What makes an effective executive? In my experience, effectiveness as an executive comes down to getting three things right: building the right business model, executing it, and quickly leading learning to close the gap when the business model or execution isn’t where it needs to be. In this second article in a four-part series, I’ll describe the need to build the right business model.

While it may seem hard to imagine, Google is only ten years old as a company. Can you imagine life without Google or even remember the “PG” – Pre-Google time? Today, Google has become a verb: it’s not just a company, but something we do several times a day. We “Google” people to learn about them on the Internet and to search for all kinds of information on every topic under the sun. If you’ve installed a Google toolbar in your Internet browser, think about how ingrained Google has become in your daily life at home and at work. Google is now one of the most valuable brands on the planet.

What’s behind Google’s rise to power? Some would say that they developed an innovative technology for searching the Internet. True, but new technology alone didn’t get Google to where it is today.

The power of Google lies in the power of its business model. By combining technological innovation with a business model based on pay-per-click advertising, they have created enormous wealth. In less than ten years, Google has gone from zero revenue to over sixteen billion dollars. (Yes, that’s a billion, with a “b”).

Google’s impact has been so significant that every major tech company is frantically reassessing its strategy to compete. Even mighty Microsoft spent the first part of 2008 trying to buy Yahoo! so that they could better compete in the changing environment. Yahoo!, which once dominated the Internet, is now struggling to adapt to a world dominated by Google. In roughly the same time frame, Google’s fortunes rose while that of Yahoo! it fell.

But it’s not just the tech giants that are affected by Google. Google is using its power, reach, and financial muscle to innovate in cell phones, health care, and energy.

And this is not just about the big companies. This is also about small businesses. Google is impacting everyone’s business. Think about how you search for products or services. Where do you go first? Now think about how your customers, prospects, employees, and investors find out about your company. By making information so instantly accessible, everyone is affected.

Whether you are a travel agent, real estate agent, financial planner, chiropractor, industrial parts dealer, life coach, you participate in a business ecosystem where changes from big players and new players impact your business. business. Think about how your customers find you and how you search for information. Google’s impact on businesses of all kinds is immeasurable.

In the same ten-year period of Google’s rise, we’ve seen many other examples of business model changes across industries:

• Apple’s iPod and the iTunes music store have reshaped the music industry.
• Traditional newspapers continue to see their audiences and classified ad revenue disappear as online alternatives for news (blogs) and advertising (eg Craigslist, eBay) have emerged.
• The network television model has changed dramatically due to developments such as reality shows (eg, Survivor, American Idol), the proliferation of cable channels, and digital video recorders such as Tivo.
• Blockbuster and other traditional video rental companies have faced the new threat of Netflix, which completely changes the nature of video rental.
• Airlines and automakers have struggled to remain viable under the threat of rising oil prices, labor costs and pension liabilities.
• The business model of the entire financial sector of our economy is in question and it is not clear what will emerge.

Even if you think your business model is sound today, consider two recent studies on the rate of change businesses face today:

• In a 2004 survey of top industry executives by Bain & Company, more than 80% said “the productive life of their strategies was getting shorter” and more than 70% said they expected to have significant new competitors in the next five years. years.
• By 2020, the average lifespan of a corporation in the S&P 500 index will drop to 10 years, down from 50 years in the 1950s, as companies are created and destroyed more quickly. (Source: Creative Destruction, Richard Foster and Sarah Kaplan, 2001)

As Google’s history and these studies suggest, no business is immune to change that will eventually threaten the core business. Even good business models end up under attack.

These realities lead me to the first imperative of the effective executive:

As a business leader, your first imperative is to ensure you have the right business model in place to survive and thrive in an ever-changing environment. Even if your business model works today, you can’t operate as if your business model will work indefinitely. You must prepare yourself and your organization to change your business model before it becomes necessary.

Do you have the right business model? If not, what are you doing about it?