Business Model Innovation: Look in Better Places to Add More Value

Although most business people can easily understand examples where time and economic benefits are measurable, you also have to keep in mind that noneconomic benefits can be important, too. When Estee Lauder formulated the Clinique line of cosmetics and toiletries, it provided hypoallergenic relief for those who wanted a better appearance and less discomfort from using common beauty products.

These benefits can also extend to aesthetics. Realizing that many of its most loyal end users were graphic designers, Apple Computer began to offer more stylish designs and colors for its Macs. Sales quickly rose for the company as a result of these more physically attractive machines.

Notice that some of these value benefits, like faster time to market, would be obvious from talking to almost any customer. Other benefits, like having a temporary office in bookstores, would probably not have been identified by talking to customers. Because of the relative invisibility of many potential value benefits, traditional market research and market analysis methods will be insufficient to find the best value benefits to add.

That's another reason why you should keep an open mind for now as you develop hypotheses about types of values to add. Trial and error on a limited, inexpensive scale will usually turn out to be critical to your identification of the new value benefits that you should offer. Until you have promising ideas, though, you cannot begin any experiments to test it. You do need to expand the variety of your sources of ideas. This is a numbers game, and all perspectives help.

Several methods are useful to perceiving what is a blank to current customers. First, begin with direct observation. Simply watch how customers and potential customers (and on through to the end user) use your product or services. You will be amazed at all of the awkward ways that they have to go about making your offerings useful to them.

Then, observe what else they do during the work and personal day. You'll find they have problems with other products and services that you can solve at little or no cost.

If you had visited a conventional book store, you would have seen people camped out on the floor leaning against bookcases reading books to find the right one while they sipped take-out coffee they had bought someplace else. When their cramped bodies couldn't take it any more or they found the right book, they left.

In many cases, the sore body was the limitation to selling more books. You don't have to sell many more books in a year to pay for a chair and the space it rests on. If the customers could get their take-out coffee from you, you saved them the time to go to a take-out coffee outlet, and increased the time they had to shop for and read books.

Second, go out and live these people's lives and walk in these people's shoes. Attempt to do what they do in the best ways you can think of. Then, imagine how you could change what you are then doing to make life simpler, easier, and better for them.

Third, do role playing. Pretend for several hours that you are a specific person who doesn't buy from your company, or even your customer's customer. Once you have totally immersed yourself in that mind-set, think about why you don't want to do business with your real company.

Then consider what it would take to get your attention and keep it so that you would try a different offering. While in this potential customer role-playing mode, also ask yourself what would keep your business if your current supplier responded.

Fourth, think about metaphors. You will probably find it easiest to start with ones that personally inspire you that will probably inspire others. The right questions can help you find helpful metaphors.

For example, what was the best product or service you ever bought? Then, you should think about that offering as a metaphor for what you might offer. Obviously, the bookstores could have used a five-star European hotel with lots of service and comfort as a metaphor for their business.

Fifth, imagine that you can totally customize your products, services, and the ways that you market and deliver them to quickly match what any one person wants. This is very important because the ultimate secret of achieving competitive advantage is to do just this more effectively than anyone else.

Having identified a method, how could you employ that method in ways that do not increase your costs, but do improve value? This may seem like a pipe dream at first, but many companies that take this approach also have been able to put in processes to support custom solutions that actually lower costs.

Amazon's listing service for new, collectible, and used books offered for sale by its customers complements its own stock, draws more potential customers, and provides a very high profit contribution similar to what eBay enjoys because so selling and delivery costs are eliminated in the process.

Sixth, by this time, you will probably have exhausted a lot of what you as a single person can learn. If you have encouraged others to follow these same steps, you can now begin to usefully have brainstorming sessions even more effectively where your individual ideas will strike responsive chords in the minds of others to produce ideas that neither of you could have had alone. If you are not familiar with this process, you should become familiar with the well-documented guidelines for such sessions before using this method.

Seventh, with work document shareware, you can also post these kinds of questions and observations on a company intranet and encourage everyone in the company to post their own ideas and comments. Extend this questioning to include suppliers, customers, shareholders, and partners through the Internet, and you will see a geometric increase in richness of ideas and refinement of promising directions.

Copyright 2008 Donald W. Mitchell, All Rights Reserved