Seize the White Space: Q&A with Mark W. Johnson

Mark W. Johnson is one of the world’s leading thinkers on business models and disruption theory. His new book, Reinvent Your Business Model: How to Seize the White Space for Transformative Growth, explores how companies can identify and leverage opportunities to serve new customers or serve their existing customers in new ways.

Johnson co-founded the world-renowned strategy and innovation management consultancy Innosight, along with Clayton M. Christensen (author of the trailblazing book “The Innovator’s Dilemma”). The NCMM spoke recently with Johnson about his new book, and how middle market leaders might develop new business models to achieve transformative growth.

What does it mean to “seize the white space,” and why should middle market companies consider doing it?

Johnson: I coined the term “white space” as a way to talk about how companies need to consider new value propositions that go beyond their core business, because sooner or later, as Peter Drucker once said, “the theory of the business can no longer work.” The white space is where companies can go into places where they’re serving new customers in new ways or even serving existing customers in fundamentally different ways. The common denominator here is you need a new business model to do that. You need a new way of operating, a new way of delivering value, and capturing value to be able to venture out and serve new sets of customers in that white space. 

 

How might the size of the company, whether it’s big, small, or mid-sized, impact opportunities to seize the white space?

Johnson: In order to seize the white space, you have to have a healthy core. Ultimately, it’s going to require people, time, and dollars to be able to seize the white space. A smaller company naturally has less availability of resources to deploy. When you think about a startup or a mid-sized company, many of them are on their way to large, and what they ought to focus on is discovering if they have a viable business model that’s scaling.

The large companies have been around for a long time and are plateauing or commoditizing, so they need to find new spaces of growth. But there are plenty of companies that will find themselves needing to develop new variants of growth and new business models. Anyway, the short answer to your question is that the size of company can impact because of the availability of people, dollars, and time.

 

Can you offer an example of a company that successfully seized the white space?

Johnson: Dow Corning did exactly that when the B2B silicon manufacturer created an entirely new business model and branded it as a separate business unit called Xiameter. They opened a different channel for sales, using the internet, to develop a simpler, cheaper B2B offering for smaller and mid-sized customers who hadn’t been Dow Corning customers before. They’d previously targeted big enterprises as buyers.

I have a “bad example” too. SAP and Intel collaborated to offer ERP systems to the middle market, and the venture was an expensive failure. Their prior experience had been dealing with complex, end-to-end solutions for big enterprise customers, but they suddenly began offering more simplified systems at a lower cost to a mid-sized market that didn’t need or want complicated ERP implementations. You just can’t use the same people (developers, sales, etc.) who were successful in large client situations and assume they’re going to have the same understanding when it comes to serving small to mid-sized companies. SAP and Intel changed their customer focus without changing their business model, and it failed.

 

Why do so few companies even consider attempting business model innovation?

Johnson: Companies have a profit and loss approach. They have a balance sheet structure. Those things are very difficult to start mucking around with. You get in a zone to do that. The operating model, meaning the resources, processes, and how people work together, gets honed over time. So rules, norms, and metrics drive a very rigid way to do things and not to do things.

The other problem is that you need a way to understand what a business model is in the first place. That’s what I’m trying to do with my book. You’ve got to set up a structure which is outside of the core business. You’ve got to be able to manage a different set of metrics, which is about what’s working and what’s not. It’s a bit of the lean startup idea, but done internally.

  

What is a “job-to-be-done,” and why is it so important in developing a value proposition?

 Johnson: It’s a term that we (with Clayton Christensen) coined for deeply understanding what a customer is trying to get done in their life. It’s different from product attributes. We ask, “What is it that customers are ultimately trying to achieve?” Customers will have functional, social, and emotional jobs-to-be-done.

In a nutshell, job to be done is a way of asking more why than what. It’s about really understanding all the pieces of the process, and gets you well beyond product to service elements to fulfill what a customer is trying to get done. That’s your customer value proposition too.

 

How can middle market companies implement their business model innovations?

Johnson: Think about implementation in three major steps. The first is trying to identify a potential, unsatisfied or unmet job-to-be-done. We need to understand that job not only in terms of product but in terms of the right channel, the right payment structure, etc. Those things are assumptions not proven until you actually learn by having a customer use what you’re proposing and ultimately giving you feedback.

You have to start small, then test and learn. The second stage is to be able to get the resources available through manufacturing and distribution to scale. Then finally, we get to a point where we need to either make this a new business unit or subsume it into an existing structure. Be patient for top-line growth because you’re starting in a small market, but be impatient for profit, because you want to prove the viability of a business model by the fact that it can make you money even at small scale.

 

What final thoughts you would like to offer middle marketing leaders about reinventing their business model?

Johnson: You must have an aligned and committed leadership team that is looking to the future in order to understand their financial and capability gaps, their market gaps, seeking opportunities to grow the business and fill those gaps. That requires  an openness to saying, “Well, maybe we need to develop a different way of making money and a different way of serving customers.” It’s not just about changing your products or services, but about reinventing your business model.

Listen to Interview with "Reinvent Your Business Model" author Mark W. Johnson on Spreaker.