Posts Tagged ‘dominant logic’

Who is in charge of business model innovation?

Monday, February 15th, 2016

Business Model Innovation State of MindIn 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.

But wait.

Let’s take a look at a traditional organization, the people there and their ability to execute business model innovations.

The Strategists?

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 Marketeers?

The marketing guys unfortunately forgot that originally marketing was about the whole business with their (more…)

Rethinking your industry logic: Cross Industry Business Model Innovation

Wednesday, September 24th, 2014

Business Structure’Our industry is unique and should not be compared with other industries!’ This is a common phrase I have heard countless times throughout my consulting career. But is it true?

Strangely enough the most successful companies become prosperous not by excluding comparisons, but by leveraging other industries success factors and applying them in a new context. Many other companies that innovated within the boundaries of their current industry logic often left the stage early. When looking at new business models it is often clear that they have not been developed from scratch. Many models that have changed an industry are merely refurbished versions of another model by another industry.

Business Model Innovation is about combining successful models from various industries as well as finding completely new ways of doing things.

Re-imagine your organisation with a different leader

When you design your future business model you need to find ways to overcome the current thinking patterns or dominant logic of your industry. Famous leaders are often responsible for defining a new way of thinking in their industry. How would Rupert Murdoch or Frank Lowry run your business? What new customer segments would Robin Hood develop in your organisation? How would Pierre Omidyar lead your not-for-profit organisation?

Google didn’t apply the business model from the software industry, yet their first product was nothing else than software packaged as a service. Airbnb.com didn’t use the business model of the hospitality industry, yet they offer hospitality services. Kickstarter.com didn’t use a banking or venture capital business model, yet they fund new endeavours all the time.

They all applied models from a different industry and combined them with a new approach that broke the dominant industry logic.

Understanding another industries business models is only the first step

Companies should always look beyond their traditional industry borders to learn. Could you learn from Nespresso’s direct sales model? Could you do the same and sacrificed some reach of your sales channels for a much more rich interaction with your customers?

Could you learn from Ikea and outsource some core activities to your customers? Could you learn from Gillette and their “razor and blade” model? Could you learn from the newspaper industry with their subscription model that makes customer pay you in advance before they get the product? (more…)

Business Model Innovation in the EU and beyond

Monday, October 14th, 2013

Business Model Thinking is coming more and more mainstream. On Friday, I was at a workshop sponsored by the EU commission on Business Model Innovation and Policy Making. Here are my takeaways.

Business Model Innovation on the top of the agenda for policy makers

I’m very happy that the topic we started more than 15 years ago will be part of the future innovation policy of the EU. 15 years is a long time for me as a person, but as the business professor Christoph Zott is pointing out in science and policy making 15 years is a short time particularly when you want to introduce new units analysis to understand how firms outperform or create über-returns with (business model) innovation.

Policy making in need for innovation by xkcd

Business Model Innovators as outperformers

While we as entrepreneurs do not care much about measuring the impact of business model innovation on a societal level, the EU or the OECD, that also participated, want to measure each countries performance on business model innovation and then define policies to foster business model innovation on a governmental level.

Most papers presented at the workshop had a strong focus on the technocratic parts of a business model like Value Creation, Value Capture and Value Proposition but were missing the human side to business, the people who run a business, make the difference in innovation but are also the biggest impediments to change.

Pieter Perett and his team from the University of Applied Science Northwestern Switzerland, who organized the workshop, presented their findings that business model innovation make a strong impact on the long-term performance of firms. They use statistical data to identify business model innovators and they try to calculate if there is a über-return for these business model innovators.

Edward Giesen, Head of BMI at IBM, presented their study on business model innovation. They use a different method. Instead of measuring the impact of business model innovation from statistical data, they interview CEOs on the importance of business model innovation, and they see that companies that are consider themselves as business model innovators are outperforming traditional product or process innovators.

