2 :: Business Model Design

🚪TL;DR:

A big part of traditional business models are obsolete. They were designed for a different society, with different generations of consumers and different consumption habits. Gen Ziers are more digital, less brand loyal, and more impact-driven than ever. We have different yet demanding expectations, so no large-scale company can rely solely on one same-as-ever business model if they want to stay competitive and sustainable in the long term. And it’s not like this is breaking news to any business leader - in the past decade almost every company has defined a strategy to adopt new business models. Besides living it at P&G now, I’ve worked directly with corporate innovation projects from companies like The Navigator Company or EDP, as well as some Fortune 500, in joint innovation programs with AWS, and all of them are committed to it. But progress seems to be slow and inconsistent in most, so the opportunity ahead is still at the earliest stages of exploration: there are too many new business models to identify, test, and integrate across the board.

🧠 What is it?
Let’s start with what it is not. It is not about the offline-online dichotomy. Not anymore. It is also not only about AI. Even though that’s unavoidable, as we’ve seen in the previous issue. A new business model is a system to create, deliver, and capture value for the business that is different from the existing ones. According to the Business Model Canvas, still my favorite framework to quickly think about and design new business models, this system contains 9 main components: value proposition, customer segments, channels, customer relationships, revenue streams, cost structure, key resources, key activities, and key partnerships - and all of them should contribute to a problem-solution fit first and a product-market fit after. Some quite popular examples of business models these days include subscription-based and freemium models (with SaaS being the most typical use case), marketplaces or aggregators (like Amazon or Uber), or peer-to-peer platforms (like Airbnb) but the list is almost infinite.

📦 Why is it relevant?
Developing new products and services from new value-creation systems that address new market needs is at the core of the role of a CINO (or any innovator, really). New business models can emerge from a wide range of sources, but it is definitely innovation’s responsibility to not only adapt to changing environments (shifts in technology, regulations, or market conditions) but also to recognize opportunities while discovering new competitive advantages and growth strategies. The responsibility also entails the implementation of a proper mechanism that enables finding, all the way down to adopting a new business model - hence the need to deeply understand what a business model is, how to develop new ones, how to navigate existing ones, and how to decide which one is the best for each innovation.

🧶 Where to learn more about it:
Alex Osterwalder is the creator of the Business Model Canvas and his book Business Model Generator explaining how to leverage it is a must to learn more about the topic. At strategyzer.com you’ll also find a lot of other cool tools and content to further explore it. The podcast How I Built This with Guy Raz is another incredibly valuable source of insights about different business models and their ins and outs that I cannot recommend enough.

See you next Tuesday! 👋

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