Business Model Transformation

Welcome to Definitely May Be Agile, the podcast where Peter Madison and David Shark discuss the complexities of adopting new ways of working at scale. Hello and welcome to another exciting episode of Definitely Maybe Agile with your hosts Peter Madison and David Shark. How are you today, Dave?

Being great. I'm doing very well. Thank you, Peter. Good to be back in the studio having a chat. So I just wanted to pick up. Last time we were talking, we left a little bit of a hook at the end, which was we were talking about process transformation in the context of digital transformations and where we start with. And we just hinted at the need to bring business to the table and really understand why we're trying to do things. That sort of naturally leads us to the conversation of a second type of transformation, which is often referred to as business model transformation.

Yeah, number two of our four, which is uh exciting here. So the I I this one I find very intriguing because I think there's lots of different types of business model transformation that go on. And when we talk about it in context of digital transformation and the the application of digital technology to change your business model, or to add new channels, or to change how you interact with your customers. These are, I think, examples of different types of business model transformation that organizations go through. And I think we've got a lot of examples of this in the marketplace.

And where would you start? Well, I mean, I I just wanted to pick up on what you're saying here because I think in many cases when we go in to clients and work with transformations, we're actually working in some sort of a we want to be or we're guiding organizations to focus on business model transformation. They are business led, they are opportunities to really impact the bottom line in some new and interesting ways where we're leveraging technology as a strategic sort of partner in that in that journey. What's interesting around that business model transformation is, of course, it's going to depend on process transformations. You're going to be doing a bunch of those to deliver it. But you have to start from that point of bringing some sort of strategic leaders to the table: business, IT, a number of other leaders to say, what is the landscape that we're working in? How can the the skills and the opportunities, the technology or the processes or any number of different things that each of those leaders bring to the table? How can we stitch these together in a different way that better serves our customers, that opens up opportunities for us to increase the number of customers that we have, retain more of our customers for longer because they're more satisfied and they're getting a better service, or uh, you know, increase the amount that they spend with us, however that that might be.

Yes, it's this that interaction piece is key to this. It's this how do we interact with our customers? How do we uh um uh if you have different channels or the way in which you get paid for them, I I like um liken it to some of the ways in which we we introduce an app into uh somewhere like Starbucks, where they they like they bring in the app and uh instead of having to line up and wait and to give your order, which then gets given to a barista, which then eventually gets to you, instead of having to do all that queuing, you can now use your app to send the coffee order in, which means that people are now more inclined because they can order it on the way down in the elevator and it's ready for them when they get to the store and they don't have to line up and wait for it all to be made for them. And so you're you're changing the uh the business model and the dynamic of interaction with the customer.

Well, what I like about that example, and I think we we need to dissect that one just a little bit. It isn't as simple as just throwing in an app and saying, look, you've got an app, we're gonna pay through the app, and so on. And that's definitely a part of it. That whole paying through the app and storing money on your card is one piece that we might talk about in the next section on domain transformations. But the the app itself, what was interesting there is shifting the model effectively from being a walk-in cafe, sort of mindset, barista is sitting there, you walk in, you place your order, you hang around, you wait for it. Like a fast food place, right? It's gonna come in. You're gonna you're gonna join the queue and you're gonna get your food pretty quickly or your drink pretty quickly, and the app facilitates the paying for that, to one of a a literally dial in and pick up. So you just you you you use the app to place the order, you walk in, you pick up. The reason I mentioned those are two different things. With the first piece, Starbucks didn't have to change things too much. With the second, once they had people lining up to pick up orders, they often had to add more people. I mean, if anybody was in, you know, had a local Starbucks at that time, number of times you'd walk in and like there's nobody in the place, but there's a whole pile of drinks waiting to be picked up, or there are people just working on keep meeting those online orders effectively. So there's a kind of a significant shift in how that business model was being run as a result of the digital elements, which has to do with the app piece. And the reason I'm mentioning that is many of us will have experiences with coffee shops that have an app but don't have that business model transformation. You may even have other examples, Peter, of things or products that have an app that don't necessarily have that business model transformation associated with it.

Yeah, yeah, I can think of the fridge that we recently bought, which uh where the app is absolutely useless. It doesn't give me anything that's of value with respect to the fridge or the the management or the interact with it. So I can't control the temperature, I can't tell um the when the, for example, the filter needs replacing, or I can't tell that there's nothing inside of the app that makes it valuable for me to even have it installed or to interact with the device or for interacting with the so that my interaction with it hasn't changed as a consequence of this being there. So there's been an introduction of digital technology, but it hasn't changed my interaction with the company.

So I'm just as you're describing that, all I'm thinking of you is using your app to order a cold beer from your fridge and seeing what happens, which obviously would be a is probably a premium benefit. But that would be perfect.

But I yes, that just brings this picture of like cans of beer going flying across the room.

But but but sort of joking, I mean, I think we've got to recognize there are a couple of things there. One is um uh business model transformations aren't easy. And the the the point that you're describing, and I can think of a couple of others as as well, um, isn't necessarily a bad thing. They've got to experiment, they've got to maybe seek out what the benefit is. So uh I'm just thinking of the car. I I have a car, I have an app with the car. It has nothing, it's not a Tesla, it's nothing to do with how I can run the car, it's just more about maintenance and reminders about bits and pieces like that. Not very compelling, but they're learning. So that's the one thing we can say about that. The fridge, the the app with this particular car manufacturer is we're in that process of trying to uncover possible business model transformation because they don't, they're not obvious.

