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managing multiple business models

Visionaries, game changers, and challengers are generating Synergies, Markides claims, should be carefully exploited even when the new
innovative business models around the world—as entrepreneurs and as model is implemented in a standalone unit.
workers within established organizations. An entrepreneur’s challenge is Risk is a third variable to consider when deciding whether to integrate
to design and successfully implement a new business model. Established or separate an emerging model. How big is the risk that the new model will
organizations, though, face an equally daunting task: how to implement negatively affect the established one in terms of brand image, earnings,
and manage new models while maintaining existing ones. legal liability, and so forth?
Business thinkers such as Constantinos Markides, Charles O'Reilly III, During the fi nancial crisis of 2008, ING, the Dutch fi nancial group, was
and Michael Tushman have a word for groups that successfully meet this nearly toppled by its ING Direct unit, which provides online and telephone
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challenge: ambidextrous organizations. Implementing a new business model retail banking services in overseas markets. In effect, ING treated ING Direct
in a longstanding enterprise can be extraordinarily diffi cult because the more as a marketing initiative than as a new, separate business model that
new model may challenge or even compete with established models. would have been better housed in a separate entity.
The new model might require a different organizational culture, or it might Finally, choices evolve over time. Markides emphasizes that compa-
target prospective customers formerly ignored by the enterprise. This begs nies may want to consider a phased integration or a phased separation of
a question: How do we implement innovative business models within business models. e.Schwab, the Internet arm of Charles Schwab, the U.S.
long-established organizations? retail securities broker, was initially set up as a separate unit, but later was
Scholars are divided on the issue. Many suggest spinning off new busi- integrated back into the main business with great success. Tesco.com, the
ness model initiatives into separate entities. Others propose a less drastic Internet branch of Tesco, the giant U.K. retailer, made a successful transition
approach and argue that innovative new business models can thrive within from integrated business line into standalone unit.
established organizations, either as-is or in separate business units. In the following pages we examine the issue of integration versus separa-
Constantinos Markides, for example, proposes a two-variable framework tion with three examples described using the Business Model Canvas. The
for deciding on how to manage new and traditional business models simul- fi rst, Swiss watch manufacturer SMH, chose the integration route for its new
taneously. The fi rst variable expresses the severity of confl ict between the Swatch business model in the 1980s. The second, Swiss foodmaker Nestlé,
models, while the second expresses strategic similarity. Yet, he also shows chose the separation route for bringing Nespresso to the marketplace. As
that success depends not only on the correct choice—integrated versus of this writing, the third, German vehicle manufacturer Daimler, has yet to
standalone implementation—but also on how the choice is implemented. choose an approach for its car2go vehicle rental concept.

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