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Elements of Sustainable Business Models

Article  in  International Journal of Innovation Science · March 2014

DOI: 10.1260/1757-2223.6.1.43

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 43

Elements of Sustainable Business Models

Talonen, Tapani1, Hakkarainen, Kari2
1KONE Corporation, Global Technology, Finland
2Virike Consulting, Finland

Tapani.Talonen@Kone.com, Kari.Hakkarainen@Virike.com

ABSTRACT
The authors present the elements constituting an advantageous business model, and
suggest how to achieve that competitive edge. They argue that traditional innovation
processes with funnelling front-end, stage-gate with go/kill decisions, and similar
processes have inherent limitations in such an inclusive concept. They propose an
alternative approach, driven by strategic business options. A business model, like
everything else, has a limited life span. A new model requires radical changes in thinking
and logics. Still, the move is not easy, and most attempts will fail. The right timing is
tricky, plans to abandon an existing model might feel dispiriting, and the necessity to
change can be blinded by past successes. This article discusses these complex aspects and
the steps needed to overcome them. Finally, in ever-changing business competition it is
not realistic to constantly renew inside-out. Instead, for a company to survive, its
business model must have a very important quality known as resilience. This article is
based on the authors’ extensive practical experience in a global business environment, as
well as on their academic work.

1. TECHNOLOGICAL ADVANTAGE IN COMPETITION

Customer experience is the ultimate differentiator in today’s business competition. It is not just a question
of the feel, look, or usability of a product, but of an entire spectrum of feelings, emotions, and physical
and psychological responses. Technical product supremacy is thus not sufficient, because the value is in
the experience. Such experience is created by business models. Competition in business is thus rapidly
becoming competition between business models rather than competition between mere products.
Schumpeter was one of the first to emphasize the essential role of innovations in business
competition by declaring that, “… innovations cause old inventories, ideas, technologies, skills, and
equipment to become obsolete” [1]. He declared the types of innovation that are of technological
advantage as:

• Technological change in the production of commodities already in use

• The opening up of new markets
• The opening up of new sources of supply
• Tailorization of work
• New organizational structures

And he concludes, “In short, any doing things differently in the realm of economic life – all these
are instances of what we shall refer to by the term innovation.” Contrary to a common misconception,
innovation does not need to derive from an invention. Even worse, people tend to muddle the two. An
invention is “a device, contrivance, or process originated after study and experiment [2]”, whereas
innovation is simply “… an idea, practice, or object perceived as new by an individual,” as Rogers
states in his now classic works [3].
Matthews [4] elaborated on the theme by stating, “Most technologies will be replaced, and most
efforts to do that will fail.” The phenomenon is by no means without significant consequences as,
according Schumpeter, it “... strikes not at the margins of the profits and the outputs of the existing
firms but at their foundations.” A good example is passenger traffic across the Atlantic. As soon as
steam engines had improved sufficiently to be competitive, they replaced sailing ships. There was
constantly increasing demand for travel between the continents, and the steamship companies
concentrated on competing against each other with the speed and size of their ships by building ever
bigger, faster and more luxurious vessels. Competition between steamship companies was hard, and

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44 Elements of Sustainable Business Models

often fatal. But their mutual threat came from a totally different direction. In fact, it was the
development of new technologies and novel business models.
Airline companies entered the game with a completely new technology and innovative way of
thinking, and the whole air transport business indisputably replaced sea transport in the passenger
business. By 1957 the airlines already carried the same passenger volumes as ships, one million a year,
and within ten years that figure grew fourfold. Air carriers took the Atlantic crossing business by storm,
and have dominated it ever since [5]. Those shipping companies that managed to survive had
transformed their business models from being a passenger transport business into leisure services.

