White Paper Innovation Management with the «Extended Business Model Canvas» (eBMC)
From the BMC to the eBMC
If you compare the Business Model Canvas with the navigation system of Aloys Gälweiler, you will see that the innovation is positioned there on the top level, with the two components «solution-independent customer problem» and «solution technology». We then put these two building blocks on the Business Model Canvas, making this extended Business Model Canvas (eBMC) a great tool for innovation management.
The book «Business Model Generation», published by Alexander Osterwalder, has hit the world of consulting and entrepreneurs like a bomb. The book is practical, very nicely done and above all very different from anything else in the field. And success proves the author right.
When a colleague told me about this model for the first time, something irritated me from the beginning – something was missing. It’s not like the BMC reinvented the world. Much can be found in it from known approaches and methods – or not.
What was lacking for me from the beginning is the building block «customer problem», namely the «solution-independent customer problem», as we used to call it. Based on the St. Gallen approach, we have always clearly separated the customer problem from the product or service itself.
The «Solution-Independent Customer Problem»
A watch is a product for the purpose of indicating the time. The customer problem, namely the time to know, however, is independent of the clock and can be solved differently. This applies even more clearly when the watch is offered as a luxury or status object. Then the customer problem is to make a difference, and that can be solved with completely different offerings or value propositions.
In the BMC, the customer problem is presented together with the building block product and then called «value offer» in New German. Later, a separate canvas was developed for the building block customer problem and with the help of the so-called empathy card (by Xplane).
I did not let this thought go, and I studied how the canvas model can be complemented with the customer problem without destroying the model’s logical unity and symmetry. And as is sometimes the case, the best thoughts come when you are alone: During a long run through the forest, I had the following idea: Let’s take the top level of the navigation system of Aloys Gaelweiler with the two components «solution-independent customer problem» and «solution technology,» and put them on the business model canvas. This makes this enhanced Business Model Canvas (eBMC) a great tool for innovation management.
This results in the following chain: customer – customer problem – technology – product or if you prefer: product – technology – customer problem – customer. The interesting thing is that the model remains nicely symmetrical and fits together logically.
Innovation Management with the eBMC
Supplemented with the two building blocks from Gälweiler’s navigation system, we use the canvas model mainly in the search for new businesses. This makes it an excellent instrument for innovation management. Because innovation can be driven forward from two sides: the market and the technology. Good practical instructions have been provided by Prof. Hugo Tschirky, who teaches at ETH Zurich, with his approach to innovation management. We find it in the book « Wunderwaffe Innovation «by Beat Birkenmeier and Harald Brodbeck. In the following, we will explain the two components «customer problem» and «solution technologies» in more detail so that you, too, can supplement the Business Model Canvas accordingly and use it as an innovation tool
The module «customer problem»
This component stands for the customer problem that a company wants to solve – and that is about the «solution-independent customer problem». This means that this customer problem is often latent and is only solved differently and better by new products or services.
Here is an interim remark: We use the terms «customer problem» – «customer need» and «customer request» as synonyms. You are free to use your appropriate term here.
Solving a customer problem brings benefits to the customer, and it is for this benefit that the customer is ready to pay. So the product «car» is not primarily a beautifully designed machine on four wheels, but creates the ability to move from A to B at any time. It is often useful to abstract a business idea to this «problem» in order to come up with new solution techniques. Innovation, which is based on the market, is mainly concerned with it and can only work if you know the original customer problem exactly.
These may be a original problem as such like eating and drinking or secondary, derived problems such as luxury goods, holidays or other amenities that go beyond a basic elementary need.
The most important questions about this module:
- Which customer problem do we want to solve or which customer needs do we want to satisfy?
- What does the customer really pay for?
- What is the background of a problem solution?
- What are the real purchase criteria from the customer’s point of view?
- Which purchase criteria are better covered by our products?
- What brings the customer to put the money on our counter instead of the competition?
Instrument Customer Value Analysis (Value Proposition)
The customer value analysis is probably the didactically best instrument to focus the company in its activities on the customer benefit. The instrument can be set up directly on the building block customer problem. This creates the logical and substantial connection between customer benefit – products – customer groups.
