Thanks to the business model canvas people are enthusiastic to build new business models and find business model innovations, but often they get lost in technocratic details. They just see building blocks but they forget the overal logic every great business needs.

Actually, you as an entrepreneur have to answer just one core question: Why should your firm exist on this planet? You need a Daseinseinsberechtigung (right to exist) for your firm. This is a very philosophical question. To be more operational, you can break down the Daseins question into four core questions. But still the answers will not come with a pure analytical process but with creativity and lot’s of empathy for your customers and their jobs they want to have solved. 

The technocratic approach is useless for finding love (source: http://xkcd.com/55/)

The four core questions on your business model canvas

1. Why should customers be excited to do business with you? That is the value proposition. You could almost go as far as asking: Why should customers love to do business with you?
2. How do you create the excitement of your customers in a productive way? That is the value architecture or operating model. Here you describe how you fulfill your value proposition.
3. How do you earn money? That is your revenue model or the profit formula and here you should be able to explain why you as the owner should be excited about the business.
4. What are your values you live up to in your team and with your customers and partners? That is the human side of the business and of utmost important, since it is the most difficult part to copy. I call it the culture and values of a business.

For these questions, you need compelling answers and the nine or elven building blocks are very helpful in answering the questions but do not get lost in details but look at the broader picture and see the interdependencies.  If you can answer the questions you have a great strategy that is customer-oriented, profitable and sustainable.

The bad part for any mediocre business is that you cannot answer the questions. Please all mediocre business, why don’t you try harder and work on “why should your customers be exicted about you?” instead of optimizing a dull business.

Open innovation is a big trend today in innovation management. Where are its strengths and limitations? A discussion with Atizo.

Today, I had a long chat with Isabel Steiner and Sabine Hofer from Atizo, an entrepreneurial platform for open innovation. Atizo is a platform where companies can post a question to a crowd to get more and better solutions. This is called open innovation since you are not looking inside your own firm for ideas but to a broader spectrum of people. Some call it crowd sourcing for ideas.

The idea behind open innovation is fascinating. With Atizo, you can address more than 8.000 people with ¾ with academic background to look for fresh ideas. The biggest advantage besides the size of crowd of the “innovators” is the fresh viewpoint on the problem. You take advantage that the innovators do not know the way you always have solved the problem in the past; they are not stuck with your dominant logic.

Atizo’s platform allows companies to generate ideas, evaluate ideas and develop the ideas into marketable concepts.

The idea funnel from Atizo

Depending from your scope you want to use, you can use either the whole crowd, a subsection of your customer and clients if you are a business or you can just invite your closest community for the innovation project.

The different crowds to source from at Atizo

Due to these strengths, open innovation became a huge success in the last years. Well-regarded firms like Swisscom, Mammut, Google or BMW have used Atizo’s platform for open innovation to find new solutions.

So, is Atizo a success?

Success Story Atizo

Yes, since most customers were positively surprised about the quality of the solution. The open innovation idea works. The open innovation platform is fast and cheap to generate idea.

However, as every innovator knows, having even great ideas is not enough. Ideas have to be implemented in the firm AND adopted by the customers. First, implementation in the firm is already difficult since so many impediments like lacking resources; different priorities of top management, wrong corporate culture, Not-invented-here syndrome etc. can and will mostly likely kill the idea.

Secondly, an innovation is not what you think it is, but what the customer adopts. Therefore, from the many great ideas only few have seen the market. The classic dilemma of all innovators.

It is the question, stupid!

Moreover, what Atizo also figures out is how important it is which question you ask. Quite often, the question is very closed and so narrowly defined that the ideas are typical MOTS ideas (more-of-the-same). Nevertheless, do not criticize the ideas and solutions. The problem is with the questions. These questions are so framed by the dominant logic of the current business that really break-through ideas cannot be found. This is the same criticism I have already raised in the case of “Design Thinking”. If you ask the wrong questions, you get irrelevant answers.

Solution anybody?

So we discussed how better questions can be asked. One option is to amend the open innovation process with a phase where the crowd can deliver insights into unsolved problems they see with a current solution. They could deliver insights in the jobs that are still unsolved. Moreover, with these fresh insights even better solutions and ideas could be found. Any other idea?

Thomas Middelhoff was the CEO of the now insolvent German retail conglomerate Arcandor formerly known as KarstadtQuelle. Thomas Middelhoff has a good sense for timing. He left Arcandor in March 2009 just 3 months before the company had to file for bankrupcy in June. What made his stint at Arcandor so remarkable was not that he turned around the business of Arcandor but his ability to benefit personally from his position at Arcandor.

I am following the Arcandor business case for a while and I have written about the failure to innovate its business model in the past. So a recent  article of Süddeutsche on Arcandor grabed my attention.

The German daily Süddeutsche Zeitung reports (in German) that Middelhoff is by far better of than his former employer Arcandor and its employees that have lost their jobs. Süddeutsche Zeitung cites a confidential report of the auditors from Deloitte that acted on behalf of the German Federal Financial Supervisory Authority (BaFin). (more…)

The Swiss private banks are under pressure to change their business model. It is not just pressure from other states that want to fight tax evasion via exchange of information on bank customers but also from employers that try to sell stolen customers’ data  to foreign governments.

The big news in Switzerland is that an informant, crook or thief – whatever you like to call him depends from your standpoint – has offered the German authorities data from 1,500 German customers of Swiss Banks that have allegedly dodged taxes. Last year, another informant stole data on 3,000 French bank clients from the HSBC branch in Switzerland and sold it to the French authorities. And in 2008, Germany already purchased data on German customers of the Liechtenstein Bank LGT. The LGT case cost the German government several million Euro but they received a far higher pay-back on its investment form all the taxes and fines that the busted tax evaders had to pay.

There will be more

And these three data thefts will not be the last. It is not only the authorities of high-tax countries like France or Germany that see their high return of investment if they buy data from informants but also there will be more willing bankers that will sell data of its customers. Why? (more…)

In the discussion on business model innovation an important point is missing: the culture in which the business is conducted. A business is all about people “creating” customers.

Businesses are not a technical machine with input and output factors. Businesses are places where human beings work together for a common goal and therefore the culture in a business is a defining part of a business and therefore also for the business model.

Most definitions of what a business model is are rather technical. We talk about components, patterns, building blocks. We make a lot of fuss about how we rearrange the components as if they were just Lego bricks. We believe that having in mind a great new business model is already a business model innovation.

Where are the people?

Ups, no! That does not work. Somehow the most important “building block” of a business is missing: The human being that designs, shapes and makes the business work and the customer who has to buy into the new value proposition and pay. And here again we have the human factor. “[I]nnovation is not what innovators do but what customers adopt.” We always have to remember what Michael Schrage is saying. It is the customer acceptance that makes an innovation. (more…)