Business Innovation Design Thesis
Innovate Like Playing LEGO
Companies fail to remain relevant not because they do not understand the market, build the right products, or monetize them. It is because they focus too much on 1 to n, and get disrupted before they achieve another 0 to 1. The most innovative companies grow by building a system to continuously innovate that balances exploration and exploitation.
Innovate or die
Volatility, uncertainty, complexity, and ambiguity (VUCA). These are the factors driving the disruption of companies - startups and corporations alike. Disruption occurs as a combination of liquid societal values, hyper-competitive market, exponential technology advancement, environmental degradation, and political bureaucracy.
Disruption occurs as a perfect storm between liquid societal values, hyper-competitive market, exponential technology advancement, environmental degradation, and political bureaucracy. In an era where change is constant, technology is accelerating at an exponential pace. Consumers shift expectations like changing clothes. Organizations grow logarithmically are pressured to operate exponentially, emulating the growth rate of tech unicorns.
Welcome to the fourth industrial revolution. Never before, organizations suddenly find themselves in an “innovate or die” situation.
Yahoo! was once a dominant search engine giant has shut down. Kodak, at one time the world’s biggest film company was bankrupt. Nokia, a global mobile phone leader tumbled into irrelevance, not once but several times.
They were once innovative companies that created new or re-invented existing markets (0 to 1) once, and stayed at the top by exploiting the market with incremental improvements (1 to n) till their eventual demise from disruption.
Contrasting with Apple, Tesla, and Netflix that remain at the top by building something new and different that creates impact in the market, again and again. The most innovative companies play to win by achieving 0 to 1 repeatedly through continuous innovation.
New market creation and existing market disruption
Between the late 2000’s and early 2010’s, taxis were being disrupted by Uber. It’s global conquest was cut short. With a lack of deep localization strategy in Asia, Uber were outcompeted by Grab in Southeast Asia and Didi Chuxing in China. Uber ultimately sold its regional operations to both of them.
As a new monopoly in the mobility market, Grab pushed to dominance by shifting its core from mobility-as-a-service to become the Everyday Super App providing all sorts of services to everyone. Grab built a mobile payment and e-wallet to centralize all of its new services (delivery, booking, subscription, and rewards). Today Grab is trying to disrupt the disruptors and incumbents in multiple verticals (Foodpanda for food delivery) while collaborating with frenemies (booking.com for hotel bookings).
Competitive advantage is transient
There are 2 ways to win.
1. Operate as a low-cost leader
2. Being different
Since there can only be one true low-cost winner in every market, the only option is to differentiate. To differentiate, organizations must innovate in order to gain a competitive advantage.
Since competitive advantage is transient, it erodes over time. Me-too brands copying hoping to replicate similar success.
As technology and consumer preferences evolve, what was new will be old. What was different will become the same. What created impacted will become the status quo. Hence, the necessity to build the capacity to continuously innovate.
Good design is good business
The value of design has evolved horizontally and vertically.
The role of design has shifted horizontally from noun to verb.
-> From “what it looks like” to “how it works”.
-> From designer objects to design process.
-> From aesthetics to systems.
-> From single design discipline to interdisciplinary design.
Design has also evolved vertically across levels. There are 4 levels of design.
Level 1: Design as Communication
Advertisement, packaging, graphics, illustration
Level 2: Design as Utility
Product, hardware
Level 3: Design as Experience
Brand, service, interactions, interface, information)
Level 4: Design as System
Process, structure, capabilities, policies
There is a fundamental shift in the value of design where it is being used to its maximum potential - designing experiences and systems. A business is a system. When design is applied as a systemic approach to innovate, companies are yielding boosts in revenue, customer base, market share, and mind share, while reducing costs and inefficiencies.
Market leaders like Apple, McKinsey & Company, PepsiCo, and Johnson & Johnson are vouching for design and have design officers in key leadership positions. On top of that, 50% of companies surveyed by Adobe state that "design plays a huge role in how they achieve success".
Good design gives good returns
DMI Design-Centric Index depicts that $10,000 invested in design-centric organizations would have yielded returns 228% greater than the same investment in the S&P over a 10 years period.
A research study conducted by Design Management Institute and Motive Strategies analyzed the performance of US companies committed to design as an integral part of their business strategy. The dmi:Design Value Index tracked the value of publicly held companies that met specific design management criteria, and monitored the impact of their investments in design on stock value over a ten-year period, relative to the overall S&P Index.
