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 its 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 that “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.
- It can help discover new perspectives on challenges, also new perspectives on solutions.
- These perspectives can be new insights, new customers, new resources and new channels.
- Framing BMI in the canvas approach can underpin the Business Case through the nine building block analysis and provide a great one page justification.
- It can define needs- needs in the market, needs required from solutions and their impact. It can compliment ‘jobs-to-be-done especially.
- It can investigate value propositions (ranking, impact, capability, competition).
- It can help investigate higher impact propositions (value- based, enhanced economic, applications etc) to stimulate internal thinking and greater generation of potential BMI’s.
- It can form the basis of any model for showing where the money lies in potential profit, the possible costs and the resources needed.
- 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.
- It can explore and explain consumer thinking (pre and post discovery and execution) in easy visual ways.
- 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.
Paul, I saw Alex give his presentation at a conference in Dublin a couple of years ago. The audience was mainly small businesses (it was an Enterprise Ireland sponsored event) and the message was well received. As I recall, people thought it was an interesting new model and certainly the presentation was very entertaining. My impression is that the term ‘business model’ was very ‘hot’ for a few years, maybe too hot, such that some bigger companies may have developed the impression that this is more jargon than substance. I agree with you that this is unfortunate as exploration and experimentation at the business model level is fundamental to innovation. In my experience, a business model discussion structured in terms of Costas Markides ‘Who/What/How’ model is manageable in most companies. The 9 dimensions canvas could then be used for a more detailed breakdown and insight development.
In terms of use as a core strategic planning tool for larger companies, I suspect one reason for slow adoption may be that usually multiple variants of a business model will be in operation simultaneously, making the question of ‘what to put into the boxes’ of the canvas more complex than in a single-product start-up company.
Paul, thanks for an interesting perspective. Here are a further thoughts around some of the issues you raise:
Emphasis on entrepreneurs.
I believe this is more of an evolution than a shift in focus. The Business Model Ontology (the PHD thesis) was an examination of how to describe businesses using 9 elements common to many (at the time) existing approaches. It also included a series of analytical models to examine and evaluate the effectiveness of the business model. I see this as a vertical understanding of BMs.
In the Business Model Generation book (BMG), the ontology became the canvas and Alex & Yves focussed on understanding patterns and the ability to change business models. This was more of a horizontal view of business models that focussed on the structure of a common language and the process and strategy for changing existing business models. BMG seems to have been primarily intended for organizations (regardless of size) to understand their business models. The process of the book is clearly designed to help organizations evolve their existing models. The first phase, ‘mobilization’, is getting organizational buy-in and the second phase is about ‘understanding’ the current business model. Likewise, there is much written about doing a SWOT analysis on the existing business model.
What we have seen in the past year or so, with Alex’s collaboration with Steve Blank was another extension of the BM canvas. The BMG lacked a process that was really relevant for startups or entrepreneurs entering new territory. At the same time, Steve Blank had developed a process for just that, but lacked a powerful, comprehensive way to describe business models. Blank fully understood the importance of BMs, but if you saw his early framework for describing them, it lacked clarity and impact. The integration of these two approaches has provided an extremely powerful tool for the startup and entrepreneurial community. This is a great marriage of thoughts, as Steve Blank puts it, the “startup stack”; business model canvas as the vision, customer development as the process. the third part of the stack is lean/agile as the methodology.
Use of the canvas in large corporations
Here I have some personal experience, both good and not so good. I got involved with Alex and the business model approach when I was leading a project to develop a new business model for how the Government of Canada does procurement (a CDN$19B-$22B business). Much of this happened while the book was being written and I used the developing concepts of the ‘process’ in the book and Alex as a mentor/auditor to guide the project. We were very successful and shifted the thinking of the leaders of a very large organization. From there I was brought on-board to help lead a business transformation for how the same government handles grants and contributions (~CDN$32B) program. Unfortunately this wasn’t quite as successful, and I believe the lack of progress was rooted in a failure in the first phase of securing senior management mobilization around transformation.
Here are some points I learned:
– in large organizations, the critical stage is mobilization of support, particularly at the senior level
– relevancy is important to help with understanding, develop case studies that are relevant to the business context of the organization. Analyze smaller components of the business and use as examples rather than showing them Apple or Amazon.
– implementation is important to people who have an operational view of the business. There needs to be a plan or a structure you can elaborate from the beginning so they know there is an end-game to the process, not just creating new ; very important to read “The Other Side of Innovation” book.
– engagement and comprehension take time.
Cheers
Thanks Michael for your thoughts. You do provide some further thought into how the BM Canvas came into ‘being’ and tend to confirm its present place of small and start ups as its greater focus to date.
I think this has partly held it back in adoption in the larger organization but this can be rectified by some different thinking. Some of these shifts are in how to build, identify with and then what does under pins the thinking, more some appropriate structured thinking, after the initial brainstorm around the potentials through the canvas. Your point about mobilization is more about recognizing a change is needed then the identification that then leads to the mobilization.
I think this has a real (untapped) potential to explore and welcome your contributions as someone well skilled in BM approaches. We need to ‘attack’ the larger business for BM Canvas (Innovation) and my thoughts were just to prompt the thinking to achieve this and get the recognition of its value to all organizations, big and small.
Hi Paul
On the issue of mobilization, I was more specifically addressing the need to get senior management mobilized around the approach than the need for change. That is not to say they are mutually exclusive. Often with large organizations they have difficulty in understanding the need and potential for change. I agree with you the BMG approach can help them to understand why change needs to happen and how it can be done.
But there is a separate engagement that has to happen in companies that have recognized the need for change, and in some cases have attempted or are planning to change. That is the mobilization and understanding around the business model innovation approach embodied by the BMG.
It is in this second stage of mobilization that the education and elaboration of the BMG approach needs to happen. In a directed organization where senior management sets the agenda, this stage can be a simple as day 1 of a multi-day workshop on business model innovation. This is a lot of the work that Alex does with large companies. He walks through this structure as part of his master-class workshop.
In a distributed governance, or in the case of government context, governance-by-permission, then more time has to be taken in engaging the management and educating them on the concepts and process behind the canvas and innovation.
Simon Wierny simon.wierny@gmail.com
I think that the whole idea of innovation now, relates on the power of networking;or as it is called in here collaboration. I think the first name is more accurate as collaboration usually refers to group of known individuals i.e. organisations while networking is constant search for new communication opportunities, search for new collaborators – in a sense networking is constant innovation, collaboration is strenghtenning the core of your innovation practises. Anyway very interesting site and blogs. Business leadership and innovation – thats another thing, while we can have ad hoc innovations which derive from pure genious of group or individual work its the business leadership that supports innovation the key ingredient for already established organisations. How often it happens that organisation sits on past innovations…well it has been written and researched all over but yet again it comes up as one of the main issues. I think there should be a budget for ad hoc innovation activities, or ongoing creativity workshops. I am mean doing workshops not in organisations which our innovation driven (google and IT in general) but let say manufacturing (not just car manufacturing but any other), services and so on. The only trouble is perception and here comes what I calle Maslow’s pyramid applied to business as a whole. When recession strikes most businesses go back to Taylor core processes, go to Maslows fundamental dive for survival. The circle goes on. Fascinating and yet so human typical. Innovation is being a maverick and not maverick at the same time. Can innovation be placed within the borders of learn processes? probably not, because it would not be what it is: stroke of luck, drop of talent, bubble of networking, moment of genius, part of strong work ethic and so on. Stimulation of innovation can be achieved by being pro-active, by probably doing what Hamel shouts as changing the way management works.