Bringing Technology to Market Conference in Berlin
2016: Cost traps in innovative business models
Firmly established B2B business models are becoming obsolete, as we have been witnessing now for several years. This has forced business leaders to fundamentally revise the way their companies function and produce value. Some have decided to pare down their premium products to compete against lowprice competitors, whereas others have expanded their portfolios by adding complex service solutions. Some have accomplished a turnaround by selling the use of their products rather than the products themselves. Others have responded to the surge of digitalization and acquired state-of-the-art technology enterprises, trusting that these will bring about the sophisticated new offerings that the market is demanding.
But redesigning a company’s architecture is not without hazards; it requires a sound understanding of whether the costs involved will improve the structure or damage it for good. Very often, though, managers pay more attention to the measures required for achieving the desired revenue goals than to the risks involved in the necessary expenditures.
However, the truth is that there are a number of innovative business models that contain higher levels of risk for the supplier than the buyer. So, when entering a new area, at minimum there should be an awareness about where the risks are located.
Just keep in mind: Planners are usually guided by the results of their past decisions, their individual biases, and the halo effect of their new plan. Hence, they will often ignore the fact that new businesses per se contain unknown factors. So a healthy amount of skepticism as to the success of a new endeavor and the careful checking of all known factors will help you to avoid cost traps and to establish the fail-safe system you need.