Innovative business model?
(Part 2)

BY EHSAN JAHANDARPOUR

#2: Ideation


Generating new Business Model Ideas: Ideation comes to the picture when we are thinking of designing a new and innovative business model. One of the most significant factors to design an innovative business model is having a creative process in place

A creative process not only helps you generate plenty of business model ideas, it also enables you to successfully isolate the best idea.
This creative process in startup business model design is called “ideation”.

Your new business model must be viable. To ensure its viability, you must master the art of ideation.
In the past, many industries were using a similar and dominant business model to compete against each other. However, unlike traditional approach, there are plenty of choices for your business model when you implement creative approaches tools such as ideation.
Ideation is so powerful that, today, businesses in the same niche are using different business models to serve their customers.
But there are always challenges about innovative business models.

At first, we have to come to an understanding about Business model innovation, then we can easily address the challenges.
Business model innovation is neither about past nor about competitors. 
When you look back, you rarely get any insights and indication that help you drive your business towards your future business model

Besides, business model innovation isn’t about what your competitors do too.
In fact, if you decide to copy or benchmark against any competitor’s business model, you are not innovating your business model anymore.

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Instead, what you need to do is to create a new dynamics and mechanism that add value and derive revenues.
What’s the practical way to do that? Thinking out of the box!

To be able to generate truly new ideas you ought to think out of the box and be able to ignore the status quo and park the concerns about operational issues.

What is Startup business model innovation all about?

Your business model innovation should challenge each and every orthodox you’ve previously used to design the original models.
It should lead you to innovative entrepreneurial ideas and new capabilities to:

Serve unhappy customers,
Penetrate new customer segment,
Address not-yet-discovered customer needs.
Ideation has two main phases:
“Idea generation”, where quantity if ideas matter,


“Synthesis”, in which ideas are discussed, combined, and only viable options are selected.
The first phase is crystal clear; you have to generate as many business ideas as possible.

When is come to synthesis phase and you’re trying to narrow down your options, you should bear in mind that selected options do not necessarily have to represent disruptive business models.

It all depends on what you’re trying achieve with different models of innovation. For example, you can focus on innovative business ideas that help you compete better against your direct competitors by stretching the starting points of your current business plan.

Obviously, there are many starting points to generate ideas. The easiest and most efficient practical points are: 
Epicenters, and “what if” questions.

First let’s have a look at epicenters.
Epicenters in business model innovation:

You can generate top business ideas from each building blocks of your business model canvas. It can be from one epicenter or from multiple epicenters.

In general, there are 4 epicenters of business model innovation:

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Resource-driven epicenter is used when your starting point is your existing partnership or current infrastructure and you wish to leverage on them to innovate in your business model.

Offer-driven epicenter co-relates with your value proposition and what you offer in your business. It’s all about how much you can mitigate risks, reduce costs or increase productivity.

Customer-driven epicenter is driven from your effort to address a need of a particular customer segment or industry by providing a service or product that your new customer segment couldn’t previously afford to have.

Finance-driven epicenter comes to the picture when you create an innovative revenue stream in your industry and manage to generate revenue using a totally different charging/pricing model.

One thing you must not forget is the fact that business model canvas is like a balloon. As soon as you move one element from one building block it can affect the other blocks and the entire business model.

The same principle applies to the business ideas generated from different epicenters. All of the above mentioned epicenters can be a good starting point to initiate change in your business model. Each one of them can have a powerful impact on the other eight building blocks of your business model canvas.\

Using “What-if” questions to design innovative business models.

Every entrepreneur I have ever met acknowledged that s/he had difficulty churning out innovative business models.

After probing further and asking them a few tactical questions it was obvious that the biggest challenge that prevented all of them from thinking out of the box was “the status quo”.

Believe me, sticking to “the status quo” kills imagination because it forces you to think about the current operation model, existing revenue stream, etc.

But don’t worry, there is a very powerful way to overcome this challenge and I’m going to walk you through every steps.
The first thing you need to do is to challenge every orthodox, hypothesis, and assumption around your business.

How?

By asking “what if” questions.

As soon as you start asking “what if” questions you’d be able to see that what seems impossible might be just doable. A great example of what was impossible is an amazing business model that IKEA put together to sell its DIY furniture.

You buy an un-assembled piece of furniture from a pallet in IKEA’s warehouse, bring it home and assemble it yourself using the step by step instructions that comes along side your package. Today it is a common practice, but when IKEA proposed this business model it was pretty weird.

Asking “what if questions” help you expand the limitations of your current business model.

Your “what if questions” MUST:


Challenge the conventional business models.
Provoke you and challenge the way you are thinking about running your business.
Be seen as starting point for business model innovation but not the end result.
Disturb you with an interesting yet difficult-to-execute proposition.
Challenge you to discover the business model that could make your suppositions work.
End of the day, there might still be some “what if” questions that remain unanswered because they are too provocative. On the other hand, there are other “what if” questions that just need the right business model to become reality.

Epicenters

What type of business should you run?

