Fluidity – the growing need of organizations today.

fluidy 9Organizations are facing increasing a dilemma in how they organize and manage within their systems and structures.

They are being forced to deal in increasingly complexity and environmental turbulence and ‘adapting the appropriate response’  remains increasingly a difficult one to master, within the existing regime and structures.

On the one hand the value in stability is still essential, working within specific routines and practices gives a clear ‘path dependence.’

This allows for efficiencies and effectiveness to be constantly at practice, constantly building the problem-solving processes, so as to master tasks in complex environments to resolve ‘known’ problems in ‘given’ ways.

We need to become increasingly fluid but how and why?

Continue reading

A new innovation perspective – change to fluidity

Fluidity 5Today most innovation is focused on creating new products or services. These new innovations frequently change or modify operating models and business models, often not by deliberate design.

We’d stipulate that most innovation should be focused on updating and changing business models constantly and with increasing focus. With this focus new products and services become by-products or outcomes that support or sustain new business models for driving greater lasting sustaining competitive advantage.

In short, most innovation should be focused on creating new business models, with new products or services serving as enablers to intentional business model innovation, rather than the other way round. This is what we mean by flipping perspectives.

Critically we have to become far more comfortable with constant, ongoing change and aligning this into new innovation and business models. This move to positive change is discussed here, recommending a movement that allows the changes we need within our organizations to become more fluid in their adaption, for leveraging and exploiting innovation in new, far more compelling ways.

Continue reading

Most Innovation is Becoming Business Model Innovation

Ending BeginningAs we consider the interplay between innovation, business models and change, it becomes clear that many companies have a definition of innovation that’s far too narrow.

Increasingly we need to rethink the scope, depth and breadth of innovation possibilities, as well as the secondary implications of innovation.

Ignoring this broader definition of innovation means we can never achieve all of the possible benefits innovation has in store.

We believe ignoring the breadth and depth of innovation can also allow competitors and new entrants to disrupt your position or industry. Fortunately, some of these definitions have been created for us.  Our responsibility is to understand the definitions and their implications, not stay constrained but seek and explore the broader options this can provide.

Continue reading

Building upon four key wealth creating pillars

Wealth creation 1Most rooms we enter have four sides; they provide the structure to build upon. Presently in many of our economies, particularly in the West, we are struggling to find real growth; we are limited on our wealth-creating possibilities. Why is that? Our structures seem to be weak not strong.

We are certainly relying far too much on ‘selected’ pockets of economic activity to keep us going. Technology is clearly one of these. Yet our longer term forces for sustaining growth remain ‘fragile’, our structures remain wickedly  ‘out of kilter’ and we need to find stronger connecting frameworks that reinforce each other, so we can build further upon these to manage our business activities in new ways.

In most of our economic activities technology is playing a significant part in altering our habits, routines and thinking but it alone, is not enough. For technology to really give benefit it needs to be driven by our ability to generate wealth creating activity and that comes from integrating knowledge, gaining experience and being able to articulate this in better ways.

To achieve this, our business structures that we have in the past relied upon are in need of changing. They need different pillars to build upon.

Welcome to my four pillar room……..with a view

Continue reading

Getting the Business Model Story Right.

Whats your story 1Framing the business model needs a compelling story so that it can be quickly and well understood by others. This is absolutely core. So, how do we go about it?

Recently I provided this contribution to Patrick Stähler’s blog that forms part of fluid minds, a think tank and consultancy for strategic and disruptive innovations. They  focus discussions through their very distinctive version of the Business Model and its design.

This was on some thoughts on how to explain your business model through a story or your business narrative. The original post is here

The hard part comes after designing your new Business Model, you have to explain it.

You have come to the end of a fairly long week. You have finally finished your Business Model Canvas. Finally you have a working hypothesis of something that is going to challenge some of the existing business models around. You should feel pleased; it took a lot of hard work to get to that point.

Laid out on one piece of paper is something that could have real business value yet although you can see where the dots connect, you begin to wonder if others will see the same compelling value, to invest in it, to back it, to simply support it and encourage you to continue.

Completing a business model and identifying its critical parts is only that first step, the hard part is getting it off the ‘drafting board’ and making it something tangible and potentially commercially viable for those around you to engage with.

What is the next step in executing this potential game changing business model?

Each new business model needs a compelling story – a narrative.

