Strategy Tools for Business Model Innovation — Simplifying the Complex

Today, more and more established companies are seeing their traditional business models come under attack, and Malaysian businesses are no exception.

Take a quick look around and you’ll see many of today’s traditional industries in danger — newspapers, taxis, banks, coal, oil and gas companies, brick-and-mortar stores, and many more.

Mature companies now are under even greater pressure to take a deep look at their business models and seek innovation.

— but how?

Our work with companies across the globe and industries suggests that with the right training, tools, and structure, any organization can successfully drive corporate entrepreneurship and seize new growth opportunities.

In August, in partnership with TNB ILSAS, our team will be heading to Kuala Lumpur to run our first public programme — Business Innovation Bootcamp 2017, a format previously available only to clients in-house.

Business Innovation Bootcamp 2017 will be led by Norwegian strategy and innovation expert and strategy tool designer Christian Rangen, as well as German visual facilitator and co-author of Creating Innovation, Holger Nils Pohl.

As the programme draws closer, we spoke to Rangen and Pohl about the upcoming Bootcamp and their insights from years of helping companies succeed at business model innovation.

For the uninitiated, could you explain what business model innovation is?

CHRISTIAN RANGEN: A lot of companies talk about innovation, although they don’t always know what they mean by it.

For some it’s a new product or service, for others it’s technology driven, some are market driven. For really advanced companies, they realize that what they’re trying to achieve is trying to come up with one or several new business models. There’s significant complexity in business model innovation, versus just another product or just another service.

Business Model Innovation, can be explained with the questions, “how can we either improve what we do today?” and even more so, “how can we come up with completely new ways of creating value that’s far outside of our old legacy business?” 

HOLGER NILS POHL: The concept of business model generation / design, is that you have a tool which, on a single page, explains how your business model works and how you can create value for your company.

What’s very interesting is that sometimes when you are searching for a new business model, you end up finding a new market innovation.

Why should leaders of large, stable companies explore and test new business models?

CHRISTIAN RANGEN: (laughs) First of all, there’s no such thing as stable.

A lot of executives in a lot of industries have gotten used to what we call “a perception of stability”, they think it’s a stable business, but in our experience, and we’ve done a lot of work around this, is that they just aren’t paying attention to what’s happening around them.

One of our big building blocks is that there’s no such thing as stability. 

HOLGER NILS POHL: It’s what I like to call “The Turkey Effect”. The turkey thinks everything is going great, and he’s being fed well. He grows and grows, getting fatter and fatter, and all of a sudden it’s thanksgiving. (chuckles) And the turkey is gone.

It’s the same for companies feeling that their market is stable. Suddenly there comes a shift they can’t foresee, like the turkey at thanksgiving, and they’re dead.

CHRISTIAN RANGEN: If you look at the big industries in Malaysia, like the energy industry — most of it is legacy infrastructure and coal, and that’s not very helpful in an environment that’s moving towards clean and renewables.

Look at finance – we have yet to find any significant FinTech startup coming out of Malaysia, although that is kind of where the industry is moving.

Look at some of the government-linked companies that are now trying to reinvent and transform, they’re still not globally visible.

I believe Malaysia has significantly space to grow in their innovation capabilities in the years to come.

What would you say are the key ingredients for business model innovation success?

HOLGER NILS POHL: Awareness. A lot of people feel like they have to do business model innovation, but they’re not aware of what that actually consists of.

CHRISTIAN RANGEN: There are two answers.

One – “do we want to or do we need to?” That’s really the starting point.

If companies really want to, and they have a strategy, a structure, a team, capabilities and funding in place, they have a much higher chance for success. If it is a company that has to, it’s probably too late already. They will suffer a really hard time, because they’ll probably be downsizing while also doing this. 

As Jack Ma of Alibaba he has a quote -- “I like to fix the roof on sunny days”. You should be doing business model innovation as a natural part of running the company, not when you’re thrown in a stressful and negative situation.

Two – “Do you have a mandate to experiment and try new things?”

What Holger and I find is that people are very busy.

“We’re not allowed to do it, we can’t do it, nobody has the time and resources to do it.”

If you have zero capacity for experiment and testing new things, then nothing can happen. 

If we look at Malaysia, it’s interesting to see what the majority of companies are planning to do in the coming years — are they planning to stay in Malaysia and try to defend the market position that they have, run their legacy business and shield the way from global competition? That’s a rather passive reactive strategy to take.

Or are they actively expanding to new products, services, markets, geographies and partnerships? And of course, business models that’ll take them into entirely new areas where they’ll need new skills and capabilities?

We haven’t seen all that many Malaysian companies go on shopping sprees for startups or doing stuff that’s outside of Malaysia. It’s happening, but ideally it’d be good to see more of that — faster global growth coming out of Malaysian companies.

HOLGER NILS POHL: There’s also a great deal of company culture in it — if you don’t manage to adapt your company culture to innovation, or at least in the direction of innovation, you will not succeed. Culture is about habits and behaviors, which are difficult to change for ourselves, much more for an entire company.

You need to look into how you can provide a safe space for the company that leads to innovation.

Chris, you’re the co-creator of several strategy tools for business model innovation, could you explain how that helps?

CHRISTIAN RANGEN: Most companies and executives very often feel that strategy is a very complex and difficult exercise. It can be but it doesn’t have to be. For most companies, there’s a huge benefit in simplifying and visualizing strategy. Holger’s been working on this for a number of years.

Many companies get stuck running the business and focusing, whether they like it or not, on the core business.

