In this interview, Dr. Alexander Osterwalder, Author and Co-Founder of Strategyzer, discusses what he believes to be the essential success factors of innovation and why his Business Model Canvas has become such a popular tool for organisations today.

Innoboard: There is no consistent definition of innovation. Every industry and every department perceive it differently. How do you define innovation?

Dr. Osterwalder: Most people think technology and R&D when they say innovation, but there are different types of innovation, like process innovation, technology innovation, product innovation, or business model innovation. Innovation simply means doing things differently and normally better in one of these areas.

The area I focus on most is Business Model Innovation, Value Proposition Design, and Management Innovation. By the way sometimes you don’t even need new technologies to innovate. Think of the Nintendo Wii. With an inferior console and a better business model they profitably concurred the market of casual gamers starting in 2006.

When technology is involved, Business Model Innovation may leverage it. Think of Nespresso. It’s only when they found the right business model that their single-portioned coffee machines and the pods really took off.

You developed the well-known business model canvas which is used in theory and practice all over the world. Why has this business model canvas become so popular in contrast to many other business model frameworks? Which success factors can be derived for developing a generic model?

I believe it was more successful than other frameworks because we turned the concept from my PhD research into a visual and insanely simple and practical tool. Business people don’t want to learn complicated tools. Business tools are only adopted and spread when they are simple, practical and solve a real job or challenge that business people are concerned about. We applied the same principles to the Value Proposition Canvas and the Culture Map, two other tools that spread like wildfire because they are simple, practical, and address a relevant challenge.

How can the business model canvas support innovation?

The trick is to not get stuck in analysis paralysis, but test your ideas as rapidly as possible.

It allows innovators to shape and prototype their ideas and formulate hypotheses that need to be tested. You will make many Business Model Canvases and throw many of them away on your journey from idea to real business. The trick is to not get stuck in analysis paralysis, but test your ideas as rapidly as possible. For example, you should have the willingness-to-pay conversation with your customers very early when you are designing a new value proposition. Else, you risk making stuff nobody wants or that customers aren’t willing to pay for.

Your book Business Model Generation was co-created by 470 strategy practitioners. How did you establish such a community? In what way have these persons contributed to the book’s success?

We published each raw book chunk on a platform where these 470 people could provide feedback. In other words, we stress-tested every single part of the book. This lead to great conversations and ultimately a stronger book. People were so excited to participate that they even paid us. The first ones paid 24.- USD and the last ones had to pay 250.- USD to get their name into the book.

In your opinion, which are the three most essential success factors for innovation?

  1. Don’t fall in love with your first ideas and NEVER stick to a business plan because your idea will change when you test it.
  2. Explore many, many, different alternative value propositions and business models just like architects explore different designs.
  3. Test quickly and cheaply from the very beginning. When you start out uncertainty and risk is at its maximum, so your tests should be cheap and fast, because you’ll inevitably get it wrong. The more you learn from cheap failure, the more you reduce uncertainty and risk, the more you can invest in more expensive tests until you have enough evidence to execute your idea.

What is your personal goal regarding innovation for the next 12 months?

We want to get more companies to use our Strategyzer software and tools in their efforts to design new value propositions, business models and growth engines. We innovate to help innovate. Ultimately, we hope to design the Strategic Operating System for Fortune500 companies. This will be software that powers strategy and innovation in leading companies around the world! We won’t be able to do that in 12 months, of course…

About Dr. Alexander Osterwalder

Entrepreneur & Leadership Coach; Innovation & Entrepreneurship Expert; Inventor of Business Model Canvas; Founder of Strategyzer

Osterwalder invented the “Business Model Canvas,” a strategic management tool to design, test, build and manage business models. The tool – successfully used by such leading organizations as Coca Cola, GE, P&G, Mastercard, Ericsson, LEGO and 3M – is detailed in his first book, international best-seller “Business Model Generation” (Wiley, 2010). Crafted alongside Professor Yves Pigneur, Osterwalder’s long-time co-author and former PhD supervisor, as well as 470 collaborators from 45 countries, the book was initially self-published in 2009 with an innovative crowd-funded business model. The book was named among the 12 best business books of all time by USA Today. More recently, Osterwalder published “Value Proposition Design: How to Create Products and Services Customers Want” (Wiley, 2015), which explains how to gain greater fit between a product and its intended market.

A passionate entrepreneur and in-demand speaker and leadership coach, Osterwalder won the 2015 strategy award by Thinkers50; he ranks high (#15) among the leading business thinkers of the world. In 2013 he won the inaugural Innovation Luminary Award by the European Union.

Osterwalder is a frequent keynote speaker at Fortune 500 companies and has held guest lectures in top universities around the world, including Wharton, Stanford, Berkeley, IESE, MIT, KAUST and IMD. He holds a PhD from HEC Lausanne, Switzerland, and he is a founding member of The Constellation, a global not-for-profit organization aiming to make HIV/AIDS and Malaria history.

This interview was first published at Innoboard, a leading Innovation blog with a European perspective.