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Entrepreneurs with Denis Oakley

I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN

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This post is an extract of my forthcoming book on business model innovation. The innovation book looks at why business model innovation is needed and how it works. You can read more about it here. These posts are early drafts of planned content and I’m putting them out to get feedback. Please do comment below, or subscribe to these pages to get each new section as it is published. In today’s post, we will be looking at my early years growing up in Birmingham.

Why I Didn’t Become a Metal basher

I grew up in Birmingham. At the time it was a city in decline. There was a malaise, a resignation about it. The buildings were dirty. The factories in old-style redbrick. The new government buildings in brutalist concrete. In the words of an advert from a few decades later, there was no “Va-va-voom.”

My Dad owned a factory making precious metal electrical contacts – pins for plus in gold or silver. The factory had been his father’s before him, and his fathers-in-law before that. The family were classic Birmingham industrialists. Similar to the Mittlestand in Germany.

The factory was always an amazing place to visit. It was what seemed to be a huge brick house with floors made of polished wooden planks. There were little staircases everywhere. There were rooms full of little polished machines, brass gleaming in the low lights with men (I don’t remember women) working over them as they spat out hundreds and hundreds of little golden gadgets. The rooms were warm and always smelled of oil and crushed metal. Decades later I can still catch whiffs of the smell.

I loved going into the vault. It wasn’t quite the vault of an ancient medieval king. There were no chests of gold and silver coins, no boxes of gems. There was gold though. Silver. Platinum. Lots of it. It was all in wire. Bales and bales of it – hard to pick up. Every bale had a slightly different shade. Different gadgets required different purities of metal.

This book, in part is the story of why I didn’t take over the works like my dad had like his dad had before him. It’s in part the story of why that factory no longer exists.

Deeper than that it is the story of why so many businesses around the world are failing, and are doomed to fail with no hope of survival. It is a story of how businesses, really their leaders, can look into the future and find a golden path that helps them avoid that doom

If You Want to Read More

I keep everything structured on my niftily titled business model innovation book page. Head there to browse, binge, read straight through or cherry-pick. Please do take a moment to comment below or upvote comments that you agree with

Subscribe to the New Book Chapters

As I write each new section you can have them sent to your email. The plan is to write something 2 – 3 times a week. It is easy to unsubscribe, but I hope you won’t as the goal is to delight and entertain as well as educate and train you through this business model innovation journey.

I’m writing a book on business model innovation. This brings together my thoughts on innovation, disruption and entrepreneurship gathered over the last 30+ years.

The premise of the book is that business model innovation offers the last great frontier for competitive advantage. Product and service innovations can be copied too quickly and easily. Quality, customer service and digitalisation are now so prevalent that they are a requirement, not a route to success.

What is it about?

In the book, I take a lot of the academic work that has been done over the last 15 years on business model innovation and put it into a larger framework that makes the why, what and how of business model innovation explicity.

I share the tools and techniques that I have polished through the analysis of thousands of business models and the design methodologies that I use to make business models far more effective.

Finally, I will show you a set of ideas that will help you with the key timing issues of business model innovation and how you can use new types of business models to crack open old markets and develop entirely new ones – without your strategy emerging as you go along!

Who is it for?

It’s primarily aimed at entrepreneurs and small business owners. I come from an entrepreneurial background and a book like this would have been amazing as I built small scrappy startups trying to change the world.

It’s also aimed at SME business owners, like my Dad, who are feeling trapped as the old ways of doing things get harder and harder. Everything in the book is designed to help them plan a way out. A way that makes more sense than stale business advice that doesn’t work any longer.

It’s not aimed at people working at big companies. It’s too irreverent and I sweat too much. Plus I focus on the more radical approaches to transformation that shareholders tend to shy away from. Still, you are welcome to take what ideas you can from it.

Academics… it’s not for you. This book is fundamentally qualitative. Where I can, I reference the sources of ideas or provide examples. It is not rigorously documented or footnoted. First, that’s pretty boring to do. Second, this book does not make an empirical argument, the focus is to get the reader to change the way that they see the world. Finally, to a very large extent, there is a huge lack of empirical data on business models. if you find any value in this I hope it will be to see new research opportunities to provide that empirical base so that future books can be better.

