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Saul Kaplan is the founder and chief catalyst of the Business Innovation Factory (BIF), a real-world laboratory for exploring and testing new business models and social systems. This is a ...

Saul Kaplan is the founder and chief catalyst of the Business Innovation Factory (BIF), a real-world laboratory for exploring and testing new business models and social systems. This is a transcription of the podcast, An Innovation Junkie Interviewed with Saul Kaplan (@skap5), the author of The Business Model Innovation Factory.

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An Innovation Junkie An Innovation Junkie Document Transcript

  • Business901 Podcast TranscriptionImplementing Lean Marketing Systems The Innovation Junkie Guest was Saul Kaplan Related Podcast: An Innovation Junkie Interviewed An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systems Saul Kaplan is the founder and chief catalyst of the Business Innovation Factory (BIF), a real-world laboratory for exploring and testing new business models and social systems. BIF has attracted a global community of over 5,000 innovators and organizes the internationally renowned BIF Collaborative Innovation Summit. Saul shares his innovation musings on Twitter (@skap5) andhis blog (It’s Saul Connected), and as regular contributor to theHarvard Business Review, Fortune, and Bloomberg Businessweek.Business models don’t last as long as they used to. Historicallyexecutives have managed a single business model over theirentire careers. Today companies must becapable of designing, prototyping, andexperimenting with new business models.Executives will have to launch two to threenew business models over their careers.They are not prepared, and corporateinnovation efforts focus only on improvingperformance of existing business models.This book provides all executives with thetools and survival skills to create a pipelineof new business models in the face of disruptive markets andcompetition. It will provide an actionable roadmap for executivesand workers at all levels to avoid being “netflixed” by doing R&Dfor new business models. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systems Transcription of the PodcastJoe Dager: Welcome everyone. This is Joe Dager, the host ofBusiness901 Podcast. With me today is Saul Kaplan. He is thefounder and chief catalyst of the Business Innovation Factory, areal-world laboratory for exploring and testing business modelsand social systems. Saul, I would like to start the conversation bytalking about your book and maybe what caused you to write it,"The Business Model Innovation Factory."Saul Kaplan: Well, Joe, first of all, thank you for having me. Itsgreat to be with you today. Its a joy to be out talking about thebook. Its a lot more fun than writing it. Its really been a labor oflove. Im really just an innovation junkie. I believe theres alwaysa better way in arranging from small nuisance things to a verylarge social system changes that I think we need here in the 21stcentury."Business Model Innovation Factory" is a book that describes myexperience and the experience of an incredible team, here at BIF,the Business Innovation Factory, the nonprofit that I founded. Wehelp people, organizations, and communities that want to go fromtweaks to transformations. Were good at tweaks.Were good at making incremental changes and improving theefficiency of the way things work today, and thats great, but itsnowhere near enough of what I call "market making." Going fromshare taking to market making, and thats what the book is reallyabout.Joe: Can you expand on it and tell me what market makingmeans?Saul: Im a passionate market maker, and I differentiate it fromshare taking. Most people and organizations focus on well-definedmarkets and the competitive day to day struggle of taking onemore share point. Thats an important activity and one that most An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systemsorganizations focus on. But theres nowhere near enough capacityfor doing what I call "market making." Not competing for onemore share point in an existing market but actually creating newmarkets. Or entirely new ways to create, deliver, and capturevalue. Im fascinated by the market makers out there, theapproach that you can take as an individual, as a leader, in anorganization, or as a leader in your community to creating newmarkets or new approaches. I believe in the 21st century, thatour era screams for transformation, and we need to all get betterat what that means, and rolling up our sleeves and getting onwith it.Joe: What differentiates this thought from the "Blue ocean"strategy?Saul: There are a lot of similarities actually in the "Blue ocean"strategy. Its a very compelling approach. The approach that Ifocus on is on business model innovation. Most know how toimprove the performance of a current business model, and thereare a ton of books, a ton of consultants and a ton of leaders outthere that can help advise us on ways to make incrementalimprovements in our current business model. To me, a businessmodel is just a story of how any organization creates, delivers,and captures value. What were not good at is re-inventing ourbusiness model, or experimenting with new business models. Italk in the book about the example Blockbuster and Netflix. Iturned it into a verb and say our goal in the 21st century is toavoid being "Netflixed," or to be disrupted by a leader ororganization that goes about the marketplace in a very, verydifferent way, leaving us blindsided, and like in the Blockbusterstory; theyre completely befuddled in terms of the fact thattheyre just stuck in their existing bricks and mortar businessmodel. They needed to figure out how to experiment withdifferent approaches and Netflix came along and completelydisrupted them. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsSaul: No, thats a really important question. I dont think its an,either or. I think the challenge of leaders in the 21st century is"and." We have to be able to scale and improve the efficiencies ofour current business models. Thats where a lot of the continuousimprovement and L approaches have been very, very helpful.Those are very important activities. But I think in a world whereyoure vulnerable to being disrupted, youre going to have to dothose things, and in addition to that, youre going to need tocreate platforms and tools that will enable you to experiment withcompletely new business models. T is the hard part, even thosethat might disrupt the current ones. T tools are very differentfrom the tools that we use when were trying to improve theefficiency of the way our organizations work today. You need todo both.I use the label of The Business Model Innovation Factory, orcreating a sandbox, where youre able to play with the design,the prototyping, and testing of entirely new business models. Ithink you have to do both. Most leaders know how to do theefficiency piece -- to continue to pedal the bicycle of the way thebusiness works today. Very few know how to set up a BusinessModel Innovation Factory or a sandbox for experimentation ofentirely new business models. Thats what I focus on in the book.Joe: Will this take a co-creation platform or co-producingplatform, is that where we are headed?Saul: I think thats part of it. I think one of the principles thatany business model innovator shares this notion its bigger thanany one of us. We need to learn to combine and re-combinecapabilities in completely new and different ways. I often say thatbusiness model innovation doesnt require you to invent anythingnew. Too many people conflate invention and innovation. I thinktheyre different. Im thrilled that we celebrate a culture ofinvention in this country, but to me, its not an innovation until itactually solves a problem in the real world, until it actually An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdelivers value. I define innovation as a better way to delivervalue. So its really important to differentiate those two.One of the tools that any innovator uses is what I call"collaborative innovation," knowing that they dont have all thecapabilities necessary within the company, and oftentimes, weneed to look for capabilities outside of the organization. I is aboutplaying with the parts. Its about combining and re-combiningthem to figure out new ways to solve a customer problem andnew ways to deliver value.The problem a lot of organizations have is they think theyrestuck with just the parts that are within the four walls of thecompany, and those parts are usually very, very busy trying todeliver value the way the company currently operates, which iswhy Blockbuster couldnt figure out how to experiment with theNetflix business model. Thats why Netflix is struggling todayeven at risk of being Netflix themselves, because theres a newset of technologies that enable us to get movies in an entirelynew and different way. Theyre trying to figure out what the rightbusiness model is for them.I think all leaders need to learn how to do R&D for new businessmodels while theyre still pedaling the bicycle of the current one.Thats the leadership challenge of the 21st century.Joe: It sounds very close similar to the Lean S and AlexOsterwalders "Business Model Generation." What makes yourthoughts different?Saul: A lot of us that focus on business model innovation are allactively trying to put these ideas into the marketplace and intothe hands of leaders. Alex is a good friend; "Business ModelGeneration" is a fantastic book. I use the business model canvasas a template in my book, "Business Model Innovation Factory."This is the new strategic imperative, and there arent enough ofus talking about and focusing on business model innovation as a An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systemsstrategic weapon. Too many of us are focused on efficiencies andimprovement within the current business model, and we need toopen up this area of exploration, create a new set of tools, andthen help leaders -- companies, governments of non-profits andfor--profits -- figure out how they can do more ongoingexperimentation. I think were just at the beginning of this wave,and Im glad that there are other voices out there, because itsbigger than any one of us.The principle you just mentioned is really important. Its aboutour customers; its about human behavior and the needs of thecustomers whom we are trying to serve. The tool that we use toignite business model innovation is to try to change theconversation from thinking about the world to lengths of yourcurrent company or organization, which we are all wired to do,and changing that conversation to think about it through the lensor from the perspective of the end user or customer.Its then and only then that we can start to understand and beginto conceive out entirely new ways to deliver value. That is whatbusiness model innovation is all about. Thats how you get frommaking tweaks to the current business model, which is aboutmaking the current way you go to market more effective andunderstanding the customer, what they value, what their currentexperience is. Then designing ways to improve their experience,or to solve the problems or jobs that they are trying to do, and toconceive new approaches to do that are not constrained by thecurrent business model. Because if you dont think through thosealternative models, even the ones that might disrupt the way youwork today, someone else will and then the 21st century the half-life of of these business models is declining.So you are very vulnerable to being Netflixed, or being disrupted,if you dont figure out how to move more quickly from newbusiness model ideas that live on a white board, and getting theminto the real world where we can explore and test them. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: I look at business model innovation; I think about it, for astandard company, is it really realistic to be changing frombuilding business model after business model?Saul: We need to try more stuff, so I think we need to do morerapid cycles, from ideas to prototypes to testing them in the realworld. So no, we are not going to scale them all, but we can testthem, we can find the conditions in the real world that will allowus to explore new business models, and we can do it cheaply, andwe can do it quickly. I love watching the way the millennialgeneration is experimenting with business models, particularlydigital ones. We are dinosaurs; we spend months and monthsand months analyzing and thinking about it and having teammeetings before we even get comfortable building some type ofprototype of something, particularly new business models thatare enabled online. Millennials are back 24 hours later and theyhave got a mock-up of a website, with a transaction engineattached to it, and they are actually experimenting with whetherthe business model works or not, while we are still sitting aroundin conference rooms and meetings.We are going to have to get much better at experimenting all thetime, learning how to fail faster with ideas that dont make senseand cant scale and learning how to harvest those that do.Joe: Can a mature company afford to take that risk, with theirbrand to do that type of experimentation out there and betransparent with the customer?Saul: I would put a counter argument out. Can a maturecompany afford not to? How many "mature companies" areincredibly vulnerable to being Netflixed to having somebody newcome into their space that does not compete in the traditionalindustry the way they define it, that is not interested in taking ashare of point away from them, but is interested in completelyredefining the market and how value is delivered to a customer. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsIf you are a leader, and you are watching this activity go ontoday, and you dont have the capacity to understand it, to dosome experimentation of the various models might work, you aregoing to be disrupted.I tell the story in the book, about Sony Corporation. Here is acompany that is in a world of hurt right now. They watched theentire music business get swept away from them by Steve Jobsand Apple. Should that really have happened to Sony? Thinkabout it, they had a huge division that was in the music business,had under contract some of the worlds greatest star performingartists, and had another huge division that made the coolestproducts and new technologies. It even brought us the Walkmanfor heavens sake. I am old enough to have had one.Everybody had one. What happened to Sony? They had all theparts, all the capability that they needed to change the way musicwas enjoyed, and delivered to consumers. But they were so stuckin their current business model, and the political infightingbetween the divisions, that they couldnt do experiments thatrecombined the parts to do what Steve Jobs ultimately did.Companies the size of Sony, they want to stay competitive, aregoing to have to create the platforms and the sandboxes to dothat experimentation, and put resources in there to be able toplay with new business models, because if they dont, someone isgoing to come along like Apple did, and take them down. This isnot going to be the exception in the 21st century; this is going tobe the rule.How do you do that is what I outlined in the book. We dont haveall the answers, but we have a lot of experience, tell and share alot of stories about how you go from tweaks to transformation,and we are beginning a conversation with like-minded innovationjunkies, to be able to explore those ideas and put them intopractice. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: How do you or BIF work with people?Saul: BIF is a nonprofit, with a mission, to enable atransformation, business models and our complex social systems,little things like education, healthcare, energy andentrepreneurship. These are all systems level challenges, and theonly way we are going to make progress in my view is if we learnto experiment with new systems level solutions. BIF has beenbuilding a community of innovation junkies. They come fromevery industry, from every part of our society, and they havebeen connecting to each other and to our platform for the lasteight years. We hold a very, very cool collaborative summit,which is a celebration of the work that we do every year.This year, its September 19th and 20th, here in Providence,Rhode Island. About 400, like--minded innovation junkies willcome to Providence for two days of total immersion in some ofthe most compelling and inspiring stories of transformation thatyou have ever heard. Its the most inspiring two days. I lookforward to it every year. We end up filling a very cool theater,and its just a remarkable couple of days, so anybody listeningshould check out BIF-8, this is our 8th year of doing it. You couldfind the information about it on our websitebusinessinovationfactory.com.We hold events like that. We have a series of labs; we call themexperience labs, where we do our project work. Our projects areall sponsored projects by organizations within our community thatwant to go up this learning curve, business model innovation andsystems level change, and we learn every day, and we sharewhat we learn back with the organizations that sponsor our work,and participate in our community. It is a very exiting communitythat is; I think, working to co-create our future and helping us allgo up that steep learning curve. