Most of Zephram’s clients are in B2B sectors, and probably the most common type of project we do is helping such clients develop new offers. As an aid to generating and evaluating ideas, it is useful to understand exactly why a company would purchase a B2B service. The following list gives you the answer:
- Outsource a secondary process. By outsourcing secondary activities, companies can concentrate on their core business and core competencies. Examples are cleaning services or facility management.
- Utilize specialist knowledge. Especially in the case of unique situations or for projects, it can be more efficient to buy in specialist knowledge that is not available within the company. Consultants are an example of this type of service.
- Flexibility. Specialised service providers are more able to adapt to changing circumstances and possess state of the art knowledge. This is often true, for example, for IT services, where the software and hardware base is continually changing.
- Dealing with load spikes. Projects and other load spikes can be accomodated with temporary external help. This solution is flexible and avoids fixed costs. This is one of the reasons for job agencies.
- Internal solution is too expensive or difficult. Internal bureaucracy and cost structures can make an internal solution more expensive (or complicated) than an external one. This can be the case for large corporations, which have high salary overheads or during hiring freezes.
- Impartiality. For some types of project, it is important to have impartial input or facilitation. This could be to maintain neutrality or to overcome occupational myopia. Examples are mediation in the first case, or an innovation service such as ours in the second.
This list can be very useful for examining and developing new service ideas in depth and for estimating their market potential.
The first five entries can be found in the book Business-to-Business Marketing by Michel, Naudé, Salle and Valla. The sixth is an addition of our own.
During a presentation on innovation management recently, I was discussing the fact that disruption does not only affect the disrupted industry, but the disrupting organisation as well. When a new offer obeys radically different rules, the environment needed to create it successfully must often conform to a new set of rules as well. Skunkworks and spinoffs are two well-known solutions to this problem.
The text on my slide which summarised this discussion read:
Innovation is becoming increasingly disruptive – not only for the disruptees, but also for the disruptors themselves. Organisations may no longer discard a good idea with the argument, „This idea does not fit us.“ Instead, they must ask, „How can we fit ourselves to this idea?„
Looking over the slide once again, I think it makes the point quite neatly.
This is an exercise I do with students in my university course „Idea Engineering“. Its goal is to demonstrate how a well-chosen change of perspective can make generating new ideas very easy indeed.
Suppose we have been given the task of coming up with an idea for a simple computer game. By „simple“, I mean the kind that is created for a mobile device or for Facebook.
The script for the idea generation consists of three steps:
- Think of an interesting adjective.
- Who or what has this property?
- What does he/she/it want to achieve?
Your answers to questions 2. and 3. are your idea for a computer game!
Here are three examples:
- A volcano,
- Bury cities ith its lava,
Trap unwary travellers,
Protect an innocent mortal from harm.
So the stories for the three computer games might be:
- By directing its eruptions, a volcano tries to cover as much of its surroundings as possible with lava.
- By using misdirections, a swamp lures unwary travellers into its quicksand traps.
- An angel has to prevent all sorts of accidents happening to a unsuspecting character as it goes about its daily business.
In this case, the change of perspective was created from two simple observations about computer games:
- Unusual protagonists (secret agent / mad scientist / blob of amoeba) yield interesting games.
- The protagonist is trying to achieve some kind of goal (kill enemies, collect money, traverse an obstacle course).
This exercise is easy and fun, and never fails to generate good ideas. However, at the same time, it makes an important point about scriptwriting for idea generation, namely the importance of a well-chosen change of perspective. To emphasise this point, I usually begin the demonstration with classical brainstorming by asking, „Who can give me an interesting idea for a computer game?“ Of course, the results of this are meagre at best, and the students are easily convinced that by comparison, trying to create ideas without the support from a change of perspective can be inefficient and difficult.
Of course, in general, finding productive changes of perspective is not as straightforward as it is in this example. At Zephram, we invest a lot of time in analysing our clients‘ ideation task and producing a script for the innovation workshop which contains a varied and productive mixture of changes of perspective. The result is a more stimulating workshop and a significantly higher quota of good ideas.
In their book Praxiswissen Innovationsmanagement (Practical Knowledge [for] Innovation Management) authors Oliver Gassmann and Philipp Sutter give a list of 17 so-called „innovation paradoxes“. These are observations on various aspects of corporate innovation which contain (apparent) contradictions.
Here are my six favourite paradoxes from Gassmann and Sutters‘ list. The translation, rephrasing and comments are my own.
