This article presents our innovation framework, which we’ve been using and refining since 2009. I already made a case in 2016 for letting go of the now generic business model canvas. Story short: it’s a fantastic training tool. As such, it’s very open and can be used by a lot of trainers, consulting enthusiasts, or business schools. However, the price to pay is that it’s a blunt tool with no credo, no vision, and worse: no teeth!
Innovation is a contact game that is played at high velocity. We require sharper tools. This is what we’ve been using for more than 10 years our own Innovation Framework. Let’s see how it works, shall we?
The full business model of an innovation project is mapped in this framework:
Not that business model canvas
The tool we have been using and polishing for years had different names but always the same logic. We simply call it the Innovation Framework, but this doesn’t matter much. What matters is that it lays out the most simple and precise logic you have to connect fast if you want to innovate anything. And this is how we deal with describing a business model for an innovation project:
Always start with the problem…
Our innovation framework always starts with the Problem box. It describes the unresolved issues that your customers face in the market and that you intend to solve — even if only partially.
This is the core of your vision and what you are determined to change. The amount of change you will deliver will define the level of innovation you’ll deliver. Solving small problems a step at a time delivers incremental innovation. Solving problems that were deemed impossible to crack until now is the essence of innovation. To break down the understanding of the problem, it’s usually easier to explain the key Pain points that constitute it. Some of them will be perceived by the customers, but some might still be invisible to them.
Customers are simply defined by answering the question “Who has the problem?”. A customer segment is a group of customers having the same type and amount of pain points, at the same time.
We also define the key stakeholders involved in the problem.
The Competitors are the most obvious ones: they are already solving part of the problem you focus on, or they intend to. They compete with you at removing the pain of your target customers, but they might not use the same product, distribution strategy, monetization scheme, or technology.
Airbnb is competing with Accor even without hotels, just as Fortnite competes with Youtube and Netflix to entertain you. Differents 'products', the same problem to solve.
The other stakeholders are less discussed but are tremendously important. They are the Activators and they are different groups of interests that talk about the ongoing problem, they can lobby for or against it, they might be customers associations, public services, or industrial conglomerates. Because they make the problem more visible to everyone, they indirectly help you create your business.
When capital cities such as Paris or London study pollution and make the case for fewer cars in their street, they unwillingly open the market to Uber, Lyft, Waymo, or now Lime. The market is more prone to understand the problem these companies solve. It has been 'activated'.
If the way you think your business model starts with the PROBLEM, congratulations! You are a customer-driven company (startup, project, team…). If not it’s OK, but you’ll have to circle back to it as fast as possible. If there is no problem to solve, there is no market to innovate.
Selling your added Value!
The central engine of the innovation framework is about the Added Value. It explains how much of the problem you actually solve and the resulting unique benefits for the customers. These benefits can be tangible (« We generate an average monthly income of X for our customers ») or intangible (« We help you find love within a week »).
The added value is not just your « value offer ». It describes which parts of the value proposition you have that goes beyond what your competitors are doing. In that sense, bringing « good quality », « simple use » or « competitive price » doesn’t explain your added value. Everyone says they bring these benefits, it’s not opposable to the market.
The Revenues of your business should be directly linked to the value you deliver to the market. Following Schumpeter’s logic: you create a value that is shared between you and the customer. What you keep is your revenue. When working on business models, it’s often referred to as ‘monetization,’ but it’s deeper than that. If you have to generate financial revenues (money), you might also generate social revenues, ecological positive externalities, etc. This should also be taken into account here.
A not-for-profit organization, for instance, would list social impact in its revenues (with its own adequate KPI). A fast-growing company such as Uber could decide to record the number of drivers on the platform as a form of revenue (it’s essentially a pre-money revenue), or Google’s Waymo, the number of miles that its self-driving prototypes are recording monthly.
Once you know your added value and link your revenues to it, the way you will communicate this to the market and make yourself visible to your potential customers is key. An oversimplification of this describes your marketing strategy, but this goes beyond it should map all the touchpoints between you and your market.
Lastly, the partners are the third parties that work with you and supply a key activity that you don’t have internally. It might be a unique distributor in a specific region, a research lab owning a patent you use, etc.
Are we forgetting something?
In our innovation framework, we explore the Product box last. I must confess I tend to remind our customers that the product is not important excessively. It’s half a joke, half an oversimplification. But as an innovator, you have to consider the product solely as key functionality of the business model.
It’s never the end game, even if you have the best technology in the world ready to launch. Startups’ and corporates’ R&D programs’ graveyards are full of amazing solutions without a problem to solve!
It’s also important to note that we couldn’t care less about the product/service distinction, and we say ‘product.’ This is usually a full discussion that we should have if you’re an innovator thinking that you should design, market, or distribute products and services in critically different ways. It is not the case, and this only really matters for accounting and taxes. But this discussion would lead us into a too deep rabbit hole for this article. Just say ‘Solution’ if you’re uncomfortable calling everything a product and be done with it.
That being said, your product will have Key Features that highlight the critical parts of the job you’re doing for the customers to solve their Problem.
Finding several offers wherever you want to travel on the planet with Airbnb is, for instance, a key feature. It has to be designed and engineered as early as possible at AirBnB’s launch to be sure to deliver the promised added value.
As important as understanding what your product is, there is the need to understand your Super-Powers. How and why you’re going to get to a breakthrough product, get it to the market faster than anyone else, or sustain its added value for years to come. These superpowers are your main barrier to entry to would-be competitors.
Associated to the product, we will also explain as briefly as possible your Distribution strategy (even in SaaS, always worry that distribution could end up as the trickiest part of your business) and your cost structure (mainly are you in Capex or Opex mode, and where are the bulk of the investments needed).
Being practical with your culture
Using this innovation framework doesn’t require that you start with the problem, move on to added value and then decide the product to build eventually. As I said earlier on, this would be the case if you were market- or customer-driven. You can also be future-driven and envision the added value you want to create in the market, connect it later to a problem, and design your product.
In this innovation game, I have to acknowledge that companies tend to start with the product by a large measure. Especially if they are tech or engineering companies: an Airbus, a Nissan, or a Vinci will not culturally start to innovate by thinking about customer’s problems. But as such, being process-driven doesn’t mean you should end up being oblivious to the mechanics of innovation. On the contrary, starting with the product because that’s what you do, demands that you learn how to translate features to a roadmap and added value, and assess the reality of the market need. You need to do it as fast as possible and with as much flexibility on your product design as possible, because yes, you are running this race backward. No surprise here: agile and lean are key cultural issues for process-driven companies.
Free Mural Template
As an extra, you can find here a Mural template to use for your online workshops : )
Here’s our innovation framework
And to conclude here’s a look at how we see our own business (this is also a good indication of the level of detail you want to have with this framework):