2. CUSTOMER EXPERIENCE & BUSINESS MODELS

Prahalad & Krishnan [6] remark that “value is shifting from products to solutions to experiences.” That
should not come as a surprise, because customer experience has already been critical in many
businesses. Behind the often-cited success stories of Dell, Apple, the model-T Ford, or IKEA is
precisely a prospering customer experience, not a single technology or other individual factor. For
example, Ford’s success is often incorrectly attributed purely to price. However, at least equally
important were the introduction of a dealer network with a presence in every major city and novel
financing alternatives – both new ideas to the industry.
No one buys something just because it is new; it has to meet a need or expectation. It is about what
a customer experiences. Occasionally a customer might simply just pick something up to cover an
acute, immediate necessity. Or, at the other end of the spectrum, hardcore early adopters get excited
about the announcement of a new product, anxiously waiting for its release, ready to queue overnight
in front of a shop for sales to start, and to dash inside the store to be one of the first to purchase the new
gadget. And all of that, even before they get their hands on the actual merchandise. It is the whole entire
experience that gives the thrill.
Customer experience builds around feelings, emotions, physical and psychological responses,
smells, colors, spaces, etc. It is very important also to identify with a particular group. Customer
experience is thus much more extensive a concept than user experience, which is normally attributed
to direct impressions such as look, feel and usability. The former is wider also in the sense that a user
is always a customer, but the customer is not necessarily a user.

2.1. Business Model and Ecosystems

There are different definitions of the term business model. Usually they stem from, or focus on,
attributes specifying financial or business targets such as new value proposition or value generation [7].
Morris [8] takes another, wider perspective. He approaches companies and businesses from a system
point of view. He describes a company as, “… not a particular department, a product, a service, or
a brand. It is the entire organization together as one thing, working together to deliver value.”
A company is a part of another system, a business ecosystem called markets. That, in turn, further
belongs to a larger ecosystem known as the economy. An ecosystem is a community that produces
goods and services of value to customers, who are themselves members of the ecosystem. It also
includes suppliers, lead producers, competitors, and other stakeholders. One can think of a company as
defined by its business model (Fig. 1), which is “a comprehensive description of business as an
integrated system functioning in an intimate relationship with the broader market. It articulates how a
company applies processes and technologies and how it organizes itself to build and sustain effective
relationships with customers” [8, 9]. When perceived from the other end, it is the business model that
delivers a customer experience.
Please note what close kin Schumpeter’s types of innovation and business models are! The points of
view differ somewhat, and the terminology has naturally changed over 100 years, but the core message
remains: no individual factor can create a competitive edge. A combination of diverse boosting,
catalyzing, enabling and supporting elements is required [10].

2.2. Competition
Every company has a business model, whether it is deliberately defined and clearly articulated, or
shaped by itself over the course of time [12]. However, in reality only few have documented it as such.
Why is a business model so important? Because it defines how a company approaches customers. It
is the business model that creates customer experience. “In the end, business model innovation is all
about the customer’s experience” [13].

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Talonen, Tapani, Hakkarainen, Kari 45

Edison already utilized business models for this purpose. In 1880, he founded the Edison
Illuminating Company, the first investor-owned utility to distribute electricity to the public. His purpose
was not primarily to profit from distribution itself, but the company was essential for the widespread
use of his other invention: a customer experience called the electric lamp.

Figure 1. Individual components of an organization do not matter as much as the way they work
together to enable the organization to create value and deliver it to customers. The list is
exemplary and adapted from [11].

All this implies that “today and into the future what we’re talking about is not just competition
between companies, but competition between business models,” concludes Morris [8], “or in other
words, Business Model Warfare.”

3. BUSINESS MODEL INNOVATION

Since business models are a more comprehensive way of understanding the focus of competition, they
must also be the focus of innovation [10]. Business model innovation differs from incremental or
breakthrough product development (Fig. 2). The arrows do not indicate the size of the implementation.
There can be small business model innovations performed quickly. On the other hand, incremental
changes could sometimes require considerable development or lead times.
The time dimension in the figure refers to the duration in time for which that type of innovation
should have value in the market. So an incremental innovation may be important for a few months or
years, while a new venture should last and provide value for ten or twenty years, or more [14]. Good
examples of this are some Japanese car manufacturers with their annual facelifts and updates, new
model releases, and completely novel brands with independent sales and delivery channels.

