In recent posts, I looked at the right boxes to think in and the process to develop an innovative business model, it is now time to look at the people who are suppose to innovate the business model in large corporations. This seems to be a simple question and in large corporation there should be a person in charge and capable of execution.
Let’s take a look at a traditional organization, the people there and their ability to execute business model innovations.
Officially, the strategy guys take the big picture view on a firm. But most of strategists are very detached from the real business and particularly customers. They talk about markets, read Gartner technology forecasts and predict the future by analyzing the past, but most of them have never met a customer in person and have never programmed or have developed a product that is later sold. Most have a background in analytics and large consulting companies.
They are very detached from business but think they know where business should be moving to.
The marketing guys unfortunately forgot that originally marketing was about the whole business with their 4 Ps. Today, they are mostly in marketing communication and see the customer through abstract market studies, but never see a real customer since this the job of sales.
The sales guys have the most contact with customers. Unfortunately, they think in quarters to fulfill their sales targets. They are trained to get sales volumes and not discuss what customers love in two to three years.
Research & Development?
The R&D people are in a firm in charge of technology and product innovation. They love technology, the products, intellectual property and toll-gate processes. But they dislike customers since they usually think they know what is best for the customer. Usually, they meet customers only in focus groups, but rarely shadow them in real life.
And a lot of service firms do not even have R&D departments or service management.
The finance people know the figures. They understand the economics of a business. But they also have little sense for the customers and what the customers really value. Pricing is seen as yield management to maximize the price customers are willing to pay instead of asking how can the company really get the maximum of value to the customer and then find the right price. A fantastic example – in a very bad way – is the airline industry where the economist took over and when economists take over, you get a dismal industry.
Actually, finance could be a great starting point for innovation as revenue model innovations like prepaid in mobile communication or concentrating on the core activities as South Western has shown in the airline business.
Heads of Business Units?
In large corporations, you have heads of business units. A business unit is usually defined as a matrix of product and market. They are the closest to customers and the products. They should be the driver of business model innovation but mostly; they are only in charge of a small slice of the whole business.
And the CEO?
The CEO is the guy who »runs« the whole business. Mostly due to experience of the past, he (and very few she) became CEO. He knows everything of the current business and but rarely meet the »bread and butter« customers and understands their jobs-to-be-done. CEOs are too busy for this. They meet the best customers but not the one that make 80% of the business. The best customers love the current value proposition as Clayton Christensen has shown in his work. Disruptive innovation is coming from the low end of the market or from non-customers. The CEO does not know these customer segments.
The core job of the CEO is to keep the current operation running and the organization synchronized. And actually, he is the one who has to unlearn the most since his track record and all his know-how of the past made him CEO. So he has to lose the most.
Very few CEOs have a track record to reinvent an industry. A shame.
Is it the innovation manager? Or do we outsource innovation to skunk work operations?
So companies understood this, that actually nobody is really in charge of customer-centric and disruptive innovation aka business model innovation. Therefore, they created the position of innovation managers and opened cool, hip skunk works where young and innovative people think and build innovative businesses. Academia and consultants came up with the term ambidextrous organizations, an organizational form that is suppose to master the current and the future business.
Most innovation managers I meet are great to talk to. They see the upcoming changes, they have good ideas, however, they are powerless. The brutal fact is that power in firms comes from the Profit & Loss statement. Only the ones that have financial resources can drive the strategy of a firm. That is a well know fact, but still we put belief in innovation managers and skunk work operations to save our company. Most innovation managers are fig leafs.
So what about ambidextrous organizations? It’s a fantastic buzzword. However, I am still waiting for the results but I am open to anybody who shows me successful examples. Please mention them in the comments. Personally, I am not convinced since this is just another buzzword and we have seen so many failures like Pandesic or any other incubator form the late New Economy. But it is fantastic sales proposition for any consultancy.
Innovators’ dilemma still applies
Resources aka your income come today from the current customers. The definition of a disruptive innovation is that at the beginning your current customers do not like disruptive innovation. They prefer sustaining innovation and if you are a good company, you will serve your current customers very well, and thereby your chances for disruptive innovations diminish. That’s the reason why Clayton Christensen calls this »The innovator’s dilemma«.
And this is still true. Unfortunately.
Who should be in charge of business model innovation?
Business model innovation is a state of mind and not a question of “in charge“. All of the above mentioned units have great input for the innovation process, but they need an united view of the business. And here the business model canvas helps to unveil the tacit assumption of the current business. Everyone sees what impact they have in the whole business model and how they interact with the other parts of the business.
And once, you have a common view, you can identify technologies or unsolved jobs-to-be done to see what impact these have on the whole business model and where you can change your business model.
You need diversity in your team to challenge really the current way of thinking. Business models are never reality but the social construct of the dominant group of managers. Only with diversity you can overcome your bias of the dominant logic of your firm. Besides diversity, your process has to be agile, adaptive, full of unlearning and learning and rapid prototyping to test your assumptions.
Besides diversity and an agile process you need a culture that can cope with dissent, inconsistency and ambiguity. Pretty difficult in an environment where your current success is based on a shared set of believes aka corporate culture that are good for running the current business smoothly.
Start today, since this is not something you can accelerate with money. Unlearning takes more time than learning. And the newcomers do not have to unlearn. They just have to learn.
So better hurry.