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:
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.
A recent article by Oren Shapira and Nira Liberman in the magazine Scientific American discusses some new findings on creativity by psychologists Lile Jia, Edward R. Hirta and Samuel C. Karpena of Indiana University. The authors discuss the concept of „psychological distance“ and claim that it helps creative thinking. Anything that happens a long way away, or at different time to the present, or to someone other than me is said to be psychologically distant. An experimental study carried out with students supports the claim.
The article provides scientific confirmation for an effect that creativity practitioners have been aware of for a long time: that it is helpful to look for ideas „over there“, rather than „here“. There exist a large number of ideation techniques that utilize this effect.
One example of such a technique is the „CIA method“, which was supposedly used by the CIA during the Cold War. Here, the CIA participants were told, „the KGB has already found a solution to this problem, now we need to find it too.“ By presenting the problem as already having been solved at a large psychological distance, it made it easier to come up with new ideas.
When working with clients on innovation projects, Zephram regularly uses different kinds of „psychological distancing“ like the CIA method.
My own explanation for this effect is that as long people associate the problem with themselves, their creativity is limited by what they believe is or is not possible (for themselves) and of course also by professional myopia. By asking, „how would Darth Vader solve this problem?“ or „how will this problem be solved 10 years in the future?„, you can free people from these self-imposed mental limitations. This is, of course, exactly what changes of perspective such as analogies are designed to do.
In a new article at Forbes.com, Clayton Christensen discusses a subtle point of the theory of disruptive innovation. In this article, Christensen raises an important question with respect to the vertical axis of his well-known functionality-time diagram, which is one of the fundamental elements of his disruptive innovation theory. He asks, „What does the vertical axis actually represent?“
In his theory, this axis denotes product performance. In the accompanying text in the book, the example of hard disk drives is used. In this case, the measure of performance is bytes of storage offered. According to Christensen’s theory, a company’s best customers demand more and more of this type of performance, forcing the company to devote all of its innovation resources to providing it. This situation makes the Innovator’s Dilemma possible, since the company is not able to assign resources to developing newer technologies which perform less well according to this measure (even if they perform better according to some other one).
In the article, Christensen gives two examples of disruptive innovations which cannot be explained by this theory: low cost airlines and advanced placement courses in the (US) school system. In neither case were the incumbents forced into a dilemma by pressure to increase product performance.
To me, it is clear the the vertical axis in Christensen’s graph should be labeled „what the organisation’s stakeholders pressure it to provide.“
Until now, Christensen has used the particular example:
„Stakeholders“ = „Best customers“
„What the stakeholders want“ = „Higher product performance“.
„Best-customer/higher-product-performance“ is only one way (albeit a very important one) of implementing the „stakeholder/stakeholder-wants“ variables, many others can be found, including the two examples in the article.
When we look at the mechanism of disruption, we can see that it is in fact the force of „that-which-the-stakeholders-are-pressuring-us-to-provide“ which causes the innovator’s dilemma. In the example in the article, it is actually the school districts‘ need for efficiency which exerts pressure on schools to concentrate on high-enrollment classes.
An example which is even more removed from product performance could be the (state) university system in Germany. In this case, we have
„Major stakeholders“ = „The state governments“
„What the stakeholders want“ = „Bureaucracy“
As our state governments burden their universities with more and more rules and regulations, it becomes increasingly difficult for them to act autonomously and react to changing circumstances. Higher education is therefore becoming increasingly attractive for disruptive private sector offers – and of course that is exactly what is now happening: there are more and more private colleges and universities.
Nobody would equate bureaucracy with performance; nevertheless it is the force enabling disruption in this particular case.
Two weeks ago I visited the University in Al Ain in the United Arab Emirates. The entrepreneurship program (ECIE) for the female students invited us for a workshop and a keynote speech for the event „Opportunities & Challenges for Women Entrepreneurs in times of Global Crisis Workshop“.
It was great to give a key note speech for young students. They have the same concerns of founding a company as everyone else. I would like to share my presentation slides with you that I gave in the key note speech. I hope I could give the students some entrepreneurial insights.
(The trip to the UAE was quite an experience for me. A new country, new culture and so many interesting people. In the UAE 75% of the population are foreigners. You can notice that difference if you join a meeting at the university. In one meeting there are rarely two people from the same country. A huge cultural melting pot!)
Innovation researcher Eric von Hippel introduced the concept of the Lead User in 1986 as part of his research in User Innovation. Lead Users are those customers who have the most advanced needs and are therefore most likely to be interested in innovations to the product they are buying.
This insight gave rise to the Lead User Method, whereby Lead Users are integrated into the ideation process. The underlying assumption is, that because of their superior motivation and knowledge, Lead Users will be able to supply the best ideas for product innovations. The Lead User Method is one of the most commonly cited examples of Open Innovation.
If this assumption is justified, then the Lead User Method will lead to incremental and perhaps even radical innovations, i.e. changes to existing products which improve their performance in a minor or perhaps even a major way. However, the method will not generate new product ideas; in particular, it will not lead to ideas for disruptive innovations, since these are not in the interest of a lead user. This deficiency of the Lead User Method is summed up nicely by a quote from Henry Ford:
If I had asked people want they wanted, they would have answered, „better horses“.
This observation leads to the concept of the Lead Non-User Method. In this method, non-users of the product are targeted as idea-givers. This concept is based on the rationale that non-users will have ideas that are outside the space inhabited by producer and users alike.
However, it is important to realise that not just any non-user will do; a Lead Non-User has to fulfil certain criteria. As is the case for Lead Users, Lead Non-Users must be on the cutting edge of their „non-userness“. For (a tongue-in-cheek!) example, a manufacturer of kitchenware might choose single men as lead non-users, since these are (presumably) an inept and unknowledgeable target group with respect to this type of product. More seriously, asking a senior citizen or a handicapped person for ideas on improving a mobile phone will yield very different results compared to asking a early-adopting teenager or jet-setting businessman.