The vulnerability of business models

The vulnerability of business models

The Business Model Innovation Factory (BMIF) is the book we often use to explain and show why innovation does not work. Why this book and what can you learn from it?

Fundamental innovation

First of all, it takes a fundamental approach to innovation, using the business model at its core. The premise of the book is that every business model can and will be “Netflixed”. Blockbuster, HMV, Sony, Kodak have all seen their business model destroyed. All business models are vulnerable. Your business model will be destroyed too.

Tweaking is not enough. Incremental change is not enough. Innovation in the context of your current business model is not enough. You have to go radical.

Why does innovation not work for most companies?

BMIF gives a few reasons why innovation does not work. Starting with the word “innovation” itself. The word is polluted and means too many things to too may people.

So why doesn’t innovation work?:

• It is the death by 1000 initiatives.
• It is because the CEO is not really behind it.
• It is because of the IT legacy systems.
• It is because cannibalisation is not allowed (what being “Netflixed is all about).
• It is about shooting the mavericks and renegades.
• It is because the ROI on innovation is assessed according to the current business model.
• It is because design thinking is not part of the approach.
• It is because experimenting in the real world is not allowed.

Refurbishing your house

The book uses the analogy of builders refurbishing your house. People who have done that and decided to stay in the house with the builders, know it is near impossible. You are camping in the kitchen, the heat does not work, the internet is down, and it is full disruption. The same goes for innovation.

Making innovation work

Real innovation needs full and unequivocal support from the senior management team. It needs to be kept independent from line managers. It needs to be a separate business unit (the Amazon Kindle is a shining example of how that can work), reporting directly to the CEO. The unit will need to ignore the current business model, ignore the legacy systems and hang out and collaborate on the edges.

Staffed by external people as well as internal staff who are willing to experiment and learn and operate as a lean start up.

In between this very solid advice the book also investigates the way that just as business life cycles are speeding up, so are career life cycles. During your career, you will need to reinvent yourself regularly.

Ron Immink is the CEO and co-founder of Small Business Can and Book Buzz — the website devoted to business books.