The need for Continuous Business Model Innovation

posted in: Adaptive Cycles, My thoughts | 0

My perspective…@42

I’m an Industrial Engineer. Does that matter? I don’t know. What I do know is that during those studies I first figured out that what’s driving me is to try to understand how things work. And in the years after the study that need for knowledge shaped more and more towards wanting to understand how companies work.

How do companies ‘work’ (or not), how do their courses get set, expanded, changed, disrupted. Why do companies set themselves up the way they do? Standing on the side-line, doesn’t it always look like that there’s a different, smarter way to do it?

It is finding answers to such questions that I’ve come to see as my continuous search. Continuous, because of change, more change, faster change, and back to the beginning… let’s see:

Companies move towards being organized in communities. Move away from hierarchies. (Em)power (to) the people – holacracy. Self organizing teams, without hierarchical control, are more efficient.

Any of that sound familiar? Any of that sound like more and more ‘promoted’ trend? And then this comes by:

Hierarchy is Good. Hierarchy is Essential. And Less Isn’t Always Better

So we stop the change, reverse it? Or is the second an indication of the trend (towards hierarchy) after the trend (away from hierarchy)? Or is it simply because everybody has an opinion and maybe, just maybe, there’s no such thing as a one size fits all trend? Does what a company does depend on more influences…

10 years into my professional career I got the opportunity to follow an MBA. I grabbed my chance. There it was: the unique opportunity to discover it all, because with an MBA you know it all, right? 2 years of sweating over books, assignments, research and a Business Plan. It helped. It helped to better understand a number of factors influencing decision making in companies (mainly money and stakeholder value), organization of companies, even the role of innovation, HR, marketing, IT etc. But still, there’s that nagging question: why does company A do its business like this and company B like that? Is it a simply difference in strategy? The never ending search for Blue Oceans? The need to innovate in an ever faster pace to keep up with the pace of (macro economic, empowered consumer, …) change?

Then something ‘new’ (to me at that time) crossed my road: Business Model Generation, a book, tools, a method, a generation… started by @AlexOsterwalder, and Yves Pigneur. The synopsis of the book says:

“Business Model Generation is a practical, inspiring handbook for anyone striving to improve a business model – or craft a new one. “

“Disruptive new business models are emblematic of our generation. Yet they remain poorly understood, even as they transform competitive landscapes across industries. Business Model Generation offers you powerful, simple, tested tools for understanding, designing, re-working, and implementing business models.”

That had to be it. It had to be the missing factor. I deep dived it. Left to right, top to bottom. I found it can be used for Business Model Innovation (applied by small starting consulting companies like Business Model Inc (@BusModInc), and Board of Innovation (@boardofinno)), for (lean) start-up (& change management), for transformation of large companies. I participated in a Master Class, and started using Strategyzer. 9 blocks… the answer doesn’t take more than 9 blocks on an A4 sized piece of paper, which can be filled-in in minutes, literally. Of course there’s plenty on the side: a value proposition template (as published in Strategyzer), influences from the industry structure & the market (as explained by @patrickpijl of Business Model Inc during the Master Class), the strategy, the narrative and numbers test (as described by Joan Magretta, already back in a May 2002 edition of HBR). But in its core it is this BMG and its canvas that helps to define what it is you bring to whom for what, and with what and whom and how…

BMC

So if this is the answer to it all, how come it is so hard for many managers and executives to just pick it up and work with it? Create your perfect business with it, where ever you want, whenever you want? Why are there still so many start-ups failing if they have the right tool for free at their finger tips?

Than a 30 minute video on “How The Economic Machine Works” by Ray Dalio made it clear: maybe people have difficulties to understand and apply it because the world turns, round and round and round: it’s CYCLIC.

Not static, not just dynamic, but cyclic. And there’s a BIG difference between dynamic and cyclic to me. Dynamic makes me think of extreme flexibility, always be prepared for the opposite, the worst, the best case scenarios. While cycles in my mind focus on something which comes, goes and comes back. Over and over again.

Ray explains it more or less like this: “a long term debt cycle taking about 70 years to complete, with many short term debt cycles overlaying it, under an angel of productivity.”

Cyclic

Thus somehow the cyclic component needs to be inserted. And that, to my feeling, can truly complete the story. Even if your search is performed by your sub-conscious, you get sucked in directions to find a representation that can explain what’s nagging you. Mine brought me to Panarchy. Pa… what? What the heck is Panarchy? Thanks to all contributors on Wikipedia! Here are two quotes from Wikipedia on Panarchy:

“Panarchy is a conceptual term first coined by the Belgian philosopher, economist, and botanist Paul Emile de Puydt in 1860, referring to a specific form of governance (-archy) that would encompass (pan-) all others.”

“Panarchy, a term devised to describe evolving hierarchical systems with multiple interrelated elements, offers an important new framework for understanding and resolving this dilemma. Panarchy is the structure in which systems, including those of nature (e.g., forests) and of humans (e.g., capitalism), as well as combined human-natural systems (e.g., institutions that govern natural resource use such as the Forest Service), are interlinked in continual adaptive cycles of growth, accumulation, restructuring, and renewal.”

Which lead me to find a blog post of Andy Hines called Panarchy, the Adaptive Cycle and Change, which tied it all so nicely together for me. It starts to makes sense!

First, what does Panarchy look like, because that’s the essence…

Panarchy

Second, if that’s the picture of the adaptive cycle than what does it mean? According to the article of Andy Hines there are the following definitions of the 4 phases and their application on the business world:

The 4 phases as explained originally: The 4 phases explained in Business Terms:
(r) Exploitation: rapid colonization of recently disturbed areas(K) Conservation: sustained plateau or maximum population that is maintained

(Ώ) Release: creative destruction, e.g., in nature by fires, droughts, pests or intense pulses of grazing

(α) Reorganization: processes minimize nutrient loss so they become available for next exploitation

(r) Growth: period of growth and competition among entrepreneurs and survivors of previous cycles(K) Accumulation: the winners consolidate and then maintain the existing order

(Ώ) Restructuring: the established order breaks down and uncertainty increases

(α) Renewal: new players and alternatives emerge

Linking this back to the usage of the Business Model Generation, the canvas and its ‘environmental add-on’s’, I believe there’s a phase and way of application in each. Getting that right may help a business to look for the right business models at the right time, prepare the company for upcoming change, when to invest in what type of innovation, or even determining a change to the current strategy.

Maybe looking at your industry, your market and your company of course (or your entrepreneurial aspiration) in such perspective may help to constantly understand where you are, look for where do you (want to or have to) go and drive improvement in business models, perspectives and results in the directions you set-out for.

Many state that as long as you learn from your mistakes it is alright to fail. Thus maybe we should replace ‘Failure’ completely with ‘Learning Point’ in our dictionaries? That being said, doesn’t it feel much better to be successful? My definition of success: a learning point with a much better taste than failure.

To keep the good taste it is crucial for any business to accept the fact of the need for continuous change, Business Model Innovation I believe is a way to help to stay on top (or slightly ahead) of it.

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