Saul Kaplan: Stop Treating Business Model Innovation As Change Management
Friday, May 29, 2015
It’s urgent because business models don’t last as long as they used to in the Industrial Era. The Netflix, Airbnb and Uber stories are everywhere. Too many industries and companies are playing defense, trying to lean against disruptive business models. No effort to strengthen and protect the core will prevent it from being netflixed or uberized! The only way to play offense is by doing R&D for new business models, even those that might disrupt the core. New business models are coming, whether we like it or not. Why not be proactive? Business model innovation is a strategy question before it’s a change management question.
We have to make it easier to move business model concepts off the white board and to prototype and test them in the real world. If you screen early stage business model exploration with the same questions, metrics and investment stage gates used to select projects to improve the core, you will never do anything transformational. Incremental improvements will always win out. Business model innovation requires a different approach.
Business model innovation is an iterative design process foreign to most Industrial Era leaders. Lets face it, trying more stuff isn’t exactly what they taught us in MBA school. Business model R&D is the new strategic imperative. Implementation starts with the creation of a business model sandbox tasked with managing an ongoing portfolio of real world business model experiments and a platform to capture, share and act based on what is learned. The new must-have organization super power is demonstrating minimum viable business models in the real world. We can use low fidelity prototypes to explore new business model concepts faster and cheaper in the market. Business model prototypes are not expected to scale, they’re expected to help us answer one question, does the model demonstrate a better way to deliver value to a small number of real customers? We can then start addressing scalability questions for only those models that work at the prototype phase.
A high performing business model sandbox operates as a connected adjacency to the core. The biggest advantage existing companies have over start-up entrepreneurs is access to resources, networks and capabilities from the core to enable business model R&D. Most are not leveraging their advantage with capabilities stuck in the straitjacket of the current model protected by line management. A business model sandbox is a safe place to combine and recombine capabilities to explore new ways of delivering value. A business model sandbox must be designed with the right balance of autonomy and the free flow of people and capabilities in both directions. CEOs should play a direct leadership role to mange the inevitable tension between the core and sandbox. Companies would be smart to groom a new generation of leaders capable of managing both the core business model and ongoing R&D for its successor.
If you start by burdening business model ideas with today’s business logic and jumping too quickly to change management, you will end up with only incremental improvement to the way things currently work. It’s human nature to resist new models. It’s also human nature to know in our guts that we can do better. The models, systems and infrastructure we inherited from the Industrial Era have served society well but we need to re-imagine them for the 21st century. Everyone knows it, but we seem to be frozen in the headlights on how to make it so. We see examples every day of how entrenched leaders, constrained by today’s business models, do everything they can, both explicitly and implicitly, to lean against change and protect the status quo.
We have created our own dilemma, we know we need transformational change but we don’t like it when it affects us! Tweaks aren’t enough. Incremental change to today’s models isn’t working and won’t keep disruption at bay. We need to make reinventing business models and social systems easier and safer to manage. 21st century leaders must be able to BOTH strengthen the core AND explore new models simultaneously. R&D for new business models is the new strategic imperative.
Related Slideshow: RI Business Rankings in US
See how Rhode Island stacked up.
Rhode Island has 2015's eighth highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Rhode Island ranks fifth overall in the category of speeding over 20 mph annual premium increase at $482. While ranking third overall in the category of 2 accidents annual premium increase at $2,721.
Rhode Island ranks ninth overall under the reckless driving annual premium increase at $749.
Rhode Island has been ranked as the 8th most eco-friendly state in the country, according to a recent study by WalletHub.
Rhode Island ranks third in environmental quality and 16th in Eco-Friendly Behaviors Ran landing them in 8th overall.
RI is behind Washington and New Hampshire who are in the six and seven spots respectively, and in front of Connecticut and Hawaii who come in at the nine and ten spot.
Rhode Island is 2015's 4th Worst State to be a taxpayer, according to a recent WalletHub report.
Rhode Island ranks 48th of 51 with an average state and local tax price of $7,159 which is good for a 27% difference from the national average.
The states that are directly behind Rhode Island are Wisconsin at $7,159, Nebraska at $7,298 and Illinois at $7,719 for a 37% difference from the national average.
Rhode Island has the highest vehicle property taxes in the country, paying an average of $1,133 according to a report from WalletHub.
Virginia and Kansas are the two states just ahead of Rhode Island in the 49 and 50 spots, paying $962 and $905 respectively.
RI also ranks 42nd in average real estate tax, paying an average of $2,779, according to the WalletHub report.
WalletHub has ranked Rhode Island as the 7th worst state to be rich in in a recent in depth analysis of 2015's Best States to be Rich or Poor From a Tax Perspective.
On a scale with 1 being the best, and 25 being average, Rhode Island ranks 37th in low income earners, 42 in middle income earners and 45th in high income earners.
To see the full report, click here.
Providence-metro ranks at the bottom for job creation in 2014
Rhode Island has been ranked amongst the worst in job creation, according to a recent survey done by Gallup.
Gallup gives the Prov-metro area an index score of 23, the lowest score is the New York- New Jersey area with 20.
Salt Lake City, Utah and Austin-round Rock, Texas rank the highest with a score of 37.
The 2014 state rankings by Forbes has just been released and Rhode Island moved up two spots from #48 in 2013 to #46 in 2014.
What does Forbes say about RI's business environment"
After Michigan and Illinois, Rhode Island has experienced the third worst net migration out of its state in the country over the past five years. With a recent unemployment rate of 7.6%—lower than only Georgia and Mississippi—residents are leaving the state in search of jobs. Rhode Island has been stuck in the bottom five overall for six straight years. One plus: labor costs are 5% below the national average, which stands out in the expensive Northeast.
Findings from The State Business Tax Climate Index were released this morning by Tax Foundation which found Rhode Island to have the 45th best tax climate for businesses for 2015. The state's rank has not changed since last year after The Index analyzed 100 different tax variables in multiple categories.
Providence is the second worst city in America for small business, according to a new survey conducted by Thumbtack.com and the Kauffman Foundation.
More than 12,000 small businesses in 82 cities across the country participate in the survey. Providence received an overall "F" grade for small business friendliness.
Small Business Friendliness Grade: F
The Economist grades states on an A+ to F grading scale for its small business climate. Rhode Island is one of just 6 states to earn an "F" grade.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Forbes ranks each state in business costs, economic climate, and growth prospects. RI is third worst in 2013.
The most damning in the commentary:
After Michigan, Rhode Island has experienced the second worst net migration in the country over the past five years.
ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.
The most damning in the commentary:
Sky-high unemployment rate bespeaks continuing terrible business climate.
#46 Tax Foundation
Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.
Rhode Island and the other states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
ALEC ranks each state in economic performance and outlook.
Although Rhode Island ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.
#47 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Rhode Island has continued to feel the direct impact and ripples from the recent recession—it ranks 47th overall in economic performance. However, positive rankings of 15th in talent pipeline and 16th in innovation and entrepreneurship suggest the existence of a foundation on which to build the future.
The Pew Charitable Trusts
#40 The Pew Charitable Trusts
The Pew Charitable Trusts ranks each state in job growth and job creation.
Rhode Island added 6,223 jobs in 2014.
10th Worst in Gallup's Annual Ranking of State Job Markets 2014
Rhode Island has been ranked 10th worst for job creation in Gallup's annual ranking of state job markets in 2014 with a job creation index number of 21
Rhode Island is one of two (Connecticut) states to rank in the bottom ten each year since 2008.
The 2014 State level findings have were drawn from 201,254 interviews with employed adults across the nation.
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