Figure 2. Business model innovation is different from incremental or breakthrough

product innovations adapted from [10].

Because of the differences shown in figure two the innovation mechanism and systems must also be
correspondingly different as shown in Table 1.

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46 Elements of Sustainable Business Models

Table 1. The Focus and Impact of Product and Business Model Innovations.

Incremental product Breakthrough product Business model

Target Product Solution Customer Experience
Method Product development Concurrent engineering Business model innovation
Impact on Products / Services New release New product or service Nil to extensive
Impact on Business Processes Minor Significant Comprehensive
Impact on Business Conduct Nil Some New logics

Typically, in new product development, the product, processes and, for instance, marketing and
other support material are implemented into existing business processes and organizational structures
without radical process change. With business models, the driver is a need to solve strategic-level
business challenges, or to dramatically change the balance in competition with new differentiated
solutions. A single individual idea for new development is not dominant, but rather a flow of several
ideas related to product or business processes. Business model innovation changes drastically the way
a business is run, because a new model calls for a completely new approach (see The Paradox of
Success below).
A business model defines a broad competitive approach by extensively encompassing the whole
range of a company’s processes, operations, and competencies. Therefore, traditional innovation
processes tend to fall short of such an inclusive concept. For that reason, we propose a framework in
which the objective is to recognize and exploit the instruments needed to become competitive and to
continue to prosper in business. The key elements in that are strategic business options.

3.1. A Bigger Hammer

Our procedure starts by carefully analyzing the dynamics of competition and the business setting. Many
swear by market research or customer surveys. Those are not sufficient in themselves. An approach
driven purely by market pull is not enough, because competitors also have the same information [5,7].
We need a broader mindset that enables us to differentiate from our competitors by understanding the
hidden opportunities, needs, and trends of the entire business ecosystem.
Matthews proposed a conceptual framework for that. He stresses that for closing the gap between
business people and technologists, and for linking these two, it is essential to have a continuous process
of communication and decision-making. This process addresses fundamental business questions of
context, considerations, and implications such as [15]:

• What business are we in, and do we want to be in it?

• What kind of organization do we want to be?
• What are the trends and forecasts, and what do they mean for us?
• What changes may be necessary or desirable?
• Where is our competitive advantage and how can we improve our competitive position?
• How can we create added value and keep our customers?

In practice, our approach starts at strategy level with three core elements, or sub-processes:
• Strategic business analysis,
• Identification of future business options, and
• Business and technology mapping.

Briefly, strategic analysis creates a competitive strategy approach, and identifies the related critical
success factors [15]. Blue Box studies define the corresponding strategic options for the future business
by assessing their value propositions [4]. Business and technology mapping puts these two together and
visualizes the synchronized plans of mutual initiatives in the form of roadmaps. These processes are
parallel and executed in an iterative and recursive manner in relation to each other, so there is no
specific chronological order.
It is essential to have iterative discussions uninterruptedly between business and technology people.
The interaction is two-way; strategy drives the innovation process, and innovations shape the strategy
[16]. A recent doctoral dissertation claims that Nokia’s innovation system, for instance, was severely
crippled when this substantive linkage was hampered by major organizational restructuring in 2008 [17].

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Talonen, Tapani, Hakkarainen, Kari 47

The strategic-level outcome is further refined into plans at tactical levels, and into implementation
on operational levels. The essential factor at the tactical level is to provide agility with fast decision-
making, in response to an unstable business environment. The operational level puts the plans into
action, striving for prompt execution, high productivity and efficiency, the right timing, good quality,
etc. We favor employing loosely-coupled elements over rigid funneling models or long-span idea-to-
launch stage-gate processes. In doing so, we build on the principle of strategic business options:

• Assessment and selection of potential future business options, and

• Only the feasible consequent development projects and change programs are actual investments
that would hopefully result in generating return and profit.