Finally, consultants. Take, use, abuse and credit me where you can.

Why is it Here?

I’m making it freely available on the blog as I write to get feedback. Like every first draft it can be better, the ideas more polished, the examples more memorable.

That’s the bargain we’re making. You get early access to my thoughts, and maybe a mention! I get feedback that will make the book better

Business Model Innovation Book

I don’t have a good title for the book as yet – it’s just BMIB – Business Model Innovation Book. The draft structure is laid out below. I am sure that this will change and certainly comments on this are welcome.

There is lots still to be done, so do sign up for weekly updates using the form, comment on posts or send me an email with feedback

Part 1 – Why Your Company is Doomed

Introduction – Growing Up in Birmingham

Introduction – Birmingham, Workshop of the World

Introduction – Finding the Golden Path

Why do Some Entrepreneurs Succeed? – Their Ideas

Why do Some Entrepreneurs Succeed? – Their Execution

Pain and the Business Owner

Change & Kondratieff Waves

Competition

New Opportunities

My Story – University

My Story – Consulting

My Story – Entrepreneurship

My Story – Business Model Innovation

My Story – Exploration

Part 2 – What is a Business Model

Business Model Definitions

How Do You Delight a Customer?

Desirability

Feasability

The Importance of Why, What and How

Viability

Price, Quality and Speed

The Triangle

Pyramids are Better

A Way of Navigating

Business Model Depreciation

Acccounting, Slavery and Opium

Kodak

Guns, Bombs and Kodak

Valves, Duralumin and Friendster

Bankruptcy in Two Flavours – Slow and Fast

And The Gold in the Shit Heap

Zombies and Corpses

Part 3 – When To change Your Company

The Business Model Lifecycle

Cars Drive Over the Hill

Academics Weigh in on Businesss Model Innovation

Here’s a Useful Definition of Business Model Innovation

Why BMI is not Product Innovation

Or Digitisation

Or Digitalisation

Business Model Innovation Seen Through the Ages

Choising the Steps or the Wheelchair Ramp

Playing with Percentages or Muscling Magnitude

Tripping up – Fossilisation as Strategy

Tripping Up – Buying a Microscope

Sailing a Blue Ocean

Weltanschauung

What’s in a new view

World views and business models

Changing Worldviews

Thomas Kuhn…

…And Wot ‘E Sed

Business as Usual

Business Revolutions

The Business Model as Sir Lancelot

Backing the Anomalies

What BMI Needs to Achieve for You

Force Multiplication wthout MIRV

Football Pitch Hit by Gravity Wave!

Super Sparkly Silver Bullet. All Your Answers are Here. Not

Part 4 – What is Business Model Innovation
Part 5 – How to Do Business Model Innovation
Part 6 – The Business Model Work Book
Part 7 – Useful resources

Business Model Design is the conscious process of designing your business model. Disruptive, or transformative business model, are normally designed to multiply the impact of your value proposition and/or disrupt your market structure so that it is harder for your competitors to compete with you.

Historically most companies have adopted the prevailing business model in their market and have innovated almost accidentally as they responded to internal innovation or market events.

Business model design enables managers to step back and look at business models in their direct and indirect competitors, assess their existing business models, and then make conscious decisions about what sort of business model they need to prosper.

For most companies, the business model that they use is one of several possible business models. Where the business model has emerged through unconscious management decisions there is a significant likelihood that it is not the best business model for the market at this time and place.

When we undertake business model design we are consciously thinking about the goal – a customer-centric focus on the problems that our customers and stakeholders need solving.

Business Model Design Maximises Customer Value

We then map the value propositions (our products and services) to those problems. The rest of the business model is then designed around maximising the value of the value propositions to the customer.

This shifts the emphasis from minimising costs, or maximising quality, to one of maximising customer value. The reason that we do this is that significant business model innovations deliver increases in customer value of more than 5,000%

The increase in value that the customer gets should be transformative, far greater than incremental cost, quality and speed improvements.

Because the business model design process can deliver such large increases in customer value business profitability and shareholder value follow along.

Shareholder value is seen as dependent on maximising customer value, rather than being the goal of corporate endeavour as falsely claimed by Milton Friedman.

