Successful innovation happens when an individual or organisation liberates or essentially redistributes value from a competitor by solving a customer’s problem cheaper, better or faster than the competitor does. Tim Kastelle from the University of Queensland Business School argues an idea only becomes an innovation when you:
1. make it real; and
2. work out how it unlocks value.
In Australia, we have at least a couple of hundred thousand university and government researchers trying to make their ideas real and spending 13 billion dollars in the process. And, judging by the overpopulation of start-up incubators, accelerators, commercialisation managers and maker spaces there is clearly no shortage of inventors, scientists and makers with ideas they think are going to change the world either for personal or community benefit, or both.
However, we also know from extensive innovation research, the majority of the emerging ideas and innovations from both research institutions, the entrepreneurial community, and large and small corporations fail to make a sizeable impact in the idea’s targeted market. This is typically not because the idea does not deliver, but results from an inability to attract, engage or excite customers or users. There are three main reasons why this happens:
- Not enough people have the problem;
- The problem is being adequately solved already and the new idea isn’t sufficiently better to warrant changing; or
- The business model for the idea just isn’t sustainable, scalable and delivered to the right customers in the most efficient and competitive way.
Therefore the most important questions for today’s corporation trying to avoid being disrupted is the same as for the entrepreneur trying to disrupt; how do I unlock or liberate value in a sustainable and scalable way; who is my customer; and what is the problem I am solving?
Steve Blank (Lean Launchpad), Eric Reis (Lean start-up), Alexander Osterwilder (Business Model Generation), Simon Sinek (Start with Why) and Indi Young (Practical Empathy) have overtly and covertly conspired to create a new paradigm and lexicon for innovators. The combination of Business Model Canvas, Customer Development, and Agile engineering in the Lean Launchpad program is significantly changing the way innovators learn how to unlock value.
Lean Start-up, Design Thinking, Agile Engineering, Practical Empathy and Start with Why are books all about designing products and services with associated Business Models to fulfill or exploit a customer’s problem or opportunity better than the current offering.
Corporations all over the world are trying to become more entrepreneurial in order to stave off disruptive forces coming from every angle. Whereas startup founders are very different to R&D, product development or marketing professionals in corporations. But each group has a lot to learn from each other. Most startup founders see a market opportunity or insight and build, buy or rent a product or service to exploit it. That is the market pull. Whereas most corporations start with their existing product portfolio and work out how they can make minimal changes to exploit a new, but often poorly understood existing or new customer problem – product push.
Lean, Business Model Canvas and Customer Development are being embraced by both corporations and start-ups because they helps both groups stop and identify who the customer is and become a forensic expert in their pain or problem, before developing and launching their new product or service. Once customer empathy is achieved they then build a solution with an associated innovative business model. This is a lot harder for corporations as they have well established and entrenched Business Models, whereas start-up has absolute flexibility to create new Business Models. Corporations endeavouring to reinvent themselves need to be more customer-centric in their product development and also need to be more open to Business Model Innovation. For a new idea or innovation to become established in the ever-crowded market place, one must have both an innovative product or service AND an innovative business model.
The traditional way to get support for the launch of a new product or service was to sit at a desk and write a detailed business plan complete with 5-year forecasts. This has now been replaced with the Business Model Canvas combined with Customer Development because most of the assumptions made in the plan are usually WRONG. Perhaps this phenomenon is best described by Mike Tyson who famously said: “Everyone has a plan, until they get punched in the face”.