The authors have elaborated on the subject elsewhere [12,16,18]. Even though the perspective is
occasionally on technology management, the same observations are valid here also.

3.2. The Paradox of Success

If you already have a working business model, or you just developed a new one and implemented it,
fine. That is the good news. The bad news is that you have to change it. If we look at the performance
of a new technology, it is usually rather low compared to existing, parallel technologies. Performance
improves gradually, until the technology reaches the improvement period of its lifecycle, when progress
becomes rapid. It starts to slow down during the mature period, coming to an end when the natural,
physical limits of the technology are reached.
When performance parameters are plotted against time, they create an asymmetrical shape
commonly known as the sigmoid curve, or S-curve (see Figure 3). Business models have an identical
life-cycle. In fact, as Schumpeter [1] states, “the world and everything in it really is a sigmoid curve.”

Figure 3. A business model’s life-cycle forms an asymmetrical sigmoid curve.

Performance improves until its natural limits are reached, and starts to deteriorate thereafter.

When technologies reach the end of their performance improvement, they become vulnerable, and
will be replaced by new and superior ones, as both Schumpeter and Matthews suggest. For the same
reason also, new business models are needed to overtake the existing ones at some point of time. The
challenge here is that the factors of success that got you here, will not work with the second S-curve.
That is the paradox of success [19].
The paradox is easy to justify. If the success factors were the same on the second curve, one would
actually follow the original one that would prosper forever. And also, the curve is a presentation of a
mathematical function. One cannot generate dissimilar curves from identical variables. A change in
thinking and in logics is needed (Table 2), as Chen and Mauborgne point out [19].
In 1996, KONE announced a technology breakthrough that was the biggest invention in the elevator
industry for 100 years. By applying permanent-magnet motors, and using clever hoistway layout, the
company could eliminate the space-consuming machine room. In addition to saving valuable space, the

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48 Elements of Sustainable Business Models

result gives more architectural freedom [20]. At first glance it might appear that the machine-room-less
elevator concept was merely a technological change, but in reality the company had to totally re-think
its whole business conduct and logistics (as exemplified in Table 2).
First, the company had to convince the authorities that the concept complied with existing standards
and regulations. The question was not about safety issues, nor violating the codes. The problem was
that the innovation did not meet all the details. Take, for example, the regulations concerning access to
the machine room, its location, or its climate control. How can one meet the codes concerning the
machine room if there isn’t one? That’s almost a Catch-22 situation! Today it might seem ridiculous,
but a machine room used to be such an elemental part of an elevator system that it raised concerns. The
company chose to drive for shaping the conditions, instead of taking them as given (see Table 2).

Table 2. A New Business Model Requires New Logic

Modified from [19] “customer experience” reads “needs” in the original.

Current way of thinking New way of thinking

INDUSTRY ASSUMPTIONS Conditions are given Conditions can be shaped
FOCUS Competitive advantage and / Competition is not the benchmark / a
or beat the competition company should pursue a quantum leap in
value
CUSTOMERS Retain and expand customer base thru Value innovation targets the mass of buyers /
segmentation it focuses on the key commonalities in what
customers value
ASSETS AND CAPABILITIES Leverage the existing assets and Think: what should we do if we started
capabilities anew?
PRODUCT AND
SERVICE
OFFERINGS Maximize the value of
offerings within the
traditional boundaries Think in terms of the total customer experience

Second, the company had to approach potential customers in a new way. It had to find those ready
to pilot a novel, radical innovation. It had to convince them that it was not about something temporary,
but that the company was committed to the concept and would guarantee spare parts availability and
maintenance. Furthermore, KONE had to rethink the entire logistics chain from material sources, to
order engineering, to manufacture, to delivery, right through to installation and maintenance. Later,
when permanent-magnet technology was applied to the company’s entire offering, it enabled the
company not only to offer its customers improved eco-efficiency, space-efficiency, and ride comfort
[21]. As a results they streamline some of the major parts of its business, from production through to
installation and spare parts supply.