Share your storyWe really need to learn how to craft a story, to tell the narrative around why your business model idea stands out and is worth other people’s time and consideration.

This business model narrative along with your business model you are potentially better placed to test it, to talk about it, to validate it, to make it ‘sing for others’.

You are out to get engagement and contributions everywhere, from everyone, as you tell the story, describe your potential new business model you gain from their reaction and improve your understanding of the real need for your idea.

So we need to think about the art of narratives and storytelling

So first things first, with setting about building your business narrative, we need to get comfortable, as each of us, in our own way are unique in how we would set about the initial thinking through of the business story.

We can certainly brainstorm, or free write, and it is certainly worth to complete some essential brain warming up exercises. All of these get that brain whirling again around your new business model but in a distinctly different way, as you are focusing this on the best way to communicate your story to others. You do need to really think about this, as it needs to appeal to them, even if you feel it is the best thing ever!

We need to find our own ways of doing this warming up. We are not warming up to figure out the business model, we have completed that; we are priming our brain to start structuring our thoughts to turn them into our narrative (about our business model story).

This can take as long as you feel it is useful. For me I take my time, I like to gather around me lots of my reference papers, all sorts of scribble notes and triggers to make a fairly exhaustive first ‘cut’. Then I set about circling or highlighting them with a yellow highlighter all the main themes, the important parts of what, why and how my business model came about.

Working through some useful but measured steps is the key

Seven steps

The question you need to ask is: “I certainly have to find within these notes a range of critical aspects that will make my business model story stand out”

Let’s go through these seven steps.

Firstly 1) you have to describe what your business model will do – even if this is still at this stage where it needs to be truly tested, what is it all about. You need to allow for action words that can be understood, keep it simple but on ‘message’ for others to quickly grasp the big idea.

2) What makes this business model special – I mean so special that it can resonate with others; they can see what it is going to do to change or challenge something they know. It needs to address identified needs but all the parts are seen as connected.

Then we move to the customer side

3) who is it for?– who are those customers that will show initial interest, the potential market place you see this addresses and listen to the reaction back- does it resonate with those listening?

4) what does your business model resolve – those famous pain points or jobs-to-be-done you feel that need resolving or will be valued to overcome existing constraints you feel there is within existing offerings. Are you getting that nod of agreement, that confirming back or increasing questioning?

So far so good we are building our story, we are telling our story, we are getting valuable feedback and identification. Now we need to reflect on the part that gives the real growing confidence

5) Why you are thinking beyond the immediate– some of your longer term goals and ambitions and the way you are setting about this and what the listener can do to help.

6) what do you envisage are the resources and actions needed that will get this going and led you beyond just the idea and turning this into something real and valued by others.

If this remains unclear to the listener then you are beginning to flounder, you might be losing their attention. Maybe your business model or narrative is missing some important learning points.

You are testing your initial hypothesis in the real market place and getting the feedback you need to stop and rethink or it validates your original thinking.

Then there is one final part, our No.7

As you search through your notes, full of highlighted points being ticked off as you go.

That is the most important one, our number 7) you are looking to summarize why you will succeed

The final partThis summary ‘wraps-up’ your solution; it provides the story behind your thinking, the final piece, it brings it all together. It is conveying why the business model you see, is valuable. It transmits the value of your idea, sitting on your one sheet of paper.

Now this is not the easy part, it is the ‘call to action’, the real identification you are asking of others to value and invest into your business model, to identify with it.

The tighter the story, the faster you get feedback and identification

This narrative needs to be a really compact synopsis, the real kernel of your business model, it forms the basis for the narrative and why your story is valuable to the one listening.

Irrespective your business narrative need to spark action

It is the story that makes the sense of your business model. It conveys its value, its sense of mission, your personal visions, it offers the place where you communicate and connect the business model with the listener.

By talking about it you are generating and testing a market-making narrative, to hone your thinking, to win over others to your solutions and ideas. You are testing your business model in the real world.

Your story narrative will be significantly tested and will change I am sure.

Target Market Your Big IdeaEach step or new iteration is a ‘smart’ step forward, if it builds and learns from the last one. It becomes more and more compelling until it resonates and translates into a new, valuable business.

Your business model is closer to filling a real market need from this consistent telling of your evolving story. The business narrative is essential to your thinking.

How are you evolving the function and design for innovation?

Organizations are struggling to forge a new path that captures opportunities fast and also exploiting that increasing need of being adaptive and flexible.

