“Pop-up business models” instead of start-up labs?

For many larger companies, it is now good practice to keep a few start-ups. The idea behind this: To gain more or less direct access to new business areas and/or to achieve learning effects within your own company through access to new ideas, a fast and agile culture and fresh talent. It acts as an incubator that not only provides funding, but is also heavily involved at both a strategic and operational level.

Start-up initiatives by large companies

While these initiatives are laudable and welcome as they promote the start-up culture, such constellations can also have rather unintended consequences for the companies providing the capital. In my article “Why industries and companies are caught up in the maelstrom of disruption”, I shed light on the background to the compulsion to change. One fundamental insight from this:

“The ability to adapt to rapid technological change and generate permanent revenue streams is the future core competence of every company par excellence.

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So if it is of crucial importance to transform into a fast-changing organization, it may not be a good idea to outsource this very change, so to speak.

Real change naturally takes place outside the comfort zone

I am fully aware that it is sometimes almost impossible for larger companies to initiate change on their own. Unfortunately, the company usually has to get into economic difficulties before fundamental changes can be initiated. Real change always takes place outside the comfort zone.

It has now reached the boards of directors of Corporate Europe: Digital transformation is not about fighting symptoms, but about developing new business models.

The supposed hold on the existing business model in the downward spiral

Many companies are not particularly good at developing and converting to a new business model. Although there are good examples of successful business model transformations, even outside of Silicon Valley, they unfortunately remain the exception. The rule is that companies stick to their old models at all costs and get caught up in this downward spiral of cost-cutting programs, staff cuts and declining sales. And end up going out of business altogether or being sold off cheaply.

Instead of ONE new business model, MANY new business models

Converting a business model is also open-heart surgery. Existing revenue streams must not be jeopardized and yet a certain amount of risk must be taken in order to be successful at all. No wonder many managers, especially older ones, shy away from this.

So why not simply do one thing and not the other? Keep the existing business running and constantly try out new business models on a very small scale. In reference to pop-up stores, I call this approach pop-up business models.

Pop-up business models (PUG)

In contrast to traditional business model engineering, pop-up business models arise from an opportunity. This opportunity can be, for example, an insight, a good idea from an employee or a customer or a completely sudden market need. Instead of ignoring this (as in old-economy companies) or evaluating it at length (as in consultant-supported companies), you try to launch a product as quickly as possible and generate initial sales with it.

This harbors the risk that a new business model will quickly flop. However, this comes at a much lower cost. On the other hand, if the business model is successful, the basis for the business has already been laid.

The positive side of accelerating change is that many more business opportunities are emerging. The period of time in which a business model can be operated successfully, on the other hand, is shrinking. It therefore makes sense, as well as from a risk minimization perspective, to drive forward various pop-up business models of this kind in parallel.

Concrete implementation

We are seeing approaches in various companies that are moving in this direction. I have discussed the idea of pop-up business models with various representatives of large companies over the last three months. The skepticism is high. Fortunately, there is also interest. While the concept as such seems plausible, the question is how to implement it in practice.

This could be accomplished by the company setting up a business engineering division with the sole purpose of enabling these pop-up business models. This division organizes a team of 8 people with relevant skills for each PUG: a leader who represents the idea and supports the team, a marketer, a business developer, two product engineers, two people for operations and someone for finance and business administration.

This team is given a financial and time frame and is completely free in its decisions. This means that it can decide independently on all key measures. The Business Engineering Division is available to all teams for advice on a case-by-case basis. Once time and money have run out, an assessment is made and a joint decision is taken on what to do with the result.

From total loss to a flourishing new line of business: it’s all there

I consider a defined end to the development of the business model and a strict assessment of the possibilities to be crucial. At this point, every result should be assessed without emotion.

However, this does not mean that the company can be used for every PUG. On the contrary. I assume that only one in 10 such PUGs can actually be included in the core organization. However, this can then be done relatively easily. The existing team is expanded in line with the respective profitability and integrated as a new division.

The remaining 9 PUGs will probably be total failures that are simply written off or interim results. These can either be pursued further, sold on or merged with other PUGs if this makes sense.

Advantages over the corporate incubator model

The advantages over a corporate incubator model are obvious: innovative, agile and ultimately also playful business model development is closer to management and therefore takes place in the middle of the company without disrupting established structures. Employees who want to try something new and prove themselves are given the opportunity to do so within the company. The rigid organization is loosened and agility is promoted as a component of the corporate culture. The company is thus systematically trimmed in the direction of adaptability.

 

This article originally appeared as part of my “Transformed!” column on t3n.