Change, unlearning and the business model

June 29th, 2009 by Patrick Stähler

Thinking in business models helps you in change projects, particularly in the unlearning of unwanted tacit assumptions and knowledge of the past. Forgetting what made you successful in the past is the key challenge in any change project, learning new things actually the easy part.

I am currently involved in a large change project. The company involved was living in a cozy environment. Demand was stable, predictable; project cycles were measured in years to decades and due to high entry barriers the firm was sure to “win” all business from its customers. Quality was so defined that the products lasted for eternity, most of the time longer than they had to last. Due to the heavy duty nature of its customers’ business everything was engineered to customers standards and very little of the components were bought off the shelf. Cost was not a major issue as long it was in budget.

And now the world has changed. Their customers had to change due to pressure from their clients. So the world of my firm will never be the same but since the change is coming slowly, there is time to adapt. The question is now: How can the firm change? How can it forget the habits that made it successful in the past but impede the future?

I teamed up with a coach that has a background in social psychology and constructivism. We had long discussion together but also with the customer’s management that was new on board. The question was where to start the change process.

Should we just have McKinsey, BCG or any other top consultancy fly in to have them develop a new market oriented strategy and then implement it? Our question was: Can you just implement a strategy into the heads of people that were not involved in the process? I think you can in certain cultures but not in nordic cultures. The danger is that you lose the strength any company has and particularly lose the commitment of the employees that make up the difference between a mediocre and a good to great company. You just lose the soul of the business and get mercenaries as employees. So that was not an option.

The other approach often used in change management is soft, typical HR driven. Management does some seminars on change, culture and innovation; and, what a miricale, people then will understand the need for change and then they will change. Unfortunately this is an illusion but big business for trainers and coaches. The problem here is that it sounds so right but people will consume not engage.

The problem and also the chance for our client was that they still have cash and time to change. Some units are in trouble others still earn money with the traditional way of doing business. So there is little sense of urgency (bad) but also time for a deeper change (good).

Understand your business model as a start, Understand what business are you in

Our approach was simple. We wanted to put a mirror in front of management. We wanted management to see the current situation through different glasses. Management should understand more of what business they are in at the moment and what made them successful in the past and what might impede them in the future. They should reflect on their current business model and culture. They should get all their tacit and unspoken assumptions of their business model, culture and values on the table.

And by bringing the unspoken on the table the idea was that they can then change their business model, build up a new culture, live new values and thereby adapt to changing customer needs. To do so we have amended the business model canvas I had developed some years ago with a fourth dimension of culture and values. You can download the canvas also as a pdf.

 

What business are you in? Difficult question

The exercise was eye opening. They found the business model canvas simple to use but when they started to describe their current business the process stalled.

First, they figured out that their business units reflected their internal needs and not the needs of their customers. So the first part of the workshop was all about defining what businesses they are really in.

Second, when starting to describe their value proposition they knew exactly what their offering was (that is by the way not part of the value proposition) but they had difficulties to describe what job they were solving for the customer and what need they really fulfilled beyond selling their products. They discussed at length what their offer really did for their customer.

Engagement through confusion

The good part was that they found themselves very comfortable to use terms like value proposition, jobs-to-be-done, but they found it difficult to describe even the current business with these words. That confused them. But confusion is good in a change process. From our perspective as consultants we could really feel how they got engaged in understanding better their current business model. And that is the third learning.

Business model innovation; not always needed

Today we hear a lot of consultants including me that promote business model innovation as a great way to differentiate yourself from your competitors. Business model innovations are great but they just happen not too often in an industry. Actually, disruptive business model innovation happens once or twice in a generation in an industry. There is no IKEA around the corner every year. But thinking in business models helps you also with sustaining and ameliorating your current business.

To understand better your current business model helps you a lot. You just get better by understanding from a customer perspective what you do and what value proposition you offer. Just by writing your business model down helps you to

  • get more focus,
  • get better customer solutions,
  • get the resources better aligned with your strategy and
  • get a sharper profile with your customers.

Unlearning starts with understanding your hidden assumptions

But coming back to my client, just improving and focusing their current business model is not an option. But the first exercise to write down their current business model and then compare it to the changing needs of their customers helped to spark a discussion how to align the business model to the changing circumstances.

Particularly interesting was the changing mindset. Some managers that were so proud of today’s core capabilities saw that exactly what made them strong in the past is an impediment for the future. That unlearning process was fantastic, even when it is the start of a long journey.

