In a memo issued to startups earlier this year, Sequoia, the VC firm, had this warning: cut costs, focus on unit economics and figure out how to make money.
For far too long, VC-backed start-ups had their priorities in reverse i.e. find product-market fit, burn money to build a user base and then iterate on the business model.
No longer. The era of free capital is over. The biggest determinants of transformational growth are not great technologies, platforms, or products. It is in fact, the business model or how a company creates, delivers and captures value.
The Business Model > Diversified Revenue Streams > Product Creation
Conventional wisdom tells us that innovation happens within the sphere of product or service development. But what if we’re wrong?
What if the single greatest factor for leapfrog innovation is the business model itself; exploring and expanding the ways in which we make money, seeing what catches fire and pursuing the potential from there?
The idea of diversifying revenue streams can be applied to all kinds of sectors. Chinese internet companies from Alibaba and Tencent for instance, have been using it to drive product strategy.
Because as you diversify and experiment with new ways of generating revenue, you are effectively honing in on your ability to give customers what they want, how they want it.
Designing a Path to Profitability & Growth
In the past 50 years, the average business model lifespan has fallen from about 15 years to less than five according to BCG as the environment shifts, industries evolve and incumbents adapt.
As a result, business model innovation is now an essential capability for organizations seeking to drive breakout growth, reinvigorate a lagging core, or defend against industry disruption or decline.
It's an opportunity for leaders to step back, understand the wider environment and forces disrupting their industry and model and make effective choices.
The Business Model Canvas is a massively useful tool for ideating around new business models, product and service concepts. It also helps us think through how these concepts are marketed, sold, delivered, serviced or financed.
Decide faster, Execute faster.
If companies want to live up to their innovation potential and even disruption potential, leaders need to decide faster and execute faster.
The Big Management consulting approach with their lengthy audits, long strategic planning, and large-scale transformations isn't for everyone. You quickly lose an entire year. And miss opportunities.
Working in Sprints can radically speed up the process. In fact, if we understand your motivations and agree on specific goals you aim to achieve such as - What types of innovation outcomes will you pursue? or How far away from home will you play?, we can customise it for you.
Our Business Model Innovation Sprint is a structured yet intense approach that results in initiatives that serve as a flywheel for growth. Think blueprint for execution. Not a shiny 200 page document.
And whether you decide to run experiments, create an incubator, an innovation lab or a venture fund, they are all meant to get your organization ready for your next big innovation opportunity.
"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
If you're at an inflection point in your business, our Business Model Innovation Sprint can help you delve into the possibilities. Get in touch.