[Milton Friedman claimed that the core purpose of corporations was to generate shareholder value. This leads to a focus on short term results and unethical decision making that tend to destroy or reduce shareholder value]

Corporate Business Model Design

Companies go through stages of maturity in business model design

Stages of Business Model Design

Zero

At this stage companies are unaware of business model design. Their business models are replicas of other comnpetitors in the market with little of no business model differentiation. A traditional pub, single outlet retail outlet or law firm will often fall into this category.

Unconscious

In the unconscious stage, companies are often slowly changing their business models as management sees changes in the market and adapt to them. These changes may deliver results or be failures. An example would be a bricks and mortar retail outlet adding a website to sell goods online because its competitors have done so and they have a fear of missing out. This is a change to the business model but there is no thought about what the innovation means overall.

Conscious

At the conscious stage of business model design companies have an awareness of the business models that they have within the company and have systematically mapped out the business models that they use. Language inside the firm has changed to reflect this and they often see the business model as a source of competitive advantage

Focused

Companies at the focused stage are aggressively challenging whether they have the right business model to compete in the market. They are assessing alternative business models as both offensive and defensive plays and are looking for weaknesses in competitors business models to exploit

Radical

The final stage of business model design is when a company is explicitly looking for business models that will disrupt or transform a market. A company looking at radical business model design is looking for a way to upset the table, significantly hurting the revenues of all existing players and planing to generate a significantly larger share of post disruption revenue as a result

Companies that move up through the levels described above can slowly gain an advantage over their rivals. The awareness of what a business model is and how it can be used give them the ability to design business models to achieve specific corporate results

Right now, the world is changing at the slowest pace that you’ll see for the rest of your life.

Just pause. Think about that. Every change that you have seen so far in your life is going to happen again. This time it will happen faster. And then repeat.

[Read more…] about The World is Changing

We have dozens of examples of the business model canvas with video walkthroughs and downloadable pdfs and jpgs. If you need a business model canvas example to help you understand how a business model works – for either study or work – have a look at the examples below.

I did these examples, initially to help myself to understand how different business models worked and then I started sharing them as they seemed useful.

A few words of warning, these are designed to be a quick introduction to some of the highlights to the business models of some technology companies. They are descriptive, looking at some of the major features of the business models.

I don’t normally go deep into network effectiveness, platform design or feedback loops, but I do try and identify key drivers in the business models – enough to give you a quick overview.

When I started writing these business model examples I didn’t quite realise how much the business models can change with time, and how complex they can get for some of the big tech companies. So, generally, I don’t update them, and the viewpoint is for the interested layperson rather that the industry analyst or scholar.

If you have any special requests for a business model review or analysis do send me an email. I will create more business model canvas examples if they are popular, a major tech company or have some other significance. If it is niche or you require more depth then it will be a paid service.

Business Model Canvas Examples – Tech Companies

For more business model canvas examples head over to Gary Fox’s website

I’ve collected a number of business model innovation definitions here to help give a sense of what business model innovation is and the different perspectives that organisations, consultants and academics have on it. If you need a business model innovation definition, read on, and hopefully, there will be one that fits your needs or provides the spark of enlightenment.

Consulting and Commercial Definitions of Business Model Innovation

Business model innovation is the art of enhancing advantage and value creation by making simultaneous—and mutually supportive—changes both to an organization’s value proposition to customers and to its underlying operating model. At the value proposition level, these changes can address the choice of target segment, product or service offering, and revenue model. At the operating model level, the focus is on how to drive profitability, competitive advantage, and value creation through these decisions on how to deliver the value proposition

BCG

Business model innovation, then, describes the process in which an organization adjusts its business model. Often, this innovation reflects a fundamental change in how a company delivers value to its customers, whether that’s through the development of new revenue streams or distribution channels.

North Eastern University

Business model innovation is a wonderful thing. At its simplest, it demands neither new technologies nor the creation of brand-new markets: It’s about delivering existing products that are produced by existing technologies to existing markets. And because it often involves changes invisible to the outside world, it can bring advantages that are hard to copy.

Karan Girotra and Serguei Netessine – Harvard Business Review

A business model innovation is thus the conscious change of an existing business model or the creation of a new business model that better satisfies the needs of the customer than existing business models.

