In 2005 Ryan Dienst and his team were coming to a painful realization. The medical imaging device company they founded three years ago was in the wrong business. Global Medical Imaging (GMI) had built up a healthy revenue stream selling ultrasound and imaging equipment to doctors’ offices, but every sale was to a new customer (no recurring revenue) and margins were uninspiring.
GMI was not the only player in this business, but while its competitors resigned themselves to their "reality," GMI decided to change it. Since then GMI has engineered two pivotal turning points, applied several patterns, and thereby unlocked new growth and profitability in what many view as a stable, mature business. Could GMI be positioned to become a game-changing player in the medical device market? Early indications say yes.
Slip into something new
A few years ago, two things converged and gave GMI’s management an idea for a winning move. Customers began asking GMI for more help. "They’d tell us, ‘Can you help us repair this? We already have a relationship with you; can’t you stick with us?’" says Dienst.
Such requests helped GMI’s management see a new opportunity. As Dienst describes, "We recognized that we had developed strong technical competencies that we could provide repair and support, and we could offer these as a service to our clients."
This shift in the business model – from only selling equipment to also servicing it – had three clear advantages.
First, by adding a service contracts business on top of its core business, GMI could grow revenues substantially.
Second, these contracts generated far higher margins than GMI’s and its competitors’ core businesses.
Third, this transformed GMI’s customer relationships from one-time transactions into long-term bonds.
This is pattern #25: shed your skin.
It involves recognizing that the current skin of your company is no longer comfortable. It’s no longer what you want or where you want to be. But you can’t abandon your entire shell, so instead you shed a layer of skin to leave behind as a decoy while you move to more profitable endeavors.
You don’t change your business model – you just add a new strategy to it. You keep your core business in operation because that’s how people recognize your company. But while they are looking at that top layer of skin, you create new opportunities behind the scenes.
By creating a façade (the device sales business) and moving the action somewhere else (service and, as we will see later, training), GMI expands its strategic options. It is able to blend and shift activities in and out of multiple games, making competing with it difficult.
This is not unlike Best Buy making profits from service contracts instead of electronics sales, even though everyone thinks of Best Buy as an electronics retailer. Thomson Travel of the U.K. similarly appears to be a travel agency but is actually more accurately a charter airline business.
Ask yourself the questions below to see if you can find a new skin to jump into.
1. What if I change my current business to better represent our capabilities and make more money?
2. How can I shed the current business plan and move the action somewhere else?
3. How can I position the current business as a façade for a new endeavor?