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.
The next key question we need to ask about our business model is ‘Is it feasible?’
Someone asked me the other day, “Denis if you were 65 and rich, what would you do?”
I thought for a bit and decided that I would start a cannon foundry making bronze/brass cannons for 17th-century sailing ships. I discovered, that various licenses from the police in the UK were needed (they aren’t keen on guns that can chuck a 15kg iron ball 3km). I’d found a place that would test my gun (proof it so that it would not explode and kill me, and lots of bystanders in a hail of brass shrapnel – The Birmingham Proof house btw). And I’d bought a few books on Amazon on cannon making in the renaissance.
This was incredibly exciting. I was having the time of my life exploring a new subject and identifying a whole range of problems that I would need to solve to make my guns. The difficulties of finding a couple of tonnes of bronze are still being explored.
65 and Rich
I’m not 65. I’m not rich, and so this idea will remain just that. I may keep researching it to provide some comic relief after a hard day – strapping recalcitrant clients over the breaching and firing the gun – as was done to British soldiers in India in the 1860s seems attractive on occasion.
The idea is daft on many levels. But step back and look at what I was doing?
I was doing what so many entrepreneurs do. I moved straight to the feasibility of the idea without ever considering whether it was desirable or viable.
The gun cost about $5500 in the 1500s when it was made in production in factories by trained craftsmen. As a home hobby, it’s unlikely that I’d be able to get within $20,000 if time and labor are priced correctly.
And who would drop that money on a cannon that they’d only be able to use for ceremonial purposes?
There’s very little viability or desirability here.
A Common Mistake
And this is the mistake that entrepreneurs or business model innovators make. It is this desire to figure out how to make something work. Part of that is the culmination of two hundred years of industrial management. We’ve discovered that a lack of planning creates white elephants that can’t walk or talk.
We need to do it – but not early in the process.
All we need to do is make a rough estimate that it can be made. We need to establish that there is at least one feasible path. If there is one path, then we can create or find more. That is the talent of the ever-inventive engineer.
If we jump straight into the feasibility, then we often get trapped in looking at one path to feasibility. If you think back to desirability, and how we said that when we talk about desirability, we are not talking about the desirability of the product or service, we are talking about the desirability of the business model.
Well, we face exactly the same issue here. We are not focused on the feasibility of the business model, not on a simple method of producing the product or service.
A Feasible Business Model
Let me give you an example.
Who is the world’s biggest maker of mobile phones? Probably Foxconn. Who is the world’s biggest seller of mobile phones to consumers? Apple. When Apple started research into the iPod, they were clear on what they wanted to make. They also had a whole range of different options with respect to feasibility. Do we make in the US, do we make in Asia, do we outsource in Asia, do we subcontract. There was a whole range of options considered before the final decision.
Feasibility thus covers the whole of the production of the value proposition, from the resources, and the activities to the key partners, and the costs involved.
All of these come together to create feasibility patterns.
These patterns of feasibility change over time.
A few months ago, I was at a conference speaking on business model innovation. I accidentally answered a question aimed at the Chairman of the African Telecommunication Union. He was asked if outsourcing had been a mistake. It hadn’t been, I answered when telecoms companies thought that they could capture much of the value created by 3G. When it turned out that they captured less than 1% of the value created by their network upgrades (Youtube, Amazon, Apple, and Netflix all have been created because of this value leakage – $4 trillion?) they started to bring outsourced functions back in the house. Feasibility patterns had changed within the industry, and the sector in just the same way that they do in other parts of the business model.
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