Business Model Innovation

Business model innovation is, it's, it's
kind of the Holy Grail of the innovation space, because most studies
will prove that when you, when you change your business model in a positive
way that, that ultimately gives you the, the greatest bump in profitability and the, the greatest
overall success. If you contrast business model innovation with traditional product development
traditional product development, when you're, when you're looking to
improve a service or looking to improve a, a product, you have a known quantity
and you, you have some obvious areas where you
might extend it. The frontiers of business model innovation
are, haven't been tread as frequently as, as
the new, new product innovation, so you, you don't have as many clear pathways from
there. but, but it ultimately will result in a, a
bigger impact on your customer. So we'll use a lot of frameworks that
stretch thinking from a single activity set to a larger
activity set. So it's not just about boarding the plane, but the
whole experience of buying your ticket all the
way through exiting. When you're focusing on a, a larger
activity set like that you, you might find newer and better
hypotheses to generate. So a, a typical way that, that people think about business innovation is through
the value chain. We can look down stream and we can look up stream, and, and innovation can happen
at any point. One of the things that we, we teach in
design school is less about a value chain and more about the idea of
an ecosystem. The idea of an ecosystem is, there is this
web of partners available both for you, as an organization, to work with,
but also, that offer different choices for your customer, your customer's
customer, and the eventual user. And when you start to look at business
models through the idea of an ecosystem, once again that, it's a
little bit more complex. you can start to see some, some very fascinating, some very fascinating
things start to happen in terms of, in terms of how you might implement a new business model
innovation. Particularly in terms of who you actually
partner with. Collaboration is becoming more and more
critical for a design team. One of the biggest failure modes in
hypothesis generation is a lack of diverse input when you're
creating your hypotheses. So if it's just you and your team, who are
all have the same education, all have the same point of
view, all live in the same neighborhood. If, if you're the ones who are generating
these hypotheses, even if you try to be creative, there're still going to be
in somewhat of a limited set. So when you start to collaborate with a, a
larger group, a larger part of the organization, you start to have ideas that you never would have had
before. Organizations tend to be idea rich, and
with, within them there are pockets of, pockets of
individuals who have great ideas that you need to make sure you leverage to, to
bring those up to the surface. Listening is one of the critical skills
that we, we try to teach designers. it's important both in terms of
collaboration but also in, in, you know, researching the users for
whom we're designing. The old joke is that a lawyer will not ask
you a question that he or she does not already
know the answer to. It's just the opposite for designers. We only ask questions where really, we
have no idea. You know, where, we want to be like
sponges, and just sort of collect from from the people that
we're working with. It all goes back to one of the core approaches that we have, which is the
ethnographic interview. ethnographic interviews are very different
than the typical business interview. The ethnographic approach is one where we
only ask open-ended questions. And those questions we, we don't know the
answer to, and we let the, the actual individual
interviewee lead the conversation. And, it's through this practice I think that our, our students and designers
become very good listeners, because you no longer are
there to sort of establish yourself as the
expert. But rather you put yourself in the, the
role of someone learning. Inefficiency and ambiguity are both
conditions of the design process. There has to be time for reflection and
disagreement. And these are, these are core to, great
new big ideas, but reflection and disagreement are
the things that make [LAUGH] processes inefficient. And it's important to have time within,
within your process just to take a step back and look at, what did
we create? Where are the connections that we're not
seeing? Can we, can we bring these two things together in ways that we hadn't thought of
before? I mean that, that's really where great
ideas come from. You also have to have time for disagreement, because good design thinking
is about bringing very different points of view together, so
that you have that diverse set of inputs. You know, if you want efficiency you get everybody who thinks the same way and
they'll [LAUGH] get to a decision quickly, and that, that
works, you know, 80% of the time. But for that, that 20% of the time where you, you need something very
disruptive, very innovative, very creative, you're going to have to put up with a little bit more of the
ambiguity. That's ultimately what a, a successful
leader will be able to do is, you know, understand there are some projects
that can follow this very linear
straightforward approach. But others that require a little bit more
of a, an open mind, and a little bit more
creativity.

