In 2006 I was doing my MBA and as part of my marketing course I came across the work of Henry Chesbrough in his book Open Innovation. He introduced business models to me. Next, it was Gary Hamel in Leading the Revolution. I thought this was interesting. This is a very different way to think about a business. It is trying to bring the principles and systems to some basic ideas and then help innovate on that. The interesting thing was the university was not teaching me about that. That made me pursue the whole thing more.
In my search I found a PhD student by the name of Alex Osterwalder in Switzerland studying business models. Alex with Yves went on to create a dynamic bestseller called the Business Model Generation where they introduced the Business Model Canvas. This was a game changer. There many different kinds of business models. In fact, Tim Kastelle describes eight in his blog including the Henry Chenbrough one which inspired me.
-“At the heart of industry revolution are daring new business concepts.”
-“Business concept innovation will be the defining competitive advantage in the age of revolution. Business concept innovation is the capacity to conceive existing business models in ways that create new value for customers”.
– “Industry revolutionaries take the entire business concept, rather than a single product or service, as the starting point for innovation”
Hamel suggests that not only is this radical in terms of thinking about innovation but it is focussed on the entire system. That is a key part of the value of this model. Strategy is at the systems level and not focussed on one aspect.
Arne frames this differently in a way that makes it more powerful. He suggests that this is actually an hierarchy of innovation.
However, the business model canvas or BMC is gaining ground. Paul has more on the evolution and the future trends.
If you follow Alexander Osterwalders travels you will see he has been on a crusade to spread the gospel of the Business model and why his (and Yves Pigneur’s) canvas works. It has been going through a classic adoption curve. Firstly the curious who worked on a collaborative book with him (about 470 people from 45 countries) in different shapes and contributions with an amazing end product on the revolutionary design of these labours- the Business Model Generation book, published in 2009. This was firstly self published and then picked up by Wiley (smart move that).
Alex is spreading the word according to the BM gospel, that the Business model needed a common voice, a common language. He demonstrated everywhere the ease of the BM canvas so ‘all around’ were recognizing the value of this tool in many different situations as valuable, so a BM can be understood, easily and quickly. He demonstrated this could be a major advance on what we presently use in having to explain our business models and took his message out across the world last year and seemingly continuing in 2012 but perhaps a little more focused.
Finding a common language is one of the critical tenets that Alex has been arguing with his Business Model Canvas approach- I think we are getting close on this. Here is some of the events merging to make this happen.
So what is a business model? A business model is a story about how you can create, delivery and capture value. That is it.
The canvas has 9 building blocks and covers all the major areas that are required to get started. The best part is the it was released on creative commons and has enabled many people around the world to modify, change and make it their own which has only increased its popularity.
My view has been that the BMC is as important in the social change business as anywhere else. In order to create social change we need to not only innovate on the programs that we create but how we create them, how we fund them and how we deliver them.
One of the other major innovations in the business world is the focus on customers, needs-first approach and using design thinking principles to co-create new products and services. The Australian Centre for Social Innovation has been doing exactly that in the social innovation space. This involves a focus on a “theory of change” and understanding how and why what we do creates change for people.
This whole thing makes more sense in the context of social change and design thinking by incorporating the principles and practices of lean startup and customer development from silicon valley. I have learnt a lot from following Steve Blank‘s work. In a start-up and the “wicked problems” world of social change, it is not entirely clear what the need is. There is a lot of uncertainty in creating a new program for change. How do we deal with this? Blank’s masterstroke was using the business model canvas but changing it from a “strategy” focus to a dynamic startup focus based on the idea that everything is a guess at this point in time and we need to change the hypothesis into facts.
His focus on the customer, the principles of “get out of the building”, and the definition of a start up as a search for a scalable and repeatable business model fits perfectly in this context. He uses the BMC is achieve this and that is a perfect storm.
With the SEED Challenge we ran for the VicHealth in Melbourne, we created a set of workshops that incorporated a focus on change, co-design principles and business models. It is a unique set of ideas and frameworks that are helpful for a startup in the context of a social enterprise or a b-corp; a new program in not for profit or government space and for anyone who wants to redefine their current programs.
The feedback from the participants is clear that they not only enjoyed the workshop but saw a lot of relevance in applying the business model canvas and business principles in the social sector.
In terms of business models, my vision is to document and share many different business models in the social sector in order to learn and remix from each other. The more we can share, the more we can learn.