- The costs for product development are increasing, but product lifetimes are getting shorter. Due to increased competition, the profitable lifetimes of many products are getting shorter and shorter, deceasing the income gained from them. At the same time, owing to increasing product complexity, the development costs are increasing. The overall result is continually shrinking margins from innovation.
- Innovation must be customer-oriented, but customers can’t give you ideas for substantial innovations. New products and services can only be successful if they serve the needs and wishes of the customer. However, with the exception of simple wishes for improvments, customers cannot tell you what they need. As Henry Ford famously said, „If I had asked people what they want, they would have told me ‚faster horses‘„. This observation has led to several new approaches to obtaining ideas for innovation such as anthropological and „live-in“ studies of customers, and the „jobs-to-be-done“ approach.
- Inventors often do not profit from their inventions. This is a favourite complaint in Germany, where (it is claimed) many important inventions come from, including the CD, the fax machine and the MP3 audio format, and yet German companies did not significantly benefit from these inventions (Japanese and US companies did.) In the case of the MP3 format, the inventors (the Fraunhofer Research Centers) do receive royalties from patent licensing, however the „real“ money from this invention is now being made by Apple via their iPod / iTunes strategy. In order to be commercially successful, an invention needs the right environment, the right business model and an innovation management which is able to develop the invention into an innovation this attractive to the market.
- Innovative companies are profitable, and yet most innovation projects fail. It is now well known that the most profitable companies in their respective markets are those with the highest innovation rate. It is also well-known that the success rate of innovations (both at the development and at the market stage) is very low (figures varying 1 in 7 to 1 in 100 are quoted.) Innovation is high-risk game, since it involves many crucial variables which cannot be determined with any degree of certainty. For this reason, innovation managers treat innovations like venture capitalists do: they manage a portfolio of projects, in order spread their risk.
- Past success is a significant barrier for future success. When a company has developed a successful new product, it installs devotes resources to maintain the competitivenss and profitablility of that product for as long as possible. This leads to mind-sets and policies which can be hostile to new ideas, especially if these appear to threaten the current major revenue generator. One well-known aspect of this problem is the fear of cannibalism.
- People who question the status quo are indespensible for innovation, and yet companies are often hostile to them. Significant innovation always involves questioning the status quo and suggesting alternatives which may contradict „the way things are done here“. However, since companies must be designed for efficiency with respect to the current line of products, the status quo has a high level of rationalisation. For this reason, innovative thinking is frequently felt to be incomfortable and inappropriate, perhaps even trouble-making. This has given rise to the call for the the so-called „ambidextrous corporation“, which can simultaneously achieve streamlined efficiency with its current offers and the freedom and creativity to experiment with innovative ideas.
Link to the book by Gassmann and Sutter at the publisher’s website (in German).
As explained in yesterday’s introductory article, Zephram has compiled a list of questions for improving and innovating business models which we use in innovation projects with clients.
Here is the first selection of ten questions from the list:
- What are the 20% of your activities that bring 80% of your results?
- How could you sell a complete solution rather than just an isolated product?
- How could you have a more effective presence in the media?
- Which market segments are increasing in attractiveness?
- Can you find a partner who provides an attractive complementary offer to your product?
- In what way are your core resources unique, or how could you make them so?
- How could you convert fixed costs into variable costs?
- How could you diversify your revenue streams?
- For what type of customer is your offer the only viable alternative?
- Can you devise a service that unifies two or more customer tasks?
A business model describes how a proposed business is to be built around a particular product or service. It is a means of communication between entrepreneurs and investors or between the marketing department and top-level management. A well-designed business model shows not only the product, but the business that needs to be built around it in order to be both profitable and stable. The business model template that Zephram uses has nine components:
- Value Proposition
- Target Market
- Communication Channels
- Value-Creating Activities
- Core Resources
- Key Partnerships
- Cost Structure
- Revenue Structure
- Competitive Strategy
The model is based on the one proposed by Alex Osterwalder. However, it aggregates Osterwalder’s Customer Relationships and Channels into one single element (Communication Channels), and adds a new element (Competitive Strategy), since we feel that this is an essential component in the design of a new business.
Many projects that Zephram carries out are Business Model Innovation projects, in which our clients are looking for ways to stabilise, protect or grow their businesses. We have developed a list of questions for use in our Idea Factory workshops, which help our clients to develop new ideas to achieve these goals.
In the coming months, we will be presenting selected questions from this list. We hope they will be useful to our readers in improving and innovating their own businesses.