The missing part for business model innovation: The process

November 12th, 2014 by Patrick Stähler

Recently, I had an intensive discussion with David Siegel who just moved to Zurich. His big idea is business agility and he is so right since the missing part in business model innovation is the process moving from your current business model to a better future. He calls it business agility. We at fluidminds use Rethinking business and Entrepreneurial Design for the process.

Business Agility, Rethinking business, Entrepreneurial Design, Design Thinking, Discovery-driven planning…

Entrepreneurial Design ProcessRegardless what wording we use, what we need is a process that helps companies to develop innovative business models that customers, employees and the owners love.

Today, two processes exit in companies that could be used: the innovation process and the strategic planning process. The names of the processes suggest that they could be useful, however in reality the opposite is the case.

Why? They lack agility and experiments. Both processes have the hidden assumption that with more and better planning you can anticipate the future. Both are focused on existing products and markets. These tacit assumptions might be right for a world of sustaining innovations, in a world of more-of-the-same.

But, and that is a BIG BUT, not in a world which is radically changing. Business model innovations have a disruptive character and focus on the whole business model. There is a need for business model innovations in any industry due to the Internet, the demand for clean energy, globalization, and due to the rise of Asia.

Therefore, almost every firm needs a different approach to innovation and strategy.

The future is not about prediction but about shaping the future with agile experimentation on what works and what does not work

Regardless how much you plan, you will not predict the future because neither customers nor companies can anticipate what is possible. The only way to push for radical innovation is to accept the uncertainty and thereby accepting that with more traditional planning we can not predict the future.

By saying so, I do not mean that we need no planning or management anymore. We even need it more than ever, but with a different aim. The aim should not be to predict the future but to plan a creative process how to shape the future.

Creativity let alone is a messy process. A well-structured process can turn creativity into a powerful force. The process forces companies into a getting-things-done mode. With the agile process you push for fast experiments and thereby faster learning. You try not to fail big but small. Small failures are not failures but fast learnings.

What do you need in the process?

  • Agility: Agility is not velocity (speed in a given direction) but finding fast the right way to go.
  • Business Model Thinking:  The building blocks of a business model are your new boxes to think in. So you circumvent the problem to always start with the classical points of innovation like products or processes.
  • Jobs-to-be-done:  Thinking in jobs-to-be-done instead of products. Thereby dissecting your current business model in the jobs you solve for your customer. The products are just means to solve the jobs. Customers hire the products to get a job done.
  • Open and Focus: Your process has to force you to open your mind at the beginning, to let you  see things differently, but the process also needs to force you to take decisions on what you want to focus on and how you can test your assumptions.
  • The process is not linear: There are pivots where you have to jump back when a core assumption has proved to be wrong.
  • Beware that we are humans: A business is not Lego blocks that you can rearrange according to your will. We are humans and humans make the difference between a good and a great business. So focus on the human side of business. Humans are the biggest source of creative solutions but also the biggest impediment for new solutions.
  • Unlearning:  As we all know, unlearning is not possible for humans, since we have no delete button in our head. But with the jobs-to-be-done approach and the business model canvas you can unhide your tacit assumptions about your business. Once, we have unveiled the hidden assumptions we can try to overcome them.
  • Give meaning: Focus in the process on giving meaning to your customers and employees.
  • Diversity: You need a group of people with different backgrounds, sexes and education. Otherwise, you will not unlearn. Diversity helps.
  • Customer Insights: Taken the jobs-to-be-done approach, you have to develop insights into your customers and their badly or unsolved jobs.
  • Technology Insights: Understand technology, very deeply but not the technological features but what its business idiosyncrasies are and what are repercussions your business but also for your customers are. Together with your customer insights you can come up with solutions you have never dreamed of.
  • Testing & Prototyping since a business is a set of assumptions: By accepting that all you know about your business is an assumption but not reality until you have tested your assumption. But even then, most factual know-how in business are human believes and not scientifically proven natural laws that never change.

The business model canvas gives you the right boxes for new and fresh ideas, the process helps you to fill the boxes. In an upcoming post, we will elaborate how we do it at fluidminds.

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What is your experience? What process do you use to develop business model innovation? Write us and share your insights. This blog is a blog about business model innovation and not my personal blog, so any great articles are welcomed. Love to hear from you soon.

