputation remain all the same. Yet on the inside, the whole business model has changed, to facilitate collaboration and cross selling of services.

With a fresh retouch of the outside, the whole will look and feel the same to your clients. They will be pleasantly surprised how something familiar, suddenly is now comfortable and up to date. While only your employees know how much work it took to revamp the back end.

Beware though, your clients will see through the facade, if the organization has made no changes and continues business as usual.

Tear downs

An other option is to tear down the old and build from scratch.

Starting anew is typically costly, but it has major advantages. Building from scratch gives you the most freedom and options to move forward. It allows you to reach new customers and venture in new markets, with new offerings, that were unthinkable before.

An example would be Buckley Sandler, founded in 2009 by a group of 40 experienced lawyers. Since, it has grown from 40 to 160 lawyers in less than 10 years, using technology and innovation to become the market leader in the banking sector serving 21 of the 25 largest banks in the USA.

Build on and expand the old foundations

A third approach is to have the new expansion on the old foundations. It enables you to make the best of both worlds!

It does require you to carefully assess what you have and what is needed to strengthen these foundations.

Once you know what the actual capacity is, use what you have and expand it to the max!

Again, your clients will recognize what is still there. However, they will also immediately notice what changed and be aware and in awe of your new capacities and capabilities.

An example would be the University of Mississippi Medical Center, which created a homegrown telehealth network to increase patient access to care. It started in 2003 and in 2017 it was one of the only two recognized telehealth centers of excellence in the country, due to its track record of performance. At the same time, that is also an indication of how difficult it is to successfully build something new atop an established system. As nearly all hospitals have launched telehealth services, most with mixed results.

Remodeling your organization by building on top of the existing organization, requires a lot of support from senior management. This type of reconstruction will impact the existing organization from the start, and often not in a positive way. It causes disruptions, conflicts, losses, and therefore a lot of faith and determination by senior management to make it happen. Things can easily go wrong, as the next category shows.

Integrating old and new?

Combining and integrating old and new can be very effective in architecture. However, it does not work that well with business units.

Most service firms use digital transformation strategies to move from tailored solutions to more productized offerings. As Moore wrote in 2005, these two options require different business models that are not compatible. Trying to operate two different business models within one organization at the same time is doomed to lead to disappointing results.

An example would be Deloitte in the Netherlands, which added an online artificial intelligence audit report platform to their consultancy. The goal was to reach a market that their audit practice could not service. Now, about two years after the successful launch of the platform, it has been taken down.

Same with Fishstep of Fish and Richardson, a patent service for startups. After a successful launch, the program abruptly ended about 3 years later.

The reasons are not difficult to guess. Addressing currently underserved markets with new business models is certainly possible. However, such initiatives will not survive their initial years, if they are held to the revenue and profit standards of the regular business, as Christensen explains so well in his Innovators Dilemma.

So mixing and matching business models is not an option.

Overall timeline?

Just like the remodeling of buildings, these types of business model revamps take time. Digital transformations take years, according to the Deloitte – MIT Sloan report.

However, that should not stop you from starting and trying. You can start with smaller remodeling projects, that concern single practice groups or departments.

That way, you will see the fruits of your results sooner and build experience and be better prepared for the larger task at hand.

P.S. Interested in learning more about how to integrate old and new business models in your organization? Or how to build the foundations for your digital transformation strategy? Contact us for a free consult.