Business Model Experimentation: Overcoming the Status Quo

I don't think a stronger article could have been written validating the need for the Business Innovation Factory. A WSJ report from April 28th, written by Open Innovation guru Henry Chesbrough, lays out the next wave of innovation - business model innovation. To do that, compannies need the flexibility to experiment with new models in an environment free of the usual trappings associated with the current model.

From the article -

"Companies get trapped by their own success. Once a company's business model has proved effective, the tendency is to seek out additional opportunities that fit that model - and to play down any technologies that don't fit that model."

Once you've got a good thing going, very few of us are inclined to muck it up with a a different model (even if it is the right thing to do.) Again from the article-

"In some businesses, a general manager or division president may have complete responsibility for the financial performance of a business unit...Some companies, for instance, put their general managers through two-year to three-year rotations running specific businesses, increasing the size of the businesses the managers run over time. This is too short a time frame to create new business models. It takes more time than that to develop business-model experiments, obtain clear results, interpret and understand the results, and then carry out a broad deployment of those results.

Little wonder, then, that most general managers simply stay with the current business model....The result is that the business model becomes taken for granted...

Ideally, an organization will give a senior manager the resources and authority to define and launch business-model experiments. This will require cooperation from many other parts of the organization. Once the data from these experiments are received, that senior executive can decide which experiments to continue, which new ones to initiate, and whether and when enough information exists to justify the wider adoption of a new business model."

What's clear from reading folks like Chesbrough (or Clay Christensen or John Seely Brown) is that companies need a place to safely and managably experiment on their business models. Here at the Business Innovation Factory, we've established the state of Rhode Island as that experimental platform. It’s an economic development strategy that turns our state’s compact geography and close-knit public and private networks into a real-world test bed/laboratory.

Experimenting with new ways to deliver value is one of the most important things an organization can do. But to find the next big idea, you need an environment where you can explore, experiment and implement with less risk and less cost.

With our Experience Laboratories we've created an environment where partners from across industries and disciplines can design and test innovation solutions AND transfer what they learn back into their organizations.

Our s Innovation RECIPE keeps concepts moving through prototyping and real-world experimentation, and makes sure that all the players get a good result from their Project.

RECIPE: Rapid Evolution of Concepts through Iteration, Prototyping and Experimentation

Our customer-focused design strategy brings players from all walks of life - healthcare providers, private companies, government agencies, educational institutions, and the customers themselves - to the table to provide clear understanding of what needs and priorities drive the customer's choices and behavior, and what improvements can be used to align to them to get better results.

Second, we take those critical improvements and create real-life examples that project sponsors and customers alike can see, touch, feel and experience. Making this tangible gives everyone a sense for what changes in training, technology, marketing, outreach, or work process will really work, before we invest in building them.

From here we extend these innovative changes into a real-world community by running an innovation experiment. Experiments are narrow-but-deep tests with a limited number of customers and project sponsors, where we implement changes in different combinations and measure the results.

Finally, when the experiment has run to conclusion, we package the results, the learnings, and the templates for the successful changes. We communicate these to the project sponsors and the BIF community, and we help organizations use the information to introduce successful change on a larger scale.

Related Links:

• Learn more about our Experience Labs and the business model experiments we're currently running.
• Read the Henry Chesbrough article from WSJ
• Here are a few other blogger point-of-views on business model innovation:
  BMID...Whose Job is it Anyway?
  Innovation Ecosystem - Whose Job Is It Anyway?
  Open Innovation, Brokering and Web 2.0