“Add new features. Sell more. Increase marketing spend. BE MORE INNOVATIVE.” These are just a few of the myriad ingredients in the pantry of company executives charged with the daunting task of cooking up revenue and profit growth on a consistent basis. In a world where competition is increasingly attacking from all angles – crowdfunded Kickstarter campaigns, agile startups and international firms, in addition to your traditional competitors – identifying new growth opportunities is not as easy as many shareholders would prefer it to be.
A handful of firms such as Apple, P&G and Amazon will grab headlines and spurn management professors into churning out book after book on how to be innovative and create disruptive products and services that “wow” consumers. Sure, these companies are great and serve as models of excellence when it comes to innovation, but we’ve been increasingly intrigued by companies that have found new growth opportunities not through innovating the products and services they’re known for, but instead by commercializing what they’re good at – their internal capabilities.
From R&D and supply chain logistics, to organization-wide functions like IT and HR, we have found examples of companies that have created new services through marketing their internal capabilities to external customers. Capabilities are the business processes, supporting systems and technologies that make your business to run. Capabilities enable the products and services conceived and developed by your organization to hit the shelves in the market. Historically, these capabilities have been nurtured so that firms may gain a leg up on the competition, but increasingly we are finding examples of organizations that are turning proprietary capabilities into new businesses in an effort to diversify revenue streams, add value to their customers, and expand their customer base by entering new industries.
Let’s examine a few case studies of firms that have created entirely new service offerings by marketing their proprietary capabilities.
Creativity, teamwork and innovation have long been the hallmarks of the culture at Disney, a company that has built a reputation of delivering entertaining, family-friendly customer experiences over the past eight decades. The culture at Disney became especially relevant to the business community after appearing in the celebrated book In Search of Excellence, which profiled the world’s most successful companies and identified the themes that led to their success. Disney’s success, the book argued, was driven by the firm’s culture. “How do they do it?” executives around the country soon asked. Disney answered.
The Disney Institute formed in 1986 as a vehicle for individuals, teams and entire organizations to learn the customer-centric methods that have made Disney so successful. Part management consulting firm and part executive education program, the Disney Institute has been retained by school systems, hospitals, foreign governments, Fortune 500 companies and small-scale entrepreneurs to teach leadership, customer experience, brand loyalty and training.
Fees from the Institute’s services range from under $1,000 per person for a one-day workshop to hundreds of thousands of dollars for extended consulting engagements. Net revenues from the service are negligible to Disney’s bottom line – the company had $42.3 billion in revenue in 2012 – but it has no doubt exposed Disney to a host of potential future business partners and given it perspective on a range of new industries.
In 2002, Green Bay-based integrated healthcare delivery system Bellin Health confronted a startling fact: healthcare costs for its own employees were projected to increase 30% to $13 million, in just one year. This unsustainable trajectory of rising overhead led Bellin to develop strategies to improve the health of its employees, rather than just treating health concerns. The organization looked at the various factors influencing the health of its workforce, and ultimately designed a system that saved Bellin $15 million over the following nine years.
Local organizations took notice of Bellin’s success and approached it in order to learn how to rein in their own rising healthcare costs; Bellin’s Business Health Solutions business was born. Bellin was able to parlay its internal cost savings initiative into a service that has allowed organizations such as the Northeast Wisconsin Technical College and the Foth Companies to save $500,000 and $250,000, respectively, in their organizations’ healthcare costs. Read the rest of this entry»