Behavior is the Unknowable Variable in Every Innovation

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“Companies are not so much in the business of what we buy, but the way we act.” – Thomas Koulopoulos

Behavior is the unknowable variable in every innovation, and it is the variable that most determines the opportunity a new business model has to evolve and take advantage of the new behavior.

It’s The Behavior, Stupid

We are at the tail end of an era that has focused almost entirely on the innovation of products and services, and we are at the beginning of a new era that focuses on the innovation of what I like to call “behavioral business models.” These models go beyond asking how we can make what we make better and cheaper, or asking how we can do what we do faster. They are about asking why we do what we do to begin with. And the question of why is almost always tied to the question of how markets behave.

When Apple created iTunes it didn’t just create a faster, cheaper, better digital format for music, it altered the very nature of the relationship between music and people. eBay did not just create a platform for auctions, it changed the way we look at the experience of shopping and how community plays a role in the experience. When GM created OnStar it didn’t just make getting from point A to point B faster, it changed the relationship between auto manufacturer and buyer, and fundamentally altered the reason we buy a car.

Google did not invent Internet search–there were nearly fifty software vendors delivering Internet-based search, some for as long as twenty-five years before Google!–but Google changed the way we interact with the Internet and how our behaviors are tracked and analyzed, allowing advertisers to find and pay for buyers in a way that was inconceivable before.

All of these are examples of innovations in behavior that led to entirely new business models. Yet we continue to be obsessed with technology innovation. To paraphrase James Carville’s now-popular political pun, “It’s not the technology, it’s the behavior, stupid.”

The greatest shift in the way we view innovation will be that the innovation surrounding behavior will need to be as continuous a process as the innovation of products has been over the last hundred years. The greatest shift in the way we view innovation will be that the innovation surrounding behavior will need to be as continuous a process as the innovation of products has been over the last hundred years. It’s here that the greatest payback and value of innovation in the cloud has yet to be fully understood and exploited.

– Thomas Koulopoulos

When we do a prototype, I typically use the Business Model Canvas as a way of evaluating each. If we can complete the Business Model Canvas or a version of it this will define our Business Model going forward. Are we in need of additional validation? Are we missing some blocks entirely? We are using the process and philosophy of EDCA (Explore-Do-Check-Act). Many people mistake the Check and Act stage and Deming himself preferred the nomenclature of PDSA over PDCA. In this format the stages of Check(Study) is the prototyping stage and the Act (Adjust) stage is our final test to see if we are ready to standardize and go forward or we need to adjust and iterate again. The Business Model Canvas is a incredible document for visualizing the Design at this moment.

The nine blocks can be completed by answering these questions:

  1. Key Partners: Who helps you?
  2. Key Activities: What you do?
  3. Key Resources: Who you are and what you have?
  4. Cost Structure: What you give?
  5. Value Proposition: How you help?
  6. Customer Relationships: How you interact?
  7. Channels: How they know you (pre-purchase) and how you deliver (post-purchase)?
  8. Customer Segments: Who you help?
  9. Revenue Streams: What you get?

Taking this approach, having it well defined, results in a great deal of clarity not only for your organization but your customers. I doubt that if you cannot answer these nine blocks, these nine questions that you will deliver a successful service product. We started the Design Module with defining the what is – the current state. We entered into the what if, the world of the Dreamer. We then prototyped during the realist stage. Now, we attempt to complete the canvas as the critic. This is your effort to create Standard Work. You may have to improve on this model refining your delivery through prototyping or use one of the other prototype. Seldom though will we go back to the ideation stage.

Republished with author's permission from original post.

Joseph Dager
Business901 is a firm specializing in bringing the continuous improvement process to the sales and marketing arena. He has authored the books the Lean Marketing House, Marketing with A3 and Marketing with PDCA. The Business901 Blog and Podcast includes many leading edge thinkers and has been featured numerous times for its contributions to the Bloomberg's Business Week Exchange.

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