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.

Are you a business model innovator?

I think nearly every significant business consulting firm has written about their thoughts on business model innovation. I was reviewing the number of articles I have collected about this and it is becoming mind-boggling how so much advice can be offered and can still make sure it leaves you in deeper conflict and confusion than before.

I’m talking here more about the larger, more established organizations confusions on approaching business model innovation, not the start-ups or the younger businesses. We struggle to get an established well defined approach to approaching business models in these more established organizations. I think there are multiple reasons and I’ve touched on some in past posts.

Is help on the way or are we about to layer on more confusion?

I know there are plans on there way where the combined minds and efforts of Henry Chesbrough, Steve Blank and Alexander Osterwalder are entering the fray even more, in a new educational offering at UC Berkley in late October. I think there is ‘stand-alone’ modules as well in their respective works, especially over at Strategyzer, Alex’s mix of tools, software, academy and on- line resource around the BMI.

Their focus at this Berkley short course will be on developing new sources of growth, by helping companies figure out ways to drive the development of new business models within their company.

They are acknowledging that this isn’t the same thing as a crafting a business model for a brand new start-up, working with a clean sheet of paper.  http://executive.berkeley.edu/programs/corporate-business-model-innovation. Instead, they will examine how to get the most out of the parent company, while avoiding the traps that “help” from the parent company can entail.

The plan is to be introduced to new concepts in business model innovation, open innovation strategies, and applying start-up models in a corporate context. The program will guide participants to reshape their thinking, assumptions and business strategies, to create and restructure teams to inspire innovation.

I have to be honest here; I’m a little nervous that this might just be adding more confusion but let’s wait and see if this does the job. I hope it does not rehash what is already available. A two-day course can be incredibly constraining or equally done well, I mean really well, then it is just the opposite, liberating and defining.

Business Models should be about explicit choices.

Before we get into thinking about new business models, there is a lot of essential links or decoupling to be thought through within large organizations. Do you ever have blank canvases in large organizations? Maybe but the majority of decisions based on new business models might come with some form of organizational baggage.

My blank canvas moments in large organizations always held some constraints. These come in many different guises: there are both clear strategies (or should be) and much conflicting interpretations at each level within organizations, there are significant heritage and legacy issues to evaluate, there is a current set of operating models that might conflict or compliment any new business model design and then we can never ignore the detailed organizational design itself.

Here I’m talking about the make-up of IT, structure options available or achievable, the processes, governance, metrics, cultural, talent available and the organization-wide clarity on its priorities. Many of these actually ‘hold the business to ransom’ and if the CEO or board are not totally comfortable and have not thoroughly discussed it, new business models have a very hard time to work within the constraints known as well as hidden.

Then you have the outside forces at work, the ones that are most probably forcing the re-think or need for a new business model. These are the forces at work, have the context of markets changes or likely too, what are our present or emerging competitors doing differently than we are, what new capabilities and competencies are coming to bear and the whole context thing (macro, trends and technologies).

So the CEO or board are central to BMI’s to get off the ground and this must be the primary focal spot for discussing and educating around the Business Model. The vital message here is designing the pre-work to BM’s is the ‘sweet spot’ to get well designed and recognized, then more into the actual BM constructs and what is needed.

So what motivates change by considering new business models?

IBM conducted a survey some time back of the CEO’s ranking for exploring new business models. These were four ‘stand out’ ones of 1) Cost Reduction, 2) Strategic Flexibility, 3) Focus and Specialization, and 4) Rapidly Exploiting New Market or Product Opportunities. There were two more but these were the big four. These four certainly have huge scope behind when you think about them and can start any business model development discussions.

One way to explore these four ‘stand outs’ regarded by the CEO as the most important

If one takes a concept from a A D Little report on their view on business models I like their idea of their archetypes approach.  A launching point within any business model discussions within large organizations is to apply these ‘archetypes’ to the above four CEO needs.

The five outlined in A D Little’s report were asking open questions to see potential or not:

  • Share the cake differently (novel ways, challenging traditional approaches, partnering)
  • Supplant someone (they suggested the middleman in the report)
  • Shift the cost curve structurally (deploying different asset bases)
  • Redefine the customer experience (exploiting uniqueness and new values)
  • Convert product into service or combine them.

