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Whenever I meet people who want to start businesses, they usually are thinking in terms of a size for their operations that won't serve their customers very well. When that happens, a business will achieve only a few percentage points of its potential.
Why leave so much opportunity behind?
People don't see the opportunity.
But with continuing business model innovation, even too-small plans can grow up to gain the required size and focus that's needed. Here's an example of how a small operation grew rapidly to become the right size and shape for its best customers:
Iron Mountain started out as a regional data and paper records storage service, based in the New York and New England areas. Auditors had been concerned that computers have appropriate back-up records in case of failure, and usually insisted that companies employ off-site storage.
The ideal location for such off-site storage was a cave because security cannot be better, which just happened to be what Iron Mountain had to offer as its first storage facility. Since trucks were carrying data storage back and forth from customer locations and there was plenty of empty space in the cave, it was logical to bid for the paper storage business as well.
Gradually, management began to see that it could provide an outsourcing business for customers' records and information management. But it wouldn't do any good unless Iron Mountain could serve all of a customer's needs. Served by many tiny companies, the industry was ripe for consolidation and an improved business model.
Bell & Howell had the same idea, and had started in this direction by purchasing the Bekins records storage business in California. Soon, the company was acquiring small operators across the country. But Bell & Howell decided to do an LBO, and didn't have the resources to continue this strategy for Bekins.
So Bell & Howell sold the Bekins business to Iron Mountain. Now, almost by serendipity, Iron Mountain became the only national vendor of these services. The company could add value to local storage companies when it acquired them by bringing in national account volume, and more professional management of outsourced customer accounts. Soon, business was growing like topsy.
Without continuing business model innovation, however, Iron Mountain might easily have ignored the Bekins opportunity and the importance of handling all the needs for firms with a national footprint.
What are you doing to be sure that your business model fulfills what customers need?
Copyright 2008 Donald W. Mitchell, All Rights Reserved
Donald Mitchell is chairman of Mitchell and Company, a strategy and financial consulting firm in Weston, MA. He is coauthor of seven books including Adventures of an Optimist, The 2,000 Percent Solution, and The Ultimate Competitive Advantage. You can find free tips for accomplishing 20 times more by registering at:
www.2000percentsolution.com
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