Be the disrupter, not the disrupted
To Saul Kaplan, a business model is “the story of how an organization creates, delivers, and captures value.” But in today’s world of constant disruption, that static business model could also lead to an organization’s demise.
Kaplan is the founder of the Business Innovation Factory and author of “The Business Model Innovation Factory,” which explores the concept of “connected adjacencies” when considering how to transform an organization’s business model. In it, he says a static business model is a threat to a company’s health. If competitors find a better way to create, deliver and capture value for your customers your organization will inevitably lose relevance. Just look at what happened to Blockbuster when Netflix hit the market.
Kaplan’s answer to avoid becoming irrelevant or being “Netflixed” is business model innovation. Innovating a business model can be done in two ways: incremental and transformational.
Incremental innovation is the small tweaks, while transformational requires completely changing your model to take an entirely new and better approach. Kaplan feels incremental innovation only gets an organization part of the way to market success; for a business to truly innovate it must also be capable of designing, prototyping and experimenting in the real world with entirely new business models.
“You must change the lens and refocus on the customer experience,” Kaplan said.
He recommends engaging an outside network to inform and support the business model innovation process. Constant real world trials and experiments will lead to faster failures and therefore faster adjustments, according to Kaplan.
Like any innovation, a transformed business model idea must be prototyped and tested to determine its potential success. There’s also a tension at play: while testing this new model an organization must continue its core activities uninterrupted.
So how do you test a new business model while sustaining the current one? Kaplan suggests facilitating a connected adjacency, or “sandbox,” in which new business model ideas can be tested while the organization still maintains its core activity. In this environment, ideas can be tested quickly and adjusted without the red tape of approvals from different levels of management.
The sandbox needs to stay connected with the core activity so once a new model makes sense to scale, the organization’s talent can be integrated seamlessly. Further, the connected adjacency should continue to experiment with new business models on an ongoing basis.
The key, Kaplan says, is to anticipate what could replace or disrupt your current business model by always experimenting with new ones. It’s better to be the disrupter than the disrupted.