Your Business Model Is Like A Yoghurt, And 7 Other Lessons From Alexander Osterwalder
We exchanged platitudes by the coffee machine, which made me happy. Then Alex dropped 8 wisdom bombs that exploded all over me.
I thought I’d heard all there was to hear about business model canvases, but Alex proved me wrong. This is what I learned from the Business Model Baron himself.
1) Nobody Gives A Shit About Your Idea
That’s exactly right, nobody cares. Why should they? People only care about the value you and your idea can provide to THEM.
This isn’t a novel idea of course, but it is worth a reminder. Another way of expressing it comes from legendary personal development pioneer Zig Ziglar, who often spoke about a metaphorical radio station. People listen to this station in their heads all day long. It’s known as WII.FM — What’s In It For Me Radio.
Don’t just throw ideas around, because ideas are cheap. Focus on the value your idea can provide others. Broadcast your message over the WIIFM channel loud and clear. Someone might very well pay attention.
2) Your Business Model Is Like A Yoghurt
Preferably a Swiss yoghurt, Alex said with a sense of national pride. Preferably a vanilla tasting one, I thought, while scrambling to figure out this bizarre analogy.
Your Business Model Has An Expiry Date
And it is probably coming very soon. No matter how well it tastes in the moment, your business model will soon go sour. To avoid getting sick, you must throw it out and get a new one.
The yoghurt has a slight edge over your business model, though. With the yoghurt, at least you know WHEN it expires.
Your business model isn’t as forgiving. So keep smelling it daily, and be open to the idea of throwing it out when it has run its course.
3) Customers Have NO IDEA What They Want
“If I had asked people what they wanted, they’d have answered a faster horse!”
Ask For Problems, Not Solutions
Customers aren’t experts on solutions.
They are, however, experts on their own problems.
So don’t ask people what they want. Don’t burden them with such cognitively demanding tasks. Instead, ask about their problems. Dig for issues, troubles, worries, challenges and, above all, PAINS. Then, and only then, get to work on curing them.
(For amazing advice on how to talk to customers, see this video from CustomerDevLabs. Justin Wilcox is a true master!)
(Note: there are valid counter-arguments to this one. When a truly ground-breaking product comes along and disrupts or creates a product category, how much would extensive customer interviews have helped with its development? Would the iPod have been possible to create based on customer interviews, focus groups and testing? Possibly not. This argument is elaborated here, among other places).
4) Watch What People DO, Not What They Say
Your loving auntie will say that your idea for disrupting the fishbowl market is brilliant. But she won’t give you $100 for the privilege of becoming your first customer. Turns out, getting Gully the Goldfish a new home wasn’t so important after all.
What people say is seldom indicative of what they do. Even more rarely is it indicative of what they’ll actually pay for when push comes to shove.
Keep this in mind as you talk to customers and develop your ideas, products and services. Then tailor your approach accordingly.
Put bluntly, test the hell out of your assumptions. How?
- Make people pay for products BEFORE you make them. If they really want your idea to come to life, they’ll be willing to vote with their wallets (sounds familiar? Kickstarter is based on this idea!),
- Run ads on Google/Facebook to see if people actually click on your offer. Then see if they’re willing to give you their money (ideally) or their contact information (second best),
- Ask your friends to share your idea on social media. Everyone safeguards their online reputation nowadays. If someone is willing to spend her limited social capital to endorse your idea, you might be onto something (again, unless she's your loving auntie).
5) Everyone Is Afraid — And That’s Great News
According to Osterwalder, 74% of CEOs are afraid of disruption.
As Alex pointed out, the most interesting part about that statistic isn’t about those 74% at all. Who on earth are those naïve 26%, and how long will they keep their jobs?
For simplicity’s sake, let’s make a very rough round up — basically all CEOs are (or should be) afraid of disruption. No matter your industry, it’s comin’ for ya in one way or another. And that’s great news.
It’s great news for everyone who’s adaptable and agile. It’s great news for everyone who is able and willing to consider disruption as an enormous bag of opportunities.