Now I think  possibly working through the four needs of CEO’s and the five archetypes you really can get into exploring new business models in meaningful productive ways. A 4 x 5 matrix perhaps. The emphasis points within these discussions changes and the depth of conversation determines next steps.

Getting the framing right is the best argument for change

CEO’s and boards I believe always listen to well-argued cases where you can pin point failure or lost opportunity or new sources of potential revenue and growth. Getting this framing right in the first place, knowing what and why you believe you need a new business model becomes more valuable, a real catalyst to change and this is the powerful enabler to unite behind.

Surely this going back to getting the ‘need for’ is far more valuable initially to lay in the foundation than working through the principles and typical pros and cons of one design or approach over another. I think we can get caught up with this rush to justify and validate one specific business model or another? Is this the ‘cart before the horse?’ Or just enterprise kicking in?

Sell the compelling reason for making change by identifying a real need, work through if this can or cannot be completed through an existing design, and then throw yourself into all the ‘delights’ of  what makes up the components of business model design.

Are we starting in the right place or diving in by layering on more BM design?

Just a bit of a Monday morning reaction perhaps, but reading the different activity going on within cracking the business model code for adoption within large organizations that seems to be buzzing within the Business Model Community at present. I would suggest there needs to be some great care, otherwise we kills the goose, not fatten it up by building the right thinking and value proposition for what it could really offer large organizations!

Are we stepping back far enough and giving this the ‘helicopter’ treatment before we launch into further solutions, courses and seminars, maybe just fitting the existing frameworks into something  without the real stepping back this might need?

Multiple Use of the Business Model Canvas

Recently I was having a ‘conversation’ with Alexander Osterwalder concerning the limited adoption of the Business Model Canvas within large organizations. I was asking him if he agreed and if he had any thoughts on this.

Now if you know Alex, he is either jetting off to somewhere in the world to keep spreading his Business Model gospel, or about to get immersed in his next idea associated with it, so these conversations are grabbing him through twitter or short email exchanges.

Short and sweet

Excellent! One thing I’ve seen: once the Canvas is in an org it spreads organically, virally without my intervention… interesting research topic!”

Those of you in the business world that have either been hiding under a rock recently or obviously as it seems, in a number of larger organizations, the Business model canvas comes from the pioneering work Alex did for his PhD. This was published not just in his thesis but in a bestselling book, as lead author, called ‘Business Model Generation” http://amzn.to/uY9U4b. Also take a look at his site : http://bit.ly/m4DNC1

The books claim of “You’re holding a handbook for visionaries, game changers and challengers striving to defy outmoded business models, and design tomorrow’s enterprise” on the cover, it sets itself up for the imaginative person striving to alter the status quo within their business.

Without doubt this book weaves design throughout, to give you a visual feast through its canvas approach. It leads by example in wanting to replace or alter the more established business book with its style. It is a beautifully designed book to enhance the pleasure of reading it and it is not a typical business book, it conveys the essentials that you need to know quickly, simply and in a highly visual format.

So what is holding the large organization back?

I’ve previously commented Business model innovation meets one of today’s business needs. Many of the tools we have relied upon for decades just simply do not ‘articulate’ the job on hand. Models enshrined in business folk law like Porters 5 forces, Boston matrix and a host of others gave insight, were very analytical, but gave declining comfort on foresight and this is what is needed today.

the times they are a-changin- bob dylan

We have seen the significant shift from internalizing to externalizing through open innovation. In seeking differentiation, businesses have had to loosen up and give up some of their ‘control’. The world seems more dynamic and complex, it is a place where you have to find a unique position in the market, and one built on competitive advantage seen through the eyes of your customer not from within your four walls. The business model captures ‘breaking’ opportunities and clarifying existing value propositions, so why this lack of uptake?