The entire body of strategy tools that we’ve developed is to help take companies outside of looking at their core, either to come up with new ideas like The Innovation Pyramid, build innovation portfolios like the Strategic Innovation Canvas, or to help accelerate their transformation program, like the Transformation Test / Transformation Architecture.

You can do strategy really difficult, like really heavy textbooks etc, but we don’t have to, and really, we shouldn’t. And that’s why we have designed and will continue to design new simple, visual strategy tools.

Holger, you’ve spent a number of years visually facilitating difficult strategic discussions within companies across the globe — what exactly does that do?

HOLGER NILS POHL: The moment you put visuals in the rooms; which might be visual tools like what Christian Rangen develops or my drawings, you create something tangible in the room – I call them artifacts.

That is something that people can relate to when they discuss something that is quite abstract, like strategy, mission, vision, and business models.

These are all abstract concepts where people try to imagine what they’re talking about and trying to keep in mind what they’ve already talked about an hour ago. That’s quite difficult because it’s so complex.

When you attach a visual to the message, you help people immediately recognize what they’ve talked about and see the connections between different times during a discussion or workshop.

People can really put the pieces together and work more efficiently. 

You also enhance the ability to remember stuff quite dramatically by using visuals. In 1969, Edgar Dale, the father of modern education, found that people generally remember only 10% of what they read, vs 50% of what they see after two weeks.

When you are telling your employees your new strategy, you want them to remember the bulk of it, not 10% – and that’s where visuals come into play.

Could you share any examples of companies that have found success using strategy tools?

CHRISTIAN RANGEN: We’ve seen first hand what can happen when you put the right people in the room, give them short intros to the strategy tools and let them work on their own company strategy. 

Some of the examples that we can speak openly about is Statoil. Statoil has significantly changed how they worked with strategy internally, after they learned how to use some of the strategy tools.

We have global pharmaceutical companies, FMCG and energy companies using our tools. We see that the strategy tools are applicable across different countries and industries.

HOLGER NILS POHL: The tools can really speed up processes, help companies go to market faster, and make informed decisions. A lot of companies realized that after going through a workshop and learning to use the tools, they now have a common language to work with.

CHRISTIAN RANGEN: It’s important to note that the upcoming Business Innovation Bootcamp is not a one-day “oh-this-was-a-fun-exercise” kind of activity. It’s really building deep organizational capability, deep organizational learning. For many executives, board members, and senior leaders, this is a new language for business.

What would your advice be to companies looking to create a sustainable innovation capability?

CHRISTIAN RANGEN: It starts with what’s your innovation strategy – and when it comes to that, most companies would say, “what do you mean?”, some would say, “we don’t have one”, some would say “we have one but it’s kinda not working, it’s hidden”, and some would say, “yes, we have a fully developed innovation strategy and we know exactly how it’s working.”

Some of the projects we do is helping companies build entry level innovation strategies – starting point, simple stuff.

We are going to cover this on the afternoon of Day 1 in the Business Innovation Bootcamp: an entry-level and simple look at what your innovation strategy is. 

HOLGER NILS POHL: If you know what your innovation strategy is, you can set up a company structure for sustainable innovation.

Until recently, most companies in Malaysia have enjoyed a stable business track. However, the market is changing rapidly, and many business models are no longer viable. How should businesses respond?

CHRISTIAN RANGEN: (chuckles) I’m going to quote the Prime Minister, Najib Razak, “more Malaysian companies need to reinvent and transform.”

Increasingly, Malaysian companies are competing on the global market, and barriers to entry, geography, local taxes and customs are falling away.

We can reasonably assume that half of the large Malaysian companies will be gone in the next 15 years, unless they get much better at business model innovation. 

HOLGER NILS POHL: It’s also important to understand and be aware that all big startups don’t care about rules. They aren’t bound by industry norms, and that’s the big difference between established, mature companies, and startups. They don’t care. There’s no such thing as, “but this is not allowed, they can’t do it!”.

What would be the biggest takeaways from attending the Business Innovation Bootcamp 2017?

CHRISTIAN RANGEN: In the past workshops that we’ve run, people usually leave feeling energized, ready to go innovate in their home environments, home turf.

If we can send a few hundred people back to their home base with weapons and tools for innovation, that’s really the big takeaway. They’ll have a very enjoyable and energizing workshop, but it’s really what happens after that makes a difference. 

People will leave with tools and inspiration for creating new ideas and business innovation. 

They’ll leave with not just theoretical examples, but actual examples for themselves that they’ve developed in those two days.

They’ll also leave with a sensation of understanding and mastering that they didn’t have coming into it. 

They’ll be capable.

For Holger and myself, coming from Europe, we’re very excited for the invitation to come down.

We hope that this can be part of a long term collaboration with many companies in Malaysia in order to improve the innovation capabilities in Malaysian firms. We’re honoured to have been invited over by TNB ILSAS. 

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Open to all with an interest in strategy, innovation & entrepreneurship, the Business Innovation Bootcamp 2017 will be happening in Kuala Lumpur, Malaysia, over two sessions: 14-15 August / 16-17 August.

Over two intense, action-packed days, you and your team will learn and master a systemic method to create industry-disruptive business models. You will be equipped with new, research-backed and proven strategy tools that allow you to run advanced and difficult strategy processes efficiently.

Engage // Innovate's strategy tools are used by thousands of executives and hundreds of companies worldwide like Cisco, RB, Biotage, and Statoil to facilitate high-level discussions around strategy and innovation.

Click here to learn more or book your tickets to Business Innovation Bootcamp.