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 finding opportunities in this new world.
After a while running my own company got boring.
I had to go out and sell the same thing to the same kind of customers every week. The business always had similar problems. Whilst we solved and reformed the problems that mutated, we were making progress, but I still felt stagnant.
What was fun though was working on business models. I started doing them for fun then, I did them for entrepreneurs. Then I designed business models for a few big companies and talked about them on my YouTube channel. Rather quickly, I discovered that I’d sketched hundreds of business models out for people. Then it went into thousands. In due course, it came a time that I didn’t need to sketch them out at all.
Robert Greene has this wonderful book – Mastery. In it, he explores how people come to master a subject. He is riffing off Malcolm Gladwell’s idea that it takes ten thousand hours to master a subject. In many ways, because I loved what I was doing, I accumulated those ten thousand hours and more. I have not counted the hours I put in though.
Describing Business Models
What was interesting was that to start with, I honed the art by merely describing business models. This is the engine, these are the axles, and these are the wheels.
This is the stage that most entrepreneurs get to when they describe their business model.
The next stage is that they start to explain how the model works. The engine rotates, and it makes the axle rotate (I think – not a petrolhead), and with some gears and stuff, this makes the wheel rotate fast!
When I talk to an entrepreneur who thinks like this, I know I’m going to be learning a lot, and he/she is going to have a better chance than most, of making the change that they seek to make.
The really interesting stuff starts to happen when you start asking why a business model works.
Are Business People empiricists?
Most business people are empiricists. They try stuff. If it works, then they keep doing it. If it doesn’t work, then they stop. Actually, that is the theory. A lot of the time, they don’t stop when things are going wrong, but that’s a story for a later chapter.
Let us assume for the moment that business people are empiricists. To them, it doesn’t matter why a business model works. If it works and is able to deliver profits or the prospect of profits in the future, then it’s good enough.
I don’t need to know why the design of my shoes is a good one so long as it keeps my feet warm and dry walking home in the rain.
When you start thinking about why a business model works, it gets very strange.
The easiest way to describe it is that it is like a ten-pound note.
It works because people believe it works. It’s more nuanced than that, but essentially a business model is a temporary construct that describes the business reality for a limited length of time. At some point, reality always moves on, and people stop believing that the business model works.
Is There a Theory Behind All Business Questions?
Why do these customers respond to these marketing and distribution tactics? Are these key resources critical for the business model? If yes, then why? Why does this pricing strategy work rather than this one?
These seem like subtle questions, but there is no underlying theory that explains them.
Should there be?
There is a reason why business studies are in the social sciences and aren’t taught the same way as maths or physics. It’s even less robust than psychology (better than sociology though!)
As a philosopher, this bugged me. There should be theories that enable us to design better business models, that enable us to product success. So in idea; l minutes over the last 10 years, I have thought deeply on how this could be possible,
Hopefully, at this point you are all excited, waiting for me to tell you the answer, and the secret to business success.
Well, if there is a unified theory of business or business models, I don’t have a clue.
What I discovered, though, is far more interesting, and this is what the rest of the book is going to be about. But, before we do that, we have to go on a diversion and head out into the jungle.
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
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