It is all about the business model (and technology)
How many articles and posts did you read about digital transformation and the 4IR (fourth industrial revolution) in 2020?
Due to the global pandemic, many business professionals have been working from home for the past 10 months, finding more time to read and listen about new technology and digital innovation. 2021 will see more of this trend, to all providers of new digital services — we should pay attention. A recent study by Gartner¹ shows that buyers of digital solutions in 2020 spent close to 50% of their time researching independently (online 27% and offline 18%) and very few had meetings (face to face or video conference calls) to scout for them. Undoubtedly, there is a plethora of information, easily confusing.
Looking back…
This decade is going to be truly amazing. At the forefront, we will have intelligent automation, smarter processes, better data, better knowledge and better predictions, with improved hardware and software, and more connected ecosystems, and… and… Back in 2000, it was actually pretty much the same, but with different buzz words.
As a business consultant, I recall the ‘internet online‘ was taking off, with search engines, e-news, e-commerce, e-sourcing, e-travel booking, basically e-anything. Back then, the messaging was leaner, faster, easier and more global, with digital interfaces, safer connections, etc. Twenty years later, we are seeing the benefits — my daughter’s music lesson was settled on my phone, whoosh, 20 seconds, done. No doubt that the user experience, the flexibility and availability of new services with new technology have made our lives easier.
Consequently, it has created new expectations — everything should be like my 20-second wire transfer. Innovation has laid the foundation for more innovation everywhere and there is potential for more. Way more. But how do we start?
Also, has it always been about new technology? Making sense of what the latest ABCD² technology can bring, matching it with the requirements and paying the best price for it? Am I ready to embrace the ‘connected 2020s’ anytime, anywhere with millions of users? Hold your electric horses.
It was not easy then and it is not getting any easier today. Thankfully, innovation also affects the family of frameworks, methods and models, as we observe our evolving ecosystem. Tools are available to analyse new market trends, adoption rates, new economic cycles — tools that are helping leaders and influencers address the complexity of transformation. We like to explore tools too; transformation often starts with questioning the approach.
Context matters and people more than anything
Disrupting or upgrading an organisation, processes and/or systems will create a trauma of sorts. Chiefly for people, on ’the way things are done‘ and on the value created so far, value that may be lost to a competitor if we do it differently, or how is my job going to change… or worse? Blockbuster was an innovator; it pretty much dominated video-on-demand before 2010, but the reality is it went bust because it was making money on late fees (!) — roughly $800m for a $3Bn market valuation. Take the money and run… against the wall.
Much has been written on innovation and change, but one thing stands true: context matters. There is no one-size-fits-all and there’s nothing like one way forward. It is, however, universal; no matter the tools available, for transformation to happen you need a vision, adherence, drive and shared wins. Stakeholders must understand the path and the benefits of transformation in the long run. Leapsight has worked on different projects and assignments for different sectors — auto, consumer, travel, healthcare, learning. We tend to start with the business model, whether you are an existing company trying to improve distribution channels or the onboarding of new clients, or build a brand new business, or even develop a start-up.
The business model canvas
One diagram we use regularly is the business model canvas (BMC)³ . The BMC was initially designed by Osterwalder and Pigneur in 2005 as a business framework that allows you to lay out clearly:
- your market and how you address it (customer segments, customer relationships, channels);
- what you solve with your product and/or service (value proposition);
- the resources you need to execute and create value (key activities and resources, key partners);
- how you are monetising your services, product or data (revenue streams) and what the types of costs are (costs).
Pre-COVID-19, the approach would have been to put the relevant team (or just yourself) in a room with a whiteboard, the BMC framework drawn and a stack of coloured post-its to fill in the nine rectangular sections. Today, that may prove a little harder — you may have one facilitator holding the pen and sharing a computer screen on a video call for all to comment, or, with a little training and a few dollars a month, you can subscribe to Mural⁴, designed specifically for digital collaboration and remote teamwork. The application existed before COVID-19, but surely it will be making a killing now.
Nine sections: we typically start from right to left, as the end-goal is to fulfil a market, solve a problem and create value.
- the right-hand side of the framework containing the three top sections describes the revenue generation, the segments of the market buying or influencing buyers, as well as how your company delivers the product or service and, importantly, how you can make it sustainable over time.
- the unique centre section describes the value proposition of the product or service you sell — it could be coffee capsules delivered to your home or connected home appliances to your smartphone and your shopping list.
- the left-hand side of the framework containing the three top sections describes the resources required to execute the business, either internal resources (owned) or external (partners, regulators and suppliers).
- the bottom two sections — revenue (on the right) and cost (on the left) are streams describing the different types of revenue flows, i.e. event-driven, flow, licensed, fees, rent, lease, etc.; and the costs that would typically distinguish fixed and variable costs, to emphasise the profile of your business model, i.e. asset-light or not, people-focused, volume-based, etc.
Start, learn and build your business prototype
The beauty of the model is not only the simplicity of a one-slide view shared with an informed audience or one discovering the business for the first time, but the actual process of designing the model (or acknowledging it) with your customers, partners and teammates. Universally, and as cliché as it may sound, the journey matters here as much as the end-result.
Whether you are in the design stage, thinking of a new business within your company or brainstorming a brand-new start-up, ideas flow into the conversation when a mixed group of people with common goals interact, debate and exchange with the ambition to succeed.
Similar to an OEM designing a physical product, a very first step is a prototype. A prototype to lay the foundations of an idea, to innovate, pivot, envision and enrich with more (or fewer) product features. The BMC allows you to build ’a company prototype‘, covering all revenue and costs associated to solve a problem for the target market, something you test conceptually before you put into application. Do my assumptions work? Do the economics hold? Did I cover most channels of distribution? Do I get green, amber or red lights when shifting cost variables? It is not perfect, not accurate and definitely will not scale until you test it, tweak it and start again. It is a prototype of your vision.
At Leapsight, we do not claim to have the best approach. We do, however, believe in simple and clear frameworks to exchange with our customers and partners; the business model is one of our favourites. We believe in the brutal simplicity of the visual and how it draws the entire team to discuss all key features of the company, identifying variables that need to be addressed (and going into greater detail in each section).
Whenever possible and depending on the context (!), we will always recommend that sales and marketing, finance and products join this process — nothing gets designed, sold nor valued successfully if you skip one of them.
One has to start with a vision, a common goal that the team is prepared to fight for (or sacrifice for), in order to give change the best success rate — it applies whether it is a fancy 2020 digital or a good old analogue transformation. We will dive deeper into capability modelling or how to take your prototype to a ‘minimum viable product’ in future posts — watch this space.
Lastly, some simple advice and the reason why my oldest teenager is so good at video games: for any framework, read the instructions. If it works, use it and practise, practise, practise.
Bruno Poggi
Leapsight Business Development
[1]:https://www.gartner.com/en/webinars/3994061/the-chief-sales-officer-s-leadership-vision-for-2021?
[2]: ABCD: AI, blockchain, cloud, data (big)
[3]:https://en.wikipedia.org/wiki/Business_Model_Canvas%23/media/File:Business_Model_Canvas.png
