Innovation is the key to progress, or so they say. Innovation is also extremely important in a business that is a social business. But innovation is hard to do, and many business owners do not know where to start. Greg Satell (2014) of Digital Tonto offers some helpful advice in this regard about how to innovate your business model that can be very useful for social businesses. Satell offers advice in five not-so-easy steps that business owners can undertake to become innovative.
Transforming a business model is sometimes critical to survival. Satell explains that this was indeed true in the case of Xerox, demonstrating how this organisation developed amazing technology that no one wanted to buy. A brainwave was had at Xerox and the company started offering machines to rent. The rest is history. But how can you change your business model innovatively to succeed?
Stop Planning and Start Preparing
According to Satell the first essential step is to stop planning but at the same time start preparing. Planning was great in the post-war years, argues Satell. A group of people at the top carried out strategic planning exercises. Then a plan was developed and people lower down began implementing the strategy. However, things have moved on. The strategic planning process is flawed, argues Satell. Not least because by the time the strategic plan starts to get disseminated to the team it is already out of date. Satell instead opines that preparing is better. Planning creates opportunities for early decision making but preparation for what is to come creates the abilities and competencies to be able to succeed. It is this that provides the flexibility and adaptability that organisations need to be able to innovate.
How do you create, deliver and capture value?
The second step advocated by Greg Satell is to: “Think about how you create, deliver and capture value.” As Satell explains, a business plan carries out copious projections and estimates but this is not needed for a business model. Instead, a business model requires simply understanding how value will be created, delivered and captured. Satell believes that those that can leverage these three factors will be best prepared for innovation. One of the challenges outlined by Satell in this regard is that business models need to be continually changing for the organisation to be able to succeed. That is because business models are no longer lasting for very long. This requires questioning of how value could be delivered or captured in a different way.
Produce a minimally viable product with a business model canvas
The third important step to be able to innovate business models that is proposed by Satell is the goal of producing a minimally viable product with a business model canvas. The minimally viable part is important because it allows a speeding up of the development process. These types of products as Satell explains do not “set the world on fire” but they do launch in time to be able to meet customer needs. The problem with developing an all-singing-all-dancing product is that project timelines become extended and by the time the product gets to market customers are already looking for something else. Minimally viable products address this problem by cutting back on development time and getting a product out there in the market at the time that it is actually needed and relevant. It can then be iterated on if need be. The business model canvas is an approach developed by Alex Osterwalder that can help to achieve this.
Scaling in a smart way
Scaling smart is the fourth step underlined by Satell. The problem is that introducing scale is hard, and if it is not done in the right way it can mean the end for a business. The challenge is, as Satell explains that bringing in more people and resources to be able to meet demand for the product often leads to performance degrading. Satell argues that instead of focusing on employee handbooks and rules, it is instead better to put the logic of the business model out there among employees for all to understand and then to let the team figure out how goals can be achieved. He states that there is no denying that this is difficult, but at the same time this is what needs to be done to succeed.
Are you ready to fail?
Finally, preparing to fail is the last step. While it may seem to be rather negative, knowing how to fail and then how to get back on your feet again is essential to succeed in a business world of continual change. As Satell points out, all business models will ultimately fail. This is not something to be mourned, rather business owners need to be experimenting with new ideas all of the time. In this way getting ready to fail is essential.
Paula Newton is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Paula’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Paula has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Paula has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.