19 Responses to “The missing part for business model innovation: The process”

  1. We Are Innovation Says:

    Agility is “finding fast the right way to go”. I love this one. Here’s my definition: http://weareinnovation.org/2014/11/03/we-are-innovation-because-we-are-agile/

  2. Kay Plantes Says:

    Spot on. Wise advice. Love the list.

  3. Patrick Stähler Says:

    Thanks Kay!

  4. Moses Olaniran Says:

    I like the fact that the diagram above has been designed using the Input-Process-Output (IPO) Model. This is a great framework!

    In essence, this assumes that the company leaders are either proactive about transforming the business model or have recognized a need to change the current (or “old”) business model to something new.

    And, I really like your Six-Step Process in the diagram. However, I’ll take it one step further by adding a seventh step, but located in the area you have shown as “point of view;” and this will become the third-step. Let’s call it: “Create Need Statement”. And this can be represented with an appropriate image / graphic.

    Once this is done, the next step is to go out (Getting Out of the Building -as Steve Blank would say) and validate the need statement. Refine and/or iterate as necessary or pivot. If the “Need” is validated, only then should you proceed to Ideation phase. I think this might be one of the pieces to the business agility / business model innovation process puzzle.
    I’d like to hear your thoughts….

  5. Patrick Stähler Says:

    Moses, could you please elaborate a bit on the IPO Model you mentioned. I think there are many good processes around. However, most of them lack one or two of the ingredients I mentioned. Most of the time is thinking in the whole business model and not just in components like the supply chain. The supply chain is a fantastic starting point for sustaining innovation however, you mostly optimize the current business model and here the value architecture. We need the holistic view to see the bigger changes.
    Contrary to Steve Blanks, I prefer to have validated customer insights BEFORE we start with ideas. You have to get out of the office before you ideate. Still validation of your hypotheses have to happen afterwards as well.

  6. Moses Olaniran Says:

    The IPO Model is just the Input-Process-Output Model as indicated in my initial comment. In essence, we use this model to assist start-ups and established companies in taking their business models from the current state to where they’re creating and delivering great value to their customers and are well rewarded for it. So my initial comment was addressing the whole not just supply chain innovation.

    In fact, your approach is quite similar to ours…in that we start by going out to observe and understand the problems, challenges and opportunities. I think this is what you called customer insights. However, once we captured this insight, it needs to be refocused, explained and written as a need statement. Then we go out there again to validate the need statement before ideation –lest we create a solution for which there’s no market.

  7. Patrick Stähler Says:

    Tx Moses. Actually, we have a different approach to start-ups and established firms. The unlearning aspect is not important for startups, but crucial for the incumbents. We use insights from customers and technologies to create cognitive dissonances in order to create discomfort with the current situation. Coming to startups, we have a similar approach. In general we put a lot of effort on customer insights before we start in detail with the solution.

  8. Mark Rome Says:

    Patrick, you make some excellent points.

    I agree, innovation must be a collaboration that takes a holistic approach to solving problems, encompassing the interaction between people (skills and performance levels), processes, and infrastructure (IT systems and technology).

    By focusing strictly on the “process” of innovation without understanding the interaction between people (skills and performance levels), process, and infrastructure (IT systems and technology), innovation is less likely to succeed.

  9. Patrick Stähler Says:

    Marc, I think you all misunderstood me a bit. We at fluidminds, my company, use the term “rethinking business” for the process. Because people have to rethink what business they are in. We put the people in the process first, but we need a process to structure the rethinking. And the ingredients help in the process. And several of them address the human side and our version of the canvas has a very important new element to Alex’s version, the team & values aspect. We have the strong belief that we should not have a change management after strategizing but the strategy process is THE change process for the management.
    My experience tells me that the normal employees usually has to do the least of rethinking. It is the top management that has to forget what made them successful in the past. That is what rethinking is all about.
    Before this post, I had already another title in my mind for another post: The title is: Who is in charge of business model innovation?

  10. Norbert Haehnel Says:

    People are the life blood of any organization. Without people no business can be operated. The team & the values of an organization are the foundation in any business model innovation process.
    I have written a blog post on this site to exactly this topic. “Value creation through values in Business Models”
    Processes are a means to an end and need to cater for human values and the culture that an organization has or likes to establish. The business model canvas Patrick has developed is the only one that has an explicit dimension for it.