Often a potential problem is to do with it’s positioning- for the BM is it:

  • Alex spends an incredible amount of his engagement time with entrepreneurs, small business owners and to a far more limited degree, I sense, within the larger organizations. Is this one reason? There is only a certain amount of time and I’m sure Alex has to be selective with what and where he wants to deliver this message across the world. He might though, need to draw in a fellow BM disciple, who could focus and spread the message to the larger organization as his ‘patch’.
  • Is his message skewed towards the entrepreneur more? Even the subtitle on the front of the book might be a little challenging to the incumbent. “You’re holding a handbook for visionaries, game changers and challengers striving to defy outmoded business models and design tomorrow’s enterprise”. Maybe those (the majority in large organizations) find this more of a “oh, I wish” but are simply not sitting in that sort of position to change the world? Maybe the book needs a mini-repositioning? Or a further one where a new book brings all the ‘collective’ knowledge that has been learnt since the first one, all together as a companion, or as a field guide?
  • Is it also because it might be hard to imagine that you can capture a complex picture within a one page canvas? Within large organizations you deal in pages (I mean pages) of business plans, marketing plans, briefing papers and countless justifications. Could a business model be captured so easily? Well actually yes, if anyone is wondering.
  • Is it partly because the Business model does not have enough of a blueprint of proven techniques or follows a more (comfortable) descriptive process, yet to be fully established? I’d argue that this has dramatically been changing in what I saw in a recent workshop given by Alex- it is going more along that route but perhaps not there yet, for wider adoption or ‘comfort’ for some. Perhaps it now requires a more radical ‘layered’ supporting structure that underpins the canvas? Or you simply shout “get on the train, it is about to leave without you”
  • Or more than likely, it is far more to do with that classic ‘lead and lag’. Larger organizations are slower in adoption; it is just a matter of course. Be this in new technology, new processes, social media or a host of new things they tread more cautiously, they are slower to adapt. Those that get ‘it’ internally spend often frustrating months, sometimes years, trying to convince others to make a change, to change a process, a planning structure, even a widget within an established product that often holds it back. Then the CEO reads it in a magazine, hears it from a friend and away we go. Why not buy him/ her the book and save yourself the time and trouble!

Irrespective of the answer to any of the above, my question here is: “can they afford to keep on ignoring a brilliant tool? One that will help them ‘galvanize’ the understanding of their business model and provide an amazing tool to explore other potential ones?

I would argue to the large organization “simplicity can sometimes be deceptive” and just find the time and really focus upon the potential that lies within the Business model canvas. It is a powerful tool in the right hands. Let me suggest a number of reasons here:

So the BM Canvas and its value to large organizations.

BMI provides an increasing value, my opening set of arguments.

  1. It can help discover new perspectives on challenges, also new perspectives on solutions.
  2. These perspectives can be new insights, new customers, new resources and new channels.
  3. Framing BMI in the canvas approach can underpin the Business Case through the nine building block analysis and provide a great one page justification.
  4. It can define needs- needs in the market, needs required from solutions and their impact. It can compliment ‘jobs-to-be-done especially.
  5. It can investigate value propositions (ranking, impact, capability, competition).
  6. It can help investigate higher impact propositions (value- based, enhanced economic, applications etc) to stimulate internal thinking and greater generation of potential BMI’s.
  7. It can form the basis of any model for showing where the money lies in potential profit, the possible costs and the resources needed.
  8. It can help in evaluating competition or watching for new entrants if ‘it’ or you understand the needs of the customer and where opportunities might lie.
  9. It can explore and explain consumer thinking (pre and post discovery and execution) in easy visual ways.
  10. It can be used as a neutral observer, uncovering opportunities or validating them in other industries that today may not be relevant but need to have a ‘watch’ placed upon them.

My other powerful argument lies in the yet to be fully explored multiple uses:

I call these my “large organizations eight powerful reasons to adopt the Business model canvas” and place all the options in front of you, to be explored, to be tested, to be given a decent trial.

These are:

