How an entirely new type of business strategy spawned digital Winners

Amazon, Apple, Google

In the "olden times," it was clear that a company had to choose between two types of business structure, as business expert Geoffrey Moore wrote in his Harvard Business Evaluation article "strategy and Your Stronger Hand." Moore said that there were really only two ways to run a business for an organization. Either you had expensive, complicated, interactive operations with a small number of customers, or you had high-volume operations with a large number of customers, and neither was profitable. Companies that used their "enhanced duke" had to choose between two different models. Moore keeps telling firms to choose one of the two options. "No longer is ambidexterity just rare." Moore says, "There is no third way to weigh things."

figure There are two types of business structures: those that are complex and those that are simple.

But during the whole decade of the nineties, strange things were happening everywhere. As Moore started to write, a third scalable business model was already taking shape. Businesses are starting to use agenda technology to make their organizations more ambidextrous. These kinds of businesses can set up complex, interactive systems with a huge number of customers.

In the nineties an enterprise architectural strategy that worked well came into being.

Amazon, Angel, Facebook, Google, Microsoft, and Tesla, which all had this ability, were the winners of the new century's agenda. The end result was very profitable. think about three

How well known S&P compared to AMZN, AAPL, GOOG, and MSFT over the past 12 months

Let's look at the "complex operations" and "quantity operations" models from before and compare them to the "alternative extent model" of the digital winners.

Companies like IBM, Cisco, SAP, and McKinsey served a small number of very wealthy clients with complicated problems. They offer good solutions for every client's situation. They did business with people who were willing to pay more for personalized service from experts. By talking to customers, finding out what they need, and coming up with ways to meet those needs, the value was created. Providers didn't have millions of customers, but rather hundreds, and each customer only did a few transactions per month at a very high price.

As a response, you can grow your business by focusing on providing connected solutions to a lot of clients at a reasonable price. Businesses deal with common customer situations, like doing important, repetitive tasks for all customers. As examples, think about Nestlé, Procter & Gamble, and Kellogg. Customers buy an ordinary item. How much it costs to meet a normal desire. Usually, suppliers try to get tens or even hundreds of transactions per client per month for a few dollars per transaction from hundreds of thousands of clients. Individual interactions with clients cost a lot of money and should be avoided. Most of the company's products were made based on surveys and analyses of the market.

In, these two models were the only ones available on the market at the time. There was only a little bit of overlap between the two styles. Moore said that businesses should know what kind of business model they have and stick to it. That was the best hand they could have. This determined the kinds of people who did well in the business and the methods they used. Businesses shouldn't be tempted to try to be successful with the wrong kind of business plan.

In the 21st century, interactive volume operations became a third type of business model. Tens of thousands of customers started getting alternatives from some businesses for very low prices or even for free. Imagine if Facebook or Google offered a lot of services for free, but made money off of the people who might use them by showing them ads. Or, Amazon could have a different relationship with its millions of users, whose wants and interests it knew a lot about, and use that information to offer new things with little trouble. Often, the commercial model led to huge benefits for the whole community.

As with complicated processes, these businesses have a close relationship with each customer, but now they do it with the help of agenda technology. In fact, customers' costs were made together with digital interactions that were quick and easy. With the help of digital technology and a focus on the customer, the organization was able to create great interactions. Affinity turned into a big expense. Most of what was learned about customers came from talking to them and using high-powered computers, the cloud, and artificial intelligence.

So, the interaction didn't come from interacting with animals, but rather with the thing or service itself. determine

Youngsters The way the interactive quantity firm model worked was very different from the way the traditional quantity model worked, which was based on regular, standardized, indifferent products where the goal was to keep things from changing. To learn about the customers, quantitative research and market testing were used. determine

figure How each type of enterprise architecture saves money

Agenda winners made a lot of money, which made other businesses want to copy their success with "digital transformations," which required a lot of money to be spent on technology and IT staff. But most of the time, the plans have not worked out. This is because the new way of doing things had nothing to do with just technology. It required a whole new way of thinking from the people in charge.

So, both the older models of volume operations and complex operations used a standard business strategy. The company's goal changed to making money for itself and its stockholders. And the organization's structure changed into a vertical chain of command where each piece of equipment worked on its own.

This was not at all like the way you had to think to use the advanced interactive model. Here, the company's goal changed to co-creating value with its customers. Profits and long-term actor value were seen as results of business models, not as goals. Instead of subordinates reporting to managers, most of the work was done by self-organizing, flexible groups. The organization's structure changed from a vertical chain of command to a horizontal network of experts who can talk to each other.

Rita McGrath, a professor of management at Columbia University, talks about Steve clean's book "Achieve to the Epiphany" and his blog. She says that in the most effective complex systems when clients had a problem, they were "aware that they had a problem, actively seeking a solution, had a mediocre answer, and had or could have a budget." It was important to be believed. "For their part," McGrath says, "advanced methods buyers want to know why they should keep trusting you to solve their problems even though there are other choices."

The goal of extended hours was to make it easier for customers to buy things and to get them to come back and tell their friends. This meant that any changes or adjustments had to be put off. In this model, designers and engineers would not tell tens of millions of customers about new trends. Research on the market led to quantitative and experimental assessments of the market. The extent operations model is still being used by important parts of the economic system.

But the interactive extent model will also give the extent consumer model a chance it didn't expect. At the time the iPhone came out, even the well-known management theorist Clayton Christensen said that it "was not really confusing." It became "an item that the newest players in the industry are strongly encouraged to beat," and "its chances of success will be limited." Christensen still thought that the iPhone would fail because of price competition and modular copies five years later. Christensen said, "background speaks positively and loudly about this."

Even after ten years and trillions of dollars in extra profits, the iPhone is still a very successful business. Christensen missed the fact that Angel has made both a volume operations product and an interactive agenda product. The iPhone did more than just make phone calls. It was an interactive, multifunctional device that kept getting better and better. It made many things and functions obsolete, such as address books, video cameras, pagers, wristwatches, maps, books, shuttle games, flashlights, dictation recorders, and music players.

Christensen's "loud instructions" from the past, in which the products of one company competed with the products of another, did not apply to companies that innovated in a digitally different way. People are now playing brand-new online games. In this new game, adding can have a big effect on many other things and mess up the way the number operations work.

So, even a management theorist as smart as Christensen needed to know about management models to keep him from seeing what was going on before him.