Models are popular, methodologies are worshipped and best practices are considered sacrosanct. Such is the state of the world that we live in. No matter how much I hammer on about the need for flexibility, adaptation and customization, people want clear processes with solid lines and well-defined actions that will reliably lead them from start to finish.
The consequence is that there is an on-going quest for models to explain the complex realities in organizations, and a continued desire for specific and practical guidance on what exactly to do to fix things when the going gets tough and the situation gets weird. Failure or challenges are presumed to require more rigour, more discipline and that much more structure and formality. The result is very often a mutually reinforcing cycle of failure, efforts at more control, and further—and often faster—failure.
While too much process applied too strenuously isn’t helpful, the reality is that no process is just as much a recipe for disaster. Structure is useful. Guidance is valuable. Making sense of complicated and difficult situations requires some anchoring in reality, and some level of practical direction that you can follow. Such is the value of simple models; they provide a way of thinking about specific situations by highlighting and emphasizing certain aspects that are relevant and important.
The challenge of applying simple models is identifying which models are actually relevant, and applying those models in ways that are appropriate. On the face of it, that should be straightforward. At least once you have identified a model that is appropriate, using it to make sense of what is going on should be a relatively easy thing to accomplish. There is a structure, there are dimensions of interest and there are boxes waiting to be filled with content. Work things through and answers should start to emerge and clarity should result.
Sadly, that isn’t always the case. To be clear, that’s not because the model is wrong or inappropriate, necessarily. It is more the issue that a model is only so useful, and its particular relevance is a product of the skill with which it is applied. Models are boxes, labels and arrows. Making sense of how to apply and interpret those boxes and arrows and labels is where the artistry comes in.
I was thinking about this the other day, as I was perusing my library. I had come across a copy of Strategyzer’s Business Model Generation. It’s one of those books that I wish I had written. It’s delightful in its simplicity, and yet potentially infinite in terms of its complexity. It’s the most in depth book that Strategyzer has produced (I had a conversation about this with the book designer one day, and his answer was that people wanted simpler, clearer and more directed guidance—which is pretty much where we came into this conversation).
The book outlines a simple structure to work through, think about, make sense of and ultimately design business models. A business model is the foundation of any organization; it’s the basis of how it operates: the services it provides, the customer value it creates and the costs and revenues that derive from how the model operates. The simplest of business models is selling products to clients; your local corner store buys milk, bread and candy bars from a wholesaler, sells them to you at a markup, and keeps what is left over as profit. The problem is that there isn’t much of a barrier to competition; anyone can open a store, and if they cut their prices they can be more competitive. After that, it’s a race to bottom to see who can price their products lowest and still function.
The challenge of business models is to find innovative ones that create a material advantage that is hard for others to replicate. An early and insightful example would be the disposable razor blade market: Gillette pioneered the idea that you could sell the razor at low cost in order to lock people into an on-going market for replacement blades. Once you are committed to their platform, you have a disincentive to move, because you would need a whole new razor to use a competitor’s blades.
The book has become something of a cult hit among entrepreneurs. It started off being self-published, and is that rare example of being later picked up by a major publisher. It currently ranks number two on Amazon in both the entrepreneurship and business development category, and number 6 in the (very general) management category. Since it was published back in 2010, it has sold millions of copies.
All of that is background to the conversation I had with myself yesterday while out for a motorcycle ride (which will tell you a little bit about where my mind goes when I’m theoretically unwinding and relaxing). My first thought was, “The next breakthrough business model is not going to emerge from someone using the business model canvas.” Followed immediately by the thought, “Whatever that business model is, though, you’ll be able to explain it using the business model canvas.” Those are two important and competing tensions, so its helpful to take the time to unpack the logic that led to them.
Let’s start with the assertion that the next breakthrough business model isn’t likely to result from someone applying those ideas (because that’s probably the more controversial of the two thoughts). At this point, Business Model Generation is quite literally ubiquitous. For better or for worse, it is the go-to reference on the subject. Do a search on it, and none of the competing books come even close in rankings or influence. When people think business models, they reach for the business model canvas (and you can even buy blank pads of 50 canvases to work on for 35 bucks, even though you can download a copy for free on the internet.). That very truth is exactly the problem.
We’ve all heard the phrase, “Once you have a hammer, everything starts to look like a nail.” In turns both clever and annoying, that phrase nonetheless reveals a fundamental truth: we get in the habit of looking at the world in a certain way. The consequence is that if you have a structure with which you are deeply familiar, it’s going to shape how you perceive situations. The business model canvas does exactly that; it superimposes nine boxes on top of a complex and dynamic topic, and then force-fits the results into a simply explainable diagram.
What is worse is that once you become deeply familiar with a structure, it frames the way you look for not only solutions but also how you interpret problems. Rather than starting with a blank sheet of paper (figuratively, if not literally) you are tempted to short-circuit exploration and apply perspectives and features that have worked for you in the past. The model determines what you look at, and also encourages you to ignore what doesn’t fit. The result is that you never really start with a blank piece of paper; you start with presumptions about the content that should show up, what it means and how it relates, and build up from there.
A consequence of this entrained thinking is that what gets produced is far more likely to be derivative rather than new. A business model that emerges using the approach espoused in the book is going to very likely look like the other business models it illustrates. Rather than breaking free and applying it in new and novel ways, the temptation is to copy and emulate what has already been defined.
A fundamental truth is that if you can copy an idea, then so can other people. If you are all starting with the same source and using the same model and structure, however, the very real likelihood is that what gets produced by anyone isn’t going be terribly original or novel. This bring me pretty directly to the rationale for my first assertion: using the canvas is likely to result in mimicry and derivation rather than novelty. For something truly original and new to come along, then, a very different perspective and take on the subject is going to be required. Innovation is more likely to result from working outside of the boxes of the business model canvas, rather than within it.
If we accept that as true, my second assertion becomes more than a little ironic: even if the business model canvas isn’t the source of an innovative new business model, you’ll still be able explain that model using the canvas. That essential truth points to the value of models: they are good at providing a structure to explain how things work. The nine boxes of the business model canvas don’t have any inherent magic in them. They are just descriptors of the elements that are going to be in play when you are building a business model. There will be suppliers and customers, there will be key processes, there will be inputs and outputs and there will be underlying costs and revenues.
All of which highlights an important insight applicable to any model: the boxes are simply boxes. The lines and words and circles and arrows are ways of making meaning, defined in a particular structure. It’s not the boxes that matter, though, but the content inside of the boxes. It is especially how the content relates and interacts, and produces new meaning and insight, that actually creates value. The model just provides a structure to make sense of and explain the insights that you have produced.
The essential reality is that the magic of creativity and innovation often happens outside of the structure of any given model. That spark of imagination might be a reaction to the model, it might be a contrarian viewpoint, it could be a reinterpretation of a previously accepted truth or it could be melding a perspective with a different idea or insight from somewhere else. Once captured and realized, you can use the model to explain what you have done. In retrospect, the insights you describe may even seem a little obvious. That’s because the structure of the model points out some things, while minimizing or leaving out other dimensions. Whatever meaning the model illustrates, there may be other dimensions or factors hiding just out of sight that are critical to the overall functioning.
Models are great for making sense of the world. They can help to solve problems and they can be used to provide insight. An essential truth of models, though, is that they are by design a means of looking at the world in a particular way that conforms to a specific structure. That’s great as far as it goes. Where innovation requires new insights and ideas, though, we are unlikely to find them by looking at the world in traditional ways. What matters is the content, not the boxes. Models will help make sense of the magic, but they’re not going to help you find it.