Customer Development and Business Model Innovation

“If you do innovation investments, do it in business modeling if you want the highest value back”, said Professor Bengt Järrehult from SCA that organized the workshop Customer Development and Business Model Innovation together with Henrik Berglund from Chalmers.

Bengt Järrehult told us that traditionally, companies spend most time on innovation related to product development. However, they often innovate less in areas such as finance. And research has shown that the most value for the company can be created in the financial area, for example business model innovation.

Therefore, SCA and Chalmers challenged us participants to come up with new business models for Frog Chemicals, a company specialized in lube for spinning cycles.  Each group got an A2 canvas with Alex Osterwalder’s famous business model system on it. The system contains nine different perspectives on the business model, for example customer segment and revenue stream. We wrote post-it notes which we placed in each area, describing how we developed a business model that support the fictive case of Frog Chemical to sell 5-years service contracts. The post-it notes we used were an innovation in itself. A new pimped up version called Stattys that stuck to the surface with static electricity. This made it possible to drag them around on the canvas easily.  

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We struggled at first with the collaboration in the group and eventually we discovered that we were trying to develop three different business models at the same time. That showed the inherent complexity of the process: another group suggested that a facilitator should be used for bringing all the aspects of the business model together.  “The hard thing is focusing on one area of the business model at the time”, said one of the participants.

Bengt Järrehult also talked about the importance in developing more than one business model and then test it before you make a final decision. Ask for feedback from the customers and then iterate. “Don’t fall in love with your first business model”.

Professor Henrik Berglund from Chalmers also talked about customer development and how this process differs from traditional product development, where you first build a product and then launch it to a market. In a customer centered process, you involve the customer and ask for feedback through the whole development process, which contributes to reaching a better market-product fit faster.

 “You need to get out of the building to learn and discover the product together with the customers. If you don’t do that you don’t know what you are doing wrong, until you are out of money”, said Henrik Berglund.

Article by Lisa Renander, Co-founder & CEO, Go Enterprise AB

Workshop leaders

Prof Bengt Järrehult, SCA & University of Lund.
Bengt is the Director of Innovation and Knowledge Management for SCA Hygiene Products and SCA Packaging. He is also Adjunct Professor in Innovative Packaging Logistics at the University of Lund. He has international experience and is frequently lecturing on and boosting innovation implementation both within SCA and at Universities and Industrial Networks.

Dr. Henrik Berglund, Chalmers
Henrik Berglund is a researcher, teacher and advisor in the fields of entrepreneurship, innovation management and strategy. He works at Chalmers University of Technology and has been a visiting researcher at Oslo University, the University of Virginia and Stanford University. Henrik currently heads a research project that explores how the Customer Development practices used by start-ups can be adapted to large corporations. http://www.henrikberglund.com

Here are some related links with additional information:

Business Model Innovation:

http://www.businessmodelgeneration.com/  - includes the canvas document as pdf, links to the iPad app etc. 
http://www.youtube.com/watch?v=dtfNsuP2AQQ  - Osterwalder talking about Business Model Innovation
http://www.youtube.com/watch?v=QoAOzMTLP5s - The Business model canvas explained in two minutes.
https://twitter.com/business_design - Follow Osterwalder on Twitter

Customer Development:

http://www.justin.tv/startuplessonslearned/b/262670582  - Steve Blank presents Customer Development
http://www.startuplessonslearned.com/2008/11/what-is-customer-development.html - Summary of Customer Development by on of Blank's "prophets" Eric Ries.
http://steveblank.com/ - Steve's blog which is regularly updated and full of interesting information.
https://twitter.com/sgblank - Follow Steve on Twitter

Please share your experience and suggestions by commenting below. Don’t forget to register for next year’s Innovation In Action 2012.

Symposium: Innovation in Action 2011
Innovation Pioneers Team
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