2015 results show that over the last 10 years design-led companies have maintained significant stock market advantage, outperforming the S&P by an extraordinary 211%.
Innovation approaches
Design is not the only discipline gaining traction in its approach to innovate. Companies have been trying to innovate using various disciplines.
Cautionary pitfalls of innovation practitioners
What is wrong with the current practices? However, have you ever met practitioners who claim that (insert one discipline) is the “key” to business success?
The designers swear by design thinking that everyone needs to design. The entrepreneurs believe the lean startup needs to be in corporations and leaders need to be more entrepreneurial. The futurists believe implementing strategic foresight will futureproof companies. Business model gurus perceive every business challenge as a business model challenge. Some believe all you need is the right business strategy. Agile is being flung around as a corporate jargon must-haves that software developers never intended to be used.
If you have a hammer, you see every business problem as a nail to knock. Single-minded practitioners claim that their practicing discipline is the missing link or the panacea to business success. This is far from the truth. Every discipline provides a specific value at different stages of a business, but never all.
For example, design thinking is a great front-end innovation approach to generate new solutions, but lacks the continuity to business operations. Lean startup is suitable for entrepreneurs who cannot wait to get their ideas off-the-ground and validated, but lacks the creative idea generation. Likewise, a branding guru can not solve every business problem as a brand challenge.
This is where single-lens mindset is falling short as practitioners fail to see the big picture, unable to draw connections how one discipline is connected to each other, and how they overlap in a system. After all, an organization is a system with interdependent components that impact one another when one part changes.
Looking deeper however, these disciplines have overlapping approaches. Here are a few similarities:
Lean startup and design thinking overlap in ethnography and prototyping.
Agile development and lean startup overlap in its rapid iteration in product development.
Design thinking and strategic foresight overlap in its creative ideation.
Hence, companies must not be forced to pick any discipline and evangelize it in the workforce, but utilize all of them as a combination to solve myriad business challenges faced by business leaders.
Becoming and staying relevant
Becoming relevant for the first time and staying relevant is not the same. Becoming relevant (0 to 1) for the first time may be the result of unintended consequences from accidents or uncalculated approach. Staying relevant is usually mistakenly perceived as 1 to n. However, staying relevant means achieving 0 to 1 repeatedly. This requires a system to be implemented in companies to enable 0 to 1 repeatedly through continuous innovation.
Going from 0 to 1 means exploring to create something radically new that results in the creation of a new market or re-invention of an existing market. This is exactly what Apple did through iPhone in 2007 that allowed them to achieve exponential growth passing through 1st and 2nd inflection points.
Going from 1 to n means exploiting to create incremental innovation of an existing market. This is what Apple has been doing since the iPhone has been introduced, by releasing better iPhones. As of 2020, demands for iPhone have not increased and therefore reached beyond the third inflection point.
Going from 1 to n also means copying others. However the next Steve Jobs will not build another smartphone. And the next Jeff Bezos won’t create an e-commerce giant. The next world class innovator will build something new and different that creates impact resulting in the formation of a new market or re-invention of an existing market.
There is a widespread belief that tech companies can continuously grow exponentially beyond 0 to 1. A business grows logarithmically by nature. While exponential growth can be achieved if a company manages to drive from 0 to 1, the growth rate is much slower at 1 to n. Hence, it is unrealistic to expect continuous exponential growth.
To continuously grow, innovative companies need to continuously innovate to achieve another 0 to 1. This could cannibalize the core business therefore requires a transitional period to change from “business as usual” to the “new business as usual”. Failing to transition risks the company towards obsolescence like how Nokia, Kodak, and Yahoo! failed to transition beyond their initial core business.
However, change is never easy internally. Being comfortable with the status quo is the beginning of the end. Hence, achieving 1 to 0 and let alone repeatedly, requires a system to innovate (0 to 1), scale (1 to n), build capabilities to continuously innovate, and manage change transitions (0 to 1 ∞).
This is why Business Innovation Design is created.
All in one, one for all
Business Innovation Design is a system to build innovative companies.
It consists of 3 key characteristics:
1. Holistic
2. Modular
3. Iterative
Business Innovation Design is holistic.
It seamlessly combines different disciplines into an all-in-one methodology that is more powerful than a single methodology.
The disciplines that influence and is part of BID include:
Design thinking
Lean startup
Strategic foresight
Business modeling
Innovation management
Business strategy
Agile development
Integrating multiple disciplines enables Business Innovation Design to have multiple approaches not fixated by one discipline.
