The Business Model Innovation Factory

The path to inspiration is through storytelling, one of the most important tools for any business model innovator. It's the best way to create emotional connections to new business model concepts and innovations.

Fifteen business model innovation principles are organized into three main themes: Connect, Inspire, Transform. Business model innovation is a team sport. It's bigger than any one of us. It's a collaborative act and connections are key. It requires all of us to build stronger collaboration muscle. The best value-creating opportunities are in the gray areas between us.

Marketing guru and Harvard Business School (HBS) professor Theodore Levitt first introduced us to the jobs-to-be-done approach to define a company's value proposition. He famously proclaimed in 1975, “People don't want a quarter-inch drill, they want a quarter-inch hole.” Levitt taught us value is in the eye of the customer and companies should define how they create value in the context of customer needs and problem solving. Innovation expert and HBS professor Clayton Christensen has been a consistent advocate for using a jobs-to-be-done approach to initiate any innovation process. Christensen and the consulting team at the firm he founded, Innosight, kick off innovation engagements by having clients answer the basic question, what fundamental problem is your customer trying to solve?
In his MBA class and outside speaking engagements Christensen drives home the importance of developing a deep understanding of the jobs customers are trying to do to shape every value proposition. He brings the jobs-to-be-done idea to life by sharing the story of a restaurant chain that wants to sell more milkshakes. The restaurant chain did extensive market research and segmented the milkshake market every imaginable way. They tried segmenting the market by product characteristic and by customer demographic with no success. They then began to look at the milkshake market not through the lens of the company but through the lens of the customer. The key question was, what job were customers hiring a milkshake to do? The answer surprised the company. It turned out 40 percent of the milkshakes were bought to-go by commuters first thing in the morning.
By closely observing customers it became clear that they were hiring the milkshake to last for their entire boring commute. They weren't hiring the milkshake instead of another drink. The milkshake was a substitute for a bagel or a doughnut. It was less messy and lasted for the entire commute. Armed with a new perspective gained only by deeply understanding the job that the customer was hiring a milkshake for the company could then improve both the product and its value proposition. Milkshake sales went up.

That all changed in 1997, when Reed Hastings got pissed off because he was charged a late fee by Blockbuster after failing to return the movie Apollo 13 within the due date. Turns out, Reed Hastings was not alone in hating to pay Blockbuster's late fees.

Once you have a good list of core capabilities and key enablers the next step in developing your business model story is to create an operating model picture that describes how core capabilities relate to each other and must be integrated to deliver customer value.

One of my favorite ways to describe how a business model creates value is by first answering the question, what is the job the customer is hiring your company, product, or service to do

The story of your current business model can be constructed by answering three basic questions:
1. How does your organization create value?
2. How does your organization deliver value?
3. How does your organization capture value?

A business model is a story about how an organization creates, delivers, and captures value.

Before you can create a business model innovation factory the first step is to understand the basic components of a business model and to clearly articulate and map your current business model.

A successful business model innovation factory has the freedom and access to the resources it needs to explore even those business models that might disrupt the current one.