Seizing the White Space: Business Model Innovation for Growth and Renewal [Hardcover]

 

 

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Mark W. Johnson poses an especially important question: What underlying forces prevent great companies from embracing transformational opportunities? Marshall Goldsmith wrote a book whose title reveals what he thinks: "What got you here won't get you there." The "white space" referred to in the title of Johnson's book "is the range of potential activities not defined or addressed by the company's current business model, that is, the opportunities outside its core and beyond its adjacencies that require a different business model to exploit." Paraphrasing Goldsmith, the business model that got you to your core won't achieve success for you in your "white space," whatever and wherever it may be. Throughout military history, there are countless examples of leaders who fought the last war. Perhaps the most famous (infamous?) is the Maginot Line in France over which German planes and gliders flew (many filled with paratroopers) and around which German tanks sped. The French forces surrendered within a few days, without a fight.

As Johnson explains in Chapter 2, the business model he proposes has four key elements:

"First, every thriving enterprise is propelled by a strong [begin italics] customer value proposition [end italics] (CVP - a product, service, or combination thereof that helps customers do more effectively, conveniently, or affordably a job they have been trying to do.

"Second, a [begin italics] product formula [end italics] defines the way a company will capture value for itself and its shareholders in the form of profit.

"The third and fourth elements of the model, [begin italics] key resources [and] key processes [end italics] are the means by which the company delivers the value to the customer and itself. They are the critical asse4ts, skills, activities, routines, and ways of working that enable the enterprise to fulfill the CVP and profit formula in a repeatable, scalable fashion."

Obviously, those who read this book will need to make certain modifications of the four-box business model framework to accommodate the needs, resources, limitations, and objectives of their own organization. To assist that process Johnson devotes much of Chapter 6 to explaining how to use a proactive, outside-in approach. Keep in mind that Johnson is recommending a framework that enables an organization to be flexible and resilient. The business model framework he describes "brings the discipline of architecture to business model innovation. With the blueprint it provides, you can diagram your existing core business model and design new models to help you seize your white space. The framework is the structure on which manageable and more predictable innovation process can be built - a structure than can unlock your creativity as you pursue transformational growth and renewal.

Near the end of this book, Johnson focuses on Jeff Bezos and notes (as does Bezos) several major as well as minor modifications that Amazon made while seizing its own "white space," before finally selecting the single-detail-page model for its third-party business. The lesson to be learned is this: "As assumptions are tested, success or failure increases the knowledge in the system [as it did at Amazon]. As the enterprise gains traction and turns the corner toward viability, demonstrably knowledge takes over. At that point, clearly defining the metrics of success gives you a clear path toward achieving it, better enabling the nascent initiative to absorb the inevitable early failures along the way."

I presume to suggest that those now planning organizational transformation initiatives or have only recently embarked on them are strongly encouraged to read and then re-read this book in combination with three others: the Updated Edition of Chris Zook's Profit from the Core: A Return to Turbulent Times written with James Allen, Dean Spitzer's Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success, and Enterprise Architecture As Strategy: Creating a Foundation for Business Execution co-authored by Jeanne W. Ross, Peter Weill, and David Robertson.

"You shall not plow with an ox and a donkey together." -- Deuteronomy 22:10 (NKJV)

Few important business subjects offer less literature than business model innovation. Those who understand the critical importance of this management task will welcome Seizing the White Space as a helpful addition to the limited shelf of resources.

What is White Space? Author Mark W. Johnson displays a key definition in figure 2 on page 8 with a two dimensional matrix concerning the nature of the opportunity as one axis and the nature of the customer as the other axis. "White space" is where the opportunity is a poor fit with the existing organization and the customers are either new to the organization or "existing customers served in fundamentally different ways."

If that seems abstract, it is. The book provides a number of concrete examples that put flesh on the bones including Amazon.com, Apple, Dow Corning, Hilti, Hindustan Lever, Tata Nano, and Whole Foods.

What is a business model? The book offers a four-box definition illustrated in figure 8 on page 24: customer value proposition, key resources, key processes, and profit formula. If those aspects are unclear to you, the examples are used to flesh out each element.

Business model innovation is defined in this way: "These companies need something more fundamental than new growth: They need renewal. They must evolve into companies that deliver new sorts of value . . . It calls for the ability to innovate something more core than the core, to innovate the very theory of the business itself."

While the book's subtitle proclaims "Business Model Innovation for Growth and for Renewal," be aware that business model innovation can also occur in the other three quadrants of the matrix. Consultant Johnson is addressing the most difficult types of business model innovation. The good news is that many of the same lessons apply to the business model innovations in the other quadrants.

Mr. Johnson is an advocate of creating a process for innovation, rather than relying on serendipity. He doesn't discount serendipity, but he wants to increase productivity for such innovation.

I thought that the best chapter in the book was Chapter 8 where the stalled thinking of those who don't think about business models and strategy very much was well and humorously displayed in a way that anyone who has worked in management of a large company will quickly understand. Chapters 6 and 7 are also good on the subjects of designing and implementing new business models. I concur with the observations there. I wish that more of the book had been focused on those subjects rather than making the case for doing this kind of innovation. For instance, I think that many readers would benefit from more time explaining how to uncover new customer value propositions, the starting point of the innovation process described here.

A decent book on business model innovation. It starts by explaining what business model is using the four-box model (CVP, profit model, key resources, and key processes) then explicates how each can be leveraged to justify foray into the author calls white space, or something beyond a company's core and adjacencies. For those who want the gist of this book, the summary version is in HBR on Business Model Innovation, published in 2010. There are many insights in this book, but I regret that the author could not abstain from using so many contemporary management cliches, which slow down the reading.

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