On the basis of purchase criteria, a strategic Value Map is created that shows which competitors bring benefits to the customer with their products. For a detailed description, the tool itself, and the tutorial, see the white paper Customer Benefits on our BLOG
The module «Solution Technologies»
This component represents the technical solutions behind a product or service. Technologies usually have a specific lifecycle and, after a certain period of time, are replaced by new technologies that solve a customer problem better and more favorably. Thus, a substitution process begins, which leads to the replacement of existing products in the market. This process normally follows the pattern of an S-curve.
An example of this is the substitution of horse-drawn carriages by automobiles. Innovation always takes place in the interplay between the knowledge of the original customer problem and new solution technologies. The timeframe of substitution varies and can go on for years. The first presentation of a new solution concept is called invention, while innovation only exists when the product prevails in the market. Solution technologies can be incremental improvements or implement completely new concepts like the laser printer or the fax technology that has substituted the telex. Such completely new approaches often turn the existing business model upside down, which is described by the term «disruption».
The most important questions about this module:
- Which existing solution technologies are behind the products?
- In which phase of life are these technologies?
- Where are new inventions, and which customer problems can be resolved (much) better?
- Where and in which technologies does our company have competencies – a lead over the competition and therefore core competences?
- For which purchase criteria can we make significant improvements?
Instrument substitution analysis (S-Curve)
With the substitution analysis, the replacement of existing products or technologies by new offers can be shown.
This instrument helps on three levels:
- to find the optimal time to enter a new market (or exit)
- To set the growth rates in growing markets against the market and the competitor.
- To plan the transition to a price or cost market, and thus to exploit the cost position or to withdraw from the market.
eBMC in the STRATEGY.APP
For each business area, we create the eBMC with the current key elements. Each module is filled accordingly and can be adapted, printed or otherwise communicated at any time:
The individual blocks and elements are entered in the usual editing window:
In the design phase, we can now add additional key elements; here e.g. as a new technology, the «nanotechnology» applied to the coating of the glass; or a new sales channel with which customers will be served in the future:
The new elements appear in red for identification. This provides us with a basis for deriving new strategic options and developing strategic directions and measures.
These are then listed in parallel with the options derived from the SWOT.
Here, too, options can be added, added, stopped or deleted at any time.
Whitepaper The eBMC as an Implementation Tool for the Innovation Architecture
The innovation turbo
We started a trial once and filled the results from the innovation architecture into the eBMC. And lo and behold, now we had a stable basis on which to derive innovations, directions and measures; almost like in a real strategy.
That works as follows:
The innovation architecture as a basis for the delimitation of strategic focus areas
The «innovation architecture» serves to increase innovation success while taking social trends and the use of new technologies into account, by enabling simultaneous consideration or coordination of market, product and technology aspects.
The various levels of architectural observation are logically linked from both the market and the technology point of view and are mutually dependent: On the one hand, trends affect the markets and the behavior of current and potential customers. In concrete terms, the influence of trends is expressed in specific customer tasks and needs. Satisfying these is the primary objective of shaping the market offering, i.e. products, services or business models. In order to provide this service, you need to click on of the other side requires competences or technologies. They fulfil – abstractly formulated – those functions which are necessary for the satisfaction of the customer needs are necessary.
For a Approach «from the market «, in marketing also known as «Market Pull«, we therefore try to optimize our own market offer as much as possible. to meet the needs of the markets. An essential feature of this The point of view is that the customers you want to serve are at least are known to the public to some extent. When looking at «from the technology or Competence her«, also known as «Technology Push«, this is not the case. must be the case. Rather, the question is in the foreground here which Needs in new markets on the basis of available competencies could be satisfied.
If one now fills the individual levels of the «innovation architecture» with concrete content, one obtains a suitable basis for deriving so-called «strategic focus fields» for innovation. In a somewhat abstract formulation, these are search fields for raising innovation potentials, which serve as a source for new market services or offers over a longer period of time. Within these fields, active search is now made for innovation opportunities and solutions are sought . Or something more concrete: Fields within which a company wants to innovate.
The limitation of a strategic focus field is not absolute, but it gives every company a framework to increase the chances for successful innovations and to minimize the risks.
What do we do with the result?
The identification of strategic focus areas forms the basis to fill the eBMC:
- We can create one eBMC per focus field or combine several of them. The prerequisite is that at least one business idea can be created from this.
