News is full of cool technologies like drones, blockchains or autonomous cars and their disruptive character. Traditional firms have switched to innovation mode and have now cool digital transformation units to use these new technologies. Everybody is happy. Great, isn’t it? Or wait? Can this really work that easy?
I just had a project with a company that has set up an innovation unit to push innovation. They have great people who are very salient with all the tools we use today in holistic innovation management like Design Thinking, Scrum or Lean Startups.
However, when management wanted to use the 3 horizon framework, originally from McKinsey but later further developed by Paul Hobcraft, to map their innovation projects on the 3 horizon matrix, we had problems to rank the projects to the 3 horizons.
The entrepreneurial side: The missing side of innovation
The reason was simple. The focus of the projects was on technology and not on customer’s side of innovation or on the business model. Somehow, it seems that the project managers were happy to have installed the new fancy technology but have forgotten the entrepreneurial side of innovation.
It is important to remember what Michael Schrage has said to innovation:
Innovation is not what you innovators do… It is what customers and clients adopt.
Not only the customer side was missing but also the side how they wanted to use the technology in their business. The following illustration shows the relationship between technology and value creation.
How could that have happened in a company that has the tools and innovation managers that know how to apply the tools?
Not tools, the right mindset to think in business model is missing
One of the beauties of the business model thinking is that we learn to see a business totally different if we really apply stringent thinking and dissect a business into its building blocks. And one of the most important concepts is that the value proposition is not the product. Why?
It’s not the product that creates value but the value proposition. The whole value architecture including the product, the revenue model and the team & values all have to deliver the value the value proposition is proposing.
Deadly business with a value proposition that customers and democracies need
A simple, a bit eccentric example illustrates this. Take manstopper ammunition that is for very good reasons banned by the Hague Convention in international warfare.
Manstopper ammunition does not sound like a lovable product and in terms of Alex canvas as a good value proposition?
Framing the business model so it can be quickly but well understood by others is core. So, how do we do it? By Paul Hobcraft
You have come to end of a fairly long week. You have finally finished your Business Model Canvas. Finally you have a working hypothesis of something that is going to challenge some of the existing business models around. You should feel pleased; it took a lot of hard work to get to that point.
Laid out on one piece of paper is something that could have real business value yet although you can see where the dots connect, you begin to wonder if others will see the same compelling value, to invest in it, to back it, to simply support it and encourage you to continue.
Completing a business model and identifying its critical parts is only that first step, the hard part is getting it off the ‘drafting board’ and making it something tangible and potentially commercially viable for those around you to engage with.
What is the next step in executing this potential game changing business model
Each new business model needs a compelling story – a narrative..
We really need to learn how to craft a story, to tell the narrative around why your business model idea stands out and is worth other people’s time and consideration. This business model narrative along with your business model you are potentially better placed to test it, to talk about it, to validate it, to make it ‘sing for others’. You are out to get engagement and contributions everywhere, from everyone, as you tell the story, describe your potential new business model you gain from their reaction and improve your understanding of the real need for your idea. Continue reading Business Model Innovation and Story Telling: How to get the story right!
Knowing where to start in designing a business model or simply just even trying to describe it to others can be difficult. You need to explain its value. The great advantage of explaining this through a business model canvas that looks for value constantly does help. This a guest post by Paul Hobcraft, an Agility Innovation Specialist.
fluidminds approach to exploring and explaining the business model does just that- it focuses on focusing the mind on the value within the business model.
The first value point is in the Value Proposition
Naturally we all look to the Value Proposition to explain the business model but like a car you should always look ‘under the hood’ to see the engine and what gives a car its performance. Equally you should stand back from the proposition and ‘take in’ all that makes this up. For a car it is the styling, the design, the promise and what or who is behind it. We look to buy on a given ‘promise of value’ and in having the benefits explained it allows us to believe and ‘see’ the potentials. A business model, well designed and described, does just that. It confirms the (new or existing) value that makes up the new business model.
The value proposition shapes much; it identifies and defines where this business model is providing new offerings that advance on existing benefits to customers. The fluidminds business model canvas seeks out the customer and the customer benefit- it is looking to provide value by identifying where there is a clear fresh, new proposition.
We do have to recognize a value proposition is not just looking to resolve the known jobs-to-be-done. In many new business models can be bringing together often fragmented parts of existing offerings and combining them in new ways, or deliberately and completely disrupting existing businesses through adapting new insight, technology advancements or understanding, into new business models. We only need to think of Apple and how it combined different technologies, revolutionary design and applied new materials into stunning, game changing products that changed our thinking of the actual jobs we thought about into totally different ones, which totally undermined existing business value or perceptions. Those become game changers. Continue reading Knowing the Value within your Business Model is vital
We always hear that the customer is not buying because the price is too high. Is the price important?
Of course, most clients will say yes in any survey or in sales negotiation. Actually, there are departments at your clients that know only two words: Too expensive!! Give me rebates! That is the purchasing department and it is their job to negotiate the price of a purchase. However, is this true, that even for B2B customers only the price is important?
Observe the jobs-to-be-done of your customers. Don’t ask the customers
Let’s take an example from RWE, a huge German utility firm. Let’s take the case they need to purchase electronic testing equipment. Nothing fancy, just a plain vanilla device for 30 to 50 Euro. Traditionally, this purchase would be a C category purchase. C means not critically important to the firm and therefore the firm usually shops around among different suppliers for a good price.
So you would assume that price is the decisive criteria for a firm to purchase from you. And yes, if you survey customers what is important in their decision to purchase C goods, the price will be on top.
So, all B2B marketplaces of the late 1990s and early 2000s like Onvia had the value proposition that price of the goods are the most important criteria for the B2B market. So they offered everything economics told them what to do in a price sensitive market: Make auctions, offer pool buying for larger quantities or make requests for proposals.
Not the price of the good is important but the whole cost of purchasing
However, they had to learn the hard way (most disappeared from the market) that this is not the case. Let’s go back to the testing device of 30 to 50 Euro at RWE. Saving an extra 20% on a purchase of 50 Euro is great. But is it just 10 Euro. But the costs for the internal purchasing process can easily be 150 to 200 Euro for the traditional process according to Karl Czech from RWE purchasing. Continue reading It’s not the price, stupid. It is the value (proposition)
Recently, I spent time at the most international and diverse university of Germany, the Jacobs University in Bremen with Prof. Steven Ney. I did a seminar on entrepreneurial design. The students were trained already to use the canvas and the course was great. However, their inability to leave blanks on the canvas was striking. What do I mean by this?
We do not like blanks. Long pauses in a conversation confuse and stress us. And since we do not like blanks we fill them. In a conversation, we do small talk. On the canvas, we just fill in the blanks with a kind of small talk as well.
Small talk on the canvas is to just fill in something which sounds good, but has no base, no facts supporting it, not even being a smart idea. If we do not know exactly who our customers are, we wirte Business-to-Business customers or advertising in the box to communicate with our customers. B2B sounds sophisticated but for an entrepreneur who wants to build something on top of her canvas, this is useless at best, dangerous at worst.