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Use Competitors as a Source for Your Business Model

Business model innovation is critical to the long-term success of your enterprise. Still, most people need a starting point for some inspiration — so start with your competition. Sure, competitors are a perpetual burr in your saddle, but if you’re clever, competitors can provide valuable ideas for business model innovation.

Jerry Jones may drive other NFL team owners nuts, but he’s credited with teaching other owners how to monetize assets they had never considered. PC manufacturer after PC manufacturer failed to make a tablet computer work. Apple’s iPad taught them that the market didn’t want a tablet computer, it wanted a toy.

Other examples include the following:

  • An innovative funeral home figured out how to monetize their website. Soon, hundreds of other funeral homes copied this innovation.

  • Several years ago, innovative retailers used hiring kiosks to lower their cost structure. Now most retailers use a similar plan.

  • Many large companies are integrating the practice of lead scoring into their sales process. Savvy smaller competitors are creating scaled-down versions of lead scoring to improve their own sales process.

  • Holiday Inn competitor Days Inn understood that its business model required a lower cost structure than Holiday Inn’s. Days Inn used a low-tech but effective site selection process — wait for Holiday Inn’s proven site selection team to pick a desirable location, and then open up across the street.

  • Extended warranties are a very profitable addition to a business model. When innovative retailers proved this was a viable concept, most other retailers followed suit.

  • Several years ago, a handful of sellers on eBay discovered it was far more profitable to overcharge for shipping and undercharge for the item purchased. Within a year, this best practice had been copied by most eBay sellers. Interestingly, the practice was so profitable, eBay customers revolted and sellers had to reverse course.

  • The Herman Miller Aeron chair pushed the limits of design and price. This innovation taught all office furniture manufacturers that customers would pay $1,000 for a single chair if it was cool enough.

  • And the most famous of them all — Steve Jobs saw the mouse and graphical user interface at Xerox PARC and used the concepts to create the Macintosh. Note: Jobs did license these ideas from Xerox, but Jobs monetized what Xerox could not.

Don’t assume your competitors are stupid. If you do, you might be missing the opportunity to find and copy their innovation. It’s more likely that the competitors have stumbled upon something brilliant than that they’re behaving against their own best interest.

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