3.3. Why is it so difficult to make the jump?

Jumping the next S-curve is not so easy for two main reasons: reluctance and timing.
Reluctance is due to:

• Mindset,
• The illusion of progress, and
• Misleading signals.

An open mindset is especially difficult for successful companies, because they often develop self-
absorbed and smug behavior. Arrogance or sheer ignorance allows incoming signals and facts to go
unnoticed. Those companies already facing problems are better off, because they are forced to renew.
Nokia’s recent poor results have been partly attributed to the company’s arrogance and by its
underestimation of its rivals. This attitude is not only insider gossip; it was also made publicly quite
clear as recently as 2009 by one of the executive vice-presidents. He disparaged Apple by claiming that
it will remain a niche player in mobile phones [22].

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Talonen, Tapani, Hakkarainen, Kari 49

Losses have a much bigger psychological effect on people than equivalent gains. For example, if a
person unexpectedly receives a certain amount of money, they regard it as extra and it is easily wasted
and forgotten. But if the same person loses the same amount of money, it bothers them for a long period
of time, even if the money had no real economic importance. It has been claimed that the impact of losses
on satisfaction is twice as strong as that of gains. For that reason people are inclined to avoid losses; a
behavior known as loss aversion. As people avoid losses, they also avoid risks that might involve them.
Risk aversion has an immense impact on decision-making rationale, as Kahneman and Tversky [23]
have demonstrated. Gupta remarks that it naturally often extends to innovation aversion [24].
A third very common mindset distortion is akin to loss aversion, or even a derivative of it. It is
known as sunk cost dilemma. In an often-used example a person has purchased a movie ticket only to
discover that the movie is not very interesting. There are two possibilities: suffer watching the movie,
or do something that is more fun. Most select watching the movie because it was paid for. Here the
argumentation is more emotional than purely monetary. One cannot abandon the current business
model, because “we have put so much effort into it,” or “we have such a long tradition in this,” or “we
have invested so much in building competencies.” That is all wrong. Lehmann has demonstrated how
separate, consecutive decisions, each apparently perfectly justifiable with the information available at
the time, can progress towards a disaster [25]. Unless sunk costs in decision-making are understood and
taken into account.
Kodak was once a pioneer in the digital camera business, creating the first prototypes as early as
1975. The company has over 1000 digital imaging patents in its portfolio. However, around 2000,
Kodak declared it preferred “choosing instead to focus on its core business of making and selling
analog camera film” [26]. As Christensen points out: “Another problem that is related with that is the
propensity for corporate managers not to be willing to create new business models. They want to
leverage the business models that they already have in place” [27]. Kodak was stuck in the sunk cost
dilemma with its traditional business model, and the rest is history. In January 2012 it filed for Chapter
11 bankruptcy.
The illusion of progress may result from a mutually biased view of a company’s future. DeMarco
[28] has very aptly remarked, “Unfortunately, momentum in some direction or other does not
necessarily imply carefully thought-out strategic thinking. A company can begin to move (or be moved)
by a process that is more or less drift. The Brownian motion within the company asserts a net force in
some direction and ‘By God we’re moving.’”
One could ponder whether General Motors has suffered from the illusion of progress. They declare
the disastrous era of 2000-2008 as “Innovation & Challenges” [29]. Certainly the company pushed
electric vehicle technology and introduced new models, as it boasted, but the key question is whether
it was nimbler and moving faster than its rivals. Or was it merely drifting? The illusion, as the Brownian
motion itself, stems from insignificant differences between effecting net forces to propagate into a
collective tenet. Every company has unwritten facts and truths of what the business is about or how the
company must react in competition.
Signals are often misleading when the transition should be made at point A in Figure 3, because “all
the messages coming through … are that everything is going fine, that it would be folly to change when
the current recipes are working so well … the real energy for change only comes when you are looking
disaster in the face, at point B on the first curve” [19].
Nokia was the world’s largest vendor of mobile phones from 1998 to 2012, but its market share
started to decline around 2007 and 2008. Nothing drastic happened overnight, and the changes were
miniscule in the beginning. At the time Nokia was still way ahead of even its biggest rivals, and it was
very profitable. It is obvious, and quite understandable, that in these circumstances the signals were not
strong enough to initiate the unavoidable changes in products, technology, and strategy. Even if there
were willingness to make the jump, the timing is difficult.
One should start before the first curve peters out. The right place to start that second curve is at point
A, where there is the time, as well as the resources and the energy, to get the new curve through its
initial explorations and floundering before the first curve begins to dip downwards [19]. Almost
invariably, when studied, there is a consensus that companies are farther along the curve than any of
them would previously have admitted. They are nearer to point B than to point A.
The discipline of the second curve requires that you always assume that you are near the peak of the
first curve, at point A, and should therefore be starting to prepare a second curve [17]. Whatever the
reason, most companies take the inevitable jump only after forced to by a performance crisis.

