Creativity and Business Model Innovation (part 1)

Business model innovation and the search for a scalable business model has been a hot topic over the last couple of years with the explosion of lean startups, customer discovery, and business model generation. But where is the actual innovation in all of this? I am seeing a lot of trial and error but not so much thoughtful creativity as entrepreneurs continuously pivot and validate until they strike business model gold. It might be agile but is it innovative?

Over the next week I’ll be looking at how structured creativity can help put the innovation back into business model innovation. If you want to know how Six Thinking Hats, the five whys, SCAMPER, random word generation or the hall of fame can help to uncover more innovative business models, then this series is for you. Let’s start by looking at how the TERMS Star can help develop more creative value propositions.

The search for customer insight 

The value proposition is all about defining products and services that fulfill a need. A great value proposition finds a customer job that has to be done, ideally with a horrible or non existent workaround and customers prepared to try just about anything to get the job done. If you can make the pain go away, get the job done and add some real benefits as well…then you just might have uncovered business model gold. The following illustration is based on the value proposition designer, see the business model alchemist for details:

VP Designer

The idea is to define a value proposition that brings together your products and services with the gains to be made and the pains to be relieved. Let’s take an example. In an earlier post I wrote about Trevor’s search for customer insight for his campus Vespa business. As he tells us, Trevor started out with the assumption that customers wanted to help the environment and were willing to pay $10k for an environmentally friendly Vespa. Once he got out of the building, this assumption was blown out of the water and the business model was quickly pivoted to one of low cost monthly rental enabling commuters to try out the hipster Vespa thing and see if they liked it. A lot of the pivot relied on observation and insight, as well as trial and error as Trevor tried out new ideas for his value proposition. But is there another way for coming up with ideas that solve customer problems and meet customer needs before you go out and field test them?

Using the TERMS Star to power-up your search

The TERMS Star is based on work by David Robinson and Rob Dew, see here for more.  Basically, you move through each of the five points on the star, using the prompts to explore as many different perspectives or aspects of your value proposition as possible.

TERMS Star

Here’s an example using the Vespa business model. THe first step is to use the TERMS Star to generate a lot of different questions about how the value proposition might work:

  • Time: when do customers need a moped, how long for, how fast does it need to get them to their destination, how long between ordering and receiving the moped, how often will they need it …
  • Emotion: what IS the Vespa look, why are customers reluctant to buy, is it a fashion accessory, are Vespa people part of a club, do riders need to be confident, what about passengers
  • Risk: what if the Vespa breaks down, are crashes a big problem, are the roads safe round here, what about parking safety, what if the Vespa isn’t available when wanted
  • Money: how much to buy, how much to rent, is the price fixed, what about auctioning rides, peak hour costs, cost to repair, who pays for repair, fuel prices
  • Situation: is this for commuting, do riders have to reuse the same Vespa for each journey, what if the Vespas run out,

Now you have some food for thought, it’s time to do some thinking. As you can see, these questions can lead your business model in a very large number of different directions from short term rental to communal hire, park and ride, owners clubs, peak hour prices and so on. Just pick a few which feel interesting to you, and develop a complete value proposition (product, gain, pain relief). Here are three (deliberately varied) examples:

  1. Option 1: Commuters use the tube to get to work, it’s hot and smelly and costs $45 a week. They would rather ride in on a hot sunny day, but aren’t so sure about riding in the rain. Value Proposition: park and ride rentals with scooters outside each tube, we drop of more on a hot sunny day and less when its raining.
  2. Option 2: Students love the whole skinny tie thing but can’t afford to buy. They are also fickle, but like the sense of freedom and ownership that comes from having a Vespa whenever they need it. They get around now by pooling into friends cars, making them dependent on others. Value Proposition: monthly rentals, riders club membership and options to swap Vespas and change their look whenever they like.
  3. Option 3: savvy young investors love the whole rented Vespa thing but can’t afford a franchise. Value Proposition: a buy to let scheme lets local franchises resell their Vespa rental option to investors wanting to buy a Vespa and rent it out during the week, using it on weekends. The local dealer takes a cut with the investor covering the capital costs and storing the vehicle on weekends when its quiet.

As with regular value proposition validation, your final step is to get out of the building and validate your different ideas. But for now, you have a quick and easy technique for developing a variety of innovative business models which you may not have thought of otherwise. Next time, we’ll build on this by using a technique called SCAMPER.

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