  11. James Streeton-Cook Says:

    So true Patrick.

    Maintaining momentum FROM the existing TO the new is always a big challenge.

    From my experience having the right intent and focus makes all the difference. The list of what you need in an innovation process provides a great prompt for us. It brings into focus what we need to do when developing a business model.

    Entrepreneurial activity is a competitive situation / reality. It is much like nature. Developing innovation in your business model is working in a SES or Social Ecological System and the rules of nature apply. It is survival of the fittest. If there is a fitter way it will win and dominate. Note it may not be a new and better way. Just more aligned at meeting the needs and values in play. This is why intent is so important in a winning innovation. Bringing focus to the business innovation process as your list does means we can be more likely to find and meet needs and values in a real way. A fitter way and not just a new and better way.

    I like it. It resonates well with me.

    Cheers.

  12. Rod King Says:

    Hi Patrick,
    First of all, I must congratulate you on writing a great article on the importance of business model agility. Also, I like that you underscore the human (people) side of the ‘equation’ for business model innovation. Great job.

    With regard to your “Call for Action” and in particular, your question – “What process do you use to develop business model innovation?” – I’d like to write a short article and share my experience on a comprehensive 1-page framework and process that cover your above listed points about “What do you need in the process?” The process, about which I’m talking is largely inspired by the US Department of Defense’s current paradigm of Adaptive Planning & Execution (APEX) as well as John Boyd’s Observe-Orient-Decide-Act (OODA) Loop.

    Do let me know if you are interested in me sending the article to you for publication.

    Warm regards,
    Rod.

  13. Kenny Fraser Says:

    This is very helpful thinking. I believe there is also a missing piece of the jigsaw. There are 6 business models emerging for the mobile and digital age – SaaS, usage, eCommerce, Advertising, Marketplace and Licence. We can use these models to link together operations, numbers and value so that investors, entrepreneurs and analysts have the same understanding of how a start up business operates and makes money. I am developing a set of tools to help this process.

  14. Gilles Meura Says:

    Hi Patrick,

    Most interesting and inspirational ! And I think your views can be very useful also in the non-profit / humanitarian sector…

    In the world of NGOs and development assistance, many donors require very careful and precise planning. They are concerned that without such planning there will not be enough accountability; this is of course a valid concern. However the typical planning approach used is the Logical Framework, which I think fails to take into account the complex, non-linear nature of interventions in human societies.

    The project teams become prisoners of the Framework, and struggle to report on KPIs that often are not relevant anymore to the situation on the field…

    Have you had experience with the Logical Framework? There is a debate raging in the NGO world on the relevance and limitations of this model. I would be interested to have your opinion!

    Best regards,
    Gilles

  15. Herbert Lian Says:

    Thanks for the excellent article! Really resonated with me, and I must say that LEARNING and failing fast is really at the heart of any entrepreneurial venture.

    I have experience with startups as well as consulting for large companies, and have seen firsthand how hard it is for large companies, with their institutional structures and biases, to innovate on business models and respond to or even anticipate the changes that affect them in order to create shareholder value.

    The question is how to instill “business agility” in a large company. The most successful companies I have seen do this based on a rather loose structure where employees with ideas are encouraged to try them out (in a kind of internal “venture fund” environment), and failure is accepted, even welcomed as it comes with learning. On the other hand I have also seen companies that try to institutionalize this through too much structure, and fail miserably… it’s kind of like forcing people to have fun and be creative.

    Wonder if you have any thoughts on how a large company can create the kind of culture where such agility and innovation are part of daily life, instead of an afterthought.

  16. Patrick Stähler Says:

    Hoi Herbert

    What is my experience with large corps? Good question and I have no positive answer. I feel the innovators dilemma very strongly in projects. Top-management knows they have to do something but they are so focused on their current business. I have long discussion with management. We have trainings with high potentials but as soon as we approach the core of a firm, the management becomes reluctant. They are scared. Scared to really touch a idea that might be disruptive to their current business. And usually, my clients are well run firms that excel in their current business so it is easier for management to concentrate on the current business model. So the success depends very much on the person that drives the change. Not really an answer that helps 😉

  17. Herbert Lian Says:

    Agree, that’s why we say “never waste a good crisis”…

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