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Many business leaders would agree that the last thing they want to do is to leave behind the company's original business, and go off serving another market and need. In many ways, taking on a new market and need is like being a start-up all over again except with higher costs (unless you can acquire a business or some talent to help you implement) while moving more slowly.Consider a fish pond. If there isn't going to be enough water to support fish, the future looks bleak. You had better pack your fishing gear and head elsewhere, even if it means having to learn to fish in a new way.PMC-Sierra's predecessor company was focused on providing personal computer modems, a marketplace where it was the third largest supplier in 1994. Storm clouds were forming for that business as new technologies would require Digital Subscriber Line modems, which could cut the future demand for the company's products.At the same time, the company's leaders were very excited about the Internet becoming the killer application for broadband as a technology.Mr. Bob Bailey, PMC-Sierra's CEO says that the company was guided by a thought often shared by Mr. Don Valentine of Sequoia Capital, "Great markets make great companies."In the company's viewpoint, the chance to be number one in making chips for enabling the Internet would be just such an opportunity while being a follower in modems for personal computers would not. This decision was "not as hard as it looked." By 1997, the company left the modem business, and never looked back.Having made that decision similar to what a venture capitalist would, PMC-Sierra continues to look at development projects for new products in the same way. The investment can easily be $30-50 million to create a new product that will start a new market. If you do this particular project, then top talent and money are not available for another project.Even with the company's success, it could only afford to pay for a few of these as the technology recession of 2001 hit.Down the coast from PMC-Sierra's Vancouver base, Mr. Scott Broomfield, CEO of Centura Software, was wrestling with another, similar challenge in 2001. Although the company had been leader in developing software for client server technology, Centura had missed the boat for morphing its offerings into the Internet. Next?Mr. Broomfield decided to move the company into a totally new business model, that built from the lessons of its earlier experiences in developing client server software. This new business model would also be applied in a new marketplace, wireless communications. With a band of 20 good people, the software could be created at no greater cost than rebuilding the company's existing base in its current market.The only remaining risk for the new model was one of getting adoption. To help deal with that the company was relaunched with the name Mbrane (as in membrane) around the idea of using technology to solve customers' problems in terms that customers who were not technologists could understand. Further, Mbrane would focus on empowering workers in organizations to make it easy to get the information they needed through wireless technology.Pricing would be done in ways to make it easier for customers to choose to use the software. To pay for the new developments, the majority of the old business was sold. Only time will tell how well this approach will turn out, but Mr. Broomfield feels that he has taken a risk with a favorable ratio of risk-to-potential-reward.As you can imagine from both cases, it probably helped focus attention on the new activities to eliminate the older ones. Military commanders have often done this by burning their boats and bridges behind them so that survival could only be accomplished by going forward.Both companies were also employing a venture capitalist's perspective in making decisions, looking at choices in terms of opportunities lost as well as profits and cash flow gained.What else could these two companies have done that would have provided even more ways to harvest from their efforts? Take a moment to think about your own answers before looking at some possibilities below.First, since each company is betting on becoming a leader in new applications, the companies could have expanded their ability to learn how to solve more kinds of related customer problems. Then, if part of a solution wasn't as robust and helpful as another part, the company could still have created a lead that reflected both efforts.The technology evolution could have focused on delivering more kinds of advantages from the same development activities. As a simple example, both companies could have looked for how to make wireless and wired networks work more smoothly together from the end-users' perspective. That might have involved teaming up with people like Mr. Bernard Liautaud from Business Objects to create better ways to access data.Many will object that neither company could probably have afforded to do more. But with the right timing, PMC-Sierra and Centura could both have sold enough additional stock at a low cost of capital during the height of the Internet craze on Wall Street to have permitted such an expanded focus.Second, talent is a key ingredient in these kinds of new-product-driven business models. By tying some of the applications for the new technologies to exciting problems, the companies might have upgraded their ability to get better ideas. For example, there could have been a contest on the Internet to find problems that would encourage many top people to leave what they are doing to work on the challenge, much as Earthwatch attracts talented people to support scientific experiments all around the world.Third, adoption risk could have been greatly reduced by lining up lead steer customers to invest in the new technologies in order to help them develop their own next generation of improved business model. With many wireless carriers worldwide to choose from yet providing few differentiated offerings, both companies could probably have found at least one willing partner from the wireless industry. Such a partner would have been helpful for application knowledge, financial resources, and access to their customers who wanted to solve specific problems.Fourth, the companies are planning to provide products to create solutions. Yet, when the companies succeed the biggest value will be provided to the services that are enabled by the new technologies.Part of the business model could have examined at where the most value would be accrued by working with those who use the products or the services they make possible. Also, they could have looked at ways to create value through technical solutions that are primarily captured as intellectual property, rather than as whole businesses. In fact, it might have been less expensive to take that route than to actually design the next generation of products. Certainly that's the circumstance for PMC-Sierra.What other ideas do you have?Is the current recession just a temporary decline for your industry . . . or a sign that you had better move to a new opportunity?Copyright 2009 Donald W. Mitchell, All Rights Reserved Article Tags: Business Model, Companies Could, Could Have, Might Have