Business Innovation Design is modular.
There are 24 blocks inside Business Innovation Design. Every block consists of its tools that give decision-making clarity from various perspectives. With over 150 tools, mix and match different tools to arrive at different outcomes. This allows the usage of only the blocks and tools relevant to solve specific business challenges. These blocks are color-coded to allow visual clarity.
How do you reach the outcome of 8?
1 + 7 = 8.5 x 3 - 7 = 8
Most methodologies are built as a prescribed linear A-Z process. However, there are many ways to achieve the same outcome. Business Innovation Design is a modular system to develop processes through an unlimited combination of methods and tools. It’s just like playing LEGO blocks.
Business Innovation Design is iterative.
The only constant is change. Designing experiences and building organizations are never done. There are constant problems, improvements and evolutions to iterate upon. Business Innovation Design is based on cycles of iterations that occur concurrently in 4 interdependent dimensions.
These dimensions are:
-> 3 phases of Business Innovation Design
-> 4 lenses of innovation
-> 5 stages of technology lifecycle
-> 6 values lifecycle.
3 Phases of Business Innovation Design
Any solutions and businesses can be designed in the three phases. One cycle contains three phases, whereby a cycle represents a process of activities to achieve certain outcomes. The logic is to perform activities in cycles of iteration. Start and stop projects in a cycle, on demand.
Phase 1 • Understand the Context
Understand past hindsight, present insights and future foresight to gain clarity what happened, what is happening, and what will happen.
Phase 2 • Design the Value
Differentiate against the competitors while creating impact. Materialize value in the form of products, services, experiences, processes, brands, and touchpoints.
Phase 3 • Orchestrate for Growth
Build a sustainable business model with profitable unit economics. Coordinate moving parts internally to scale impact.
4 Lenses of Innovation
Innovation is not just about ideas. It's a balance between 4 types of lenses.
Business Viability
The business has a growing customer base in the market that generates revenue with profitable unit economics.
Human Desirability
The people need and want the solution to solve their unmet needs and latent desires to achieve better conditions.
Technical Feasibility
The ideas are materialized with available technology, production process, and market channels.
Regulatory Permissibility
The business and value propositions comply with all rules and regulations imposed in the market by authorities.
5 Stages of Technology Lifecycle
Any new technology will go through 5 stages in a lifecycle.
Stage 1 • Discovery
An invention or innovation occurs. The benefits are discovered with a huge upside to the industry. More people and companies are getting exposed to it. To win in this period, be at the right place at the right time.
Stage 2 • Proliferation
The “gold rush” period where everybody jumps on this. Having the first-mover advantage can only be achieved in the early stage of proliferation to capture significant market share.
Virtual reality and augmented reality are in this stage right now with Facebook Oculus Rift and Microsoft Hololens vying for first-mover advantage. In the auto industry, Tesla is pioneering the way with its driverless car models. Beyond Meat has the first-mover advantage in the plant-based meat industry.
Stage 3 • Standardization
Setting the standard led either by industry, government, or economy. Regulations to comply with standardization occur and are enforced. To play in this stage, be the one that sets the standard or follow the program.
Blockchain and cryptocurrency are going through a period of standardization with regulations being imposed by banks and governments.
Stage 4 • Consolidation
Companies with first-mover advantage and organizations that maintain the standard scales up and get richer. Those who don’t follow the program get marginalized or go bankrupt.
On-demand ride-sharing and accommodation booking has entered the consolidated stage after a period of standardization.
Stage 5 • Disruption
This is the statis stage with a lack of progress and competition to move the industry and technology forward. Dissatisfaction from stakeholders causes the technology and industry to be disrupted or reinvent itself.
Successful technology and industry that has reinvented itself in multiple cycles including phones and railways, time and time again.
6 Values Lifecycle
It's all about values.
Identify Value
Target the right niche with sizable market size and identify what the market finds valuable.
Create Value
Create an ecosystem of products, services, experiences, processes, brands, and touchpoints.
Deliver Value
Build, implement, and transform the target market from status quo into better conditions.
Capture Value
Monetize value delivered based on market affordability with profitable unit economics.
Scale Value
Replicate activities, repeat operations, and optimize channels to multiply impact.
Remove Unvaluable
Discover the obsolete and redundancies to remove in all areas across levels of the system.