Unlearning is by far more difficult than learning.

The biggest challenge to incumbents is the unlearning, forget. The best business model innovation will fail since managers and employees will use their tacit dominant logic of the past to implement the future. And that will not work!

So, if you have any ideas, experiments or cases how to start the unlearning process, I would love to hear from you!

12 Responses to “Change, unlearning and the business model”

  1. robin Says:

    Hey Patrick,

    Du bloggst ja, gratulation.

    Robin

  2. John Says:

    Nice model you copied from Alex Osterwalder. Unbelievable.

  3. Sander Says:

    John, you are so right. @ Patrick: what is your story?

  4. Patrick Stähler Says:

    @Sander @John
    Thanks for your worries. So you asked what my story is. Here it is. I have researched and worked on business model innovation already since 1997, when I started my Ph.D. thesis. Actually, at that period of time the term business model innovation did not exist. At the end of the 1990s the term business model became popular with regard to businesses on the Internet.

    I worked at the institute for media and communications management at the University of St. Gallen in Switzerland. Our research was on the impact on new media on business. The institute published also the Journal “Electronic Markets” where Paul Timmers wrote his famous article “Business Models for Electronic Markets” which is widely cited as the origin of today’s definition what a business model is. I worked at that time on the question how businesses on new media might be different from businesses that are based on “brick and mortar”. During that process I coined the term “Geschäftsmodellinnovationen” or in English “business model innovation” which, in my humble opinion, was not used in academia before. Gary Hamel was very close with his concept on business concept innovation in its book “Leading the revolution”. Kim and Mauborgne coined in 1997 and 1999 the term value innovation which they later elaborated in their book on “Blue Ocean Strategy” which is also related to business model innovation.

    In 2001, I published my Ph.D. thesis on “Geschäftsmodelle in der digitalen Ökonomie” in German which became a classic in German speaking countries. Translated into English the title would be “Business models in the digital economy”. You find my work at Google books or in parts on http://www.business-model-innovation.com, a website that has been up since 2001. If you are interested in my definition you find it here and in more detail you find it here. There you also find a chapter on the origin of the term business model. The illustration you mentioned in your comment is just a graphical representation of what I wrote already 8 years ago.

    The reason why we probably do not know each other is simple: First, unfortunately I published only in German. Second, I was working in a different industry for seven years before starting my think tank on businesss innovations in 2008 so I was not very active in disseminating my ideas.
    Actually, your comment inspired me to write a post in the next time on the origin of the term business model (innovation).

  5. Cyril Lecocq Says:

    Hi Patrick,

    Nice post. Thanks for that.

    I’m currently working on the Business Model concept as student for my master thesis (I’m french, sorry if there are some mistakes).

    Ok, the purpose of the thesis is to develop the business model of a company that I’m creating (a webagency) and analyse value creation sources.

    I’m still working on the literature. I have a question relating to your canvas. You consider “Values” as a bloc in the Business Model canvas, isn’t it to be considered in the strategy at a corporate level? is your logic is that values need to be considered in BM to then be implemented within process?

    Can you also explain what you mean by leadership style, I mean, how you consider it in BM concept?

    Finaly maybe you have a written explaination of this canvas?

    Thanks for you answer anyway,

    Best regards,

    Cyril Lecocq

  6. Patrick Stähler Says:

    Hi Cyril

    Sorry for the late reply. I was on vacation. You rise an interesting question about where the value proposition is located either on the business or at the corporate level. Actually my last post was on business vs. corporate strategy. Here I argue that the value proposition has to be on the business level of your firm not on the corporate level. In most small firms that is actually the same. But for large corporations with several business units it is not. And as a matter of fact quite often business units are not organized around customer needs but around internal reasons like production facilities.

    Your second question is about the culture aspect. I have added the cultural aspect for one very special reason. The traditional view of a business model does not comprise the human factor. And as we all know it is the human being who makes or breaks a business. Of course, you can argue that the human factor is already included in the core competencies but I found out in my workshops with managers that the cultural aspect is neglected if not mentioned strongly on the business model canvas.