  • To simply explore new business models as the book originally sets out in the how, what and where of doing this through the canvas approach.
  • To ‘map’ changes to existing business models as they evolve or need to pivot differently. There is a growing body of work on the pivot by Steve Blank and Eris Ries. This is not exclusive to the entrepreneur, where they have tended to focus but much of their thinking can be applied to the larger organization to learn, understand and gain from (http://bit.ly/bYhHwQ and http://bit.ly/1fpIpK ). Just spend some real time on these two sites, it is time well worth spending to learn and challenge your current thinking on many approaches to your market and knowing the different value generation points in any engagement with your customers.
  • To sketch out competitors positions to explore possible opportunity gaps should be one of those consistent ‘habits’ that so many large organizations often have a real blind spot to undertake and then get caught out and surprised when they see their share slipping away. The BM Canvas can spot and track competitors.
  • Use it as a dashboard for innovations that have an impact on existing business models. Whenever you have any major BM change you capture it on your BM Canvas so all above and below can see the change. Again Steve Blank has been pioneering this concept for using the BM Canvas to ‘signal’ significant changes that he as a VC investor really only needs to get involved in. This can apply also as a ‘trigger’ point for communicating significant changes happening, up and down the organization.
  • Use it to compare business model components across countries where different models are being applied to build businesses. This enables all involved to quickly focus on the differences on these operating models and market formations to get quickly at strategic discussions. This gives the visitor clarity and draws out critical ‘talking points.’ for allowing the visiting fireman to actually say more than “how can we help” but “let me show you ways to be safe.” It brings everyone onto the same value proposition and to rapidly explore the different options far more quickly than through those countless power point slides we have all endured, explaining each of the factors within the market. It gives business reviews a (fantastic) template. Try it!
  • When you are pitching for funds it provides the top picture that others can quickly see and appreciate the why and how- they ‘see’ the value and the $$ potential, Again this has been grasped by some of the more enlightened venture capital investors, just wanting to know where the money is coming from, and then when the changes occur, as they always do, why the ones running the business made the changes from the original BM proposition. This offers ‘intelligent enquiry’ not getting involved in the running of the business but supporting owners or business managers with appropriate experience to compliment theirs.
  • To have ready alternative scenario’s for volatile business conditions as ‘early ready’ that have mapped out potential changing conditions and where and how the business model might be adjusted or radically changed. The earlier ‘warning system’ pays in volatile times and we are all facing those at present.
  • Rapid concept brainstorming to move into prototyping evaluation and market testing. Testing many different variations in small bite sized bets is rapid prototyping, do this through the effective use of the business model canvas. Testing fast in the actual market place new business models and then learning from them to improve the approach is absolutely critical. Get the customer involved.

Just consider all of them. Learn the basics then experiment and you will not look back. I will be doing some more research and validation in the coming months on these, hopefully with large organizations willing to open up to this exploration and thinking.

Find a common language is simply needed

I do think the Business Model Canvas is about to go through a (further) tipping point, that crossing the chasm into mainstream adoption. Finding a common language is one of the critical tenets that Alex has been arguing with his Business Model approach. To find this common language and recognizing the value of this tool in many different situations can be valuable.

Gaining this common voice to the business model, so all those around can understand it easily and quickly, is a major advance on what we presently use in having to explain our business models. For me there is something intuitive about the BMC approach. But to then empower everyone, to go out and seek increased value from new ones seen, that can then be communicated on one page, well that’s the real power of the Business Model Canvas, for any organization, large or small.

Making untested hypotheses compatible to Business model innovation success

An email from Business model innovation hub (http://bit.ly/bnTd6G) landed on my laptop that stopped me to think a little harder on the whole momentum of Business model innovation. It summarized the ‘breaking’ collaborative work going on between Alexander Osterwalder, Steve Blank, Alan Smith and Bob Dorf. This is around untested hypotheses coming out of new Business models, that need a better structured and systematic way of exploring these to test assumptions, as early as possible within the lifetime of the model.

A breaking collaboration that seems really valuable

Steve Blank has summarized this first step in the collaboration in an entry on his site www.steveblank.com under http://bit.ly/9cElPf. He stopped me in my tracks (well briefly) with the statement that the “Business model canvas was at the end of the day a tool for brainstorming hypotheses without a formal way of testing them”- “a static planning tool”- the very thing I thought the canvas was taking us away from.

What the group is working upon is a “strategy stack for entrepreneurship”. A way to successfully validate and execute the Business model. All this sounds positive and interesting although it is was a little surprising to label the canvas initially that way. I would argue there are a number of other aspects that need focusing upon to validate and execute the Business model, including researching much both in formal, more structured ways and informal ways, applying given tools and techniques that clarify assumptions better.

Going beyond simply guessing

His diagram to drive home the point was highly effective- if all entrepreneurs do is ‘guess’ and on these quesses convince others to invest then something needs to be resolved to avoid this risk in the future and to build business models that have a higher chance to be successful.

Is all Business model work simply quessing? Still I don’t really want to go there as Steve Blank has some clear views on the alternatives that do make good sense- he coins this ‘Customer Development’. By spending some time on his site you will get a great understanding of his thinking and solutions and if it does reduce down this quesses then great and it raises my expectations from this collaboration.

