Posts

The Power of Business Model Innovation: Interview with Professor Jay Bal, Part One

Business model innovation is an incredible tool but one that often isn’t considered by those developing new products. As part of our mission to explore the wide-ranging commercial opportunities for new product developers, ITERATE team members Gethin Roberts and Holly McSweeney recently interviewed Dr Jay Bal to understand why business model innovation needs more attention. Dr Jay Bal is Professor at the University of Warwick and leads both the Master Program in Innovation and Entrepreneurship and the Master of Research in Business Transformation. Dr Jay Bal vibrantly explained why combining product and business model innovation is vital if businesses want to really succeed and make an impact. In part one of our interview, we covered what is driving the need for business model innovation today and why new start-ups are especially well-placed to experiment with business models. Jay also shared why there is freedom in business model innovation, as it helps us focus less on failure and instead on pivoting.

 

Could you give us a little background about yourself, about your work and what you specialise in?

I’m currently Professor at the University of Warwick. My main interest areas are technology, I’ve got a background in AI and I also know quite a lot about manufacturing processes. But my main interest really is business transformation, but I think increasingly – as a result of the fast-changing world around us – I’m really interested in transforming whole industries. So, for example, currently we’ve got a big project ongoing in the midlands about how to transform the old automotive industry into a very different industry that’s fit for supplying electric vehicles. So, a wide background, I’ve worked for the World Bank and the Commonwealth Secretariat, in training managers in incubators, worked as a consultant for a whole range of countries on poverty alleviation through business development. As a result of that, I’ve managed to visit a lot of exotic islands because they seem to be the main customers for this kind of work. Places like Fiji, Samoa, Vanuatu. So, I’ve had a rewarding and interesting career.

 

“Increasingly – as a result of the fast-changing world around us – I’m really interested in transforming whole industries”

 

You mentioned that you’re looking more into how whole industries can be transformed rather than just on an individual business level, one thing we were particularly interested to know is how you see this looking now, post-Covid? Is the need to innovate with your business model or to innovate across industries more urgent now?

Well, I think there’s the old saying, innovation is driven by necessity. So, I think in the last year we’ve seen quite interesting innovations driven by the necessity of Covid. But I think there are four key pressures at the moment that I see are driving this need for innovation.

The first one is really changes in customer needs and demands; so, what we’re seeing is a change where for most products and services, supply exceeds demand. You only really make money for a short period of time when demand exceeds supply, that’s when you can charge what you want. But in the modern connected world, pretty soon other people come along, supply increases and there you’re then into retaining market share. So, I think innovation is critically important in that kind of world.

And secondly, I think that changing customer profiles or needs is an important factor. We’ve all got too much stuff and there’s a change from customers into experiences. A lot the design implications are more about how do we enhance experiences with products and services, so there’s a lot of business opportunities opening up around the changing needs of customers from stuff to experiences.

The third factor is these black swan events and Covid-19 is a black swan event. Other ones are at the moment, for example, the Suez Canal blockage, the current shortage of chips, that’s caused a lot of the automotive industry to shut down. So, what seems to be happening is that these black swan events seem to be occurring more often and this is driving us to innovate, to innovate in products and services.

And then finally, zombie businesses. I’ve got a bit of an obsession about zombie businesses. If you look at the figures in the UK before Covid, about 15% of all businesses are what I’d call zombie businesses. These are businesses that survive, they make enough money to keep going, but they never make enough money to pay back all the money they owe. So, these zombie businesses they employ, but also, they block the mechanisms that you get in fully free markets, i.e., it’s hard for me to do a start-up business when there’s a zombie business already occupying and filling the needs of those customers. Normally, those businesses would fail and then a start-up business with a better value proposition would come along. It’s very hard to displace these zombie businesses because typically as a new start-up, it’s not about being a bit better, you have to be three times better to be able to overtake a zombie business in your sector.

So, there are these four challenges that I see are driving innovation, or the need for innovation.

 

“It’s not about being a bit better, you have to be three times better”

 

So, then, the early-stage start-up who we’re talking to has a real challenge on their hands; how do they actually compete? What do they do? Would you say it’s harder for a start-up to be innovative or do you think there’s also an opportunity there?

