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.

Business model innovation can really help the VC assessment

I believe the Business model canvas, presented by Alexander Osterwalder & Yves Pigneur in their book “Business Model Generation”, holds a very powerful way for Venture Capital to use in their assessments of promising ventures they are considering for investment.

Traditional pitches to VC’s are loaded with financial numbers, providing crisp, well written business plans pitched by teams oozing with optimism but much of this is still highly intangible in reality. There is often a decision made on the people chemistry more than anything else. There is nothing wrong with that if you are the lucky one, but tough on the countless thousands that face rejection after rejection for their ideas to attract the necessary funding needed to move their business forward.

Where the Business model canvas can fit in the VC pitch.

You can often feel that there are different thinking through conversations going on, one from the presenter of the pitch and another in parellel in the way the investor is thinking this through at the same time and they so often on such different thinking plains  or planets, and you as the presenter need a way to bring them back to ‘seeing’ the same opportunity. To do this a more highly visual way is needed, well beyond the classic PowerPoint presentation. I think the Business model canvas could be that very ‘meeting point’ tool to strengthen and convey many of the important points being looked for by the VC.

These important points are a real clarity on the value proposition- the what- by providing something new from a market/ customer perspective that is different and exciting to invest in. Then “how does it work” in key partners, activities and resources, the “who it appeals to” in customers, channels, segments and the vital part for many investors point of view- showing them the money in revenue streams and cost structure for the “how much” it will provide in return for their investment. All of this can be covered off well, within the Business Model Canvas.

I can see the Business Model Canvas as a strong compliment the VC’s Strategic Market Map (their need for the external analysis) and the Strategic Competencies Map (the internal core part).

The Four Critical Parts of the Canvas

  1. Describing the Customer part Within the Canvas you would need to have an increased emphasis for that often understated part, the Customers- in showing the discovery of the job-to-be-done that your proposal addresses, your ability to test the hypothesis by providing customer facts and having validation that indicates or shows a repeatable, scalable business sales model. It takes the Canvas a little deeper than normal but within its sections of Customer relationship, Channels and Customer Segments you can specifically address this need to address for the VC investor. This becomes a strong selling story of the distinct offer you have seen and validated.
  2. Clarifying the needed infrastructure needed to support this proposal. Often these remain far to hidden in any plan. The Partners, the Activities and the Resources are the very structure of a successful business. These are more often the intangible part, the part that resides, needs to be found to fulfil the plan. Knowing the present gaps of what is needed to create the value intellectually and where this knowledge resides is important to know. These help you see beyond the present and can help the VC quantify the risks that level more. The BM Canvas can provide a powerful support to filling out the Strategic Competence Map required by a VC in what is core, what is needed to be ‘purchased’ ,the technology/ patents, action plan and why this is a ‘winning combination’.
  3. Showing where the money lies underpins the Financial Numbers. Numbers are the ‘meat and drink’ of VC’s, this is where they do their countless calculations of risks, attractiveness, cash flows, exit forecasts, returns etc. Showing where the money lies within the Business Model is showing the repeating, scalable part that can lead to a profitable business. So often business plans have those magic spreadsheets showing a classic ‘hockey stick’ outcome but do they clarify the ‘willingness to pay’ and the breakdown of the different ways to generate revenue streams, not just in tangible products and services but in usage fees, subscription fees, lending/ renting/ leasing grants and licensing, all growing in increasing importance today in the business model. The BM Canvas can ‘flesh’ these out in potential to strengthen the business case by being a little more imaginative. Also offering some potential concepts of different fixed/ variable costs, economies of scale and scope all can show a determination of wanting to minimize costs and maximise opportunities.
  4. The Value Proposition shows the VC investor the strength of your concept. It needs to address the newness or novelty of what it is addressing in customer needs; it needs to clarify performance and how it will be customizable to take advantage of economies of scale and scope. It states how it is getting the ‘job-done’ in broad design and convenience and usability. It states and describes ‘resolution’ and ‘context’ to all the other aspects within the Business model canvas. It articulate the vision that everything else supports, that piece of innovative thinking based on the customer value proposition, that is better than ‘something’ already in existence, and why it is valuable to financially support by the VC.

In a highly visual one page diagram using the Business model canvas you can bring those ‘divergent’ thoughts of the people clustered around the table into your thinking in new ways, so all can share and better understand many of the often ‘hidden’ parts of the pitch. The Business model canvas ‘speaks’ more powerfully due to its simple but effective building block approach in some highly visual ways, that focus everyone’s attention onto a single page and the shared place to think together and ‘see’ the opportunity in new ways.

The case for a more systematic understanding of Business Model Innovation design

Business model innovation is shaping up to be one of the most challenging aspects for leadership of existing business or that aspiring leaders need to fully understand.  The question today being faced by many is how to transform existing business models so as to avoid that race to commoditization and decreasing shareholder value and so to provide improved value.  Equally business model innovation increasingly needs to be able to reduce the threat of new competition that is constantly finding ways to undermine your present business. The Entrepreneur is snapping at your heels like never before.