What If

Think outside the box

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Ideation Process

Ideation process can take several forms because it is all about innovation and using creative approaches to design a business model. I suggest you to use the Silly Cow to break the ice and take your team out of their day to day job routine.

The Silly Cow exercise might sound silly. But it’s been tested globally & has been proven to be a great practice to get everyone ready to produce innovative ideas
Here is how silly cow exercise should be done:

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Begin by asking your team to talk about the characteristics of a Cow! It could be a good breaking exercise for opening a session
Then, ask everyone to sketch 3 different business models using a picture of a cow.
The goal of this exercise is to use the characteristics of the cow and churn out an innovative business model.
It should not take long, so make sure the exercise does not exceed 3 minutes.
Once you’re done with your silly cow exercise, you can begin working on the 5 steps of the actual ideation process

Here is the breakdown of all 5 steps of ideation process:

Step #1: Gather the Troops
The first thing you should do is team composition. At this stage just be honest with yourself and answer this key question: Is our team sufficiently diverse to come up with innovative business model ideas?
Don’t be selective and form a team with diversity in terms of seniority, age, experience level, business unit represented, customer knowledge, and professional expertise. You can use these techniques when assembling a diverse team

Try to get everyone involved, not only the “creative ones” as they are human and have their blind spots too.
Don’t forget to invite those who are involved and impacted by all nine blocks of the canvas, whether Distribution Channels, Revenue Streams, or Key Resources to join the brainstorming session.

Make sure everyone knows what’s active listening. If they don’t, teach them.
Embrace Ideation as a team exercise, ask for participation and let a neutral party facilitate the process.
People, often stick to cost reduction strategy or promoting a revenue booster product. These methods have nothing to do with innovation.

Encourage your team to suggest ideas from all 9 building blocks.
Do not outsource or delegate the ideation process to your R&D unit. You can invite them to participate but it should never be in one unit’s hand!
Make your team as diverse as possible. The diversity will help you generate, discuss, and select new ideas.

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Step #2: Immersion
Once you’ve got everyone on-board, you should focus on research and data gathering, and a little bit of analysis.
The key question at this point of time should be around research areas. It’s essential to know which elements you should study before begin generating business model ideas?


Your team and you must ideally go through an immersion phase in which you’d study certain areas of your business. For instance, depending on your business objectives, you might have to look into customer behaviors or how to engage with prospects. You may also consider exploring the impacts of shifting to new technologies, and the limitation of your existing business models, etc.

There is actually no time limit you could force to finish the immersion phase as it might take as long as a few months or could be concluded in a couple of exercises such as Empathy Map.

Step #3: Expanding
The next step is to identify your starting points and learn how to expand from there.
During expansion phase you must concentrate on your starting points to generate business ideas. You must make sure that you’ve overseen all 9 building blocks of your business model canvas.

The key question should be about what business innovations can we imagine for each building block? How innovative can we be in our revenue stream, or customer relationships, etc.!
At this stage, you shouldn’t worry too much about the quality of your business model ideas because what matters now is quantity, not quality. The more business ideas you have the better, so don’t criticize the ideas too early, instead, focus on brainstorming and record all ideas.

Brainstorming is a process where people share their ideas on how to achieve certain goals and objectives. It is imperative that a brainstorming session is well facilitated, otherwise it could be a complete disaster and waste of time.

Here are some great tips to conduct a brainstorming session:

Start with Problem statement and make it very clear to everyone. The objective of your brainstorming session is to find ideas that can result in addressing the problem statement. In this case where we are looking for ideas for business model innovation, your problem statement should be about addressing customer’s needs and desires.

Stay Focused! Keep the brainstorming session towards the right direction.
If the discussion is dragged or strays from its intended direction, you should pause, step back, and bring the team member’s attention to your problem statement.
Make sure you clarify and enforce the brainstorming rules beforehand. 

Here are a few general rules you can implement:
Defer Judgment
One conventional at a time
Quantity matters
Be as visual as possible
Encourage out of the box ideas
Always use sticky notes (also known as post-it™ notes) and write or sketch on them. This way you can easily move ideas around or even take the off the canvas, if necessary.

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Step #4: Criteria selection
Now that your brainstorming session is over, you should have lots of ideas to refer too. Having lots of ideas might be confusing, that’s why the next step is to prioritize them using critical criteria.

Your primary concern should be about figuring out the most important criteria for prioritizing your business model ideas?
The rule of thumb is defining criteria is to select a few manageable ideas that are related to the context of your business.
Then depending on your objective, you can now consider choosing factors such as execution and delivery time, ROI, and competitive advantages, etc.

It’s absolutely necessary to include factors that might enthuse your customers not to accept your new business model easily?

Step #5: Prototyping
Now that you have shortlisted a few ideas, it’s time to get to the bottom of it.

Since you have defined your criteria in the previous stage, and you have compared the shortlisted business models you can reduce the number of business model ideas to minimum 3 and maximum 5 potential business models.


Prepare the business model for each shortlisted idea and start compering them. You must at least know how do these business models look like. This is where you can choose which business model innovation you should be focusing on...

Brainstorm

No idea is ever stupid

Prototype

Keep track of your versions & get to work

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