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50 Elements of Sustainable Business Models

3.4. Failure is not fatal

Consider that you are ready to take the next new S-curve with a new model carefully crafted with all
the available information, and the timing is perfect. That is the good news. The bad news is that you
are bound to fail! No matter how meticulously planned, no matter how precise the timing, most efforts
to replace a business model will fail. Just like what Matthews said about technology. His assertion is
supported by the very low industry initiative success ratios and by the surprisingly high volatility within
business indices such as the Fortune 500 [30].
Dell is a frequently-cited textbook example due to its innovative build-to-order sales model. But it
has also been very active in trying to broaden its business. Nevertheless, not all of its initiatives have
been successful. Introduced but discontinued products include PDAs, mobile phones, office desktop
computers, MP3 players, etc. Dell has also initiated various different retail models; e.g., kiosks in the
U.S. to give personal service to customers. The kiosks were shut down in 2008. Various other
arrangements with retailers have been set up, rearranged and abandoned in different geographical
market areas [31]. This does not imply failure. It only demonstrates how difficult it is to implement a
new model. On the contrary, without such a pro-active approach Dell would not have its current
offering of products, services, and third-party accessories.
To minimize the probability of failure, one should follow disciplined, but still flexible and agile,
innovation models as discussed above. Even so, “success is not final, failure is not fatal,” as Winston
Churchill has been attributed as saying. A failure is not a disaster in view of the fact that the homework
was done. Nothing has been lost. Only the exploratory phase of the second curve has been conducted.
No major commitments will have been undertaken until the second curve overtakes the first, which will
never happen as long as the first curve is still on the rise [19]. You are now prepared to take the new S-
curve when the time is ripe.

4. STRATEGIC RESILIENCE
The good news might be that you have learned to live with your present business model, or you
successfully managed to jump onto a new curve as the old one flattens out. The bad news is that it is
still not sufficient. Companies must change, because the ecosystem, and thus competition, changes. All
the time. If the players do not move, there will be outsiders who change the rules of the game and its
structure, or may even destroy the entire business [5].
Inside the swirl of business dynamics, a new business model is not always an option. It takes effort,
it is time-consuming, and it is risky. On the other hand, sustaining an existing business model is also a
complex issue. It involves balancing intergenerational and intergenerational needs and aspirations
while also satisfying numerous economic, environmental and social constraints [32].
A successful company needs what Hamel & Välikangas call strategic resilience [33]. Strategic
resilience refers to the capacity of an organization to morph itself, before it is forced to by an impending
performance crisis. It is about taking action when the range of options is still relatively broad. In most
cases, companies move from crisis to crisis, and renew only when imperative. Hamel & Välikangas
state that confidence in the future of any company depends on the extent to which it has mastered three
essential forms of innovation (as related to strategies):

• Revolution: Unconventional strategies are needed to produce unconventional financial returns.