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: It sounds very interesting. What would you tell a smallbusiness guy? This sounds good for the startup guy to be able todo this because I got a blank slate to deal with. I can just startdoing this; a bigger company can allocate resources to be able todo it. We get to a smaller company or a mid-sized company, andthere are not that many resources to go around. I know I have tocommit to it, but how would I organize something like this withina small company?Saul: Small companies obviously have the advantage, becausethey are not as entrenched in a single business model. In fact, welearn a lot from entrepreneurs. One of our labs is called theEntrepreneur Experience Lab. Its a partnership with BabsonCollege, one of the best entrepreneurial education centers in theworld. What we learn from talking with entrepreneurs all over thecountry, and all over the world, is exactly what we have beentalking about. No entrepreneur ever gets it right on the first try.If you talk to most entrepreneurs, it takes three, four, fiveattempts to get to the right business model. Business plans arejust put together because thats what investors want to see, buttheyre no semblance to the way that the business model evolvesin the real world.So we can learn a lot about business model innovation fromentrepreneurs. Now, the trick, of course, is, once you land on abusiness model that works and has the promise to scale, thenyouve got to be able to do both things. Youve got to be able toscale that business model and at the same time youre going tohave to be thinking about potential new ones because thebusiness model isnt going to last as long as they used to, andthats the trick -- the balancing act between scaling and makingthe current business model efficient and contemplating,experimenting and testing with new ones.Joe: How would I keep that alive? Im sitting here scaling theircompany, but I want to keep that innovation alive. Do I have to, An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systemslets say turn that over or do I hire someone to scale it like aSculley? That may be the wrong example. And leave me toinnovate on the side? How do you do something like that?Saul: If we stay focused on business model innovation, right?Theres a whole other part of the innovation continuum which isabout how I innovate within the current business model. How do Iadd new products, new services? How do I improve thecapabilities? Thats where a lot of the work that you, and yournetwork folks has done Lean and other tools. It really is useful.Theyre important so I dont want to dismiss those. But for thesake of this conversation, talking about transformational businessmodel change, I think you have to create a sandbox.I often talk about it as a connected adjacency. I think thesandbox has to have enough autonomy to be able to wrap itscycle and test new business models. It has to have the resources.It requires senior management to run interference and to handlepotential conflicts. Because the minute that team wants toexplore anything that even smells like it might be disruptive, allthe line managers in the core model are going to resist it, somesubtly and some not so subtly. So it requires some strongleadership from the top.It also needs to be connected to the core business model. Itneeds to be able to borrow capabilities, rather than reinvent themso that it can do its business model experiments. It should be away to move people in and across the platform. People should befree to dip their toe in the water of the innovation platforms. Itshouldnt be an isolated unit.I think people should move back and forth, as they are moving upthe career ladder, to work alternatively on ways to scale theexisting business model and to be thinking about andexperimenting with the next one. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsWe should move people back and forth so it doesnt become adeep silo with big walls between it that we cant move capabilitiesand ideas fluidly back and forth.Of course, this is easier for me to say than it is to do and thatswhy I wrote the book. To begin to put that down on paper and tobegin to have the conversation with leaders about, what does itreally take to create a Business Model Innovation Factory andhow do I balance both of those important activities?Joe: I think you really hit the nail on the head. Because whenyou look at Apple, for example, you have the iPod and the iTunesbut the iPhone still was connected to the iPod, a lot of similarities,and a lot of overlapping features. Then when you go to the iPad,its the same thing. There are a lot of overlapping features, a lotof things that are all connected. The interesting thing about Appleis that you can lay all of their products, practically, on one table.Saul: Yeah. The story I love to tell, and I told in the book is howthey created the Apple Store which completely changed thecustomer experience. Its a great story. If you read the SteveJobs book by Eisenberg, he talks about it there, as well.Imagine this. Imagine the day that Steve Jobs came in and saidto the entire team that, "Were going to create an Apple Storeand sell directly to our end customer." Now, at the time, theirbusiness model was to sell all of their products through valueadded resellers, like Sears and CompUSA.Imagine all the layers of management, all the incentives, andeverything lined up to maximize the leverage of those channels,all the customer relationships.So, Steve Jobs comes in and says, "Were going to create andopen an Apple Store." Now, imagine what all of those linemanagers thought and said. