Innovation through Co-opetition

How do you innovate a business model?   You can create new products and services within the current business model to drive growth.  Or you can create a new business model and open up a whole new world of possibilities for the firm.  Either innovate within the current game, or change the game.  But how?   

Several books address this, from Clayton Christensen's "The Innovator's Dilemma," to a more recent offering, "Innovation to the Core: A Blueprint for Transforming How Your Company Innovates"  by Peter Skarczynski and Rowan Gibson.  When Professor Christensen presented his disruptive innovation model to our company several years ago, I remarked that what is needed is NOT so much a disruptive product, but rather a disruptive business model.  His book is a good historical account of a few industries that suggest disrupting (innovating) the business model is what really counts.  While these books and others do a good job of exposing the issue, neither give a prescriptive "how to."  The most recent book suggests a holistic approach.  "To build a breakthrough business model that rivals cannot easily emulate, you'll need to integrate a whole series of complementary, value creating components so the effect is cumulative," the authors note.  Fine, but there are no step-by-step processes how to do it once you have unpacked the original business model.

My answer comes from combining two existing concepts (a Medici Effect as described by Frans Johansson).  Those two existing concepts are Systematic Inventive Thinking (S.I.T.) and Co-opetiton.  S.I.T. is a proven process for generating innovation on demand.  Co-opetition is an idea described by Barry Nalebuff and Adam Brandenburger in their book called, "Co-opetition."  It means cooperative competition, and it is a way to see your industry not as a zero sum game, but rather as a group of participants that can behave in a certain way that benefits all.  They coopetate rather than compete (legally, of course).  I met with Professor Nalebuff and had him "school" me on the concept.

The trick is to apply S.I.T. templates to the Value Net model of co-opetition.  Here's how.  List the activities of each Value Net participant (Company, Supplier, Customer, Complementors, Competitor).  Rotate each specific company in the Value Net model so that each takes a new role (competitors become suppliers, suppliers become complementors, etc).  Use each S.I.T. template on the new list of activities, starting with Task Unification.  Using Function Follows Form, envision how the new role and role player can benefit YOUR company.  Here is an example, using Nintendo as the company of focus:

Now imagine each player rotates clockwise one position.  Applying S.I.T. Task Unification, we ask what roles could Atari perform as a customer to Nintendo that would be beneficial to both.  (For example, could Atari and Nintendo cross license software code to each other, perhaps making some features of their games work on the other's game box?)  Apply all five templates systematically to each role and each player within the context of their new role.  This will generate many new, innovative business model components and themes.

Disruption doesn't have to be uncooperative.

Comments

[Graham Horton]

Thank you for sharing your combination of two techniques - the representation of part of a business model with the SIT checklist. It is often said that creativity is the art of finding fruitful combinations!

The idea can be extended to include both more comprehensive representations of business models (to include, for example, revenue streams and cost structure) and to more comprehensive lists of actions (including, for example reverse, eliminate, and put to other uses).

In the above example that might to lead to questions such as "How could Nintendo put Disney to other uses?" or "What does reversing the revenue stream of online sales mean?"

Thanks for the great blog!

Graham

[Drew Boyd]

Thanks, Graham. I'm glad you like the blog.

I've been invited to speak at the Frost & Sullivan innovation conference this September, and my topic is business model innovation. I will cite your ideas here in my talk because I think you are spot on. Thanks for the suggestions. The essence of using S.I.T. is to break things into components, then manipulate them with a template. Business models can certainly be broken into components, so the approach should work quite well.