The September 22nd edition of Business Week had an interesting chart titled “Innovation: The Biggest Bang for the Buck”. The chart depicted the average revenue growth and stock price returns over a three year period for 25 enterprises that are known for innovation in products, processes, consumer experience, or business models. These forward thinking firms were chosen in a survey of 3,000 executives. And, the winner by a wide margin (both stock returns and revenue growth) was the group of companies known for “innovative business models”.
While the Business Week chart compared a very small sample of global enterprises it is congruent with my experience in the high tech industry. I found the importance of innovation in a firm’s business model true not only as a point of initial differentiation but, possibly more important in order to sustain competitiveness within an industry as it matured (or, as a key technology moved through the adoption life cycle).
Within the arena of “innovative business models” one of my “hot buttons” is the use of distribution strategy as a key element of a firm’s sustainable competitive advantage. While I can list any number of successful firms across diverse industries (such as Dell, amazon.com, Lexus, GEICO, Charles Schwab, etc.) where an innovative distribution strategy was a cornerstone of their business model; my experience was that it was difficult to find staff or managers with this expertise. I will leave for another blog post the challenge of hiring or growing this expertise and how to internally transfer that knowledge especially for firms that are in highly competitive and rapidly evolving industries.