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsBut Steve Jobs knew how to balance both of those activities. "Youkeep doing what youre doing now, to deliver the near termoperating objectives of the business. Were going to come overhere, and were going to completely redesign the customerexperience."He literally built a store. He built a store and the way thatEisenberg tells it; he lived there for a year, literally lived there.He totally immersed in all the details of that customer experience.They got very close to wanting to open the first store and onenight, Steve Jobs in the middle of the night says, were doing itall wrong. Weve organized it around our product groupings,which is what most of the companies do because they see theworld through the lens of their current business model.But he said thats not how customers use our products andtechnology. We should completely redesign this store and thecustomer experience for the way customers value and thinkabout these technologies.He literally went in there and they completely re-did it. I thinkthey might have had 60 days left before the opening. They justcompletely re-did everything from the previous year, made theirdeadline, opened the store, and of course, now we all know howimportant the Apple Store is and thats where we go to see andtouch and feel the products. Then they were online to buy them.They completely changed their business model. They reinventedit while they were pedaling the bicycle of the old one. Then whenthe time was right, they moved to the new one that completelychanged the way we think about and buy Apple products.Its a great example of creating a Business Model InnovationFactory that knows how to do both of those things. We can alllearn from that. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: I find a lot of humor in what you said there when I think ofthe remarkable channels that they were going through before,the CompUSA and Sears.Saul: No, but think about it. You can take almost any maturebusiness, right? I mean, you can think about any maturebusiness; it has a very well--honed way to go to market. The wayit creates, delivers, and captures value. Thats a good thing andtheres nothing wrong with that. Now, we do a lot of things toimprove the efficiency of that. But none of that is going toprevent that mature business from being disrupted by someonewho comes at it from a completely different way. We have tolearn how to disrupt ourselves, rather than waiting for someoneor another organization to disrupt us.I think this is true for us as individuals. I think its true certainlyfor organizations, and I think its also true for our communities.Were not going to have the 21st century that we all want untilwe learn how to be more experimental and how to carve out theconditions in the real world to try more stuff.Joe: Well, it sounds great. Steve Jobs can pull this off. SaulKaplan can pull this off. But can Joe Dager, this normal guy withhis normal company, pull something like this off?Saul: Even putting my name in the same sentence with SteveJobs, I think Im a lot closer to you Joe than to Steve. Im adinosaur; Ive had to scratch and claw my way up that learningcurve. I think it starts with recognizing that the way things haveworked is not the way that things are going to work goingforward. It starts with being more than just a little worried aboutbeing disrupted or being displaced as an individual or as acompany. Then it starts by being willing to learn and to exploreand connecting with others that are. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing SystemsI think the imperative for all of us is to get better faster. We haveto take advantage of every day where we can learn a new set ofskills and gain a new experience if we want to stay relevant.I dont think there is any magic bullet here. I think that theresjust recognition that we need to get better faster and thenbeginning to put ourselves into places and connecting with peopleand events that can help us do that.Joe: Is there anything that you would like to add that maybe Ididnt ask you? A parting thought here.Saul: First of all, its a great conversation, and I enjoyed thequestionings. I really appreciate the opportunity to share some ofthese thoughts. Obviously, Id like a lot of people to read the"Business Model Innovation Factory" and share their thoughts andideas with me. If youre interested please check out the BusinessInnovation Factory, BIF. Take a look at what were doing.Theres lot of different ways to connect with us, including theBIF-8, the summit that I talked about earlier in the conversation.I just look forward to continuing the conversation and connectingwith logs of new, like minded innovation junkies so that we canget on with co-creating a better future.For the book, if you want to check that out, it is bmifbook.com.There you can download the introduction to the book and learn abit more about it. You can see where I am talking about the book.The website for BIF is businessinnovationfactory.com.Joe: Id like to thank you very much. This Podcast will beavailable in the Business901 blog site and also the Business 901iTunes site. Thanks again.Saul: Joe, thanks so much for taking the time. I appreciate it.Good conversation. An Innovation Junkie Interviewed Copyright Business901
  • Business901 Podcast TranscriptionImplementing Lean Marketing Systems Joseph T. Dager Lean Marketing Systems Ph: 260-438-0411 Fax: 260-818-2022 Email: jtdager@business901.com Web/Blog: http://www.business901.com Twitter: @business901 What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joes ability to combine his expertise with "out of the box" thinking is unsurpassed. He has always delivered quickly, cost effectively and withingenuity. A brilliant mind that is always a pleasure to work with." James R.Joe Dager is President of Business901, a progressive company providingdirection in areas such as Lean Marketing, Product Marketing, ProductLaunches and Re-Launches. As a Lean Six Sigma Black Belt,Business901 provides and implements marketing, project and performanceplanning methodologies in small businesses. The simplicity of a singleflexible model will create clarity for your staff and as a result betterexecution. My goal is to allow you spend your time on the need versus theplan.An example of how we may work: Business901 could start with aconsulting style utilizing an individual from your organization or a virtualassistance that is well versed in our principles. We have capabilities toplug virtually any marketing function into your process immediately. Asproficiencies develop, Business901 moves into a coach’s role supporting theprocess as needed. The goal of implementing a system is that the processeswill become a habit and not an event. Business901 Podcast Opportunity Expert Status An Innovation Junkie Interviewed Copyright Business901