In the next decade, business model innovations will replace technology as the most frequent and most effective sources of business disruptions. While today many monitor technology trends, most leaders ignore looking at the business model innovation environment for their industry.

Yet most business model innovations require no additional technology. Even the fleet-footed companies attuned to the semiconductor improvement cycle (doubling performance every 18-24 months) will have to become faster, more flexible, and more effective in their business model improvement focus.

Because of the huge rewards for business model innovation, the vast sums to back such efforts and the rapid improvements in quickly customized technology, major generations of business models will probably emerge every few months within each industry. In many industries now, major business model innovations occur now every one to two years.

Ask yourself if you know what your next four business model innovations will be–four that will surpass anything that will become available in your industry over the next five years.

If you don’t know, you are in good company. Hardly anyone does. But they soon will . . . or they won’t be in charge any more.

“The purpose of a business is to create a customer.”
–Peter F. Drucker

To rephrase Professor Drucker in terms of this article’s message, the purpose of a business is to continually develop and employ better ways to create and serve customers, while fairly rewarding stakeholders. Let’s look at how two CEOs pursued that imperative.

A beaming CEO greeted me as I entered his office some years ago. He was excited about the opportunity to open a new national market and eagerly shared the details. Through costly cultural contacts, he and his company would be the first American firm in their industry to present their case to the Chinese government authorities. He was due to leave in two weeks and asked me to come back to hear the details after his return.

Alas, the next meeting found him not so happy. The contacts had led nowhere, and he felt that the whole effort and the company’s large investment were wasted. He wished he had stayed at home.

Later that year, another CEO told me of his recent visit to Japan to study the design and manufacturing practices of the company’s joint venture partner there. He gushed with excitement about what these practices could do for his U.S. products and factories.

He learned that the Japanese partner was profitably selling equivalent products for less than his company’s U.S. costs. Employing the insights gained from that trip, his company experienced more than a decade of improved prosperity.

Two CEOs leave on trips to the Far East. One returns empty-handed, and the other returns with a gem. What made the difference? The second CEO was better focused. He knew who to talk to and what to ask on his trip. The first CEO was just having a pleasant daydream about his desire to have more business, although he thought he had studied the issue from every angle.

The former wanted to grow while the second wanted to improve his business model. Which are you trying to do?