Industry revolution is creative destruction.
• Renewal: Renewal is about reinventing industry, changing the rules of business. Often the
reformers are newcomers, or those from outside the established business. Incumbents have it
harder; they must first reinvent themselves. Strategic renewal is creative reconstruction.
• Resilience: In most cases, a performance crisis is required before a company is forced to renew,
whereas resilience refers to a capacity for continuous reconstruction. Resilience is akin to what
Schumpeter means by the importance of technological advance in competition, and by the
essential role of innovations.

Revolution, in turn, calls for victims to Schumpeter’s creative destruction. Western Union’s business
model has a long and interesting history [34]. Western Union was founded in 1851 as a telegram
company, and it completed the first transcontinental telegraph line across North America ten years later.
A method for transmitting stock price information over telegraph lines was introduced in 1869. It
consisted of a paper strip which ran through a machine called a stock ticker, which printed abbreviated

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Talonen, Tapani, Hakkarainen, Kari 51

company names as alphabetic symbols followed by numeric stock transaction price and volume
information. The stock ticker was in use until 1970 [35]. Today one can see lookalike tickers flowing
at the bottom of the TV screen during business news. Western Union was also a pioneer in microwave
and satellite communication. Its current business, money transfer, started as early as in 1871. By 1980
it was generating more revenue than telegram services. Today, the company’s global money transfer
operation has 500,000 locations. It would be misleading to think that the service is used by those
unfortunates with no access to a bank account. Even in the era of internet banking, many prefer Western
Union because the sender does not have to worry about the details of bank accounts, the receiver can
withdraw money wherever he or she prefers, and no clearing houses are involved so that withdrawal is
globally available the moment the money has been paid. It is also quite interesting to notice that the
company partners with its seeming rivals: i.e. banks, credit card companies, and post offices.
Another good example of resilience - or even renewal - is IBM, which over the last 100 years has
morphed itself from office machinery to mainframe computers, to software, to personal computers, and
lately to solutions and service business.
Hamel & Välikangas [36] add that any organization that hopes to become resilient must address four
challenges:

• The cognitive challenge: A company must become deeply conscious of what is changing, and
perpetually consider how those changes are likely to affect its current success.
• The strategic challenge: Resilience requires alternatives and awareness — the ability to create
new options that provide compelling alternatives to dying strategies.
• The political challenge: An organization must be able to divert resources from yesterday’s
products and programs to tomorrow’s.
• The ideological challenge: The ability to continuously renew itself requires that an organization
must be able to concentrate its efforts much more widely than on mere operational performance.

Resilience must be inbuilt throughout a company’s functions, operations, and decision-making. And,
no matter how good the procedures and tools are, people are crucial to a company’s survival. Systems
do not do thinking, as Mintzberg [37] reminds us, even though systematic approaches can stimulate
creativity and debate. Even the best of business models is worth nothing if an organization is not able
to renew itself, to adapt to the changing ecosystem. As Hamel aphoristically summarizes the paradox
of success, “Companies are successful until they are not” [31].

5. CONCLUSIONS
Neither a superior product nor any other single factor can define success in business competition. One
must be able to deliver a distinctive customer experience that beats competitors. Customer experience
results from a business model that extensively encompasses a company’s processes, operations and
competencies. It describes how a company organizes itself to build and sustain relationships with
customers in order to deliver those experiences. One might be satisfied in having managed to create a
feasible business model. The bad news is that even business models have a limited life span, and a new
one is needed. Luckily, with careful planning and timing, it is nevertheless possible to get organized for
implementation of a new model. The bad news is that it is bound to fail. And even if one succeeds in
establishing a business model, the bad news is that it is not necessarily sufficient. Not any model will
do in the dynamics of business competition. Nor is it realistic to constantly change a model. So the one
model must have resilience to adapt to the continuously changing environment. In reality, such a thing
as a sustainable business model does not exist. The good news is that one can have successive
viable business models.

REFERENCES
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