Why Organizations Need to Innovate Their Business Model Now
Don’t Wait for Disruption! An Interview with Business Innovation Factory’s Saul Kaplan on business model design and corporate innovation.
An Interview with Innovation Junkie Saul Kaplan
Over the past year I’ve been learning more and more about business model innovation through the masters, Business Innovation Factory (BIF). It has changed the way I see business innovation, differentiation, and competitive advantage. In hopes of sharing this view with our community, I interviewed BIF’s Founder and Chief Catalyst, Saul Kaplan.
Kathryn: I’ve had many ah-ha moments while on this journey of understanding your point of view and methodology around business model design and innovation. What were the key defining moments for you which led you to this work and informed your point of view?
Saul: I’ve been motivated by market-making versus share-taking throughout my career. Share-takers accept industry boundaries, compete for market share against predictable competitors, and play by well understood industry rules of the road. Market-makers create their own rules and open up entirely new customer experience and value creation opportunities. Initially market-makers are alone in leading the markets they create until competitors follow and the share-taking cycle starts again. I am obsessed with market-makers (individuals and organizations) and what it takes to become one. The 21st century screams for more market-makers and the industrial era has left us with mostly share-takers.
Why do organizations today need to innovate their business models versus just innovating their product and services in order to remain competitive? What companies are successfully using these innovation strategies for creating competitive advantage?
Business models don’t last as long as they used to. Unlike in the industrial era when a single business model lasted for generations, today all business models are vulnerable to being Netflixed, or totally disrupted by a market-maker. Product innovation is necessary but not sufficient to avoid being Netflixed. Current corporate innovation approaches aren’t working. They’re fine for strengthening today’s business model but all wrong if the goal is to explore, test, and commercialize entire new business models. Most companies need transformation and end up with tweaks.
Steve Jobs was the consummate business model innovator. He wasn’t afraid to explore and move to new models, even when they disrupted Apple’s current business model. Elon Musk is another good example with multiple disruptive business model successes including Tesla, SpaceX, and Solar City.
Who is not doing it well? Do you have an predictions of organizations or industries that will soon be extinct if they don’t figure this out?
Most aren’t doing it at all, but in their defense they haven’t had to change their business models. They need to now. Corporations need a new innovation approach to go from tweaks to transformation. The imperative is to do ongoing R&D for next practices and new business models. The unmet need is to make transformation safer and easier to manage. All industries are vulnerable. If you wait until disruption is at the doorstep, it is too late. Just ask anyone in the newspaper business.
Corporations need a new innovation approach to go from tweaks to transformation.”
— Saul Kaplan, Business Innovation Factory
I’ve started to notice “symptoms” that organizations exhibit when they are struggling with their business model. What are the tell tale signs for you that it’s a business model problem?
Share-takers look for signs of a business model problem and rush to address them by protecting or improving the current model. They keep pedaling the bicycle of today’s business model faster and faster and look for acquisitions to grow market share and to protect margins. No matter how hard share-takers pedal they won’t protect themselves from being Netflixed.
Market-makers don’t wait for a business model problem. From a position of strength they explore disruptive models at a small scale. The new leadership imperative is to simultaneously strengthen today’s business model while also exploring what’s next. Market-making requires a different innovation approach. Most innovation labs are organized to produce only tweaks.
Tackling your business model can feel daunting and overwhelming for most organizations. Even if most recognize the need, they don’t know where to start. What advice do you have for them?
Transformation can be safer and easier to manage. It doesn’t have to be a scare word. First, be really clear and develop discrete strategies and organizational approaches for both incremental improvement to today’s business model and the exploration of entire new business models. CEO’s should sponsor new business model exploration. The COO should sponsor innovation in the context of today’s business model. If line executives in the core are responsible for selecting and resourcing both kinds of innovation projects it isn’t surprising when they select for less risky, more predictable, incremental improvements to today’s business model. New business model ideas get crushed before they leave the white-board. A big barrier to transformational change is asking 1,000 questions about scalability and change management, too early, before a minimum viable business model has been prototyped and market tested with real customers. Transformation is a generative, not an analytical act.
It was a such an honor to help BIF finalize and visualize their methodology! What benefits did you get from the experience that you couldn’t have accomplished on your own?
XPLANE’s visualization superpower is imperative for any market-maker trying to explain a new way to create, deliver, and capture value. It enabled our team of experience designers to visualize BIF’s Methodology for Next Practices and New Business Models and to create a visual asset which powers our market conversations with company leaders who are trying to make transformation safer and easier to manage. Storytelling is essential to any transformation process and XPLANE helped us create a compelling storytelling asset we use every day.
The BIF team just introduced their new Design Methodology for Next Practices and New Business Models and we’re proud to be a part of it!
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