The value of the Pivot

The heart of his own hypothesis, besides his Customer Development lies the Pivot, this is the point when reality leads you to change one or more of your business model hypotheses. Take a look at this excellent introduction to this concept from Eric Ries here (http://bit.ly/1fpIpK).

The pivot is the step you make from constantly  validating learning from your customers and then adjusting with this new knowledge your business model (in this case). It does make sense to adjust, adapt and manage the learning from implementing your Business model by adjusting to new information not throwing everything out when your Business model concept meets the ‘reality of the market place’. You pivot on what you have and adapt to new insights to achieve a better fit. Steve recommends a path to ‘discover and validate’ each assumption behind your business model and change it from fresh insight.

Where there is need to ‘test hypotheses in the Canvas

Steve offers a great visual of the different points that need testing and validating consistently within any new Bm based on the Business model canvas approach.

It strikes me this collaborative piece of work seems really valuable and ‘sensing’ the power of the minds within that meeting we should be expecting something a little different and exciting that moves both Steve’s and Alexanders work that significant step further.

I look forward to future posts on part of something that was certainly missing in the present work for Business model canvas, the steps necessary for validating and executing within Business Models. I certainly believe it will continue to evolve as we all gain from exploring Business model innovation in the future.

Shifting to the 21st Century Business model through management innovation

Gary Hamel is amazing. He constantly thinks about the future and lays out how to get there; he has been doing this repeatedly for years.

One quote of his seems to hit home for me especially “The real brake on innovation is the drag of old mental models. Long-serving executives often have a big chunk of their emotional capital invested in the existing strategy”

A real big challenge is changing old mindsets but how?

Today, the value of Business model innovation seems to be a critical part of breaking out of the old and finding the new avenues to growth and prosperity. The trouble today is the existing mindset of the manager is often the major block to challenging the existing business model and working towards a real change. This lack of realisation is increasingly allowing the young usurper, the entrepreneur, into seizing the opportunities and seizes the initiatives of the very growth needed by existing businesses.

The closer to the final customer you are, the more you will detect the opportunities. Large organizations today with heavy hierarchies that rarely ‘interact’ with the customer just cannot respond at the rate of the change that is occurring. How can this be resolved?

Business models today need to rapidly adjust, stay lean, flexible and keen to change and adapt and it will only come through the potential of the people that know where change lies, not internally but externally, close to markets and listening and observing customers and what they need to get done.

Have you explored the Mix, to get fit for the future?

(http://www.managementexchange.com)

To quote: “The MIX represents a pioneering attempt to use the open innovation model to help accelerate the evolution of a critical social technology -management. Rather than struggling in isolation to reinvent the processes and practices of management, MIX members can leverage the expertise and insights of a global community of like-minded innovators. The success of the MIX hinges on the willingness of its members to share their ideas and experiences, which depends in turn on a belief that more can be gained by sharing than by hoarding. Truth is, there’s a lot more management innovation going on in the world at large than in any particular organization. Thus the MIX gives every progressive management innovator the chance to share a little and learn a lot”.

“To thrive in the 21st century, organizations must be adaptable, innovative, inspiring and socially accountable. That will require a genuine revolution in management principles and practices”. I’ve signed onto this and look for ways to make my contribution to advancing the agenda of the Mix.

The Moonshots we should organise around

The argument of the Mix is centred on the Moonshots- the make-or-break challenges that will focus management to create organisations that are fit for the future

Management Moonshots

The MIX helps to accelerate the pace of management innovation by energizing and organizing the conversation around the most critical challenges facing managers today.

Learning, experimenting and exploring is needed

As we look at Business model innovation more and more, we need to address the barriers that lie within organizations. It is no good coming up with a great new business model if the roadblocks of fixed mindsets blocks and frustrates this. We need to find alternative ways to ‘unlock’ this existing barrier within large organizations. Before Business model innovation can succeed it needs to find ways to address this internal mindset problem. Perhaps exploring the Mix will help as it does provide a clearinghouse and virtual laboratory for offering not just a platform for conversation. It is establishing a growing practice of leading-edge ideas to tackle our left over legacy of the last century- a management mindset emphasising control, discipline and efficiency. Today we need, more than ever, adaptable, innovative, inspiring and social engagement to ‘read and react’ to rapidly changing demand that Business model innovation is designed to support.