So now we've looked at four questions and
how these were used to produce some positive outcomes in The
Good Kitchen story, as well as, I know, many other stories that I
could have told you about. But design thinking is not a kind
of one size fits all solution. Design thinking works best on
particular kinds of problems. How do I identify the kinds of problems
that design thinking is really suited for versus those that our traditional
analytic tool kit is better suited for. Well earlier Jeremy talked about
the differences between mysteries and puzzles as one way to understand
the difference between the kinds of problems design-thinking solves. Relative to the more ordered even
if more complex problems that traditional analytics work well for. Another way that designers have talked
about this distinction between different types of problems and which I have
always found particularly helpful is the difference between problems that
are wicked versus problems that are tame. With tame problems we start with good
agreement about the definition of what the problem is. We often have fairly relevant data and
we can determine cause and effect. And so we can successfully
use linear processes and existing data to come up with an answer. None of these conditions
apply to wicked problems. In wicked problems, the stakeholders
involved can't even agree on a definition of what the problem is,
much less agree on a solution. There may be a lot of data, but it's not
clear whether any of it is relevent or how, and the situation is often
sufficiently complex and fluid, so that we can't really confidently
predict cause and effect. And the only way to see if
something works is to try it. Those of us living in
the US will recognize, for instance, that health care is clearly
a wicked problem that we've been trying to solve as though it was a tame one for
many decades here. Here are a few questions to ask yourself
as you consider whether the problems you have might be wicked or tame, and so
lend themselves to design thinking or not. Well, the first question to ask is,
is this problem human centered? Design thinking is appropriate if a deep
understanding of the actual people or users involved is essential. Linear analytic methods may be better if
there are few human beings involved in the problem or the solution. A second question to ask is how clearly
do you understand the problem itself. If we need to explore and perhaps build agreement even around
the definition of the problem. Design thinking, is an appropriate method? On the other hand if we understand
the problem clearly and are sure that we're solving the right one. Linear methods may work better. What's the level of uncertainty, is another important
question to ask yourself. If there are many unknowns,
both large and small, and past data is unlikely to help us,
design thinking is appropriate. If, on the other hand, the day that
you've got on the past is a pretty good predictor of the future analysis works. Finally, I'd encourage you to think about
what data is already available to you. If there's very little relevant existing
data, then design thinking is appropriate. If, on the other hand, there are several
clear sources of analogous data, linear analytic methods may work better. So once you're sure you have
the right kind of problems and opportunities for
design thinking to address. You're ready to roll up your sleeves and
get started. In our upcoming sessions, we will explore a 15 step model that will
walk you through the four questions and help you think about the kinds of
design tools best suited to each stage. We've talked today about what the first
few of these important steps looked like. Steps like identifying the right kinds
of problems for design thinking. And steps like then scoping the problems
correctly and keep in mind how the good kitchen started out with too
narrow a definition, and fix the menu. We'll learn more about these
tools as we go through the class. You can always learn
more about the tools and process by turning to our book,
Designing for Growth.

