Until the fall of 2001, InVision Technologies Inc. was a small manufacturer of tomography systems used by airports to detect explosives. All of the company's manufacturing took place on one production line at its Newark, CA, headquarters. Then Sept. 11, 2001, changed everything. "Suddenly we were told by the Federal Aviation Administration that we had to increase our output of machines by tenfold in 10 months," recalls Wally Orlow, then operations vice president at the company. "We had to rethink everything we were doing." Finding a traditional contract manufacturer (CM) to pick up the slack wasn't an option. Normally it would have taken a CM six months just to get certified and into production. So InVision got creative. Orlow found a contractor, CoorsTek Inc. (Golden, CO), that was willing to partner closely with InVision, and the two companies quickly built a second production line identical to the existing one. Working side-by-side with InVision's team, CoorsTek's crew quickly learned InVision's production processes, right down to the kanban system. Then CoorsTek built two more identical production lines at its own nearby facility. In the end, InVision met the FAA's mandate, and the dramatic business changes transformed the company. Sales increased by 600 percent in 2002 to $439 million, and in 2004 the company was acquired by GE for $900 million. "We made the transition to a new business model because we had no choice," Orlow says. "If we had taken the traditional method of analyzing things and getting approvals, we never would have done it. But speed, in this case, was really our ally." Shift on the Fly Most manufacturers will never face the kind of sudden, disruptive business model change forced on InVision. Still, today's markets are changing too fast to permit manufacturers to stick blindly even to historically successful business models. Unfortunately, many are paying a price for attempting to do so. According to research recently conducted at the University of Manchester, the lifetime of the average company is now just one-third of what it was in the 1930s. On average, the research found, even large companies in Europe and North America fail within 20 years. So how can manufacturers avoid becoming part of those sad statistics? One key, experts say, is that manufacturers must be willing and able to continuously assess and, when necessary, quickly change their business models. Manufacturers, for example, must be willing to outsource production or even product development to partners in lower-cost locations when new opportunities arise or offshore competition turns once-profitable products into commodities. They also must be prepared to turn over asset-heavy processes such as logistics to outside partners when necessary. A core tenant of Managing Automation's Progressive Manufacturing philosophy, Business Model Mastery -- the ability to recognize one's core competencies and partner for the rest -- is also the focus of a newly published book by Linda Sanford, senior vice president, Enterprise on Demand Transformation and Information Technology at IBM, who has played a role in major business model changes at the Armonk, NY, company. In Letting Go to Grow: Escaping the Commodity Trap, Sanford says companies must find the will to break themselves up into discrete components and, where necessary, outsource key pieces to partners with whom they closely collaborate. "I'm suggesting that we all let go of business models and management systems that are not effective in today's ultra-competitive marketplace," Sanford said in a recent interview. "The Internet, globalization, and deregulation have given rise to a situation in which many products and services have become commodities. To compete in this environment, businesses need to find new ways to differentiate themselves." A recent study by Accenture also pointed to business model mastery as a key factor differentiating consistently successful manufacturing companies from those that are less successful. The study, based on in-depth interviews with 100 industrial equipment manufacturers, found that global flexibility -- defined as the ability to quickly change global operations in order to take advantage of regional cost differences and opportunities in emerging markets -- is one of four characteristics common to manufacturers that consistently deliver above-average shareholder returns and growth rates. So how can a manufacturer become a business model master? How, for example, can managers be sure the business model changes they are contemplating will truly deliver value and competitive advantage? One key, experts say, is to make sure business model changes -- such as the decision to outsource major operations -- are tightly linked to and driven by your company's business strategy. Too often, says Shoshanah Cohen, a director at PRTM Management Consulting (Mountain View, CA), companies embark on a major business process change as a reaction to what competitors are doing, not necessarily because it fits their long-term business strategy. "We are seeing a lot of clients who just watch the competition and do what they are doing," Cohen says. "Their conclusion is often, 'If they're outsourcing, it's probably a good idea.' There's a bit of group think going on." Keeping decisions about business model changes such as outsourcing tightly linked with business strategy will help manufacturers enter into the right partnering relationships, Cohen says. If you are seeking to outsource production of a complex and strategically important product, for example, you might want to select a CM for whom you will represent a large, important segment of business, Cohen says. You might choose to outsource less-strategic products, on the other hand, to larger CMs that can deliver the lowest cost. Consider the Ripple Effect Manufacturers considering a major business model change such as outsourcing should also carefully assess the risks and the potentially major impacts that will ripple through the enterprise as a result of the change. Outsourcing production to an offshore CM, for example, means supply chains will be stretched sometimes by thousands of miles. And that will impact everything from logistics to transportation costs and supply chain planning processes. Also, outsourcing means that processes such as demand and supply chain planning become collaborative, involving you, your CM, and the CM's suppliers. Making that collaboration work, Cohen says, usually requires people with partner management skills that are often in short supply at manufacturing companies. Outsourcing without first considering such issues, Cohen says, often leads to disaster. "We see a lot of companies that end up throwing bodies at problems and doing a lot of firefighting but still ending up with obsolete inventory, missed shipments, and, in the end, missed customer service opportunities," Cohen says. "But, once you've outsourced manufacturing, it's very hard to get it back." One way to avoid that situation, experts say, is to put into place a risk assessment and management process before making a major business model change. Celerant Consulting (Lexington, MA), a global operations consulting firm, for example, has created a risk assessment model that can be used by manufacturers to assess and track key performance indicators such as supplier performance, quality, on-time delivery, and service quality. The model also takes into account the potential impact on operations of events such as macro-economic changes and even natural disasters. Such a tool, says Mark Butler, a Celerant vice president, helps focus the attention of managers in different functional areas -- manufacturing, supply chain, legal, and logistics, for example -- on the same key business issues that must be considered when making a major business model change. "There's a big behavioral change that must take place along with the business model change," Butler says. Finally, experts say, recognizing a need and quickly implementing business model changes should not be considered a one-time or even infrequent action. On the contrary, says Celerant's Butler; just as the competitive landscape shifts continuously these days, manufacturers should be continuously evaluating their current business models and putting in place changes such as outsourcing. "It is paramount that business-model change metrics and processes be woven right into the day-to-day running of the business," Butler says. "You should constantly be challenging yourself about whether you are calling the right plays when it comes to operations." A recent study by Mark Coming, Gunter Jordan, and George Hughes of consulting firm AT Kearney, in fact, advocates an "outsourcing continuum" in which manufacturers execute different outsourcing models for each of their product lines, depending on where in their lifecycles those products are. Design and production of newer, higher-margin products, for example, might be kept in-house, while assembly or packaging of slightly older products might be outsourced to a CM, according to the study. Ultimately, manufacturers might outsource to OEMs all aspects of producing and distributing older, commoditized products. Of course, such an approach can be challenging. In the example of the "outsourcing continuum," it would mean creating and managing multiple outsourcing relationships and cycling different products through each. For many companies, making the transition to the kind of continuous business model change that includes healthy doses of outsourcing won't be easy. That's because, for many, it involves major cultural change. "It's a bit like cleaning up after the circus," Butler says. "Nobody likes to do it. But everyone has to realize that there's no alternative."