They are looking at structures for their innovation activity that are taking a more agile and focused approach, wanting to push for constantly accelerating the process. New practices are emerging.

This is demanding more radical redesigns of the function, processes and structures around innovation. Innovators are being more challenged.

Against this need for new, more radical designs there still lies that underlying concern, often at the top of our organizations, on how to manage innovation risk without significant organization disruption. There is this lingering fear that pushing for more radical innovation can create significant upheaval within the organization. Innovation is being challenged by the view of “we want predictable innovation but radical enough to make sure we grow.

Innovation has to manage within this conflicting message. It is through the well-designed system, processes and function that this can happen but this needs redesigning fairly radically to adjust to today’s world of wanting innovation faster than ever.

Continue reading

Value realization comes through innovation and our business models.

Everything, it seems we work towards in business, is for seeking out new value creation, for new growth, for wealth creation, for providing improved returns on the investments we have been making.

To achieve this we consciously have to set about the value capture and what contributes to its realization. This is where innovation plays such a vital part. If we don’t build our innovation capital we will certainly have a much harder, perhaps even impossible time of realizing new value. We are more than likely to just maintain our existing value or see it steadily decline. So a constant focus upon renewal is always needed. Do we consciously do that on a daily basis or just once a year at annual review time?

Value-adding activities need to be central in nearly all of our decisions. The how we can turn our resources into being more productive, more creative is increasingly becoming one our biggest strategic areas of  future investment decision. Our resources are those all-inclusive assets, capabilities and processes that make up the Enterprise.

Yet it is clear management is spending far more of their discussion time and focus on the ‘harder assets’ that are made up of land, buildings, equipment and machinery – the ‘heavy’ financial capital investment decisions. Any new investment in IT, processes, software are usually well identified in the accounting or discussed within the narratives that support the reported numbers. We constantly report on these in our annual reports to validate and justify management’s decision.

Where we still seem to remain far too silent upon is our ‘softer capabilities’ Of course we extol the virtues of our employees for their hard work, for their vital role within any result, yet we still struggle to go beyond ‘simple’ articulation and quantify this value. Why is that?

Managing the innovation ‘stock’ and ‘capital’ potential

We do need to know our ‘innovation stock’, a large part of our wealth generating capital and where it can be best put to use. We are valuing the knowledge perspective far more and with this we are increasingly recognizing the importance of the intellectual capital that makes up the organization.

We are still caught in old world value reporting systems. We are not assessing our organizations for their true ‘invested’ worth. As the more intangible side is completely under-reported we make educated guesses. We are valuing firms on what we ‘feel’ they will generate in future innovation value but those internally as well as us externally lack the real ability to measure this. Yet we can if we took the same amount of time to understand the ‘make up’ of these.

We are needing to value the knowledge perspective far more. Far more intangible assets and the knowledge available is being recognized as the valuable aspects of the potential future of a business. These are the more ‘dynamic’ parts that come under human capital (competency, sharing, collaborative, learning quickly, collective competence and enduring value for the future), creative capital (creativity, fast prototyping, design and development, replacement & renewal), the relationship capital (responsiveness, retention, absorption, empowerment, networking), customer capital (the customer base, engagement, the potential and the ability to connect), entrepreneurial capital ( risk- taking, venturing and exploring)  and finally, the process capital (productivity, cycle time, process yield, on time delivery) are becoming far highly valued today. It is these contributing capitals that make up the unique mix we find within our innovation capital. These significantly deliver the value creating abilities.

We need to know the multiple capitals that make the true value of a business.

It is these different capitals that together are making up the intellectual, wealth generating parts. It is those that are more dynamic, the contributing parts of our capitals that should be highly prized today for the investment premium.  Yet often this ‘premium’ is often no more than an educated guess on what we suspect on past track records, assumed as the basis for the possible ‘promise’ in the future. We need to change this guessing into much more harder validation. Lets move away today from those traditional assets ‘seen’ and well measured on a balance sheet (buildings, machinery, the physical more static assets) and capture and report on the real value generating ones that create the innovation growth.

We need to make much more of a concerted effort to identify these intellectual and knowledge providing capitals and perhaps ‘house them’ under this broader innovation capital. As it is innovation that renders that different, unique set of value outcomes far more. Surely it is this innovation capital that is at the core for future wealth, that value creation potential. Innovation capital must be treated as the essential strategic asset and is it is central it needs to be far more reported upon by the management of organizations. Of course it constantly gets mentioned within the narratives by management today but often lacks quantifiable and substantive validation.