Going forwards, plenty of people and organisations are going to disrupt, while someone else will inevitably be disrupted. Our job as 21st century citizens is to take the active form of the verb. We need to lead the change rather than being outrun by it.
6) Entrepreneurs Have ONE Job: Reducing Risk
“You’re an entrepreneur?? That’s SO RISKY!”
-Practically everyone (especially accountants, believing to be on a safe path, but really being on the verge of being replaced by A.I.)
Your only job as an entrepreneur is to REDUCE RISK through experimentation and testing. Alex calls this phase the search, which implies that one is searching for something.
The goal of the search is to systematically search for clarity in the fog of uncertainty that is early stage entrepreneurship.
You do this by testing and running experiments (see #2 and #3 above). Ideally cheap and fast experiments, which reduces the downside when you encounter inevitable failures. Spend $100 on Google Ads to see if anyone shows interest in your app before you consider spending $100,000 to develop it.
You definitely need a solid dose of (often irrational / borderline delusional) optimism to get started on something that may or may not work out. Then, after deciding to give it a shot, your primary goal is to systematically reduce the risk of a big failure as soon as possible.
(Paradoxically, failing a lot is often a core component of reducing the risk of a major failure, but that is another post in and of itself.)
7) Your Company Culture Is Like A Garden
“Show me your garden and I shall tell you what you are.”
If you leave a patch of land to its own devices, everything will look perfectly fine for a while. But don’t be fooled — a total mess gradually ensues. Before you know it, vicious weeds will completely dominate your garden.
Not a great scenario, but luckily one that can easily be avoided.
Consider the main principles of actual gardening (brutally simplified):
- Sow good seeds,
- Add water, fertiliser and sunshine,
- Remove weeds quickly.
Gardening is all about intentionality over time. So is your company culture.
The three steps to creating a prosperous company culture look very similar of those of a great garden:
- Get good people on board,
- Add interesting work, tasty coffee and praise whenever praise is due,
- Swiftly remove toxic people with detrimental effects on others.
Much like your garden, your company culture will get out of hand if neglected and left to its own devices. Despite having great soil, even despite sowing great seeds initially, your garden will get out of control over time if you don’t continually cultivate it.
Keeping your garden beautiful is easy if done well from day one. If your garden gets out of control, resetting it to its pure, initial state is very difficult. The same is true of your culture.
Be a cultural gardener. Intentionally cultivate and care for your culture from day one.
8) Make Your Company Schizophrenic
Corporate Schizophrenia: when one company has two distinctly different approaches to business within itself.
Your business’ core operations and its innovation efforts are fundamentally different from each other. Thus, thinking about your business as two separate parts might help make it more innovative.
Let’s explore what I hereby call corporate schizophrenia a bit further.
Your core business is to keep your well-known operations running smoothly, and continuously improve efficiency throughout your supply chain. This is great for maintaining the status quo and capitalising on your existing products, services and business models. Let’s call this part of your business the Status Quo Profiteer.
However, as business models have shorter and shorter expiry dates, being great at what you’ve always done is no longer enough if you want to survive and thrive in the long run.
The other vital part of a future proof business is its innovation engine. Here, you want to disrupt yourself before anyone else does it. In your innovation engine the goal is not incremental improvements. Rather, it seeks exponential gains and truly innovative breakthroughs.
Mixing up the Status Quo Profiteer and the Innovation Engine can get messy. You will make very different choices if you seek incremental improvement than if you seek exponential gains, but having both is important.
Understanding this duality is key. Your business will not survive today’s disruptive landscape without a relentless focus on innovation and new business models. However, without the profits of today’s business models, you can’t afford to develop your future ones.
Mentally splitting your business into these two parts can therefore be beneficial, as it allows you to accept making very different choices within the same business.
Summary: Have Your Yoghurt And Eat It Too, Cultivate Your Garden, And Embrace Corporate Schizophrenia
An good idea might be that you do the same. If you give a shit about my ideas, I also suggest you click “Follow Me” below. Thank you!
Originally published at Jacob Mørch.