Embrace the Business Model That Threatens You

23 May

By Leonard Fuld

If your company is already well established and has smart management, it is likely that it will become a hybrid in the next ten years, blending its legacy business with a new business model that is rising to threaten it. Take Walmart, for example. After suffering several years of Amazon’s online hegemony, Walmart responded with a hybrid approach. Merchandise ordered online can now be drop-shipped for same-day pickup at local stores. This and other creative solutions have driven over $9 billion of online sales to Walmart. (It’s no surprise that Amazon — which has no physical stores — has mirrored the move from the other direction, installing lockers in neighborhood stores to allow for direct pickup.)

Entertainment and medicine are other industries where hybrid models are beginning to emerge as resilient success stories. Netflix, formerly a media distributor increasingly threatened by the very entertainment companies whose programming it sells, has begun producing its own original programming (such as the recently released series House of Cards.) According to Netflix, offering popular original programming has attracted its customers to order more items from the rest of its media catalog — a hybrid win-win. The Veterans Administration hospital system has formed an alliance with Bosch Healthcare to offer a more efficient means to monitor and diagnose the elderly or infirm remotely, from their homes.

To understand how strategic logic leads readily to such hybrids, consider the results of a recent war game I helped to stage, in which participants sought winning strategies in one fast-changing sector: the US higher education market. Teams playing the roles of traditional large state and non-profit colleges confronted other teams representing the new Massively Open Online Course (MOOCs) and distance learning enterprises, such as Coursera and The University of Phoenix. At first the teams circled each other in the plenary session, each declaring its position and revealing strengths and weaknesses. It soon became clear to the teams and to the observers in the room that neither the online nor the traditional college “education delivery” model alone could prevail. Traditional brick-and-mortar schools suffer from a high cost base that has resulted in tuitions reaching stratospheric heights. Meanwhile, the alluring proposition of the online offerings — courses you can take anywhere, anytime, at a lower price point — is tainted by high drop-out rates and the somewhat lower credibility of their certificates and degrees.

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Posted by on May 23, 2013 in MOOCs in the News


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