Sunday, 12 February 2012

Business Models for Innovation

Innovation is the Olympic gold medal of the business world; many compete for it, but few are successful.  In the UK, one in three start-ups fail in the first three years.  Since 2002, the UK venture capital industry has returned 9.8%; you would have made double that return in the stock market by re-investing your dividends.  Why do we accept, perhaps not cheerfully, that technology innovation is high risk, and that it is difficult to make money from indulging in it?

I'd like to suggest that the time is right to re-examine the business models we use for technological innovation.  In the US, creativity in business modelling is a hot topic.  The Business Model Canvas, a creativity tool devised by Alex Osterwalder and Yves Pigneur, generates over four million hits on Google, but is possibly less well known and used in the UK.  BMC forces users to think about their model creatively, with a strong emphasis on customers, who they are, how to reach them, what is your relationship with them.  Only when you understand that can you think about the value of the product or service you offer to each of your customer segments, and the other elements needed in your business. By creating, building and testing robust, innovative business models, your enterprise can significantly improve its chances of surviving its first customer meeting,  and into year 3+.

I lead a MasterClass on Business Modeling for Innovation in Cambridge last week.  The audience was a tad smaller than I would have liked, but included representatives form big pharma, the NHS and the lone entrepreneur community.  In half a day, they managed to create an entirely new business for farm animals, multiple uses for a  new cryogenic technology and an impressive variety of market avenues for organic popcorn.  Certainly none of these were robust business models, but they were creative first steps, which provide the basis for the development of new business enterprise models with further research. 
At the MasterClass, we discussed the difficulty of getting these approaches adopted more widely, particularly in big corporates with their commitment to leading consulting companies, and variations on the BCG matrix. Using creative design methods, visualization techniques and learning to tell supporting stories are all helpful in overcoming the resistance of nay-sayers along the way.   Let's develop a culture of creative business model design for sustainable innovative enterprise?

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