- Then we put together the customer criteria on the one hand. For this we use common KN tools, such as the Kundennutzenanalyse or the Value Proposition Canvas (VPC). The evaluation of customer problems – customer needs – customer benefit criteria helps to precisely define and define the offer from the market point of view.
- On the other hand, we capture all the key technologies necessary for this.
- The description of the product or offer is a derivation from customer benefits and technologies. It is the solution for which the customer is willing to pay. This solution now has not only any derivation, but is strategically embedded, or in English: we have a «STRATEGIC FIT».
- Now we have to fill in the remaining fields of the eBMC, either with already existing elements or with new ones that have to be created. We recommend that new elements be highlighted in color. Immediate measures can then be derived directly from this.
- Now we embed the result into the corporate strategy and define the options, directions and measures, and the recipe is ready.
The procedure step by step
Step 1: Creating the innovation architecture
When creating the innovation architecture, the aim is to fill the above-mentioned levels with concrete content that is relevant for your own company. The following procedure has proven itself:
- Initial filling of the individual levels: This is done by collecting existing analyzes from the market and technology perspectives and comparing them with the corporate strategy.
- Complementary strategic innovation analyses to close remaining gaps in the innovation architecture: This can be achieved through partially standardized interviews with management and key persons from the areas of market, technology and product. On the other hand, targeted analyses are carried out along structured work instructions. These serve, for example, to determine the company’s own core competencies, future customer requirements, relevant megatrends and their consequences, as well as new Technologies with relevance for the company.
- Setting up the innovation architecture: The results obtained are continuously assigned to the individual levels of the innovation architecture until the picture is complete from the point of view of the core team. The art is to find a granularity suitable for further processing – not too generic, but also not too detailed. Results consisting of 40 to a maximum of 70 elements have proven themselves in practice.
Before further work is started, the innovation architecture should be adopted by the management as a suitable basis for the next steps. This includes a check of the completeness and quality of the content as well as of the granularity. The following figure shows an approved innovation architecture of a manufacturer of chemical laboratory equipment:
Step 2: Identification of strategic focus areas
To identify and delineate a strategic focus, a single content, such as a trend, is selected from the innovation architecture, which, from the company’s point of view, opens up opportunities for differentiating innovations. This content then serves as a «driver» or «nucleus» for the strategic focus field. Each content can already be seen as a strategic focus field on its own or, if necessary, supplemented by further contents from other levels, which should sharpen the task in a suitable manner. Since the demarcation of strategic focus areas should be in line with the corporate strategy, appropriate content should already be incorporated here. This procedure is repeated until the most attractive strategic focus areas have been identified. A number of five to a maximum of ten strategic focus areas has proven to be appropriate. The most important facts about each focus field are summarized in a profile.
Depending on the content of the focus fields, we then either enter the eBMC via the customer problem or the technology.
Step 3: Solution-independent customer problem and solution technologies
As part of a first «exploration» of the focus areas, it is about sounding out possible innovation potentials. This primarily includes the concretization of solution-independent customer problems in the sense of articulated or inarticulate customer needs. In doing so, it is possible to fall back on proven methods of innovation management in the early stages. Possible meaningful approaches include: lead user workshops with selected customers and sales partners, customer process analyzes, customer observations, in-depth interviews with customers, critical event method (CIT), frequency relevance analysis of events / problems and complaints, internal ideas competitions, open innovation Activities (eg public competitions), benchmarking days, business model confrontation or trend scouting. These are entered in the corresponding field of the eBMC. At the same time – as far as possible – ideas for solution technologies are developed and also recorded in the eBMC. Here, too, can be built on proven methods and concepts such as the S-curve, the Gartner hype cycle or technology radars.
Step 4: Customer Groups and Products
In the next step, the idea will be given further contours by, on the one hand, sharpening the profile of potential customers and, on the other hand, putting the offer together. Osterwalder’s «Value Proposition Design» approach provides valuable assistance in this regard. He assumes that the customer profile can be derived from the «jobs-to-be-done» of the customer as well as the pains and gains in the fulfillment of the tasks. From the considerations to possible «pain relievers», so solution elements for the reduction of the Pains and «Gain-Producers, so solution elements, which are able to donate a customer use, finally the product can be designed. By a product we mean everything that the company «produces» and donates to the customer for money. This includes haptic products, services, services and everything that is today called New German word creations such as «value proposition», «value proposition» and other terms
Complete the remaining fields for the eBMC
On the basis of technologies, customer benefit and offer, the other fields of the eBMC are filled up according to the already classic pattern.