Lead Innovation Management

Business model innovation is the development of new, unique concepts supporting an organization’s financial viability, including its mission, and the processes for bringing those concepts to fruition. The primary goal of business model innovation is to realize new revenue sources by improving product value and how products are delivered to customers.

Ben Cole @ Tech Target

Business model is [sic] the way an organization creates, delivers and captures value. Successful business models thus take a very holistic approach by integrate [sic] these different aspects of the business into a well-organized and thought out system. Business model innovation, then is simply a novel way to put these pieces together to hopefully create a system that produces more value for both customers and the organization itself.

Jesse Nieminen at Viima

Business Model Innovation is about fundamentally rethinking your business around a clear—though not always obvious – customer need, then realigning your resources, processes and profit formula with this new value proposition. It’s not easy and can take decision makers out of their comfort zones. But the results can be dramatic.

Cio Index

When an organisation creates a new business model, the process is called business model innovation. There is a range of reviews on the topic, the latter of which defines business model innovation as the conceptualisation and implementation of new business models.

This can comprise the development of entirely new business models, the diversification into additional business models, the acquisition of new business models, or the transformation from one business model to another (see figure on the right).

The transformation can affect the entire business model or individual or a combination of its value proposition, value creation and deliver, and value capture elements, the alignment between the elements.The concept facilitates the analysis and planning of transformations from one business model to another. 

Frequent and successful business model innovation can increase an organisation’s resilience to changes in its environment and if an organisation has the capability to do this, it can become a competitive advantage.

Wikipedia

Business model innovation is about fundamentally rethinking your business around a clear—though not always obvious—customer need, then realigning your key resources, processes and profit formula with this new value proposition. It’s not [an] easy approach and can take decision makers out of their comfort zones. But the results can be dramatic, providing a real competitive advantage.

Innosight

Business model innovation is the process of reinventing how you transform your organisation to more effectively compete. At the centre of business model innovation is the need to create new products, services or organisational models that improve your value proposition

Gary Fox

Business model innovation describes the innovative processes and rationale of how an organization creates, delivers and captures value as opposed to how to create a new product or service

Dwight Chestnut

Academic Definitions of Business Model Innovation

I’ve linked to the actual papers to make it easy for you to read full text articles and see the business model innovation definitions in their original context. There are undoubtedly some that are behind a paywall. If you can’t get one hit me with the contact form and I will share my copy (licensing restrictions permitting)

By business model innovation, we mean business model replacements that provide product or service offerings to customers and end users that were not previously available. We also refer to the process of developing these novel replacements as business model innovation

Mitchell and Coles, 2004

A business model innovation changes one or more dimensions of a business model (which are perceived by the authors as product-market combination, the architecture of the value creation, and the revenue model) so that a novel configuration of the elements is created and implemented.

Labbé and Mazet, 2005

Specifying a set of business model elements and building blocks, as well as their relationships to one another […] a business model designer […] can experiment with these blocks and create completely new business models, limited only by imagination and the pieces supplied.

Osterwalder and Pigneur, 2005

Business model innovation is to “advance [the] business model […] from very basic (and not very valuable) models to far more advanced (and more valuable) models.

Chesbrough, 2007

Innovation becomes BMI [business model innovation] when two or more elements of a business model are reinvented to deliver value in a new way. […] BMI can provide companies a way to break out of intense competition, under which product or process innovations are easily imitated.

Lindgardt et al., 2009

business models as definers of the value creation priorities in an organisation should be continuously reviewed in response to actual and possible changes in the perceived market conditions and evolve the enterprise strategy as the business environment and customers’ needs change.