Christian Zott, who published one of the first works on business models in 2001 and is a strong advocate for business models, criticized from a scientist point of view the methods to measure the impact of business model innovation. His main point is that business models are often defined too broadly so it is difficult to understand where the real impact was in the business model.

I liked his criticism a lot from a scientist point of view and his focus on rigidity, however his proposal to focus only on the activities might be rigid but then the concept of business models looses its relevancy and its magic to see new boxes, entrepreneurs have never thought of as points of innovation like the revenue model, the value proposition or the Team & Value side of a business.

Where’s the beef?

Hans-Jörg Bullinger, former Head of the German Fraunhofer-Gesellschaft, criticized that the studies are interesting from a scientific point of view, however, they do not help to overcome our technology bias. His call for action was that we need better tools to design business models for entrepreneurs. Of course, I loved his objection, since this is exactly, what we do with the upcoming tool box for entrepreneurs. (more…)

Fighting for the next business model in the pets industry

Monday, January 30th, 2012

I had in the last months the chance to apply business model thinking & innovation on several, very diverse industries: the airline and travel industry, the pets industry and some time ago on the media industry, particularly newspaper.

In the upcoming three next posts, I will share some insights I gained from using the business model canvas on these industries. The series will start with the pets industry.

A word of warning to all industry experts: I am not an expert for these industries. I’m not a pet industry expert. I am an expert for the process of re-thinking and re-inventing business models.

Pets Industry – A revolution in the making

The following slide deck is my presentation, I gave on January 27th, 2012 in Berlin at the Pets International conference. Enjoy some insights in a very interesting industry where the core is all around living creatures and the close relation we have to them.

Enjoy also my new design of the business model canvas I have created together with Gottschalk & Ash, a designer with the support of the Wolfsburg AG, an innovation incubator in Germany. You will see more in the future.

 

Pets are man’s best and dear friends

Pets are highly emotional and men’s best friends. Pets are members of your family. Sometimes they are treated better then human beings. (more…)

Markets vs customer driven business model design

Saturday, September 3rd, 2011

Do you have to be market-oriented or is this again one of the buzz words that hides more than its reveals? Or should you be customer driven? Let’s take a look at the two words and concepts and see why Alex and I have chosen not the term market but customers for our canvases.

I just return from a workshop for entrepreneurs in Wolfsburg, the birthplace of Volkswagen. We used the business model canvas to focus the entrepreneurs and their coaches on the core building blocks of a business models.

Interestingly, most participants of the workshop always talked about markets, that we need to be more market oriented, that we have to conquer new markets. But is this true?

Customers pay your bill not "markets"

Markets, top-down approach

Markets are the sum of customers that spent money and therefore have shown a demand in the market. But a market is abstract and impersonal. You can not sell your product to a market. There is no Mrs Market to write a bill to and that is exactly the problem for entrepreneurs. You might be in a great, growing and profitable market but that does not mean you have one single customer who pays your bills.

Markets is a top-down approach very well suited for analyst and consultants. The market is great for analysis but not good to sell something to.

Customers, bottom-up approach

Let’s take a look at customers. As a business you need an individual client that is willing to pay for the service or product you offer. (more…)

What business are you in? Business models as social constructs

Wednesday, June 8th, 2011

“What business are you in?” sounds like a simple question. But it’s not. How you define your business determines which direction your firm can go. Based on your answer, you define and limit your strategic options.

In a company, the business model is defined by a dominant group of people. They have a common understanding of what business they are in and how they create value. However, the business model is not an absolute reality. It’s a social construct of dominant opinion makers, e.g. your top management. This is important to understand.

By taking a different look at your business, and thereby challenging your dominant logic, you can identify more and different strategic options for your firm. But beware; by doing so, you are also challenging the top dogs in your firm.

Life is not that simple. Changing perspectives by xkcd.com

How you define your business depends on the dominant logic of your management

Considering the definition of what a business model is, it seems easy to describe the business model of a company. You can use  the business model canvas (Alex Osterwalder‘s or mine) and then you describe how value is created. Often we assume that regardless of who describes the business model, we will end up with the same description. This is a mistake.