Any new Business model innovation needs to take into account the internal mindset and ensure there is a clear understanding of mindset change built into the solutions that allow them to break with the past.

Research, platforms and collaboration move towards BMI

My last week was spent in the UK and it was a fascinating trip when it came to advancing my thinking on innovation. Innovating through new Business Models was constantly being discussed in the meetings, workshops and the conference I attended. It is becoming a lightening rod for growth and change.

Let me try and bring together this ‘convergence’ that is going on through the different dialogues I had, that in my opinion is bringing together the strands of research  and collaborative activity needed for accelerating Business model innovation.

Firstly Technology Strategy Board’s Innovate 10 conference & networking event

I attended the Technology Strategy Boards (http://www.innovateuk.org/) Innovate 10 conference. Innovate 10 is a leading networking, conference and exhibition event for businesses to meet other businesses, government and academia with the aim of making innovation happen – creating opportunity and growth for the future. Hosted by the Technology Strategy Board, Innovate 10 addresses different aspects of innovation, with a special focus on the commercial exploitation of the DIGITAL economy, HEALTHCARE markets of the future, ENERGY generation and supply and the SUSTAINABILITY economy. The TSB aims for providing the connected environment for challenge-led innovation by connecting and catalysing.

One very exciting new programme – called the Stratified Medicines Innovation Platform – is all about tailoring medicines to patients as a key challenge for the $750 billion global pharmaceutical market.

TSB’s Competition is very specific on developing new Business Models

The Stratified Medicines Innovation Platform will focus initially on therapeutic areas that present a challenge to healthcare providers and  are ready for a stratified approach and that provide a significant market opportunity. This competition aims to develop a better understanding of where and how value will be created in the stratified medicine value chain, and to develop Business models that will enable companies to find the best way to capture that value. TSB will be providing funding to enable businesses, such as diagnostics and pharmaceutical companies, to develop and evaluate viable Business Models for the successful co-development of a medicine and a companion diagnostic.

Meeting up finally with Stephen Newbury of IIGglobal for Business Model Research (http://www.iigglobal.com/)

Stephen is striving to be the leading provider of Business Model Research and Development. IIGglobal are looking to explore how successful businesses work today and highlighting those emerging strategies that will provide the research foundation for the fast-growth companies of the future. He and I have been in different exchanges for some time so it was good to finally meet up with him, to take our combined thinking of surprisingly mutual future needs required to support Business Model Innovation, that little bit further.

Stephen  summarized where he is in the following way with his work:

  • The building of a Case study research library that will tell us a lot about business model success and failure.
  • He emphasises it is not good enough to just look at present day models; a) You need to look at timeline within the results and the clear context of BMI, b) How model breaks the convention and clearly are different and c) Business model type and mechanism that works for the consumer.
  • His team have been constructing a BMI Research process – multiple source cross-reference research, KOL and company interviews and bringing this together for developing a leading support practice for BMI.
  • IIGglobal are currently very focused on Health, with mobile e-Health as a special area of interest, also  the Hotels & the Leisure Industry but are equally discussing numerous different industry and academic opportunities as well at this present time.
  • They are presently looking to build evaluation tools to draw conclusions / provide threads from research that will speed up the thinking that leads to new development opportunities.
  • Working on different mechanisms, design methodologies, explore adjacency opportunities, evaluate where disruptive innovations fits, and provide blind-spot analysis
  • Building and exploring novel tools you can apply to BMI.

Our collaboration together accelerated each other’s understanding of BMI

In a broad set of discussions between us, we laid out some future thinking for BMI and what needs to be brought into place that links our two mutual objectives, so as to have available what we both see as the solutions for accelerating and establishing this better BMI environment:

  • Ongoing focus on building more cases of BMI and providing the performance analysis of published cases to mutual clients.
  • Our mutual belief that there is a real need of deeper structured research to help discover new perspectives on challenges, also new perspectives on solutions.
  • These perspectives can include new insights, new customers, new resources, new channels
  • Research can underpin / justify the Business Case through different analysis
  • Research & investigation can define needs – identifying the possible solutions needed to problems that often remain hidden without a methodology of discovery.
  • Tools and methods that can investigate value proposition (ranking, impact, capability, competition).
  • Provide structure to help investigate higher impact propositions (value-based, enhanced economic, applications etc).
  • Methods that can model potential profit, evaluate competition.
  • Solutions that can help companies look at their business in the eyes of the customer before and after change.
  • Research that is vigorous enough that it can uncover business opportunities and validate them.
  • Developing rules with control mechanisms and framework for an integrated BMI process.

