Thinking Outside the Business Model
How companies are successful at transformational change.
By David Day
Thinking Bigger
"It is not the strongest of the species that survives, nor the most intelligent, but the one most adaptable to change." This quote, often attributed to Charles Darwin, is as true of companies as it is of living organisms - perhaps more so.
Companies must constantly make adjustments based on changes in technology, industry, markets, customer desires, competition and more. Successfully reacting to these changes isn't a competitive advantage, it's an imperative for survival. The competitive advantage comes to those companies that are able to go beyond simply reacting, and transform their business models by identifying trends and opportunities to capture new customers and new markets.
Popping Outside Your Business Model
Joseph and Salvatore Paris went into business to sell gourmet popcorn. In 1983, they founded Sally Jo's Old Fashioned Popcorn, a popcorn manufacturing and distribution company. Even before the kernel of their business was fully popped in 1983, the brothers were already expanding their business model.
"Right away, one of the first things we did was to start a second company, called S.J. Paris and Co.," said Joe Paris.
S.J. Paris and Co. bought all the supplies and inventory Sally Jo's needed to operate, but in larger quantities in order to gain a discount. They then turned around and sold the excess to other companies, including other popcorn companies.
"It lowered our product costs, and it started us in another company," Paris said. "That was right out of the get-go. It was actually before we sold our first bag of popcorn."
The forward-thinking entrepreneurs have since grown Paris Brothers into a diversified company with 100 employees offering specialty foods, as well as warehousing, logistics and distribution services.
The first step to the logistics services came when the brothers sold the popcorn business in the 1980s. They kept S.J. Paris and Co. and moved into poultry processing, where they gained expertise in efficiently moving perishable goods.
"We had to be able to move stuff around the country and get a feel for what it's going to take to get it somewhere on time and intact. In the chicken business, that's very important," Paris said.
Another company approached them to help solve a freight problem it was facing. The Paris brothers took on the challenge, which led to the birth of Ground Freight Expeditors (GFE), their logistics services company.
"It's basically, when you think about it, just leveraging our core business," Paris said. "We were accustomed to moving difficult boxes in a timely fashion."
View from the Press Box
A lot of companies are good at moving boxes around. So what helped Paris Brothers transform from moving their own boxes, to moving boxes for other companies? It requires a deliberate focus on looking ahead and recognizing new opportunities, said Joe Calhoon, a strategic business consultant and author of several books on business growth.
"Most businesses don't have an innovation strategy," Calhoon said. "They don't have a strategy to continuously reinvent their business."
Calhoon said business owners need to be focused on the far horizon, rather than nose down in the daily operational tasks. He said business leaders should focus on the marketplace and stakeholder needs, the vision and mission of the organization and the strategy, and let managers focus on structure and systems, culture and results within the organization.
Patrick Shore, president and CEO of IntelliThink, agrees that the key to transformative growth is company leaders focusing on "big picture" strategy.
Shore equates it to a coach's view from the press box: assessing the field from a high level to see how things are unfolding in a broader perspective.
Needs and Opportunities
Both Shore and Calhoon said the question for business owners is how they can better serve the present and future needs of current and prospective customers.
"People don’t spend enough time thinking about the needs of other people," Calhoon said. Focusing on those needs can lead to opportunities to transform.
When Gina Stuelke first joined her family's business, her job was to focus on change and the future needs of customers. Kenton Brothers got its start in 1897 selling locks, repairing umbrellas and sharpening ice skates and rotary lawn mower blades. And throughout the 20th century, the company was a typical locksmith. Although locks aren’t going away anytime soon, as fourth-generation owner, Stuelke has led a transition to electronic security and video surveillance systems. The company has found new customers and new ways to meet the needs of existing customers by breaking out of the "lock" box, so to speak.
It is tempting to label Kenton Brothers a "security company," but the technology solutions the company provides go beyond security. They can improve businesses' processes. Store video surveillance systems, for example, can monitor and track customer engagement opportunities in retail by alerting management to extended wait times at registers, or video monitoring in a distribution environment can show whether orders are being filled and shipped correctly. Stuelke calls it 'video analytics.'
"We're using security tools for a variety of additional purposes that add to the bottom line of a company," Stuelke said.
Nueterra Companies also has seen transformative growth based on customer needs, as well as the needs of Nueterra itself.
Chairman Dan Tasset launched Nueterra Healthcare in 1997 to partner with physicians to build ambulatory surgical centers. Today, Nueterra Companies comprise eight divisions. All are focused on health care industry customers, but the services are as diverse as capital management, human resources solutions, real estate development and insurance.
"As we began to grow, the big picture was that we knew we had to continue to change and adapt, and broaden what we were doing," Tasset said.
Each new direction the company took, he said, was triggered both by a desire to grow and a need of Nueterra itself or its clients and partners.
For example, the company moved into real estate development of health care facilities because the existing model of contractors wasn't meeting Nueterra's needs.
It is common for construction companies to turn over possession of a building for occupancy while subcontractors continue some final finish work, but that doesn't work for health care facilities, Tasset said, where patients are coming in, along with licensing agencies, and where a sterile environment is needed. Contractors were resistant to changing their practices and hold occupancy until all work was completed.
"That prompted a need for us to do the development ourselves," Tasset said.
Leading Change
While business leaders must have the vision to identify needs and see the opportunities, they also must have the support of employees.
Shore said existing employees are a key to successful transformation.
"When companies do a transformational change, in many cases they're only focused on the emerging skill sets and movement of people. But the core business is what's paying the way for them to do that transformation exercise in the first place," he said.
Shore said employees are the foundation of that core business. Business leaders must actively engage employees in the change process.
"Where companies fail the most is they don't bring the employees along with them," Shore said. "The number one thing they have to be able to do is paint a compelling vision of the future."