I’ve been working with 16 executives on behalf of InfoComm, the industry association that represents the professional audio visual and information communications industries, taking them through a nine-month program to develop innovation in their businesses. This program encompasses four face-to-face sessions and five web meetings. As I write this I’m in New York City preparing to conduct a real time working session on Version 2.0 of their business models, using the Business Model Canvas. (By the way, kudos to InfoComm for focusing on dramatically improving their members’ businesses, not just advocating products and services and features and functions as many trade associations do.)
In my consulting I’ve been drawing on the work of two Swiss professors, Alexander Osterwalder and Yves Pigneur who developed the Business Model Canvas methodology and its companion, Value Proposition Design. The brilliance of this system is that it takes the complexity of any business in almost any industry and breaks it into a model consisting of nine fundamental strategic components, mapped in a way that makes it easy to see their effects on each other. Most companies really struggle with this kind of planning, and this methodology is vastly helpful.
We’ll start by mapping out each participants’ current business model. That’s the business they know, they understand, they are comfortable with. We will dive deep into what’s going on with customer segments, the value proposition, channels, customer relationships, revenue streams, key resources, activities, partnerships, and cost structure. Then we will work on where, out of those nine boxes, there might be potential opportunities to innovate. Where can claim and leverage an advantage in version 2.0 of your business model?
This is not just important business; it is extremely urgent. Here’s why: the old model of industry evolution has become obsolete. In the last century, industries moved toward maturity at a measured pace that gave executives time to test new models. In a very controlled fashion, over time, a business could prepare for the shift. Incumbents in the industry maintained their core business while developing the next S-curve. Funded by the successful existing model, they could innovate the next idea, bring it to market and then drive its growth until it in turned reached a certain maturity. For years I coached leaders to work on the next innovation while the current one is going well, and you jump to the next S-curve as it goes up.
That was then. Now, any business can be devastated practically overnight. We now live with “Big Bang Disruption,” to use the term coined by authors Larry Downes and Paul Nunes. They talk about the Big Bang Disruption Z one, where industries are disrupted even before their current S-curve reaches maturity. You don’t have to look far for examples: Retail? Amazon. GPS services? Waze. Taxi service? Uber. Hospitality? Airbnb. Music? iTunes. Banking? PayPal, Square, Apple Pay. In Big Bang Disruption, one S-curve gives way to the next much more suddenly. This forces incumbents to not only anticipate their next move sooner, but react much more quickly.
If you don’t disrupt you value chain, someone else will. I’m asking these executives to do an unnatural act, which is to take an existing mature industry and think in an intentionally disruptive manner. This is all about changing people’s perspective from “we’ve always done it that way” to a radically fresh lens.
To see this in action, just look at the disruption now taking place in transportation. Until recently, one of the most profitable investments in Manhattan was to buy a taxi medallion because the return on it was 10,000 percent. Then comes Uber. The founders’ breakthrough insight was that most cars on the road have only one passenger in them. The idea of aggregating the available space in private vehicles to directly impact traffic congestion led quickly to providing a service that creates operational efficiencies and market effectivenesss. Bang! It disrupted traditional taxi and limo services overnight. But I’m going to go one step further: Car rental. I’m renting cars less because I’m using Uber more. I used to land, go pick up a rental car, figure out where I’m going, get there, park, and if it’s a hotel, pay for overnight parking for the rental. The car is only a means to an end; Uber is much less hassle for me. Uber’s value proposition for me is about getting rid of complexities.
If you owned taxis right now, you’d be studying how to shift your business model in response to this shift in market demand and market behaviors and market dynamics! But it isn’t just taxis; you have to think about the ripple effect. Uber is allowing more people to live without owning cars. If people aren’t buying cars, they’re not going to buy car insurance. And so it goes, industry by industry.
Let me call your attention to another Big Bang Disruption factor: the increasingly pervasive digital mindset. While Millennials and Seniors move at very different speeds and may take different paths, every customer is now a digital customer. So version 2.0 of your business model should definitively reflect digital customers and their expectations. Digital technology now inhabits every dimension of our lives. Your business model and value proposition are expected to deliver seamless experiences. What are the key components needed to achieve that?
Version 2.0 of your business model will live or die in this age of constant disruption. It’s time to develop the skills of rapid, agile innovation. That’s what I’m working on with the InfoComm executives right now, and it’s what I advise you to do as well.
- Alexander Osterwalder and Yves Pigneur’s Business Model Canvas methodology and its companion, Value Proposition Design, is extremely helpful in reducing the complexity of visualizing an enterprise’s existing or potential value creation and delivery.
- Businesses no longer have the luxury of time to innovate in the traditional fashion, riding one business model’s mature phase as they develop the S-curve of their next success.
- If you don’t disrupt your value chain, someone else will: executives must learn to intentionally disrupt themselves. This requires a radically fresh lens—one Osterwalder and Pigneur’s methodology delivers.