Step 5: Partners, Resources, Activities
No company is alone in the market. List the partners you work with here. This is best done along the value chain; So from the purchase of materials and services on the service to sales; Marketing and communication with the customers, also record the services provided by the partners.
The resources used to create the market offer the following categories: the physical resources (premises, production machines), the intellectual resources (knowledge, patents, partnerships, customer base), the human resources (employees) and the financial resources (available capital, securities).
The key activities describe the processes and competencies needed to ensure service delivery. Again, we cover the entire value chain, which we serve from – to marketing and sales.
Step 6: Customer Groups, Customer Relationship, Sales Channels
Customers can often be divided into groups or segments. In many cases, segmentation also serves for the division into business segments. We recommend equal quantification of these groups, i. with which groups which turnover or even better, which profit is achieved. A good instrument for this is the classic ABC analysis.
The customer relationship also determines the communication with the customer. Between intensive collaboration e.g. There is a whole range of possible relationships with joint developments and pure marketing of the products. Depending on the intensity of the marketing is adjusted accordingly
The sales channels determine how the products or offers come to the customer. Distribution, online channels and points of sale form the interfaces of a company to the target customers.
Step 7: Expenditure
The most important cost factors of a business model are summarized here.
Step 8: Revenue
Here, pricing models and pricing strategies (one-time payment, subscription) are described.
Step 9: Integrate the innovations into the corporate strategy
We can now directly derive the measures from the eBMC for the implementation. If we have highlighted the «new» elements in color, they can easily be formulated.
Alternatively, we can now embed the result in the corporate strategy and develop options, strategic directions with quantitative targets. These then lead to concrete measures and form part of the strategy that will be implemented and accompanied by strategic controlling.
eBMC in the STRATEGY.APP
For each business area, we create the eBMC with the current key elements. Each module is filled accordingly and can be adapted, printed or otherwise communicated at any time:
The individual blocks and elements are entered in the usual editing window:
In the design phase, we can now add additional key elements; here e.g. as a new technology, the «nanotechnology» applied to the coating of the glass; or a new sales channel with which customers will be served in the future:
The new elements appear in red for identification. This provides us with a basis for deriving new strategic options and developing strategic directions and measures.
These are then listed in parallel with the options derived from the SWOT.
Here, too, options can be added, added, stopped or deleted at any time.
Literature: « Wunderwaffe Innovation «By Beat Birkenmeier and Harald Brodbeck
Learn more about « Innovation Architecture » at:
beat.birkenmeier@gronova.com +41 41 727 04 70
White Paper: Strategic Success Potentials in Times of Disruption
Part 1 of 2
Just as operational management has its controlling or core figures in annual or quarterly earnings figures, so too does its strategic management. The most important control variables here are the market position, the cost position and the customer benefit. Add to this the handling of new technologies and here come S-curves and disruption into the game. The interplay of these variables allows us to derive the success potential and thus the future viability of a company.
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Strategic success potentials
Success potentials are all the prerequisites and abilities of a company, with which the results of the enterprise are achieved. Gälweiler differentiates here by distinguishing between current and future potential for success.
Today’s potential for success
Today’s or existing potential for success forms the basis for the medium-term success of the company. The most important key figures for this are the market position and the cost position. However, these key figures are not sufficiently informative about the long-term success and survival of the company.
Future success potential
Future success potential ensures that a company can remain successful in the long term. The central control parameters for this are the «solution-independent customer problem» and «new technologies». The building up of future success potentials is attributed to the strategic management. Essentially, the development of future success potentials corresponds to innovation and thus to strategic innovation management.
«Strategic corporate governance as a precontrol task with regard to the subsequent realization of success therefore consists of the search, creation and maintenance of high and secure success potentials, which always includes the timely location of innovation potential.»
