Over the past five years, the keynote speakers at the CEO Strategies Breakfast to kick off the BizTech Conference & Expo have been stellar. They’ve ranged from Renee Mauborgne, author of “Blue Ocean Strategies,” to Joe Pine, author of “Authenticity” and Marilyn Carlson Nelson, author of “How We Lead Matters.”
Now in its sixth year, the Expo will bring another top-notch speaker, Kay Plantes, a noted author and consultant.
Plantes, who happens to reside in Madison, is the author of “Beyond Price: Differentiate Your Company in Ways That Really Matter” (Greenleaf Book Group, 2009).
Although she is an MIT-trained economist, even Plantes could not have foreseen how the Great Recession would make her new book all the more relevant and vital when it hit the presses last year.
As companies were ravaged by the economic downturn, many succumbed to the pressure to slash their prices, just to keep as many customers as they could. For many businesses, that strategy only expedited their demise.
Plantes is an expert on business model innovation and reinvention. At the CEO Strategies Breakfast, she will help executives learn how to re-evaluate their companies’ business models. She also will help them position their companies for new growth as the economic recovery takes root and picks up speed.
The book makes a compelling argument that new products and cost-efficiency are no longer sufficient to maintain attractive margins. Rather, leaders must innovate their business models, anchoring them in hard-to-copy advantages. Her book uniquely integrates strategy, execution and leadership best practices. The end result is an eight-step road map for building a differentiated company that earns price premiums and customer loyalty.
Before starting her company 20 years ago, Plantes served as director of marketing and then director of business development for a global medical products company now owned by GE Health Care. She also served as chief economist for Wisconsin’s Department of Commerce in Gov. Lee Dreyfus’ administration and helped establish the Wisconsin Housing and Economic Development Authority (WHEDA) in the early part of Gov. Tony Earl’s administration.
Plantes holds a Ph.D. in economics from MIT and a B.S. in business administration from The Pennsylvania State University.
Plantes will open the BizTech Conference & Expo on Wednesday, April 28, at the Wisconsin State Fair Park. For more information, visit www.biztimes.com/expo.
She recently discussed her book and her philosophies for business model innovation during an interview with BizTimes executive editor Steve Jagler. The following are excerpts from that interview.
BizTimes: Let’s start with the title of the book, “Beyond Price.” The recession really did create pressures on businesses to fixate on the prices of their goods or services, thereby commoditizing themselves, didn’t it?
Plantes: “Yes, although the drive towards commoditization had been going on even before the recession. More and more companies were facing price competition. So, the recession, because it created a lot excess supply relative to demand, accelerated the commoditization that had been an underlying trend in our economy to start with.”
BizTimes: Make the case of the Wal-Mart/Sears comparison, as you do in your book. I find that to be fascinating.
Plantes: “Well, every industry has a Wal-Mart, which is the lowest-cost competitor. And in a market-based economy, competition will drive people to compete on price. There will be a lowest-cost company, which will be the Wal-Mart of the industry. And as long as the terms of the competition are around price, the Wal-Marts will be the only ones in the industry that will make a profit. So, if you can’t be the Wal-Mart of your industry, what are your options?
“What you don’t want is to try to compete on Wal-Mart’s terms, but not having their underlying advantages that make them the lowest-cost. So, you have to build a different kind of business, and I think Target (Corp.) is a great example of a company that has done that. It’s also a discount retail center, but what’s different about it is it has created a much better shopping experience and a lot more confidence in the products that you buy. Another company that has taken market share from Wal-Mart is Amazon. There’s a different business model. It started out as books, but it has become the leading online retailer. And it has advantages Wal-Mart doesn’t have. Also, it relies heavily on customer-to-customer communications about the value of different products and services. Here are two examples of companies that built different business models to win beyond the lowest possible price, which is Wal-Mart’s value promise.
“What you don’t want to do is become Sears/Kmart. Walk into a Sears store, it’s extremely confusing, as to who they are. On what basis are they trying to win your business? On one corner, they have Land’s End, but they have similar clothing somewhere else in the store.”
BizTimes: If not price, what can a business compete on, exactly?
Plantes: “A lot of it depends on what your target market is and what are the things they care about. In many B-2-B markets, it can be extremely helpful to look at the overall total costs your customer has working with you, compared to the individual product cost.”
BizTimes: Relative to B-2-C companies, many B-2-B companies fall into the trap of not investing as much in their brands. From what you’re saying, that’s a mistake, isn’t it?
Plantes: “Well, every company has a brand. Every company has a business model. The question is whether or not you take it as a given, and that’s what it is when you don’t have to change or innovate around it, or you say that by transforming my business model, by improving my brand, I have a better business. I think B-2-B companies make a huge mistake in not thinking about what their business model is and how the customer sees that. The reason why that’s a mistake is that in so many B-2-B markets, everyone is running the same kind of business. It’s on the same terms, the same capabilities. And that’s just a formula for a commodity market. If you can’t be the lowest-cost, it’s not going to be an attractive position to be in.
“It’s commensurate, then, for leaders of B-2-B companies to step back and say, ‘What kinds of problems can I solve in my desired customer base, that I can solve those problems better than anyone else?’ It often times is going to require doing different things than you’ve been doing in the past.”
BizTimes: How does a company begin the process of re-evaluating its business model?
Plantes: “It’s important to think about the business model to start with as the core strategy decisions that every leadership team should make. And they’re pretty straight forward. It’s who is my target customer? What business do I want to be in? What’s the value promise that I want those customers to choose me over my competitors? And then what advantages am I going to build that I can deliver on that value promise in ways that competitors can’t easily copy? And then, what’s going to drive my profitability in this area?
“Then take a step back and look at what are all the changes going on in your customers? What are all the changes going on in technology? And your customers’ customers? Look at all of the forces that impacting your marketplace and then consider different ways that you might innovate around who you sell to or possibly the channel you use to reach them … different notions of what your business is all about. Think of a much stronger value promise. And also think about, are there things you could do uniquely well that maybe you haven’t developed well enough yet? You might also want to think about ways to innovate your revenue model. It’s those innovations in the core strategy decisions that lead to a new business model.
“If you are stuck in a commodity-based situation, the only way out of it is through a new business model. People historically thought, ‘One new product can pull me out of the commodity market, and I can ride that new product and those attractive margins into the future.’ But we live in a copycat economy today, where people can see a new product and copy it instantaneously, so the speed with which new products become commodities is so fast in today’s economy, that the only way you build something that’s hard to copy is through a business model that is anchored in things you can do that no one else can do. And it’s enhanced by a strong culture that supports your business model.”
