New Routes to Creating Social and Economic Value—Business Model Innovation
By Doug Morwood, Rothko Business Growth Management
Having attended the Symposium for Entrepreneurship Educators at Babson College in January 2012, I was struck by the fresh approach to creating both social and economic value and a new kind of entrepreneurial teaching for leaders of all organizations.
Understanding desire and motivation combined with Entrepreneurial Thought and Action® is particularly resonant in today’s uncertain world.
Driving toward a deeper understanding of our entrepreneurial ecosystem also was interesting, resisting the temptation to attempt to recreate Silicon Valley in Scotland but to work with and improve what we have. It also calls for a deeper understanding of innovation and design thinking in business, and the business models at the heart of our enterprises.
Every organization has a business model, but do we have a shared understanding of what that means?
We, at Rothko, ask that question during the workshops we deliver to various organizations (start-ups, established businesses, social enterprises, and the public sector) and receive a multitude of answers ranging from a description of their product or service or who their customers are, but not a description of their business model.
A business model describes how value is created, delivered, and captured in an organization.
It is the revenue-generating logic of an enterprise.
There are numerous methodologies and approaches in play in today’s environment, and there is no one that fits all. So much depends on the organization, its appetite (desire) and capability, and, of course, its environment.
We have found Alex Osterwalder’s Business Model Canvas to be an excellent visual tool, and it works very well with Steve Blank’s Customer Development process.
Our workshops and client engagements encourage a team approach to understanding the current state business model and developing potential new business models.
We introduce them to the tools to describe business models rigorously, concentrating on the four main areas: customer, offer, financial viability, and infrastructure.
Getting a group from different disciplines and functional areas discussing the model around this visual canvas (whether on a flipchart or projected on a wall) and populating it with Post-it® notes will almost inevitably result in a richer understanding.
To start understanding an existing business model, we ask two questions:
- Who is the customer?
- What job does the customer need to have done?
All rights reserved: Alex Osterwalder
We then introduce a framework that allows them to experiment with their business model and test various hypotheses.
We know that customers and revenues sustain enterprises, but business models involve more that just cash and customers.
Introducing this design thinking with an organization can bring its own challenges. We provide a structure within which to create options; not aimless brainstorming or ideating, but a platform from which to create innovation.
The aim is to reach informed decisions through experimenting with the canvas initially. The outcomes generated are:
- A clear understanding of the current business model
- A structured approach to looking at the future business model
- Multiple potential innovations on your current business model
It’s now time to get out of the building and test these hypotheses.
All rights reserved: Alex Osterwalder
At this point, the simple, practical approach recommended by Babson College President Leonard A. Schlesinger in Action Trumps Everything: Creating What You Want in an Uncertain World is introduced and is a wonderfully powerful way to challenge current inertia.
“Be the change you want to see in the world.”—Gandhi
In our own small way, we want to add value to our local ecosystem and join up with the international movement toward an agile, iterative, and new way of thinking.
We will continue to work intensively in and from Scotland to improve our local ecosystem, to work more collaboratively with all stakeholders (education, public sector, private sector, students, banks, and investors) to embed lasting changes in entrepreneurial acting, learning, and building:
- To help build the future that sustains us environmentally, economically, and socially.
- To reduce unemployment by increasing the numbers of successful sustainable startups, and by assisting in defining purpose on an individual and organizational level across all sectors.
Our approach to understanding organizational and personal business models by using the Business Model Canvas and Business Model You, while no panacea, is a start to helping define purpose on an individual and organizational basis, and satisfying customers’ unmet needs.
Combining this with Steve Blank’s Customer Development approach, lean start-up principles, and Action Trumps Everything: Now that could be a winning combination. Let’s “GO DO!”