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.
One of my big heroes of antiquity was Archimedes. He lived in Syracuse, a small city at the end of a causeway in Western Sicily. It sits right under Mount Etna, and from its harbor traders and galleys could control access to the Western Mediterranean and the Adriatic.
It had a similar effect to the British controlling the English Channel during the two world wars or Singaporean control of the Straights of Malacca today. Their position gave them military and trade strength.
In the great war of its time, the Athenian and Spartan alliances fought for dominance across the Mediterranean. The Peloponnesian war was a fight of the Spartans to maintain their traditional military hegemony and for everyone else to hold down Athenian arrogance. Athens preached democracy – but only the Athenian version – and if you weren’t Athenian, it looked rather like a dictatorship.
The Athenian And Spartan
Alcibiades in Athens came up with a masterstroke that he thought would end a seemingly endless war. If the Athenians took Syracuse, they would at a stroke control the whole of the western Mediterranean, depriving the spartan alliance of resources and supporters.
The Athenian fleet sailed to Syracuse, and there they met Archimedes. The story goes that Archimedes used giant mirrors as laser canon he created huge cranes that lifted up Athenian triremes and dashed them against the cliffs. Cool stories but not a lot of evidence.
The Athenians were defeated, by a lack of supplies, better spartan armies, and Alcibiades turning traitor. Most of the Athenians died a few kilometres from the centre of Syracuse as slaves in a quarry. When I went there, the only entrance to the quarry was through a narrow tunnel through the rock. The quarries were a sun-baked vision of the upper levels of hell. The Athenians all died in there, and you can still feel it in the stones.
Archimedes stayed on, and we remember him now for his saying ‘give me a lever, and I can move the world’.
When we approach business model innovation, we are looking for that lever.
If we think about mediaeval warfare, the simplest approach to destroying a wall is to throw rocks at it. Most startups and new businesses think of their products as rocks. They throw them at the market, hoping to penetrate the city walls and access the profits within.
Look At Your Competition
Corporate results suggest that less than 1 in 300 of those rocks succeed. Startups succeed about 1 time in 10 – so actually better odds – but still low.
There’s a better way, and this involves finding a lever long enough and the right fulcrum, the object that goes under the lever close to whatever it is to try and move that magnifies the force you are applying. (Physicists and mechanical engineers – shoot me. This is good enough)
Most of the time, when we look at competition we are looking at competitors’ products. It makes sense – their product is going mano a mano to our product in a Fortnite style face-off. We can both bulk up, and become uber fighting machines in our attempt to win dominance – or find other ways through – perhaps, we instead of features we focus on benefits or experiential marketing. Whatever.
The truth is the products and services that we sell are the tip of the spear(perhaps the tip of the lever).
I don’t know if you’ve ever had someone jab a spear at you. A proper spear is somewhat longer than you are tall with what seems to be an oversized, double-edged carving knife with a wicked point strapped on the end.
Hollywood Films And A Spear
Most of the stuff that we see in Hollywood films shows a couple of actors hacking at each other at really close range. Spear fighting has you about 10 feet from the other man. When he brings the spear down to point at your body – torso – heart – lungs – that centre of mass that’s quite important – you see the spearhead moving slightly about 3-4 feet away from you. Threatening – but it’s still far enough away to feel safe.
Then the left leg moves forward, and the torso leans forward, arms extending – and the kitchen knife moves faster than you realise towards your chest. It’s a moment of horrifying vulnerability – much the same as when you are on a bike, and you realise that you aren’t going to make the corner.
The business model is the spearman and the haft, shaft, of the spear. That’s what gets the product into the target.
When we start looking at business model innovation, if we can build a business model that rams the shaft of the spear into the solar plexus of whatever it is that we what to hit, it’s going down even if we don’t have the right spearhead on the end of the spear. We don’t even need a spearhead.
The danger is in the ability of the spearman – the business model – to deliver force to a very precise area quickly.
How do we do that?
We don’t start off by thinking about the spearhead at all. We think about where our business model is going to stand and how it can deliver a spear with a longer shaft faster and harder to the target than any of the other business models on the market.
Let’s look at the other spearmen.
First Stage: Three Main Competitors?
My usual rule of thumb is that we look at your two to three main competitors first.
What are their business models? They are often going to be very similar to yours. I want you though to be diligent, going through their websites, and mapping out their business models as well as you can. Put yourself in the place of the boss of the company, and think about how the business model works, how it should work, and why it is good.
Because you are starting off looking at someone else company, you’ll leave some of your egos at the door. You will be critical – perhaps overly critical. The thing is though because these are your nearest and dearest competitors, they are likely to be just like you (no guarantees there – just empirical observations).
As you go through this process – and this is more than mapping it out by yourself with a beer late one evening after work – this is also about talking it through with your leadership team and advisors – you’ll really start to understand them, why they work the way they do – and get insights into their real strengths and weaknesses – not just the trivial stuff we often get from SWOT analysis.
This is a value that you can take away from the normal tactical environment and be acting on immediately.
Second Stage: More Competitors?
The second stage is to widen the net and look for competitors who are direct and indirect substitutes for what you do. The aim here is to maximise the diversity of the business models that you are looking at. The more business models that you can look at, the greater the depth of understanding that you can achieve.
Don’t take it too far. I worked for a client in the automotive industry once and it went a little wrong. We looked at over 400 business models. This was interesting for a while, but eventually, we hit overload. I had no interest in the companies, their business models, or what we could find. Please don’t make the same mistake.
A better way of doing it is to do this for about 5-7 companies to start with. That’s about as far as willpower and interest take most people, either in doing the business models or for the team in analysing them.
What’s The Difference Here Between Traditional SWOT Analysis And A Business Model Review?
One of the very first times we did this was with a client in legal services. We’d gone through the set of business models, and he said ‘Denis, everyone has the same business model.’
‘It looks that way’ I said
‘’That’s why it’s so hard to get ahead, isn’t it?’
It’s a frighteningly simple statement. From everything we’ve seen so far, it has the taste of truth. If you are running a commoditised business model, then you have no way to extract competitive advantage from it. When you find yourself pouring over differences to try and distinguish between the lesser spotted law model and the multi spotted law business models, it is a clear signal that there is a lack of diversity in the market.
If we go back to the business model cycle – maturity and approaching sense are when the number of business models seems to reduce significantly and so this is a good ‘buying’ opportunity to start the business model innovation process.
The other huge benefit of diving into looking at business models is that traditional SWOT is very much focused on the ‘How’ of winning. The strengths and weaknesses that emerge are tactically focused, exploitable characteristics that can be attacked immediately.
Business model review is much more interested in the twin questions. What is the business model and why does it work. This insight into the workings of complex systems is your secret weapon. Because it’s new, it often sits up in the black box of your mind making new synaptic connections and bringing very different thought patterns to light.
That’s the whole point. Thinking different about your industry – is the way to find a competitive advantage even in a commoditised world.
If You Want to Read More
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