Thriving in 2010 and beyond

Thriving in 2010 and beyond Transforming your business model for the changed economy TEN 102, February 9, 2010 Hugh Coppen, President Winning Leadership, Inc. ©Winning Leadership, Inc. All rights reserved

To truly become number one, you must constantly strive to surpass yourself… Not the competition.

Whatever the post-recession will be, it won’t be a ‘recovery’ to what was… • US consumer: Unemployed and underwater • Economic realities e.g. tight credit, stimulus hangover • Double-dip? • Climate change & growing environmental issues • US vulnerability (oil, deficits, wars, US$) • Changing global economic dynamics • Impact of tech (Social networking, viral marketing, speed of obsolescence) • Which of these will have similar impact in Canada? ©Winning Leadership, Inc. All rights reserved

“… a fundamental transformation…” “…Peter Drucker used to say that companies fail not because they do the wrong thing or because they do the right thing poorly, but because they fail to understand a fundamental shift in the theory of business*. (Jeff) Immelt calls it an ‘economic reset’. But you could call it a fundamental transformation…” * Drucker’s ‘theory of business’ has three components: Assumptions about the environment of the organization; Assumptions about the specific mission of the organization; and Assumptions about the core competencies needed to accomplish the organization's mission.

“… a fundamental transformation…” “…Peter Drucker used to say that companies fail not because they do the wrong thing or because they do the right thing poorly, but because they fail to understand a fundamental shift in the theory of business. (Jeff) Immelt calls it an ‘economic reset’. But you could call it a fundamental transformation... “The most important thing any company should or could be doing now to prepare for the post-recession environment is to look at all the fundamentals and re-examine what changes in the theory of business might mean for their core competencies, for their ability to meet the new customer needs.” Paul Laudicina, Chairman, A.T Kearney As quoted in Business Week, August 24 2009

“This economy can’t get back on track because the track we were on for years – featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere – simply cannot be sustained. “All we know is the current economy can’t “recover” because it can’t go back to where it was before the crash. So, instead of asking when the recovery will start, we should be asking when and how the new economy will begin.” Robert Reich, July 2009 Professor, UC Berkeley & Former Labor Secretary Implication: Challenge your business model for its robustness in the evolving economy

Customer Infrastructure Business Model Value Proposition Profit Plan Components of a business model People & resources Competencies & processes Priorities & culture Who they are What they really want Your unique offering How you make money What’s your business model? ©Winning Leadership, Inc. All rights reserved

Obsolete business models Business models that work • In & out of Chapter 11 • Rigid boundaries / silos • Hierarchical, ‘them’/ ‘us’ • Multiple aircraft types • Constantly changing priorities • Higher price, worse service • Consistently profitable • Resources collaborate • Relationship-based • Single aircraft type • Shared goals & values • Lower price, better service ©Winning Leadership, Inc. All rights reserved

“General Motors must always lead…” Harlow Curtice, CEO, 1955 “The culture at GM has been an impediment to change…” Fritz Henderson, CEO, June 2009 • Business model erosion • Undermined their unique historic ‘step up’ brand progression • Declining car sales masked by over-dependence on SUV ‘s • Culture - ‘The GM Way’: • Tied proudly to history of industry dominance • Home-grown leadership - conformists not innovators • Minimal accountability (e.g. after losing $72bn in 2004-08) • Inward looking: “Why we can’t…” not “How can we…” • Unrealistic outlook: “..turnaround is imminent.. our market share will increase..” ©Winning Leadership, Inc. All rights reserved

From industry pathfinder to also-ran 90’s: Years ahead of its time, family friendly, simple ‘Walled garden’ – community, ‘it’s all here for you’ Debuted communication innovations e.g. AIM BUT… Stayed in dialup while broadband grew from 6% in 2000 to 30%+ in 2003 Neophytes with free CD’s replaced savvy users Watched the community positioning it owned taken over by Facebook, YouTube, MySpace, Twitter, etc. ©Winning Leadership, Inc. All rights reserved

Failed business models– what they have in common Customers Value Proposition Profit Plan Infrastructure • Lost touch with changing customer needs • Failed to sustain a unique offering • Suffered margin erosion in ‘conventional’ profit streams • Poor mobilization of resources • Lack of innovation • Outdated processes • Change resistant culture ©Winning Leadership, Inc. All rights reserved

“The inertia of success” • “Senior managers got to where they are by having been good at what they do... So it’s not surprising that they will keep implementing the same strategic and tactical moves that worked for them during the course of their careers… I call this phenomenon the inertia of success. It is extremely dangerous.” • Andy Grove, Chairman, Intel • As quoted in “The Leadership Engine”, Chapter 4 ©Winning Leadership, Inc. All rights reserved

What’s business model transformation? A definition: The introduction of a game-changing business model that meets a real customer need while offering a unique value proposition that makes money in a different way than has existed before ©Winning Leadership, Inc. All rights reserved

Successful business transformations– what they have in common Customers Value Proposition Profit Plan Infrastructure • Meet changed customer needs in an inspired way • Unique, innovative, responsive • Capture new sources of profit • Use resources in a different way • Leverage core competencies • Innovate processes & priorities • Align the culture ©Winning Leadership, Inc. All rights reserved

Business transformation – success is driven by what YOU do • Fully grasp the implications of external changes • Relentlessly innovative, willing to be disruptive • Never lose sight of the vision; stay focused on the customers • Identify and fully support the right champion(s) • Empower strong, task-dedicated teams to execute • Act with courage, persistence & determination • Drive a powerful sense of urgency • Keep priorities clear; stay consistently on message • Remove obstacles and resistance • Constantly review, recognize, reward - and revise the plan ©Winning Leadership, Inc. All rights reserved

Implementation steps Conduct a ‘Business 360’ Challenge the status quo on everything ‘Stress test’ your current business model Redefine/reinvent your business model Align culture with your business model ©Winning Leadership, Inc. All rights reserved

Customer Infrastructure Business Model Value Proposition Profit Plan Redefining your business model Who are they? What do they really want? How do we reach them? What resources will we utilize? What core competencies do we need? What processes must we innovate? Do we need a shift in our culture? How will we make money? How can this give us an edge? What’s unique about it? Is it a game changer? ©Winning Leadership, Inc. All rights reserved

Change leadership “One of the most vexing dilemmas that stable corporations face when they seek to rekindle growth … is that their internal schools of experience have offered precious few courses in which managers could have learned how to launch new disruptive businesses.” Clayton M. Christensen & Michael E. Raynor, “The Innovator’s Solution: Creating & Sustaining Successful Growth” Harvard Business School Press ©Winning Leadership, Inc. All rights reserved

The question for TEN members: Will what got you here get you there? Hugh Coppen, President Winning Leadership, Inc. (415) 644-5774 hugh@winningleadership.com ©Winning Leadership, Inc. All rights reserved

Thriving in 2010 and beyond