In our last blog called “Push the Envelope…Create a Category”, we made the case that winning today means selling solutions and creating/leading a category. When you do that well, your products will outsell the competition and in turn you will build an outstanding brand.
Let’s look a little closer at the challenging task of category cultivation and preventing business model myopia. Business Model Myopia (BMM) is caused by looking through the limited lens of the current business model.
Business Model Myopia Examples
Through our work within the Silicon Valley, we have seen first mover brands enjoy an early advantage in defining a category. Palm and RIO mp3 players come to mind. They both enjoyed early success and dominant market share. The issue was that they didn’t define their category broadly enough, they viewed changes through their current business model lens and, while they innovated the product, they didn’t innovate the category. It took Apple to show the industry how to recreate the category, focus on innovative customer solutions and take a whole systems view of the category. The broadened category, in turn, changed the music and entertainment industry as well as the phone/mobile computing industry.
Even a 150+ year iconic brand like Levi’s can fail to grasp this point. For a long time Levi’s defined the jeans category and was the nation’s largest apparel brand. Then, in the late 80's and 90's it began to focus primarily on lagging indicators (product sales, which looked good at first) but failed to act on leading indicators (brand relevance). Had Levi’s acted on its brand relevance indicators and challenged itself to innovate the category they may have better handled the urban hip hop surge or designer jeans and other category invasions of the time. And maybe Levi’s would not have been reduced to less than a third of what it once was.
This type of current business model myopia is a common disease with once big time industry leaders. To name a few — Kodak, Sears, Xerox, Newsweek. When those suffering from BMM look at innovations through their current business model they can’t see the vast opportunities of new innovations, even ones they invented…like Kodak’s Digital Photography or Xerox’s graphic user interface or computer mouse (these innovations didn’t fit their business model of film photography or document copier manufacturer).
The key is to look, not through the narrow lens of the current business model, but through the broad lens of an expanding, re-invented new category. Then the enterprise must broaden the definition of its brand (Apple is no longer just a computer company) or expand its family of brands to take advantage of the innovative opportunities (Toyota Prius and other hybrids).
Expanding a category takes new resource devotion. This means the enterprise must milk or in some cases kill the current cash cows of its current business model to free up human and financial resources to expand the category. Maybe if several years back Sears had been visionary and brave enough to reinvent the direct selling category for the digital age it might have become the Amazon of today.
To be a major value-creating winner in the future, each enterprise must move out of the comfort of its current business model. It must challenge itself to envision an expanded, innovating category and shape its future business model to capitalize on the opportunities the newly defined category offers.
This is brand and business building at its best.
The Lesson: If you’re leading the category your job is to reinvent the category before someone else does it for you.
— Dan & Meredith Beam, Principals, BEAM, inc., San Francisco