Strategy in San Francisco

What follows is a high level account of a recent trip to attend a masterclass for the highly popular business tool, the Business Model Canvas. This method, combined with lean startup is taught in some the world’s most respected business schools.

Here are some key takeaways:

• Think about the main elements on the canvas as part of the front stage or backstage. Everything can look great at the front, but if behind the scenes it doesn’t work, your model will fall apart.
• The model should be built over time to avoid cognitive murder. If you present a canvas in its finished state there is a high risk that the viewer will become confused and overwhelmed.
• Less is more when presenting. Lots of sticky notes are fine when you’re working stuff out, but a high level strategic view should have less notes.
• Aim for invincibility. There are 4 levels of understanding of the canvas a company can attain. We should aim for a business model that contributes to the invincibility of a business. One that is capable of continual reinvention such as Amazon.
• Allow a culture of innovation to stay ahead of the competition. Top management should buy into a program of continual innovation and ideally sit apart from the execution part of the business.
• Desirability, Feasibility, Viability. All three must be satisfied and validated before embarking on an expensive program of work. These can be identified early on using the business model canvas.

Often, we help some of the world’s largest and most respected brands with business strategy. This ranges from realising cost savings through appropriate choice of technologies, critical testing of product-market fit, validating the need (or not) for significant investment in new product ideas through to organisational shifts towards a more design orientated culture. Financial services, Retail and Publishing are where some of these clients operate and the strategic impact we have is often a byproduct of working closely alongside them for a period of time executing on a specific program of work. This allows us to build a deep understanding of their business and operating environment.

So when we got the opportunity to take Alex Osterwalder’s 2 day master class in Business Strategy we jumped at the chance.

Alexander Osterwalder (Ph.D.) is an academic and business theorist who wrote his thesis on The Business Model Ontology a paper that caught the attention of many renowned industry peers including the grandfather of the lean startup movement Steve Blank, who also joined us during the 2 day masterclass to impart critical knowledge and experience about customer development.

Why did we go?

Valuing continuous learning and development like we do, we keep a healthy library at Red Badger. Included among the many tomes on our shelves are Alexander Osterwalder’s the Business Model Canvas and the Value Proposition Canvas. We have already been making excellent use of the tools outlined in these publications (to great benefit to our clients) for some time now, so listening to the originator of the ideas explain the thinking behind the methods was a clear next step.

What was the value?

We hoped that by going we’d would get a deeper understanding of how these techniques may be used in a practical way for those businesses who are uncertain about the value of applying business model thinking to challenge the status quo.

We often see businesses who attempt to execute on an idea which may or may not work in the name of experimentation or based on the beliefs they hold about their business. Is there a product – market fit? Are the assumptions made about customer segments been proven? Which channels will you use to take your product to market? How about payment models, one off purchases, subscriptions or something else? Who are your key partners? and what are the key things you need to do and resources you’ll need? Sometimes, if you are lucky, making assumptions based on hunch can work very well, but for the most part you are at risk of wasting valuable resource building the wrong thing.

Day one

Seventy or so fresh faced and keen students are welcomed by a warm and friendly team offering coffee and pastries. Attendees from all over the world. A retired CEO from a multi billion pound company, leaders from many of the Tier 1 consultancies, NGOs, several silicon valley start ups and a wide selection of others. Alexander Osterwalder’s books have been translated into 70 languages and this was certainly reflected in the diversity of the attendees.

A benefit of the training is that we were walked through many examples of businesses who had managed to reinvent themselves and those who hadn’t.

Nespresso – Good example of company that has reinvented itself.

Kodak – Good example of a company that failed to innovate despite being a key factor in the invention of the digital camera.

Throughout the day we were introduced to the various elements of the canvas in a logical way which, critically, avoided ‘cognitive murder’! We learned why ‘shrek’ models were great (shrek is yiddish for nervousness) and how architect Frank Gehry’s work influenced business model thinking.

The tools were well prepared, the timing and pace was good, keeping energy levels up throughout the room.

Day two

Testing was a core topic of Day two, something we do a lot of at Red Badger. Testing the various elements of the business model canvas can be as simple as getting out of the building and speaking to a few people face to face, but the key is to base your decisions on fact not opinion. Steve Blank, grandfather of the Lean Startup movement made a guest appearance and contributed with nuggets of advice and stories about how he teaches the business model canvas alongside Lean Startup at Stanford University.

‘There are no facts in the building… so get the hell out and talk to customers’ - Steve Blank

At the core of a test is the hypothesis. Treat it like science. We believe that [xyz], we will know this is true when [xyz]. The group had opportunities to write hypotheses and learn techniques for getting out of the building to talk to customers. Despite having taught hundreds of students about some of these theories, it was great to learn new techniques including a nice way of teaching people about good and bad interview techniques. In groups of three, one person would observe and grade the interviewer across 4 main criteria highlighting what went well (e.g. open questions about actual facts) vs. what needed to be improved (e.g. leading, binary questions).

Finally, we ended covering the business financials of successful start-ups, organisational culture & structure and future of the business model canvas. Needless to say the 2 days were jam packed and we learned a lot.

Summary

It is not everyday you get to go on a training course that includes insightful discussion with some of the industries most respected leaders, such as David Bland, Tony Ulwick, Steve Blank and Henry Chesbrough. These special guests definitely added great value to what was an inspiring and worthwhile training course. I would recommend this to people who are responsible for driving innovation and looking for alternative business models within companies or for and on behalf of their clients.

The business plan is dead. Long live the Business Model Canvas!