I think really the answer to this is the topic of our conversation. I think one of the big advantages that new start-up businesses and early-stage businesses have is the ability to innovate on the business model that’s being used.

So, one of the things I’m doing at the moment, I’m head of the WMG (Warwick Manufacturing Group) incubator and accelerator. In the incubator we’re helping new start-up businesses, but in the accelerator, we’re taking businesses that have existed for a while but have not really managed to grow.  And it’s interesting, because what we find – technically this is termed product-market fit – but what we find is that the products they’re offering don’t fit the market they’re targeting. And quite often we have to change the target market. An example is a guy who quit his job, set up a business and created a collaborative working tool and he was targeting it for doctors and GPs. This is a common problem: people tackling areas they don’t know enough about. So, first of all we had to tell him that doctors don’t specify these tools, probably the practise manager will specify it, but then the practise manager doesn’t want to take risks since the majority of their money comes from the NHS, so they will only use the ones that the NHS recommend. And to get accepted by the NHS – as you know – is like a four-year project, it’s not something you do very quickly. So, what we had to do was to look at what the attributes of the product were and then innovate or brainstorm around what other applications there may be for that product.

So that’s what we mean by product-market fit, products don’t fit the market the entrepreneurs target them at, maybe because they don’t have a wide enough appreciation of other markets. And I would argue that probably, in the majority of cases with start-ups, they’ve targeted the wrong market, or they’ve targeted the wrong customers within that market. Nothing wrong with their product or service but they’re targeting the people who will not benefit the most from that offering and that’s part of business model design. I think another key problem that start-ups have is they create products (going back to this market-fit), they create products that are nice, or useful to a large number of people. And this is a path to death, really.

If you look at a lot of examples of business models, the classic example is Airbnb; now, they’re the world’s largest accommodation provider and in ten years they’ve gone from being a little start-up to the world’s largest accommodation provider, bigger than hotel chains like Hilton and all the others. The fact is that they didn’t start off as an accommodation provider, they targeted a very niche market which was cities or locations where there were large events – pop concerts or conferences – which overwhelmed the local accommodation capacity.

And successful businesses start out with a very targeted, specific need and they satisfy that need and then they grow the business from there. Too many target general use and a broad customer base because they think it’s safe; they think, some people might find it useful. They’re a product looking for a market, rather than a market which designs a product.

 

“They create products that are nice, or useful to a large number of people. And this is the path to death really”

 

Obviously, you’ve got your accelerator and the people you’re working with who are able to identify different applications for a product. But how might a start-up actually go about exploring that themselves? If they think that their product is suited to one target market and they find that actually the scale of the opportunity isn’t there? Should they look again at their product and to try and understand where else they could apply it? Or should they reach out to someone like you?

The standard lean start-up process is recommended for start-ups and I think you mentioned pivoting earlier on; typically, even in my one-week course where we start off with an idea and try and develop an innovative business model, the student teams pivot three or four times in that week. Now I think there’s some research that says that you won’t arrive at a successful business until you’ve pivoted around three or four times. And a pivot is either you change what you’re offering and keep the same target customers, or you change your target customers and keep what you’re offering. One of the other major things you can think about which would allow you to have a better fit, is thinking about channels. If you think about the classic sales funnel, all those steps, from how the customer finds out about the product, builds trust in the product, tests the product, and then finally buys and rebuys the product. So, there’s a huge number of variables in the business models and understanding these variables and understanding what different people have done in different situations is the added knowledge that consultants, incubators and even quite often investors bring to start-ups.

 

“A pivot is either you change what you’re offering and keep the same target customers, or you change your target customers and keep what you’re offering”

 

What we see sometimes is that people try and build up their target persona and almost create their target market themselves and then in doing that, they distance themselves from the original need – they’re thinking very narrowly. In doing so, it makes the entire process of starting a business and developing and bringing a product to market seem a lot riskier. Whereas actually, it seems like what you’re saying is that there’s a lot more flexibility and variation that can happen?

