Columbia Business School professor Rita Gunther McGrath studies strategy in highly uncertain, volatile environments. She spoke recently with HBR executive editor Sarah Cliffe about how to recognize an oncoming crisis—and seize opportunities to get ahead of competitors.

HBR: Why is there so much interest in business model innovation right now?

McGrath: I see three main reasons. The first is the increasing speed of everything. Product life cycles and design cycles are getting shorter. When the pace of change gets faster, people realize that they need to look for the next big thing. The second issue is interindustry competition. Competition is coming from unexpected places. Who could have anticipated that the iPad’s success would put all kinds of display devices—like electronic photo frames—out of business? And the third trend is disruptions from business models that offer better customer experiences instead of simply products. Traditional toy retailers are struggling, but Build-a-Bear gets people to pay good money to provide free labor and make their product themselves. Maxine Clark, the entrepreneur who thought that up, was brilliant!

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Publication/Copyright: Harvard Business Review