There was a there was an example that um that you gave before, which I thought was um actually to me more of an example of a business model transformation uh around insurance and the switch from I buy an insurance policy once a year to I pay for my insurance by the mile that I drive. And that that to me is a fundamental shift in in the business model, in like how uh where my where does my revenue come from? Like what what is it I'm getting paid for? How am I getting paid for it? Perhaps it might be a better way of thinking.

Well, and and what I liked about that example and and uh is it's also a great example of how digital technology is coming in to facilitate that. You couldn't have done that without the sort of technology shifts that we've been seeing in recent years. So this is a great example where you've got strategic leaders coming together to say, how can we tackle this market in a different way? What can we do? We're already dealing with car insurance, we're already, we've got technology, we're tracking various things in terms of whatever it might be, information about our um clients, because we have to from an insurance perspective. But what is it? Is there some opportunity that we can uncover? And I think that's just a great example. There's another one that we saw, I think all of us experienced through COVID is restaurants and takeout, that shift that many, many restaurants made towards uh a takeout mentality, you know. And I we we see restaurants, I'm sure all of us are seeing restaurants where the bulk of their business is clearly takeout business. Um they really have kind of moved away, or they're at least it's a 50-50 or something like this. But the takeout is not the occasional thing, but is a big part of their business because technology allowed them to do that. And that technology happens to be quite a number of things. It's to do with you know all of the delivery uh um uh startups that are out there, but also updating websites and allowing people to take payments and placing orders, like point of sale work, you've got to be able to plug that into however your food is being the orders are being taken for the food and getting sent to the kitchen because otherwise you're going to get into an awful uh state. So that's again an example where the digital side enabled that business model transformation.

I've got I've got one last one before we wrap this up here, and this is forward-looking, yeah, back in that space around cars. Uh, when you cars have become more and more complex over the years. Now there's so much software and sensors inside of a car, um, that it's because it's not really possible for somebody at home on their own to actually fix these. You've got to take it to garage because that's the only way that uh it could be fixed. Um that combined with the um oncoming rush of electric vehicles and everything coming into the marketplace means that there's a there's a shift in how we will probably buy cars in the future. And so, the uh from this perspective, your business model, if you're in the business of selling cars, is going to need to change too. And the supporting systems will need to change. So the environmental shift around the organization, uh, and that change, which will drive a need for the change and the adoption of uh uh digital technology to support that new uh model and that new way of uh delivering cars.

I I really like the example that you're using there because I think it sort of it's it's a great way for us to sort of get back to the beginning, which is um in the last episode we talked about process transformation being the default place that most people go to when they think of transformation within an organization. And what you've just highlighted there is there is absolutely a shift to the business model transformation beginning to be that dominant starting point of a transformation. The need for it driven by a market where if you're not the one that is disrupting that market, that is adjusting, that is doing what we've described in terms of Starbucks, what we've described in terms of some of the US insurance companies, if you're not the ones doing that, the others are, and you're having to respond to that. You're having to kind of because they're eating into your market share, they're taking customers away from you, or they're changing the pricing structure. So all of this points to business model transformation. And remember, we got we define that as strategic leaders around the table, not driven out of technology, but business leaders coupled with technology leaders really beginning to understand that landscape and look for these opportunities, try out different things, find out which ones land, which ones gain traction, and which ones don't. And I think that is a big learning from this.

I like that. I like that. Um, so I think I think we've covered a lot around this. Is there are there three points we'd want our listeners to take away from this?

Yes, I think I think the a couple of points. Number one is you need business and IT at the table. You need probably more than that, but you need strategic leaders in business and IT at the table.

I I like to always talk about our business versus it being business and the IT. Thank you.

Yeah, that's a great way of looking at it. Yes, absolutely. I I think that's so essential, right? Um, the second piece is uh that it is it is sort of shifting how you interact with customers. And we talked a little bit, maybe it's the different channel that you can kind of get paid in, maybe it's just a different way that you interact, you offer a service which is somehow slightly different, such as the uh insurance by the mile versus annual insurance. But there's some sort of shift in how you go to market, how you find your customers, what service you're offering with the money and where the payments are coming. And then I think the third thing I'd say is as a survival strategy is the need to get good at business model transformations. There's we've not really touched on it, but there's an innovation and an experimental piece of it, which you're not going to be able to whiteboard the next perfect business model strategy and go and implement it. You're gonna have to probe, you're gonna have to try different ideas, you're gonna have to find out what customers kind of turn their attention to and where you can uncover those points that gain traction.

Yeah, get good at change.

It's uh really like how can you well get good at experimental innovation in a sense. But yes, absolutely, get good at change.

Okay, well, thank you. I think that's uh summed it up beautifully. And so we've covered off out of the four types of bit digital transformation, we've covered off process transformation. This was all about business model transformation. Uh, next time around is going to be domain transformation, and we've still got that oldie but goody cultural and organizational transformation to come. So awesome. Uh look forward till next time.

As always, feedback welcome.

See you all next time. Feedback's always welcome. Thanks. You've been listening to Definitely Maybe Agile, the podcast where your hosts Peter Madison and David Sharack focus on the art and science of digital, agile, and DevOps at scale.