For years there has been this call for a far more integrated reporting mechanism, one that ‘accounts’ for identifying the intellectual capital to provide this better understanding. The struggle with this argument is it still seems to be a ‘pipe dream’ as management seemingly fails to understand the mechanisms within these. Can this change, if so how?

 Maybe we should reframe the measuring of intangibles differently?

Today we are operating in business environments that are highly diverse, specific and subject to rapid change. This reacting to this volatility and our ability to spot new opportunities is what is often keeping management up at night and certainly giving the investors equally sleepless nights, trying to second guess organization performance so as to make the decision to continue to invest or begin to divest.

The value creation being created simply needs articulating better. Markets and investors need the value generating perspective far better framed and explained. Today this is often random, ad hoc, left to individual interpretation in their presentation; it needs some form of uniformed framework to bring this together to allow for clearer, more transparent comparison and judgement of real value. It does need a more integrated framework of value creation.

The focus should be on value creation through the business model

Last week I read an excellent paper written by Vivien Beattie and Sarah Jane Smith called “Value Creation and Business Models: Refocusing the Intellectual Capital Debate”. I was kindly sent this by Vivien Beattie after the abstract caught my eye. It has triggered much of my thinking in the last week.

Of course! The Business Model, this is the place for us to gauge measure and gather a real sense of the dynamics that are making up the organization. Today there is certainly far more of an emphasis upon understanding the business model, so why not make this even more central to reporting?

The quality of the business models is paramount to the value proposition to the customer and this triggers even more of value identification within the value proposition, so central to the Business model canvas.

Within the business model we need to gain a real sense of the dynamics that make this up. Where is the intellectual capital being applied to create new innovation, where are the new business opportunities? It is the abilities to ‘connect’ these, in how we acquire, combine and utilize those unique and valuable resources with the business idea. It is this dynamic ‘combination effect’ that delivers the value (proposition) to the customer.

The Business model is the new unit of analysis for evaluating future value

Arguably the business model is holistic and is becoming increasingly the new unit of analysis, that spans the organization and ‘articulates’ its capital and strategic value capturing parts.

Can we achieve a more integrated set of disclosures that combine the Business model, its strategic approach, what makes this up and clarifying its value creating process?

This potential approach does need to place a much heavier emphasis on the innovation capital and all the knowledge creating aspects that make up intellectual capital. It would need a significant shift in management’s understandings as they would need to articulate the critical components far more, they would have to find a common communicating language. Where better than the ‘heavier’ use of the business model canvas or the layering structures that makes this understood?

Externally we can also judge far more the potentials within the stated ‘interactions’ between the critical components of the business model. Management does not have to ‘give the store away’ in their competitive position to its competitors but they certainly can do a better job to convey much of the dynamics that make this up, in better, thoughtful ways. Make this more financial contingent for future investments.

Beyond narrative reporting, we need to push further.

Narrative reporting has been suggested as the step for this to happen. To make the business model an essential mandatory part of the management reporting. I think this can even be pushed further. Whenever management has been ‘pushed’ by regulatory forces it has taken the time to learn and understand the parts that make this up. Our intellectual capitals are part of this learning as equally knowing the ‘dynamics’ that make up the innovation capital becomes essential.

The business model, the intellectual capital and the innovation capital simply make up such a significant part of the Value Creation process. Realization of this ‘make up’ and understanding its critical connections is needed far more today to understand. Knowing these can move us towards value our organizations far better than we can do at present.

Communicating the value creation and business model is critical today

Today and in the future, it is the ones that can articulate and ‘point towards’ what makes up the value creation will attract and command investors premium. Those that can describe how they are setting about sensing and seizing opportunities by knowing the more dynamic ‘interactions’ will be in a far better shape to exploit and capitalize on them.

The organizations that understand their unique mix of capitals and how it is made up in this broader sense, will be able to deploy their innovation capital towards the ‘value proposition points’ far better. These will will be through constantly evolving business models, to convert opportunity to their gain, repeatedly by directing their innovation capital far more effectively.

The key today is they need to know what to invest into as the critical resources and this is far less the ‘hard’ assets but more the softer competencies, capabilities and capacity parts that are made up through knowing what contributes into the innovation capital.