(more…)

Can you copy a business model? Groupon and its clones

Thursday, April 14th, 2011

Particularly on the web, we see a lot of copies of successful business models. How many clones are there of Groupon? How many competitors and incumbents wanted to copy Amazon in the late 1990s and failed? The core question is: Is it possible to copy a business model? In this post, I will elaborate on this topic.

Business Model Copycats

During a recent interview for a bachelor thesis, I was asked: Under which circumstances is the transfer of a business model e.g. from a different country or from a competitor a useful strategy?

I must admit, I am skeptical about the outright transfer of business models from one firm to another. The reason is very simple. A business model is more than its technical components like your value chain, revenue model, your product etc. The business model also includes soft factors like the value proposition, your values and corporate culture or your core competencies. Remember the definition of core competency: core competencies have to be rare, difficult to copy and valuable.

Many strategists, VCs and purely analytical people think that it is easy to copy a business model. What they forget is that a business model is not just a technocratic combination of components, in fact, humans are involved with their values, cultures and hidden assumptions. You can copy the hard components, but the human aspect of a business model –values, culture, tacit knowledge – is difficult to copy.

Business Model transfer from Start-ups to Start-ups

The case is different for startups where (more…)

Open Innovation: Does it work?

Thursday, August 12th, 2010

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?

Changing financials, changing economics, retailing and business model innovations

Wednesday, March 3rd, 2010

In the discussion on business model innovation the focus is often on the innovations regarding the value proposition or on the value architecture but it is interesting to look at the revenue model as well for starting points for an innovation.

Anders Sundelin in a recent blog post reflected on net working capital and the influence of the business model on it.  I can only recommend his post to anyone. He shows how this important financial figure (net working capital)  is influenced by the business model. Actually, almost all innovation in the retail industry change the economics of the industry. They all start by minimizing the working capital needed in the operation. Since the traditional business model in retailing is very capital intensive due to inventory, all disruptive innovations help to reduce the capital tied to inventory. And interestingly, at the same time as the working capital is decreased or in same cases, it even becomes negative the margins on sales go down.

One example: department stores vs. discounters

In the 1960s managers in department stores were having a good time. Department stores ( marked with a 1) went well and their economics were great with gross profits of 40% on sales. Imaging you would have worked at let’s say Karstadt, a German department store. You have a great idea. You believe that the future of retailing will be different and you have the idea a discounter retail outlet with limited stocks and less choice for the clients. You do your economics and you end up with a gross profit of 23% on sales (marked with a 2).

(more…)

Design thinking, Ideo and disruptive business model innovation

Wednesday, November 25th, 2009

To be honest, I get a bit bored about the mantra that design thinking will solve the problems of large corporation. Well, when I go through the case studies at Ideo I am extremely impressed by their client list but not about the output. I have seen several design thinking sessions and I am not impressed at all with the output. The results are very often: More-of-the-Same but with fancier design.

Wer hat es erfunden? Novo Nordisk insulin pen

Where is the invention from design thinking that changed the industry? Where is the iTunes or the Kindle of Ideo? The problem with design thinking starts very early in the process with the problem definition phase. And that is where large corporations fail. They define the scope too narrow and than you get nice new things that sustain your current business but not new business models that rock your industry and yourself.

Ideo is a very good (self-) marketing & design firm but not an industry rocking firm. Large firms just love Ideo because Ideo just offers such a well designed process to solve the big problem of “being not innovative”. You hire Ideo for comforting yourself for not using your own common sense and your own customer insights. You just outsource your understanding of the customer to Ideo.

And how innovative are Ideo’s ideas?

Let’s take the example of the insulin pen Ideo describes on its homepage as a case [update 22nd Oct 2010, case is not available on IDEOs homepage any longer due to redesign of page]. (more…)