There is a quiet revolution unfolding in your industry — led by some of your smartest competitors. In case you are a manager, you may be unaware of it because you cannot see it in the streets, nor watch it on the news. This new revolution is actually happening inside the heads of the leaders running your rival firms. They call it a mental model revolution. Let us report....
A select group of smart leaders are reframing their mental models — i.e., radically shifting their perception of the world — to conjure up disruptive business model innovations that could rewrite the rules of the game in your industry. They call them the "Reframers." Here are examples of three:
Indra Nooyi, CEO, PepsiCo. Nooyi, ranked by Fortune as the world's most powerful woman, is reframing the essence of what the food and beverage industry ought to be — shifting its vocation from feeding people to nourishing them. They is taking a cue from Ayurveda (India's 5,000-year elderly traditional medicine process) which states that "food is medicine and medicine is food." Until now, the food and medical industries have operated separately; Nooyi desires to bridge them by reframing PepsiCo as a wellness solution provider. To deliver this dedication, Nooyi is radically shifting PepsiCo's business model by flipping the ratio between "fun-for-you" products (e.g., Pepsi drinks and Frito Lay chips) and "good-for-you" products (sold under brands such as Tropicana and Quaker). Specifically, Nooyi desires to increase revenues from good-for-you products from $10 billion today to $30 billion by 2020.
Jeffrey Immelt, CEO, GE. Escalating healthcare costs in the West are due to the "more for more for less" (MML) innovation model currently pursued by Giant Pharma and medical tool makers that charge extra money for more resource-consuming and complicated solutions which only a few people can afford. Immelt realized that this MML model cannot be sustained as GE enters the Age of Shortage dominated by eco-friendly and frugal consumers. This insight led Immelt to reframe GE's MML innovation model as more for less for more (MLM) — that is, delivering more experiential value to more people for less economic and environmental cost. Since adopting the MLM paradigm GE Healthcare has developed and marketed several breakthrough products such as the MAC 400, a low cost, transportable CT scanner ECG machine with super-long battery life and Vscan, a small and cheap ultrasound tool that operates as basically as a cell phone.
Ratan Tata, Chairman, Tata Group. A whopping one billion people from across emerging markets are expected to join the middle class over the next decade. Since these Next Billion consumers haven't yet risen to the income level of current mainstream buyers, most companies are waiting before they create and market products for them. But Ratan Tata reframed these Next Billion users, viewing them not as low earners but high yearners who would readily buy quality products that are priced and meet their aspirational needs. That mental switch led him to conceive the Nano, the $2,500 automobile initially aimed at two-wheeler drivers craving for a more comfortable and safe driving experience. Since it was introduced in early 2009, Nano has been a runaway success, forcing automobile makers all over the world to rush to their drawing boards to design a rival budget automobile.
What is remarkable about the leadership of Reframers such as Nooyi, Immelt, and Tata?
First, Reframers dare to query well-ingrained business truisms and industry paradigms. As they experiment with radically new business ideas, Reframers constantly ask themselves "why not?" For example, Tata shattered the century-old automobile manufacturing paradigm: than producing the Nanos in its own factories, Tata Motors will distribute part kits that entrepreneurial small businesses can assemble close to customers. By questioning the conventional wisdom, creative leaders like Ratan Tata help their organizations navigate an increasingly complex business surroundings that places a premium on leaders with a flexible mindset.
Second, Reframers think not only with their minds but also with their hearts. After all, the heart of change begins with the change of heart; as Mahatma Gandhi eloquently put it: "Be the change you require to see in the world." As such, Reframers are erecting what they call a mental (and heart) barrier to entry for competitors. For example, you can bet that leaders at major food and beverage companies are busily hatching new business models to compete with PepsiCo's wellness strategy. But these rival business models won't be sustainable unless the leaders who developed them honestly care about the wellness of consumers. In the dawning Web 2.0 world where authenticity is the new source of competitive advantage, a sincere business model transformation will be more readily accepted and handsomely rewarded by consumers than a disingenuous me-too competitive offering.
Third, Reframers catalyze large social innovation. To borrow from chaos theory, the change in the minds and hearts of Reframers is akin to the butterfly flapping its wings over Hong Kong that can unleash a tornado in Illinois. Even a minor reframing can yield a disruptive business model that can revolutionize not only an industry but whole societies — a giant chain reaction captured in the following formula:
Mental model innovation → business model innovation → industry innovation → social innovation
For example, GE Healthcare's MLM innovation model won't only threaten the industry's well-entrenched "more for more" business model but promises to finally make health care affordable and obtainable to more people in emerging as well as developed economies. Equally, the Nano is not a disruptive product innovation, but a disruptive social innovation as it empowers low-income consumers worldwide and accelerates their social mobility.
In our next post, they will report the way you can also become a Reframer and continuously practice mental model innovation. Meanwhile, tell us about the opportunities and challenges for Reframers in your own industry.How Reframers Unleash Innovation in Their Companies (And Beyond)