Leaders need the tools, skills and experience to envision, test and implement new business models more than ever and certainly faster than ever. The worrying aspect today it seems  is that many leaders are still not knowing what it is within their existing  business model that ‘combines’ to make the existing profit engine of the business, those ‘value points’ that really provide the innovation opportunity to sustain or challenge their existing business models.

So what is Business Model Innovation?

There are numerous definitions of a BMI- let me provide three that I trust build the understanding.

In Alexander Osterwalder’s & Yves Piqneur’s book “Business Model Innovation” they simply explain this as “creating value, for companies, customers and society, replacing outdated models that respond to emerging user needs and pressing environmental concerns. A business model describes the rationale of how an organisation creates, delivers and captures value”. The authors offer nine basic building blocks that build up the complete logic of how a company intends to make money through a new BMI. It basically covers the four main areas of the business: customers, offer, infrastructure and financial viability. They suggest you construct a business model canvas through exploring key partners, key activities, key resources, customer relationships, channels (to market), customer segments and the value proposition with cost structure and revenue streams.

In Mark Johnson’s book “Seizing the White Space”, he firstly starts with White space as defined as “the range of potential activities not defined or addressed by the current business model, beyond its core and adjacencies that require a different business model to exploit”. He sees a BMI to have four parts requiring a clear, strong customer value proposition (CVP), secondly the show me the money part- a profit formula that defines how and where the company will capture value for a given set of customers at a given price. The third and fourth element of this framework is key resources and key processes as the means by which the company delivers the value to the customer and itself.

Thirdly, Boston Consulting Group argues a business model consists of two essential elements- the value proposition and the operating model. Within the value proposition you need to be explicit on your target segments, product or service offering and revenue model. In the operating part you need to address three critical parts- the value chain, cost model and organization.

So in summary:

Tackling the 4 main tasks

Business model innovation is really all about game-changing moves, partly dependent on the industry and the circumstances. BMI should be seen as a proactive need for all to explore new avenues of growth and opportunity before others steal in and take the space from right under you.

Understanding your value-added points is essential

Articulating the (existing) business model as a first step leads to exploring ways to add further value. Customers want to be served in increasingly different, more exciting ways that often need lower cost delivery, greater convenience or improved functionality or are genuinely novel to the world. Knowing these value points is vital.

The role of the business model is capturing that value from new innovative insight. Increasingly this is coming from articulating your purpose more than the product or service and discovering the value promise that will gain customers attention and then delivering on it through your redesigned business model. You need to be really clear on the scope of your business and be ready to outsource the rest to others who specialise in that part more efficiently than you can do. This might be in the area of supply chain, technology platforms, research and development, warehousing and storage, support services etc.

The Catalysts of Change needed for a new Business Model Innovation.

The starting point of a new Business Model is to know what the customer is trying to do that they cannot do as effectively as they would wish today. These are regarded as jobs-to-be-done or knowing the unmet needs and often not unarticulated as they have not been recognised or even appreciated  as needed when you ask.  You can recognise these more often through deeper observation to discover the opportunities that are presently not being served correctly. So the executing of the task or job is becoming increasingly more important to focus upon and today I feel less attention should be given to (existing) known product or services that often over-serve the real need of the customer. The critical aspect here though is that it must be delivering something the consumer wants resolving not what you might just think from your own internal perspective, it needs identifying and then validating. If you can correctly identify these then you have a potential innovation match that might need a new business model to support this.

For me, there are four powerful drivers that can galvanise BMI- increased visibility, reducing complexity, providing a different effect than the present and altering the perception with significant impact on today’s understanding.

The reason for today’s emphasis on Business Model Innovation

The challenge is to unravel the (increasing) complexities of a business. There is a consistent need to beat back intensifying competition, not just coming from the normal competition but from emerging entrants that have spotted these breaking opportunities or seen a unmet job that need to be changed and resolve a customer needs. They can quickly translate this into a viable business alternative and scale rapidly to disrupt the existing business providers. This ‘disruptive process’ is happening across all sectors of the manufacturing industry and service and has given rise in these times of increased uncertainty, accelerating global competition and increasingly more choice for the buyer. As a consequence it is getting harder to not evolve constantly and this is increasingly coming through a closer ongoing review that Business Model Innovation provides.

To summarize why you need a clear understanding of BMI

Business Model Innovation is becoming essential to understand and explore. Luckily there is numerous references available to refer too, to draw down examples and to gain encouragement to experiment. It is not something that I would suggest you push away or delegate to others, BMI offers a powerful concept to change the existing ways and to help you identify the present unknowns that can offer new value and growth paths for you and your future business.

  • A business model defines a broad competitive approach to business and you need to articulate this
  • A successful business model needs to ‘earn’ some sort of competitive advantage to the extent it changes the existing offerings available in worthwhile ways, for the consumer to ‘do something better’ than what is presently available.
  • Having a comprehensive understanding on the focus of competition must also mean a greater focus on innovation, as the relentless changing conditions ensures any business and its model must evolve.

Today you simply cannot afford to stand still, you need to innovate your business model consistently.