IIGglobal is open to growing its network

IIGglobal already has coverage set up in Mexico to service the American markets, a base in the UK for Europe and a small  team in Shenzen, China for Asia. We both saw significant ways to build on this initial contact for collaboration ideas that offer research, consulting, advisory services and support to organisations in all sectors- government, social, business and institutions- that are beginning to understand the power of Business model innovation.

My third event was with FutureAgenda

(http://www.futureagenda.org/)

The Future Agenda provides a forum to discuss how to address the challenges we face and gives you the opportunity to share ideas, visions and solutions and ultimately seed change. I met up with Dr Tim Jones – Tim is Programme Director of the Future Agenda. He is a recognised leader in innovation and future growth with specific expertise in bringing together unique collaborations and helping organisations identify new opportunities. I see this as a fertile area for future BMI.

Briefly the Future Agenda is a unique cross-discipline programme which aims to unite the best minds from around the globe to address the greatest challenges of the next decade. In doing so, it is mapping out the major issues, identifying and debating potential solutions and suggesting the best ways forward. They hope, as a consequence, that it will provide a platform for collective innovation at a higher level than has been previously been achieved, so as to gain clearer and more informed views of the future so that they can place intelligent bets in terms of business strategy and innovation focus.

My final contact was with 100open

(http://www.100open.com/)

100%Open is a new open innovation agency spun out of NESTA, the UK’s National Endowment for Science, Technology and the Arts. Roland Harwood and David Simoes-Brown lead this and I had some good opening discussions with Roland. I see their work in opening up company thinking leading to the need for innovation through Business model re-designs.

100open focus on open innovation through their jam and discover approach for finding collaborations and the discovery of unmet needs through mediation and catalysts, all about helping you to co-innovate better, cheaper and faster. Opening up innovation challenges makes eminent sense from the large company perspective to begin to rethink their business directions not just for the existing core, but leading to adjacencies and possible ‘white space’.

A very connected week for me across innovation that offers real convergence.

It is the convergence of research, of platforms and collaborative environments along with other emerging activities that will accelerate the understanding and use of Business model innovation. These will form a critical support to finding new growth opportunities as well as those different value propositions that are waiting to be discovered as current unmet needs, jobs-to-be-done or opportunities to discover through these activities surrounding the Business Model concept.

So for me a week well spent in my own areas of innovation activity.

Missing the Window of Opportunity or Seizing the Advantage: Innovating the Business Model

There is such unprecedented change occurring in global business that Business Model Innovation is becoming all pervasive in its need to understand, its real value and use in business, and why it can provide that consistent evaluation ‘power’ for exploring existing business models and competing alternatives in a more dynamic way. Today the environment has become so much more forceful and we need tools to reflect that and capture breaking opportunities.

Intensity of Change

The incumbents’ already operating within the market need to be so much more proactive in seeking to extend and change what they offer. They can’t afford to sit still, to ‘freeze’ their business model, they need to keep moving, make the model more fluid and the organisation grouped around it increasingly alert and flexible to change. If they don’t today they seem to face an onslaught of disruption through existing competitors, redefined industries, and new technology paradigms. Let alone they need to simply not allow start ups and new entrants to capture those significant value points from underneath their very noses. They need to constantly be questioning their value to the customer, known ones and those undiscovered ones that are out there lerking to engage. The race is intense especially when you are just climbing out of a recession with this this recent downturn, unless you have taken this recent time for the opportunity to re-evaluate what you offer, as it is certainly the case that the final customer is getting even more restless and fickle than ever before.

Business model innovation meets one of today’s business needs

So Business model innovation seems to meet the ‘times need’. Many of the tools we have relied upon for decades just simply do not ‘articulate’ the job on hand. Models enshrined in business folk law of Porters 5 forces, Boston matrix and a host of others gave insight, were very analytical but gave declining comfort on foresight and this is what business today cries out for- foresight. We have seen the significant shift from internalizing to externalizing through open innovation, seeking differentiation, business has had to loosen up and lose some of its ‘control’. The world seems more dynamic and complex, it is a place where you have to find a unique position in the market, and one built on competitive advantage seen through the eyes of your customer not from within your four walls.