Angela Myer, an experienced designer, has
a created a video on visualization to give you more information on that important
design tool, please check that out now. >> The visualization is a really core
component of the way that we communicate, whether we're aware of it or not. When we're dealing with very complex
problems, we're actually enacting a different kind of problem solving that
has to bring in more than just logic. We're actually doing extrapolation. We're doing inductive reasoning. We're thinking about possibilities
that we haven't yet seen. So that kind of imaginative work really
has to be brought out by exercising and understanding that right
side of our brain. So getting in the habit
of doing visualization is actually a way of cultivating
that side of our brain work. Visualization is really important. For the process of design
because it's actually a way of unlocking a different part of brain. It allows us to think in a nonverbal way. It allows us to access parts of our brain,
parts of our creativity, that we might not normally be using
in the course of conversation. Most people will tell you,
especially in the business world, that they are not artistic and
they cannot draw. [SOUND]. Visualization isn't really about drawing,
though. It's actually about visual thinking,
and we all do it. What I've seen is that through practice,
you can actually get better and better at doing it. Visualization is anything from the things
we write on a chalkboard or a whiteboard. To the images that we create
in a PowerPoint presentation, to photography, video. It's basically anything that takes us
beyond just using words or language alone. Things like color. Things like symbols for example. If you're looking at logos and the way that companies represent the,
represent themselves as a brand. Those are all ways to enact
a more visual understanding. When we're talking and we're verbalizing
things we see things internally, but we may all be understanding the words
in a slightly different way. The beauty of using visualization is
that we can tap into a single picture. The more you begin to use pictures,
the more that you begin to diagram while you talk, and create a visual image for
people of how you are thinking. The, the more likely you are to
achieve a sense of agreement and consensus with people, the more you
are likely to draw out conversation. In an environment where your,
your ability to, to get things done and to solve problems is dependent on other
people being able to understand you and align their ideas with yours. It's really, it's really important to
be able to understand the way that you communicate to people. The primary tools for, for thinking visually are really just
mastering some basic elements of imagining people, spaces,
situations and actions or movements. It's very easy to create a simple diagram,
and most anyone can draw a stick figure,
an arrow, a circle, a square. Those are the basic building blocks
of creating a visualization. Visualization has a role to play
throughout the design process or the development process. Innovation itself has a, has a rich and detailed development
process that we have to follow, from beginning with exploration,
moving in through pattern finding. Kind of peeking with ideation sketching, that's where we really think about the way
that images come in through prototyping, and finally in the way that we pilot and
scale. Visualization has a role to play
in each one of those pieces. It's, it's an incredible tool,
in that sense, in that we're using those, those tools, that part of our brain,
at each phase in the design process. Designers use visualization all the time. It's not just something that has
an application in one part of the process. But it has many ways of being useful
at different parts of the process. For example, we won't really rely heavily
on photography when we're doing our exploration activities. So we're researching,
we're trying to understand our users. We're looking at customers,
we're looking at new user segments. Photography is a very rich way for
us to understand that world. And not just the people themselves,
but the context in which they live. Innovation is really centered on having
a rich understanding of those contexts. So things like photography and sketching can be a very important way
of capturing that kind of information. When we move on into pattern finding,
that's where we start to think visually. So that's where we begin to take what
we've learned in our exploration phase. And we begin to synthesize it. And since this itself is
a visualization process. When you get to concept development
visualization becomes incredibly key. Because concepts are literally
coming out of your imagination. And your brain is creating pictures
of something that doesn't yet exist. It's creating pictures of
something that will soon be. The way that we might use
visualization in that, in that kind of situation
is through sketching. We might use a white board and
work with the group. And, and use sketching and
diagramming to capture our thinking. We might utilize photographs at
that point to make sure that we understand what the customer
experience is like. As we move forward into prototyping, we get much more detailed in
the way that we start to visualize. Then we create very complex diagrams, or maps of how we think the customer
experience ideally is going to work. Pictures and images enable us to not only
help people understand what it is we're trying to do, but to help really
persuade them in the worthiness of, of, that particular idea, or, or,
the strength of, of that concept. So if I was introducing a new service and
I was, I was actually relying on a number
of people in the field to, to be able to deliver this,
this service to a set of customers. They need to understand exactly
how I intend this to work and I might use story boards,
I might try to create visual scenarios. But they need to understand what
it is we're trying to do so that they can actually create an effective
testing environment for that idea. The advice I would give to business
people who were interested in improving their visualization skills
would be shortly, just to practice. It's the kind of thing where
once you begin to use the skill. And it,
it can be a little intimidating at first. But I think that people will find that
once they start getting in the habit of doing that, you quickly see how
the rest of the room responds to you when you get up and you start drawing.