“The business world today requires different tools, skills, and mindsets because the world is changing, customers are changing. Unfortunately, many businesses are still on old assumptions and old views on what they think the world looks like and what clients want…But business as usual is dead.”
So says Patrick van der Pyle, innovation consultant and producer of the international best-seller Business Model Generation, in a recent webinar. “It is clear that there are new forces at work…new rules in the business game…a changing context.” He pointed to Lisa Kay Soloman’s book Moments of Impact which describes today’s environment as a VUCA world of constant Volatility, Uncertainty, Complexity and Ambiguity. This turbulence is a constant business factor that has to be dealt with. The speed of the market is extremely fast and the shelf life of companies and business models is getting shorter and shorter. Traditional business toolkits and strategy sessions were not built to address this kind of changing environment. Business plans, for instance, are great for execution, but they do not help you come up with and shape new ideas or innovations needed to differentiate oneself in this kind of operating climate.
The fact is that high growth firms in this environment are 3x more likely to have a strong differentiator. Versus wimpy differentiators like “better service”, “commitment to excellence”, “experienced people” , “we care about our clients” or others along those lines, business model innovation has been at the core of many successful businesses (Uber, Airbnb). It offers a process that specifically addresses the need of creating and delivering differentiation. That is why there is a growing interest on business models and where the business model canvas comes in.
A business model canvas is a visual tool, a diagram of what your business looks like, that helps facilitate discussion, and provides a process and a common language. The visual nature of the tool allows you to “see” where your present-day firm is capturing and delivering value to which specific clients. Download a template business model canvas here. You can see how it breaks down your firm and your activities and depicts them in separate boxes:
- Customer Segments
- Value Propositions
- Customer Relationships
- Revenue Stream
- Key Resources
- Key Activities
- Key Partners
- Cost Structure
By reviewing each of the above pieces of your current business model, challenging the assumptions in and effectiveness of each component, and exploring how they impact each other, the business canvas can provide new insights and different options for your business. Most importantly, the exercise sets up a shared, common language for everyone in the firm to work from.
The next key component is in how to work with the canvas. Besides the tool, it was suggested that business leaders need to operate in a different way - be more keenly observant, use visual tools, imagine the future through studying trends, prototype new ideas, and think like a designer. That will allow them to start seeing new ways to re-configure, redirect or re-imagine their firm; make better assumptions; and create stronger differentiators.
One particular canvas technique that was discussed was the epicenter technique which asks that you focus on one of the building blocks of your business model and start your creative thinking process from there: What would your firm be like if….you used different resources, changed to different customer segments, adjusted your value prop?
Real world examples were used from Nespresso, Amazon and a typical accounting firm to illustrate how firms can work through the canvas. For those that missed the webinar and want to see the detailed examples, a recording of the webinar is available here.
It was mentioned that once you put your firm through this level of scrutiny and challenge, you will begin to better understand your firm’s dynamics and realize the benefits of systematizing the canvas exercise into a consistent business practice; revisiting and working through the canvas every 3-6 months. It will develop a way of thinking and provide guidance on how to best develop your firm. It will make you have different conversations with your customers. It will direct you away from one-dimensional thinking and more to finding what is” the job that needs to be done” for the client versus just randomly adding new services or features.
It was recommended that, to maximize success, it is best to do the business model canvas with a mix of people and departments, especially client-facing ones, throughout the firm. This will ensure a greater range of perspectives and be able to generate more and better ideas.
Once you have determined changes to your business model, start small by testing changes in the market with customers to see if your new assumptions are true. As a basically iterative process, you go back with what you learned and make adjustments and then go out and test again.
On being asked if the business model canvas doesn’t work as well in certain industries or non-profits, the answer was that, based on their experiences and new cross-industry research on how business leaders are using the canvas, they haven’t seen where it didn’t add value.
The Institute will dive deeper into the different Business Model Canvas frameworks and processes available and how they can be applied to Institute Founding Innovator members’ businesses. Articles are being added into the Institute's Innovation Library for more exploration into the topic of business model innovation. - Bill Hortz
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial services firms. We position our members with the necessary ongoing innovation resources and coaching to drive and facilitate their growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors--Innovation Equity Partners, Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, MeridianIQ/AdviceIQ, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information or to join click here.