Decision Model Innovation: An Introduction

In the future, I will write in this newsletter about a concept I have developed over the last couple of years: "Decision Model Innovation."

You might ask: What is Decision Model Innovation?

To be honest, at the beginning of my journey, I wasn't sure what it actually represented as a concept. The only thing I knew was that even companies with innovative products & services were increasingly facing the challenge to differentiate themselves from their competitors for several reasons including:

• Digitization lead to increased market transparency (among others).
• Robotics (production process automation) lead to increased product quality in emerging markets while Machine Learning (cognitive process automation) improved engineering service quality around (among others).
• Access-based business models (e.g. in the form of the sharing economy) decreased the potential of branding for most established companies to differentiate from competitors (among others).

In a nutshell, these developments lead to a slowly growing COMMODITIZATION of all sorts of products and services (even innovative ones) because most customer segments were not interested in classic product or service improvements anymore (it's basically Clayton Christensen's "The Innovator's Dilemma " revisited).

In this situation, many companies and clients of mine slowly started to realize that they can't differentiate themselves through classic product/service, process or even business model innovation anymore (only). This is when I developed the concept of Decision Model Innovation as an additional perspective on how to innovate products, services, processes or even business models based on the logic of DECISION INTELLIGENCE .

Decision Intelligence is a concept that I have been working on since 2014 with a few others. Google only picked it up in 2018 , Gartner Group from 2020 onwards with many others now trying to position themselves in this space. In short, Google defines Decision Intelligence as "the discipline of turning information into better actions at any scale ” while I define it as "the ability of organizations and people to apply different filters along the Data-to-Action value chain to make better decisions".

While Decision Intelligence as a approach aims at making better decisions in any area, Decision Model Innovation focuses on the Value Proposition perspective of this kind of thinking. Thus:

"Decision Model Innovation is the combination of Decision Intelligence & Customer Centricity"

That's why it is so difficult to compare or differentiate it from existing concepts such as product, process or business model innovation. You can create a Decision Model Innovation outcome via product, process or business model innovation. You can apply Design Thinking, the Blue Ocean Concept or any innovation development concept. The only thing that Decision Model Innovation requires is that you put the DECISION MAKING CHALLENGES of your customers at the center of your Value Proposition.

Let me be clear, I am not proposing that Decision Model Innovation is the solution to all problems that companies are challenged with when facing increasingly commoditized markets but:

"Decision Model Innovation is a way to differentiate companies from their competitors in increasingly commoditzed markets"

A Decision Model Innovation Example

Okay, what does this mean in the harsh and brutal reality of the corporate world? Let me give you an example. Imagine you driving from Mildura (Victoria) to Berri (South Australia) and after 20 kilometer your oil lamp lights up - just in time to exit the road and drive to the next petrol station (the only one in the area) and you find this assortment of engine oils:

Once you have entered the petrol station and face this wide selection of engine oils, which one do you pick? The brand you know, the most expensive, the cheapest, something in between? You go and ask the cashier?

The average car owner most likely doesn't know what kind of engine oil is optimal for the cars they drive. So, do they simply go for the most expensive one as the price differences are not so high compared to the importance of the right engine oil for the longlivability of the car's engine? Or do they try to figure out what is the best engine oil for their specific car's engine by comparing what is written in the car's manual and on the oil cans on the shelf?...and do they even know what to look for in terms of information?

As a result, we can conclude that the car owner's real decision-making challenge is not to pick between brands or compare prices but to find the most suitable engine oil for their specific car (engine oils representing a highly commoditized market). However, this process is quite tedious for most car owners!

What are the implications from a Decision Model Innovation? How would you approach this challenge from a oil engine seller's perspective?

This is what Castrol did:

In short, if you are not sure which engine oil is the best for your car, you can simply send your registration info (i.e. plate number) to Castrol's platform which is connected to the official and publicly accessible database where plate numbers provide you the following info about the car (not the owner): Make, Model, Colour, Shape, Manufacture year, Tare weight, Gross vehicle mass. This is sufficient to connect it then with other databases where Castrol's solution sources the specific engine information from each car manuacturer in order to make the necessary engine oil recommendation - obviously out of Castrol's product selection!

What are the lessons learned from this story?

• Engine oils are certainly an example of a highly commoditized product but the same Decision Model Innovation logic applies to much less commoditized products and services (more in future newsletter issues).
• With Castrol's Rego2Oil offering, they managed to differentiate themselves again from their competitors through a Decision Model Innovation approach - putting their customers' real decision-making challenge at the center of their value proposition.
• Decision Model Innovation requires companies to integrate (rather than innovate) different technologies along the data value chain to support their customers' decision-making challenges.

How does your company put your customers' key decision-making challenges into the center of your value proposition?

I want to thank SatSure for its continued support of this newsletter. SatSure is a great example of how Decision Model Innovation can lead to competitive solutions!