Additional experts thinking is further colliding

In my last blog “grounding innovation through the convergence on jobs-to-be-done” I spoke of intersections where ideas collide that give us insight. I was reading a report from IBM’s Institute for Business Value recently, called “Seizing the advantage” (part inspiration for my header on this blog) and they suggest there is growing agreement on what elements define a business model:

  1. What value is delivered to customers- the specific job-to-be-done, what is provided (sold) and how it is provided (sold)
  2. How revenue is generated- the form of monetization and the different models emerging
  3. How the company positions itself in the industry (or sector) and the role choices it undertakes and the relationships needed across the value chain
  4. How the value is delivered: through the type of internal resources mixed in with external partnerships.

These four dimensions are pointed out within the report as emphasised by Alexander Osterwalder, Clayton Christensen, Mark Johnson and have given me yet another converging point.

Finding the common language and tools to do the BMI job

Where I struggle at present is we have just not got enough meaty ‘aids’ to help us on working through Business Model Innovation. There are some good books on the subject, there are a growing number of articles but they have been so busy explaining the phenomena that we have an awful lot of gaps still to be filled from growing knowledge. As always when something new arrives we have this ‘rush’ to tweak different business model frameworks to claim them as our own when we have a perfectly good one emerging in the Business Model Canvas of Alexander Osterwalder. This dispersing of energy does not help the very business entities that would benifit from a common voice. I subscribe to Alexanders call, along with some others working in this area to “find a common language” and quickly so we can focus on the best, most exciting, leading edge exponents of working the Business model well and fill these gaps.

Needless dispersion of ‘creative’ energy

One example of this needless dispersion of energy or blurrification I recently saw was from IDEO. Anders Sundelin has a wonderful blog all around building the database and discussing the Business Models (http://tbmdb.blogspot.com) and has provided a video of Tom Hulme, the Design Director of IDEO working through THEIR version of the Business model. I found this so close to the Business Model Canvas (as pointed out by Anders) you just despair and feel disappointed that a company regarded by many as highly innovative seemingly re-inventing a perfectly good, well research and grounded model to make it IDEO’s version. I wish they would be part of a common language; their shared voice would be valued by many if all these alternatives models came together and settled on one.

The call is for foresight not dog fights

Business needs foresight. It does not welcome competing models, it confuses them, it stops them and makes them hesitant, worrying over the right model to adopt.  In so doing, losing them precious time and energy to get on with incorporating Business model innovation expertise to meet their challenges of today and tomorrow as outlined above.

How can the community that is actively working on Business Model Innovation come together more? To examine, define and establish tools, accepted research approaches that resolve BMI issues, provide clearer, leading edge implementation methods and tools that will aid the corporate manager?

BMI provides an increasing value

  1. It can help discover new perspectives on challenges, also new perspectives on solutions
  2. These perspectives can be new insights, new customers, new resources, new channels
  3. Framing BMI in the canvas approach can underpin/ justify the business Case through different analysis
  4. It can define needs- needs in the market, needs required from solutions and their impact
  5. It can investigate value proposition (ranking, impact, capability, competition)
  6. It can help investigate higher impact propositions (value- based, enhanced economic, applications etc) to stimulate internal thinking and greater generation of potential BMI’s.
  7. It can form the basis of any model for showing where the money lies in potential profit, the possible costs and the resources needed.
  8. It can help in evaluating competition or watching for new entrants if ‘it’ understands the needs of the customer
  9. It can explore and explain consumer thinking (pre and post discovery and execution) in easy visual ways
  10. It can be used as a neutral observer, uncovering opportunities or validating them in other industries that today may not be relevant but need to have a ‘watch’ place on them.

Moving forward

This is where the Business Model innovation community should be placing its energy, in getting business to understand the power of BMI. The significant changing market environment is unrelenting that it demands response in new business tools that will help.

So my insight of convergence that seemingly is happening needs that extra push to focus the very talented energy out there, on where the real challenges lie: not on which business model methodology but in equipping the business of today with more foresight through providing those much deeper insights and more ‘beef’ in what BMI can do for them at these times. Otherwise we lose a real opportunity to equip business with a new business concept that helps address some of todays challenges and not stuck in yesterdays thinking.