The Challenge of Business Model Innovation

You Need More than Product Innovation

Innovation is about much more than just creating a new product or service. Innovation should apply to all parts of a business; from supply chain and logistics to the relationship with customers and how you make money. Full spectrum innovation requires that you are innovating your business model as well as the product you sell. Indeed, many have argued that to fully exploit an innovative product or service, particularly one that sets out to disrupt an existing market, you must change your business model at the same time.

Business Model Innovation is Hard

But business model innovation turns out to be very hard to deliver.

There are many reasons why business model innovation struggles:

• If you have an existing business model, particularly a successful one, the unspoken assumptions in “how we do things round here” can block alternative ideas.
• It often looks like a better idea to invest in an existing business rather than to create a new way of doing business. Unfortunately, in the long term failing to create new kinds of business separate from your current models can be fatal.
• Just as with product innovation, a fear of cannibalising existing business holds people back.
• Many people are heavily invested in the current ways of doing business and will resist change.
• Business model innovation can look like a very big and very scary bet on the future.

Because most of these barriers apply to larger and more established businesses you might think that start-ups can avoid the problem. After all, they don’t currently have a business mode at all!

The risk for start-ups is actually the same as for established businesses; making assumptions about what the business operating model should be and not challenging those assumptions. Very often a business model will be chosen from the past experience of one of the founders, or from a similar and admired business. It might work, but those unexamined assumptions can hole a business below the waterline just as easily as the invisible mass of an iceberg can sink a ship.

So what is needed is a structured way to examine and test these assumptions. To look in on the business model from an outside perspective. Some companies will use an outside expert or consultant to provide that challenge and external perspective, but there are ways in which a team can provide their own challenge.

Pick a Card…Any Card

A week ago I attended a workshop on business model innovation at the KTN organised by the Innovation Caucus to showcase their approach. The Innovation Caucus is a team of social scientists funded by Innovate UK and the Economic and Social Sciences Research Council to improve the practice of innovation in the UK.

Recognising the pull of existing ways of working in a business, and the difficulty of breaking away from existing assumptions and models, they have come up with a deck of cards with questions to challenge and provoke thinking.

The cards are grouped into three aspects of a business model:

• Offering – or proposition.
• Experience – how you interact with your customers.
• Configuration – how you are organised to deliver.

Each group is then further subdivided into questions that help clarify your existing or assumed business model, and questions that reveal and challenge the assumptions you are making. A sort of ‘near’ and ‘far’ perspective. The idea is to use the ‘near’ perspective cards to get a clear understanding of how you currently work, or plan to work. Then select some ‘far’ cards that look like they can strengthen your business model, and then some that don’t fit your current thinking or could represent a weakness or challenge to your plans.

Thinking about what these questions mean for your plan, and how they might be incorporated, helps you to break out from your existing ideas. By repeating the cycle you can explore your business model from multiple different perspectives.

I think this is an excellent development with real potential to support people in the tricky problem of business model innovation.

A Deck for Every Occasion

Cards are great for stimulating break out thinking. They are particularly effective in a group discussion. They can be rapidly dealt, sorted and grouped as the discussion evolves. Debating what they mean and how they apply to the topic under discussion stimulates and validates new perspectives. And a well-designed deck of cards stretches the conversation so that the problem is examined from multiple directions and interesting avenues are not closed down too early by groupthink.

I am a great fan of using card decks in workshops, and this new deck is in the tradition of those that already find a place in my toolbox:

• Drivers of Change – a set of trends and drivers cards from Arup covering important developments to 2050 under 10 headings.
• Oblique Strategies – developed by Brian Eno and Peter Schmidt to help musicians and other artists to break out of creative blocks. Each card carries an enigmatic instruction to change what you are doing or to challenge an assumption.
• Design with Intent – a card deck developed by Dan Lockton to help designers nudge behaviour to address environmental and social issues.
• Horizons – developed by Innovate UK to help businesses to incorporate sustainability issues into their business strategy and plans.

What I saw in the workshop was a late prototype, so nothing is yet guaranteed, but the Innovation Caucus expects the deck to be available very shortly. When it is available I plan to add it to my toolbox.

So if you have an interest in business model innovation, and would value some challenges to sharpen your thinking, keep an eye on the Innovation Caucus Twitter feed @InnovCaucus and give this new deck a try.