Most entrepreneurs regardless of whether they are struggling novel start-ups, seasoned serial entrepreneurs or veteran industry incumbents don’t pay enough attention to their own business models or evolutionary shifts in their sector or industry structure, (or what some are calling industry architecture), as an opportunity space to exploit.. When I mention the two terms and ask: Is your business model aligned to the downturn or is your industry architecture changing and are you taking advantage of the shift or driving the shift? I often get a blank stare. Their eyes usually glaze over, until I provide them with one or two examples. Then the usual response is…(pause) ….(wheels turning in their head, followed by tacit acknowledgment )…good point…..(another pause) …well frankly, I never even thought of that.”
Michael G. Jacobides, who is associate professor of strategic and international management at London Business School, illustrates my point succinctly in a recent Financial Times story.
"Over the past few decades, economic theories have become increasingly sophisticated, borrowing analytical tools from theoretical physics and mathematics. Financial tools have become vastly more complex. Regulators have created sophisticated rules to govern the economy, particularly banks.
So why did we not see this coming? [some did, but most economists were in denial or played their role as cheer leaders and not objective analysts—Walter Derzko]
And how did last year’s “strong incentives” and “profit-driven behavior” become today’s “reckless profiteering” and “abuse of the system”? [Natural evolution according to one of the effects of Marsal McLuhan's Tetrad model -- "flip or reversal"--Walter Derzko]
The reason is that we neglected basic economic facts and failed to appreciate the evolving structure of arand sectors. In the past decade, what I term the “industry architecture” – the rules and roles that govern how participants do business – in financial services changed the financial world dramatically, but almost nobody noticed. Most economists did not bother – for them, industry structure (in particular, the business models operating in the sector) is of secondary interest – and they stuck to the mantra that “markets regulate themselves”. Regulators ignored the monumental changes in how money was made, concentrating instead on fine-tuning rules that focused on an ever-decreasing part of the business world. Academics busied themselves with models that had less and less to do with reality, helping to create structures so complicated that they were bound to implode. And management gurus did not want to spoil the party by suggesting that there were no solid foundations for this brave new world.”
Industry architecture will change dramatically in many sectors during this re / depression, and business that can anticipate this or drive the change in the direction that favors their products, platforms or services will be the big winners, leaving others behind in their dust.
Walter Derzko
Smart Economy
Toronto
Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.
Related posts in this series:
Related Posts over that past year:
· Opportunity Recognition in Difficult Times
· Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn
· Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn – June 25, 2008, Ontario College of Art Design, Toronto, ON
· Recession-Proofing your Business-Strategies and Tactics for smoother sailing in turbulent seas
· Master Class in Opportunity Recognition for entrepreneurs and intrapreneurs> May 30th 2008> University of Toronto
· Turning Misery into Opportunity
· Vacuum leaves pullout opportunities;
· How will baby boomers handle the recession? Zoomers, Doomers, Gloomers, Opportuneurs
· Recession, Depression and Shortages as Opportunities
· Restructuring of American Business-A New Business Model?
· Using New Yorker Cartoons for Opportunity Recognition /Sense-making & Pattern Recognition
· Text Mining for S&T Scouting, Foresight and Opportunity Recognition
· The Opportunity Clinic-swapping opportunity scenarios 08-002
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Walter Derzko -"Changing the world, one idea at a time"©
Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "
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