When more Money and People can't be the Answer
Using business model thinking to find a creative solution to growth.
A complaint I hear frequently from managers is that they haven’t got enough money or enough people to do the work that needs to be done. It’s a universal complaint. In fact, I’ve sat in meetings with c-suite level leadership, who have literally spent hours bemoaning the pressures on them and the lack of resources available, somehow not realising it’s entirely within their gift to change. Both money and people are finite and there will be times when ‘more please’ just isn’t an option. If you work in the public sector or a non-profit, you will know this only too well. But you’ll find over-committed and under-resourced teams in any organisation.
When the volume of work that needs to be done is greater than the amount of money or people you have available to do it, and the dial’s simply not going to move on your resources, you have two choices:
Prioritize ruthlessly, providing clear strategic direction and accepting the personal/political/social risk of saying no or stopping pieces of work;
Get creative — which is what I’ll focus on here.
To be clear, pushing your people to the point of burnout because you don’t have the courage or ingenuity to do either of these things should not be an option.
Using Business Model Thinking to find a Creative Solution to Growth
Many people use the Business Model Canvas to design new business models, but sometimes forget that it also helps us to iterate, improve or entirely rethink established business models. When more money and people can’t be the answer, we have to use our creativity to find the answer elsewhere. Using the Business Model Canvas provides a structured and systematic approach to help us.
If we look at the nine boxes of the Business Model Canvas, only one of those nine is concerned with money and resources. Only ONE of the nine. This means there are potentially EIGHT parts of our business model within which we can innovate! What business model thinking gives us is a way to help structure our thinking and focus our creativity to work out how we might grow our service or product through other means rather than just growing the ‘as is’ business model by asking for “more resources please”.
When I run this type of exercise, I ask the senior leader in charge if any other part of the business model is non-negotiable so that teams are clear what the boundaries are within which they have creative licence. They often tell me that the Value Proposition and Customer Segment(s) are untouchable. I always challenge this assumption, and encourage you to do the same, as pivoting to new customer segments and discovering new value propositions can be key to business model iteration and growth, as well as the discovery of new business models.
However, even if we worked on the basis that these two boxes of the canvas are non-negotiable, that still gives us SIX parts of our business model where we can change things up. And that is where I would start. In fact, that is where I expect people to start. As Head of Innovation in a government department, I expected my team to explore and show me evidence of how they could achieve more impact for more people with the same money and budget. And they did it. Time and time again. So, what are those six areas I’m talking about?
Backstage Innovation
Most people tend to start ‘backstage’ (i.e. the bits that make everything work that customers typically don’t see), in particular, Key Activities and Key Resources. They ask themselves: “Where can I get the same thing cheaper?”. This makes sense and can be really effective in reducing costs, but be aware it can have unintended consequences on your value proposition or your relationship with customers if you’ve cut quality whilst cutting costs. I also urge consideration of ethics and sustainable sourcing when exploring this space.
My preferred place to start ‘backstage’, which tends to stimulate more creative thinking, is around Key Partners. Key Partners provide some or all of the Key Activities and Key Resources, that are essential to our business model and which we don’t own ourselves. Some companies, who prefer to keep things in house, have never fully explored external partnerships. For others, poor relationships with unreliable key partners and/or a lack of clarity about what the key partners are accountable for makes consistent delivery of the company’s value proposition vulnerable.
For this part of the business model to be operating most effectively, our agreements with Key Partners have to be clear and explicit and, ideally, our Key Partners will share similar values to us. If your company has tended to keep things in house, it might be worth exploring which Key Activities and Key Resources you could outsource to companies who have the expertise and resource on tap. This enables us to leverage specialist skills quickly and bring some often needed agility to the workforce.
If your existing Key Partnerships aren’t working, you may do the inverse and decide it’s more effective to bring some of those key activities in house or explore switching to new Key Partners, ideally ones that better understand and are better able to meet your needs. Acknowledge and question assumptions about what you need to do and what key partners need to do. Generate as many new ideas as you can, defer judgement and the consequent shutting down of ideas too early, and instead explore those alternatives.
Frontstage Innovation
Where breakthrough innovation more often happens though is ‘frontstage’, i.e. what the customer sees and is aware of. Here, you can explore the nature of your Customer Relationships, the Channels through which you deliver your value proposition to customers and Revenue Streams.
Perhaps your Customer Relationships are particularly high-touch, requiring significant investment of employee time. Is this high-touch, high-resource model a core component of the Value Proposition or not? Even if you think it is, I’d check that assumption. A good example of this is the increase in self-scanning equipment and the corresponding decrease in staff in our supermarkets, even the high-end ones that pride themselves on their customer service. For most customers, good customer service means not waiting in long check-out lines (even tolerating the 1 in 10 times when self-scanning equipment doesn’t work). Fewer people are now required to sustain the shop floor part of the business model, releasing valuable people resource which can be better invested elsewhere in the company.
Moving to Channels but sticking with the supermarket theme, totally online supermarkets, like Ocado, innovated the Channel by using a web-based platform rather than a physical building to provide groceries and convenience to the customer. Ask yourself, ‘how else might we get our value proposition to our customers?’. The Covid pandemic forced many businesses (restaurants and shops in particular) to innovate this particular part of their business model because their usual Channel was no longer available. We can often innovate under extreme pressure; but how much better it is if we can bring that creativity to our business models before they’re on the verge of collapse!
Exploring new Revenue Streams is another avenue to explore. Working with startups, I hear a lot of assumptions about what people will and will not pay for. Perhaps there is a component of your existing value proposition that you have always assumed people wouldn’t pay for. When did you last check that assumption? What’s changed since you did? An example here is the fitness and activity tracker app Strava. The competition element of the app became a key factor for users, consistently drawing them back to the app. So, in 2020, Strava relaunched a subscription service called Summit, which you had to sign up for if you wanted your name on those leaderboards. Strava’s revenue went from $60 million in 2019 to $72 million in 2020.
Summary
Too often, seeking to increase budget or team size is the first resort of managers and teams. There are times additional investment is necessary to enable growth of the business, but having this as the default option often discourages us from exploring alternative, more creative approaches, which could be more impactful and better value for money. Strategyzer’s latest book, The Invincible Company, has a chapter devoted to business model patterns, which serves as great inspiration for anyone looking to build a new business model or iterate an existing one.
Key Takeaways:
The business model canvas is a great tool for helping us innovate our existing business models by structuring out thinking and focusing our creativity.
Challenge assumptions that parts of the business model (such as the Value Proposition or Customer Segments) are non-negotiable to open up maximum opportunity.
Re-evaluate existing Key Partnerships and exploring new ones could unlock efficiencies in your key activities and key resources and improve workforce agility.
Rewriting the rule around Customer Relationships and Channels can lead to breakthrough innovations.
This is a great way to look at things.
Only thing I can think to add is financial model innovation. (The bottom 2)
That might be the wizardry or playing with billing terms in order to profoundly impact cashflow.