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.
As we see business models starting to slowly die one of the key features that they all have is that they have unresolved anomalies in them.
Imagine a tree growing beside a concrete lamppost. As the tree grows, the lamp post remains in place, forcing the tree to grow around it to distort its natural pattern of growth. One way of resolving it is if the tree is large and strong enough to slowly force the lamp post out of its way as it grows. Or if it puts enough strain on the lampost so that it cracks and falls. If it can’t, then the tree is distorted by it. This introduces inefficiencies in the tree’s growth and makes it harder to survive.
Anomalies work like this in business. The weird thing is that they are often not as visible as a concrete lamppost.
Palm Oil Farming: A Complete Anomaly
Let’s think back to our Asian palm oil plantation. This has a number of anomalies, persistent problems that managers could never really fix.
- They could never improve the yields on the palm oil trees.
- They found it harder and harder to get good staff
- Could not find a way of automating harvesting.
Every industry has a number of problems like these. They are driven by market structure, the nature of supply and demand in the market, historical happenstance, the way that innovation happened in the industry, or for another thousand reasons.
Most managers accept these are constraints on the business model. They work industriously to ensure that they maximise sales and profits and minimise costs to ensure that the business works.
Some managers inside the industry see them, like a stump, in the middle of a field, as something that needs to be blasted or otherwise removed.
How to Remove Anomalies That Are Impediments To Business
What seems to be the case is that as anomalies are removed business models are suddenly able to change rapidly. Imagine – taking the concrete lamppost away that has constrained the tree’s growth. It can now expand out into the void that the lampost prevented it from using.
If we increased the yields on palm oil trees, let’s say by 50% through genetic modification, that will drive huge numbers of the lower yield producers out of the market in a few years. It also changes the manpower requirements, exacerbating them in the areas where the new high-yield trees are planted. It also changes the dynamics of palm oil refinery placement. Mills are usually less than 20 miles from the plantations to minimise the time that the bunches have to spoil before they are processed. They could then be made larger, driving down the costs of the finished product through inefficiencies of scale.
From that simplified example, you can see how when we removed an anomaly. Whether it is a technological, cultural, social, economic, or political constraint then a business model can change very rapidly.
This is a sense is what the whole book is about.
What are the anomalies in your industry? Why do they exist? How can they be removed, bypassed, reconciled, and what will that mean to the patterns of business models in your industry?
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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