Do You Have the Right Model?

With the onset of the "new economy," there is much talk in the business world about failing business models and the need for reinvention.  Early childhood leaders may think this talk is not relevant to them, as if the way child care services are delivered is set in stone.  Here is what Rita Gunther McGrath from the Columbia School of Business said when asked by Harvard Business Review (January 2011), "What are the signs that a business model is running out of gas?"

"The first clear stage is when next generation of innovations offer smaller and smaller improvements.  If your people have trouble thinking of new ways to enhance your offering, that's a sign.  Second, you hear customers saying that new alternatives are increasingly acceptable to them.  And, finally, the problem starts to show up in your financial numbers or other performance indicators.

"There's always very early evidence that a business model is in trouble, but it usually gets ignored or dismissed.  That's because at most companies the people at the top got there because of their success with the current model — so they have very few incentives to question its durability.  So you get a denial reaction initially, followed by desperate attempts to eke just a little more time out of the existing model.  The recognition that things must change happens only when it is far too late, and then change is much more painful than it had to be."

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