Romero and Molina, 2009

[Business model innovation] [1] Articulates the value proposition (i.e., the value created for users by an offering based on technology); [2] Identifies a market segment and specify the revenue generation mechanism (i.e., users to whom technology is useful and for what purpose); [3] Defines the structure of the value chain required to create and distribute the offering and complementary assets needed to support position in the chain; [4] Details the revenue mechanism(s) by which the firm will be paid for the offering; [5] Estimates the cost structure and profit potential (given value proposition and value chain structure); [7] Describes the position of the firm within the value network linking suppliers and customers (incl. identifying potential complementors and competitors); and [8] Formulates the competitive strategy by which the innovating firm will gain and hold advantage over rivals. (p. 355, citing Chesbrough and Rosenbloom, 2002)

Chesbrough, 2010

[Seizing the white space] calls for the ability to innovate something more core than the core, to innovate the very theory of the business itself. I call that process business model innovation.” (p. 13) “business model innovation is an iterative journey“ (p. 114)

Johnson, 2010

Business model innovation describes either a process of transformation from one business model to another within incumbent companies or after mergers and acquisitions, or the creation of entirely new business models in start-ups.

Geissdoerfer et al., 2018

Which is the best business model?

Lots of clients ask me that. The usual answer is ‘How long is a piece of string?’ It depends on what you are doing, how well you execute, the market, competition and so on and on.

Dig a little deeper and we can start to give some answers. As part of the business model innovation process that I use we will come up with multiple potential business models for a client.

How to chose the best one? One of the problems we’ve had in the past is how the highest paid person in the room has an outsized impact on the decision making process. Seniority can reflect decision making capability – but not necessarily.

To take account of this bias I use an algorithmic decision making tool called N2D (Need to Decisions) developed by Subsector

What we can do with it is to look at each business model and assess the impact that they have on the users or consumers we are trying to change and how effective we are at doing so.

This process makes it very clear where we should prioritise our efforts – and thus heklps us to answer – which is the best business model.

Most organisations are struggling to keep up in a rapidly changing world. CEO’s, Founders and Leadership Teams need to make rapid investment decisions about transformation, innovation, communication and technology in response to increasingly complex customer needs.

Phil Dearson

What is the N2D Method?

The N2D Method® is a Decision Model or Judgement Protocol. It provides evidence of customer needs, the degree to which your organisation is meeting these needs and an evaluated set of initiatives that will deliver the greatest impact.

N2D stands for Needs To Decision. The N2D Method focuses on:

  • the needs of the people you care about most (e.g. customers, prospects, citizens, staff, etc)
  • how serving those needs helps your organisation to achieve its objectives
  • clearly revealing which business initiatives should be prioritised
  • flexible application across a range of use cases


At the heart of the The N2D Method is the NeedRank™ algorithm that has been in continuous refinement for over 20 years. It interprets the data we give it, in order to deliver a clear set of priorities.

Business Model Innovation and N2D

Here’s an interview I did with Subsector about Using N2D for Business Model Generation

One of the things that had a huge impact on my career was the existence of professional joy killerz.

(That was actually a typo but I thought what the hell and left it in!)

When I started as a railway engineer I was full of vim and verve. I was so excited and was determined to make my mark in the railway industry. I learned, worked hard and asked lots of questions.

“We don’t do it like that here.”

“Stop trying to reinvent the wheel”

“There’s a reason we do it that way”

As a licensed and competent engineer these were ways for the business (industry) to inoculate itself against change. They weren’t valid on an engineering or business basis.

With no desire to suck up to something I thought could be a lot better I eventually quit the industry

The joy killerz are still doing the same to all the fresh blood that comes in.

In a lot of my clients I find the same joy killerz. 

There is ALWAYS A REASON NOT TO CHANGE

There is always a reason why things are the way they are.

They were often good reasons.

Brilliant reasons some times.

If you are talking to me though it’s pretty likely that your industry is in serious trouble (or you are a troublemaker) and you need to change.

So the first things that we do when working with a client is to start challenging some of those assumptions, to start ripping them open. 

They need to be challenged, modified or discarded. 

Business model innovation doesn’t give you a shiny coat of paint to the old company (that’s digital transformation) 

Business model innovation changes your world first, then it lets you change the world. 

It doesn’t mean that things stay the same!

I was talking to Louise Stigant, MD of Mondelez last year and she said ‘Denis, you think the world is changing fast? Right now it’s changing the slowest that it will for the rest of your life!”

Think on that for a minute. Then go back to the office and execute the joy killerz

Denis

If you haven’t already been to one of our business model innovation webinars do come and join us.

Every other Tuesday (next is on today October 27th and then November 10th)
New York 8 am;
London 12 pm;
Singapore 8 pm.

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