Decision Model Innovation: The next frontier in creating competitive advantages in converging industries

DECISION MODEL INNOVATION: An Introduction
The RDA Business Environment
Many companies that I work with are strongly affected by three major developments:

1. Robotics & Globalization: The automation of more and more physical work in combination with global trade & investment opportunities lead to a situation where companies are increasingly locating their production sites as close as possible to their respective sales markets because the cost of human labour becomes less relevant in such decisions. Even more important, especially companies from/in emerging markets can faster and more effectively produce the same quality levels as their competitorsoriginating from developed markets.
2. Digitizaiton: Digitization including Social Media, Industry 4.0, Industrial Internet of Things etc. is finally always resulting in increased Transparency and enables companies across industries to increasingly collaborate based on a common denominator – data.
3. Access-based Business Models (Sharing Economy): The Financial Crisis and the ongoing Climate Change Challenges are pushing for different consumption models such as access-based business models; i.e. Sharing Economy. This changes the way people value brands, quality and customer experience. 

These three developments ( Robotics & Globalization, Digitization, Access-based Business Models) lead to an increasing “Commoditization of Products and Services”. For example, the automotive sector has been among the first to both experience a massive industry convergence into the so-called mobility sector and to fully embrace the potential of robotics to harmonize their manufacturing processes around the world and locate their assembly plants next to their major sales markets. This development also allowed OEMs from emerging markets to catch up in quality levels and at least reduce the margins of established players in the BRIC countries. Similarly, the sharing economy is reducing the number of cars sold and, even more important, disconnecting the actual mobility consumer from a specific car brand (e.g. a subscriber to a ‘premium’ car sharing service doesn’t care whether the car he/she gets access to for each ride is a BMW, Mercedes, or Audi). In addition, digitization in the form of artificial intelligence, massive cloud computing or detailed digital maps and new data transmission standards allows for new forms of mobility such as autonomous driving; i.e. the ultimate form of transparency that a mobility consumer can get from a car).
As a consequence of this “Commoditization of Products and Services” through industry convergence, companies face the problem to identify new ways to create customer value & capture in order to sustain their profit margins in the future. 
​Our suggestion is to think of “Decision Model Innovation” as a posssible answer.

DECISION MODEL INNOVATION (DMI)
In the past, companies have created COMPETITIVE ADVANTAGES through product/service innovation, process innovation and business model innovation. 
​However, with the rise of the DATA-driven economy & KNOWLEDGE societycompanies need to consider another form of innovation. In our observations of industries and our interactions with companies we have experienced that companies are increasingly struggling to find ways to differentiate their value proposition from competitors in converging industries due to the “Commoditization of Products and Services”. During the last decades, companies first focused on product innovation, later in combination with process innovation, and finally followed the concept of business model innovation.
We do not propose DECISION MODEL INNOVATION (DMI) as being a completely new model compared to business model innovation but differentiate DMI as follows from product, process and especially business model innovation: 

• DMI emphasizes the importance of DECISION MAKING SUPPORT for your CUSTOMERS as the KEY VALUE PROPOSITIOIN of your own company given the increased transparency that can be achieved in a DATA-driven economy. 
• DMI emphasizes the importance of business ecosystems to integrate all necessary technologies required for the continuous improvement of your DECISION MAKING SUPPORT for your customers = DECISION MODEL INNOVATION.
  
  

In sum, DECISION MODEL INNOVATION…

• …focuses on creating value for a company’s stakeholders based on the transparency that new developments along the DATA VALUE CHAIN offer (Data Value Chain: data gathering (i.e. sensor technologies), data transmission, data storage, data analytics, data visualization).
• …provides a company with the opportunity to differentiate itself from competition in converging industries; when facing an increased "Commoditization of Products & Services". 
• …requires a company to consider itself as a member of multiple ecosystems serving multiple customer segments - each with a different decision-making support value proposition and value capture strategy.
  
  

More on the implementation of Decision Model Innovation and case examples in the next posts.​

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