(A. Gälweiler, 1987)
The different crises of a company
According to this logic, corporate crises can be classified:
- If a company lacks the liguidity, it is technically bankrupt and one calls this the «liquidity crisis». This happens to many startups – although you have good business models and a lot of potential when you run out of money, that’s over
- The operating crisis or earnings crisis occurs when the profit is down or negative. This is not the death of a company. As long as money is there, it can survive and if the strategy is right, it will even be back in the black.
- The strategic crisis is defined by a poor market and cost position. The gain may still be positive, but the future is endangered.
- The innovation crisis will only take effect in a few years, when new solutions based on new technologies begin to substitute our products and services.
Gälweiler on operational key performance indicators versus strategic success factors
Quotes from A. Gaelweiler: Strategic Management, 1987
- The autonomy of strategic corporate management lies above all in its independent orientation. (P. 26)
- The autonomy of strategic corporate management lies above all in its independent orientation (p. 26) Operational business data, as important and irreplaceable as they are for running the day-to-day business, often leaves the actual strategic problems of a business venture in one Light that does not correspond to the real strategic conditions. Therefore results and data of the current business usually lead to a strategically wrong behavior. (P. 25)
- Success data are relatively ineffective and often totally misleading as a basis for strategic corporate governance. (P. 30)
- The signals emanating from the short-lived success data are usually not only too late. Too often, they also mislead to acting in a long-term, wrong-pointing direction without first being noticed. (Pp. 240 f.)
- Last but not least, therefore, the fundamental importance of the strategic management task lies in the fact that wrong decisions and omissions are generally no longer correctable or recoverable if they only become noticeable at the time of the operational implementation of the success data. (P. 26)
The current success potentials and their control parameters
According to Gälweiler, today’s potential for success is derived from the control factors of the cost position and the market position. From our point of view, it is indispensable to include the area of employees as a further position for control variables. Our experience shows that this as a strategic success potential also plays a crucial role.
Market position
The control parameters of the market position include the following factors:
- Absolute market share
- Relative market share (in relation to the 3 biggest competitors)
- Customer loyalty
- Customer Value
- Relative Qualitä
- Image
- entry barriers
These figures show whether your own market position can be maintained and defended, or expanded.
Cost position
The control variables of the cost item are the various types of productivity. The continuous optimization of structures and processes comes into play here:
- Productivity of knowledge
- Productivity of the invested capital
- Productivity of employees
Know-how Position
The active involvement of employees in corporate development releases strong and often unimaginable energies and decisively supports the development of factors such as:
- Know-how
- Core competences
- Motivation and commitment
- Creativity and new ideas
Future success potentials and their control variables
Gälweiler derives the future potential for success from the control parameters of customer benefits and technologies.
Customer benefits
Customer value is the anchor for any corporate strategy; And this is about the original customer problem, detached from the product or offer. We also refer to this as a «solution-independent customer problem». Whether you prefer to call the customer problem a customer request or a customer need, leave it to them. We treat these three terms as synonyms.
Here are the questions:
- What does the customer really pay for?
- For what does he put the money on our counter and not go to the competition?
A detailed description of this topic can be found in our whitepaper «Customer Benefits».
Technologies
All technologies have a limited lifetime because they are replaced by new and improved technologies. There are on the one hand gradual improvements and optimizations of existing technologies, on the other hand quantum leaps, with which a new technology replaces the existing solutions within a short time. Not only does it offer improved solutions, it also offers completely new applications that are better for the customer. These are e.g. the automobile with the internal combustion engine opposite the horse-drawn carriages or the email via the Internet opposite the letter post. As control parameters of the technologies the questions after the
- right key technologies
- the life phase of an existing key technology
- the advent of new technologies
- your own core competencies
- the substitution of existing products and solutions
Disruption and S-curve
Here we find the basis of what is being discussed and treated nationwide under the term «disruption»: the S-curve.
The expiration of a technology while at the same time a new technology spreads, shows the emergence of future success potentials. Existing products are substituted by new offers according to the pattern of the S-curves.
In the next whitepaper, we will discuss it in detail and introduce the S-curve tool in more detail.
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Ignaz Furger
Furger and Partner Inc Strategy Development Hottingerstrasse 21 CH – 8032 Zurich +41 44 251 8070 furger@furger-partner.ch www.strategy.app