By: Caspar van Rijnbach
To be successful in radical business model innovation requires companies to go beyond the traditional modeling: ideas are only one part of the innovation equation. Business model implementation requires structural changes in your organization; otherwise, you will just get stuck with a beautiful model on paper.
As many will remember, the late 90s and early 00s were exciting times. With the internet booming (or bubbling as you may say), new business development and business model innovation were “in”, not only at start ups, but also at large corporations, such as Shell, where I worked at the time. Together with me tens of people from different areas of the company, received the opportunity to work together with the Shell Gamechanger to develop new ideas for the internet. We went into sessions to learn about new business model innovation, so we could create great new ideas.
And some great new ideas came out. After being judged by a high level executive committee, several ideas were approved, and some even received funding. Unfortunately, not many of the ideas were ultimately implemented. Some moved on to further development, but many were lost in the process.
There are several reasons why great radical ideas do not get implemented.
Does this sound familiar to you? Well, many companies face this challenge. When asked, executives general state two issues about business innovation: either their front end is not working: they produce only few or no real great ideas; or their back end fails: they have various great ideas, but they are not able to implement them. The first issue is much spoken about, but the second requires just as much, if not more attention.
There are several reasons that great radical ideas do not get implemented. Some ideas are de-prioritized, due to short term, more urgent, goals and then, unfortunately, forgotten. Some other ideas get “lost” in consolidation: seeing the potentially of the idea, the idea is integrated with other, also very promising ideas. But, by becoming too big, these ideas needed bigger budgets, higher level decision making and this way many just got stalled. Individually, they might have moved on, but as an integrated whole, they were not prioritized. Furthermore, there is the human resource issue.
Often, business modelers have their daily jobs, and although passionate about innovation, people need real time (not 5-10%!) for implementation of a new model. Last, but certainly not least, some ideas require radical changes in the company’s infrastructure. And this will find the biggest resistance.
In the end it is all interconnected: if your back end is not prepared, great ideas will be quickly de-prioritized in the front end of innovation and therefore will not even be heard in the organization. And even if they are prioritized, they will get stuck immediately, because the company does not have the knowledge, the processes, the resources or the infrastructure required to bring radical new ideas to implementation.
Implementing radically new ideas
Implementing radically new ideas is quite different than implementing incremental ideas. It requires:
- Lots of experimenting: new business models need maturing and many times the model you designed initially, will not be the model you will implement. And as a client at Delphi last week confirmed again, constant customer interaction is crucial to implementing a successful model – testing his model with one of his preferential customers and adjusting it time after time helped the company to create a great customer value proposition that is now being bought by other clients;
- Dedicated human resources with different skills, different knowledge and with little attachment to the current business or business model. Unless your current business is failing, few people will want to risk their current success for an unkown future. Hire the market specialists required to set up this radical new model. Current staff can be allocated, if your model is not radically different from the business you are in now;
- Separated structure from your current model. Although synergy is recommendable when it benefits the new model, many times companies try to squeeze the new model into the old framework. If you go from a B2B to a B2C market, for example, it is obvious chances are little you can use the same distribution channels or decision making models. Equally, when you go from high volume to low volume sales, you will have some serious difficulties to convince your Chief Operating Officer to chance his factories in favor of the new model;
- Funding as a venture capitalist. New ventures and new business models need capital, not budgets; The yearly budget cycle will: set aside too little money for great ideas, too much for unsuccessful ideas, none for great ideas that pop up during the year;
Consistently preparing your company for implementation is more important than many executives think. Several other key elements can be mentioned. What are to you the crucial elements to successfully implement new businesses and new business models in a consistent manner?
About the author
Caspar van Rijnbach, Dutch from origin, lives and works in São Paulo where he is an Executive Director at Ernst & Young’s Advisory. Passionate about Innovation, he has been working as a consultant for over a decade with large Brazilian companies and multinationals to improve their capabilities in innovation and knowledge management.
Caspar is author and co-author of several books and articles about innovation, some of them published internationally and others in Brazil, in Portuguese. Also, he has given classes at renowned universities in Brazil, spoken at both national and international conferences and has lead many in-company courses.