    A great example where culture makes the different is Zappos, an online retailer, that was recently bought by amazon. Zappo is very similar in its business model compared to other online retailers but it is the culture that makes Zappo unique. Here is a link to their culture statement. Another example is mountain guide company in Switzerland called Bergpunkt.ch. Normally, the value proposition should be directed to the customer. In their case it would be people who like the mountains and what to do hiking anc mountain climbing. The quality of mountain experience is closely related to the quality of the mountain guide since he/she is the one that makes a huge impact on the tour. The guide makes or breaks the tour. So for Bergpunkt it is crucial to get the best mountain guides. How do they do it? They offer them a job with more safety than by working alone but still with the freedom of an independent mountain guide. They created a company culture that is highly attractive for the best mountain guides and that is one of the reasons why they are successful.

    Hope I have help you. Actually, your question inspired me to write a post on the cultural aspect in a business.

    Best regards

    Patrick

  7. Cyril Lecocq Says:

    Hi Patrick,

    Thank you for your detailed answer.

    In fact, my first question wasn’t about “value proposition”, but “values”, I mean “What values & beliefs top management does pursue”. Let’s imagine, we have a company, like global company with several Business Units, each of them following different Business Models.
    Do values differ among these different Business Units? That’s why I’m asking about taking in account values at a strategic level, corporate one. You have one strategy, several business models, but you follow just one group of values (and it is at strategic level), this is what I think for now. Or maybe we shouldn’t call that “Value”, but “Value implementation”, considering the question: how to implement value and beliefs in each business block (key activities, key resources, value proposition …)?

    Same with leadership style, I totally agree with you about the human factor, but do you believe it can differ among different Business Units inside a group? Hmm maybe on a cultural way if it is international? Also, shouldn’t we consider leadership style inside values? Cause it also depends on values of the top management?

    One last thing, in your canvas, I don’t get the difference between “Offer” in the value architecture and “value proposition”.

    Hope I did explain it good : )

    Thanks for considering my comment,

    Best regards,

    Cyril

  8. Patrick Stähler Says:

    @Cyril
    I strongly believe that you should have common values across all your businesses in a firm. You cannot claim that integrity or honesty are core values in one business unit and in another business unit you pursue just shareholder value.

    But on the other hand you can and sometimes must have different cultures in one firm. Just take the example of an IT Service firm which has two different business arms; one is project business, the other is data center services. The project business needs creative people who get a project done on time and on budget. During the project they can try different ways to find the optimal solution. From the data center guys (few women in this business) I expect that the service is up all the time. I want little creativity in running the machines, I just want reliable services. Due to the different requirements both business attract different kinds of people that value the different cultures and blossom in these different environments.

    So to your last question on the difference of value proposition and offer. The offer is your just the physical product or service you offer. The value proposition is more abstract and is all about the utility/value your whole business model offers your customers.

    A good example is the public transport in Germany and Switzerland. Both railway companies offer train transportations from one point to another. That is the offer. That is same but in different countries. In Germany the fast trains try to compete with planes so you have to book the trains in advance and the price is rising the shorter in advance you book your ticket. In Switzerland, the value proposition of the SBB, the national railway operator, is different. The idea is that train riding should be as easy as possible. So there is not mandatory reservation, trains go always at the same time so, for example, you just have to remember that the trains in Zürich to Bern leave at xy:00 and xy:32. The trains go every half an hour. Other trains even have go every quarter of an hour and allways at the same time of an hour. So, for example, at xy:05, xy:20, xy:35 and xy:50. And it starts at xz:05 again. Sounds complicated, but it is not. Customers just have to remember very little to get the right trains and if you miss one not big deal since the next train leaves in 15 or 30min. So the value proposition of SBB is different from Deutsche Bahn. SBB wants to have the train rides as hassle free as possible for the customers. SBB wants to compete with the flexibility of the car and not with planes.

    So you see, the difference between the value proposition is huge between Deutsche Bahn and SBB while their offering is pretty much the same.

  9. Mohammad Ameli Says:

    Dear Sir, I have become so confused. Once we are going to write Business Plan. Some other times we should develop a strategy in various levels corporate, SBU, etc. Every time we work on something. Now Business Model and value preposition. What is the difference. I have worked on it when defining vision, strategy, …
    Thanks and Best Regards.

  10. Abdifatah Reflective Essay | Abdifatah Blog Says:

    […] THE BUSINESS MODEL […]

  11. Top 10 in 2011 on business model innovation | Business Model Innovation Says:

    […] Change, Unlearning and the business model (6/2009) […]

  12. Culture and the Business Model: We are humans | Business Model Innovation Says:

    […] model is so impeded in the heads of all people. Culture and values have to be unlearned and unlearning is the most difficult task as we see from all big American car firms or from the bankruptcy of retail conglomerate […]

Leave a Reply