Growth through Asymmetric Business Models
April 24, 2015 | By Peter Bihr |
The other day I sat down with Andreas Constantinou, founder of analytics company VisionMobile and adjunct professor at Lund University. He researches business models, particularly around developer ecosystems.
Andreas showed me this model about asymmetric business models (ABM), that is: a business model that crosses industries, by forcing profits to migrate from one industry into another:
Source: VisionMobile 2014, used with permission
To put it simply, it says to grow companies could either…
- diversify, which means branch out into new markets by investing their profits into that new market, and try to turn that new market into a source of profits in its own rights; or…
- grow asymmetrically, which means branching out into a new market with the intention of not turning huge profits within that new market, but rather to drive profit in the core market.
Two examples that illustrate the point:
- Apple creating the app ecosystem to sell more mobile devices (core business: hardware).
- Google disrupting industry after industry with heavily subsidized offerings to capture data and ultimately play out more ads (core business: ads).
All of this sounds obvious once it’s presented like this – I found it tremendously useful because it’s very clear and easy to deduct strategy implications.
One huge implication, as Andreas points out, is that both strategies need to be measured very, very differently:
- To measure successful diversification into a new market, you need to measure profits in that market.
- To measure successful assymetric growth, you need to measure not the newly entered market, but the impact on your core business.
It’s pretty straightforward, but of course a fickle management might easily apply the wrong metrics here and create tremendous damage.
We see these assymetric growth dynamics play out just about everywhere in the world of the big (formerly) “pure” web companies: Apple, Google, Amazon. Where a platform play isn’t the whole story, but rather the goal is to create whole ecosystems.
If you think about business strategy for your company, I recommend testing this model.
- If you work in automotive, to help you figure out who’s friend or foe;
- if you work in media, to figure out where your organization truly delivers value;
- if you work in city management, to figure out how to build complimentary services and partnerships to grow your “core business” of delivering services to citizens;
Let me know what you think!