Posts Tagged ‘mental models’

The missing part for business model innovation: The process

Wednesday, November 12th, 2014

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. (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…)

The strange business model of airlines

Monday, May 7th, 2012

The airline business is a strange business and in desperate need for business model innovation. On the one hand, more people fly than ever to prices lower than ever. IATA, the industry body, states that the real cost of travel has fallen in the last 40 years by about 60% and the number of travelers increased tenfold. Air freight has grown in this period by a factor of fourteen. (See IATA Vision 2050) That sounds like a very successful industry. Is it? However, on the other hand, airlines are notorious to not even earning their cost of capital and producing unhappy customers.

 

During the 2000s the average airline generated an EBIT margin of just 0.7%. Taken a longer perspective, the figures are as drastic. From 1970 to 2010 the airline industry generated over USD 12,000 billions of revenues in today’s prices, but only a total of USD 19 billion of net post-tax profits; a margin of only 0.1%.

Another dull figures: Around USD 500 billion of investors’ capital is tied up in the airline industry. Normally, investors would expect a return on capital of around 7-8%. Taken the 500 billion that would mean a return of 40 billion annually to cover the cost of capital. But what did the airlines earn? 20 billion or 20 billion less that the capital would have earned elsewhere. The airline industry is a big capital destroyer. Interestingly, other firms along the travel value chain like airports or computer reservation systems earned excess returns. So there is profit in the travel industry but not with the capital-intensive airlines. Airlines are a dismal industry.

So are customers at least happy? Just type in Google the search “airline experience” and enjoy all the customer stories about flights. And watch the film “United breaks Guitars” like 12 million others did on Youtube.

What went wrong and is there a solution to it? And think about it why we all hunt of low prices on traveling while we spent USD 5 for a latte at Starbucks. Why are we so price conscious on travelling and not on coffee?

Here are some thoughts I presented at the 17th international airline conference last fall in Seattle. Thanks to Nawal Taneja, Dietmar Kirchner and Rob Solomon for the kind invitation.

Thesis 1: Airlines are masters of transportation economics, not customer experiences

It seems that all airline managers are great students of economics but not of entrepreneurship and marketing. Since they have a perishable good (empty seats on an upcoming flight are like perishable goods), they believe strongly in variable pricing by exploiting the maximal price customers are willing to pay.

That sounds very reasonable at first, since who wants to argue with economists and their theoretical models, but what airlines have forgotten over time is, that if you treat customers like rational customers then you will get rational customers and extremely price sensible customers in the end.  However, there is a good reason why economics is called a dismal science. So if you follow economists, (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…)

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?

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…)

Let’s commit a thoughtcrime

Friday, August 21st, 2009

In formulated strategy we use a lot of words like innovative, based on core competencies, market driven, customer centric, operational excellence, best-in-class, top quality, leveraging existing brand, etc…. You named it and of course business model and business model innovation are now part of these buzz words. Are they still meaningful or did we forget the deeper concepts behind the words? Do we use the technocratic jargon to signal others that we are the experts?

doublethink by duncan

As I have argued in my last post, I think we use in strategy and in management in general too many generic and meaningless words. And I think we use also too many meaningless graphs and pictures to say nothing as a matter of fact. Visualization does not help you if your strategy is bad. Sorry, Alex for this 😉 .

Every decent firm claims in restructuring that it is concentrating on its core competencies when divesting or closing parts of its firm. Well, and often it is the same firm that argued some time ago that it was necessary to buy this now divested firm since it wanted to offer full service to its customers. We have so many words for “Sorry, it did not work. We just could not make it work”. Why are we so afraid about the truth?

Management Newspeak

In management we have invented Newspeak. Original, Newspeak is a fictional language in the novel Nineteen Eighty-Four by George Orwell. The basic idea behind Newspeak is to remove all shades of meaning from language. While in Orwell’s novel the government tries to introduce Newspeak to the people in order to make the people more compliant to its will, in the case of management it is our own fault. We managers use our own Newspeak and we have taken all meaning out of it. (more…)

Change, unlearning and the business model

Monday, June 29th, 2009

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. (more…)

Slides: Growth by business model innovation (2 part)

Thursday, May 28th, 2009

These are the slides of the second part of my lecture I gave at Leuphana University in Lüneburg in May. The first set of slides you find here.

Ask questions! Ask why!

Saturday, April 25th, 2009

In workshops participants ask me what business model innovation would be best for their industry. I am always surprised about these kinds of questions.

I am not the expert for all industries. You are! You are the expert for what you are doing. The participants are the expert in their field. They know the idiosyncrasies of their industry, the hidden mental models of how their trade works. They understand the accepted rules of competition. They should know exactly what the customer values. They should have the insights in the customers’ behavior.  And they should find starting points for innovations.

I am not very creative. I was not great in art at school. I was a lousy painter, my brother helped me, I must admit. I never wrote a poem or composed music. But I am extremely curious. I was a pain in the neck for many. (more…)