How To Invent A Brand New Business Model

The world today is experiencing an unprecedented flow of capital, talent, energy and passion into the startup ecosystem. This is great news for entrepreneurs, consumers, and the economy as a whole but also raises a concern if all this capital and talent is being allocated to the right businesses. To get it right, we need entrepreneurs and investors who could protect themselves from a potential ‘bursting of the bubble’ by focusing their attention on startups based on new business models and/or by designing resilient business models for their existing ventures. The following are a few pointers on how to do this:

Start with change management

Innovate! Innovation starts at the organizational level so it will be dead on arrival without proper change management. Innovation is not a KPI, it has to be embedded within the cultural fabric of a company. Dedicated teams are tasked with immediate product and service innovation, innovation 12 months from now, and finally five and ten years out. Small teams made up of practitioners from a variety of disciplines will be substantially more adept at the creative problem solving required of true innovation. The fresh perspective that a designer can offer an engineer, or that a supply chain expert can offer business development will unlock previously unconsidered solutions.

Test, test, test

Real innovation comes from design thinking — the process of observing and brainstorming that leads to a wealth of ideas, each of which needs to be tested. The failure of 19 ideas will make the 20th that much better for the lessons learned along the way. Think like a scientist, formulate a hypothesis based on what you believe to be true about your business, and test the hypothesis. Keep in mind that venture capitalists succeed because they hit home runs on a minority percentage of their investments.

Mind your P’s

Who are your customers today, who will they be tomorrow, what is their lifetime value, what are the reasons you’re gaining customers, and more importantly, why are you losing them? You can learn a lot about innovating your business model from the good old fashioned four, now seven, marketing P’s: product, price, place, promotion, packaging, positioning, and people. Think critically about each to find holes in your value proposition.

If you’re losing customers because of price, how can you deliver more value in your product’s value chain to justify your price? But remember that it takes more than a focus on cutting costs to disrupt industries. Cost cutting is a valiant, and necessary, exercise, and by no means do I intend to diminish its importance. Just look at Apple; Tim Cook cut his teeth at Apple as a supply chain guru, an operations genius.

Build on your existing foundation

No one is so savvy that they can do without the help of proven toolkits. Find the innovation framework that works best for you. Start with something that your entire team comprehends. Universal shared language around business is itself a catalyst to fostering an innovation culture. Strategyzer’s “Business Model Generation” and its latest “Value Proposition Design” are fantastic books for building a shared language because they hinge on the “how” in a way that teams of all disciplines and experience levels can get behind.

Rally against repetition

The most common reason a company fails at innovation is that it’s too good — too operationalized, too precise from a process perspective. All this adds up to routine; after all, routine creates optimization, optimization saves costs, saves time, and in almost all cases improves product quality. But routine is the enemy of innovation. Sure, if you keep doing the same thing over and over again, you’re going to have a very lean, six sigma-esque process. The problem is, you will never innovate because you will never try anything new. You need that small group of explorers that are dedicated specifically to inventing, innovating, and iterating on existing products and services inside your company.

Siloing them actually gives them the fresh perspective required to approach problems differently.

We get numb to the people, processes, and organizational ways of thinking that we experience day in and out. But the key to success lies in fighting repetition and unlocking fresh thinking with exploration. Go on…explore, fail, repeat and then, innovate.

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