One of the biggest problems which kind of describes the situation you’re talking about is people fall in love with their idea; trying to get them to change their thinking and see alternatives is very very difficult. And I think I see more failures because people have fallen too in love with their original solution. Whereas, in practise and in the process of business model design, most people get it wrong. They think their goal is to design one business model, it isn’t: it’s to design a number of different business models which may work. So, with any kind of problem you get a solution space, you get an area where good and bad solutions exist, and your job is to explore that solution space to find a good solution. Hopefully, you can find the optimal, the best solution, but not always. And that’s why, rather than trying to produce one solution, what you need to do is produce three or four solutions. And then, the process is to test those solutions. But most start-ups they tend to go ahead and produce one solution and then start trying to make it work. Whereas, the real methodology is to use the tools, the process of business model design, create four or five different solutions and quite often these solutions are created using standard business models. So, there are a number of standard models where you can learn from the experience of other companies in terms of what challenges they’ve had, what benefits they’ve brought, take them to your idea, create different business model possibilities around these standard models and then evaluate them, work out which one is best.

 

“Most people get it wrong. They think their goal is to design one business model, it isn’t: it’s to design a number of different business models which may work”

 

How would a start-up do that? With a physical product, if we’re developing a product, obviously prototyping that product, testing it, evaluating it, getting market feedback is part of that process before you even get to market. So how would a start-up “prototype” different business models? And how long should they do that for? Is it a year with one business model and then try another?

That’s a really good question because often I’ve had founders come to me and say everyone says we should stick with it and carry on and persevere and show real determination, but at some stage you’ve got to say enough is enough. What I always say is, don’t quit, but pivot. If you keep pivoting, I think it’s really a race, can you pivot enough times to something that’s successful before you go broke. And that’s why the process of design and evaluation needs to be very structured and quick and easy to undertake because then you can do more pivots.

 

“What I always say is, don’t quit, but pivot”

 

On that topic of ‘how long should I stick at this before I say it’s a failure?’ Or ‘I’m not making any money; how much longer should I do this?’ How can you attribute success or failure to either the product or the business model? Are there any signals that you could pick up on or metrics that you could track that could indicate that maybe the problem is with the business model as opposed to with the product?

I would argue that that’s part of the evaluation procedure; we have a four-stage process. So first of all, this is founder-problem fit: how well does the founder understand the problem that their solution is trying to address. And we see often that they don’t really understand them properly. And really, the best founders are the ones who personally experience that problem, because then they have real insight into it. Then from the founder-problem fit you get problem-solution fit: how well does your solution actually address the problem that you’ve identified. And quite often, because of poor fit on founder-problem, you end up with solutions that are maybe too niche or too broad. And then, after you’ve got the problem-solution fit, you get what I call the product-market fit. The solution has got to fit the market and that means making decisions around the business model, around some of the things we’ve talked about, the journey to discover the product, to build trust in the product, to try out the product etc. So, then you’ve got that product-market fit. And then you’ve got the scale-up fit: can the solution we’ve got actually scale up to become a viable business. So, we go through these four fits in terms of assessing proposals, taking people through the process from an idea, hopefully to a successful business through a number of pivots.

 

“the best founders are the ones who personally experience that problem”

 

Part two of our interview with Professor Jay Bal will be released next week. The discussion evolved to cover topics such as the future of business model innovation and the challenge of legitimisation that affects so many start-ups.

8 Commercial Touchpoints in the Product Design Journey

Not every Client we work with chooses to develop their product for commercial reasons, but many do. And, as we are increasingly seeing business play a bigger role in social, health and environmental impact, entrepreneurs have an opportunity to make a difference and a profit. So how, as entrepreneurs looking to materialise ideas and as designers helping to achieve this, can we develop products with intention and direction, products that build lasting businesses, products that ultimately will flourish in the market and make a real contribution. Bringing a commercial awareness into the product development journey can completely transform both the experience and the end-result.

While a keen commercial sense is valuable throughout, we have compiled 8 critical points during the design journey where a commercial perspective can have real influence. Recognising and exploring the commercial consideration or opportunity at each of these points will result in the creation of a better product in the end. These 8 touchpoints stem from many years supporting entrepreneurs and helping our Clients grow future-focussed businesses that can thrive. These touchpoints run alongside our product development journey, starting from that very first idea through to pre-launch strategy.

 

Perhaps surprisingly, the first three touchpoints are pre-design project considerations.

1. Knowing Your Why 

Being able to clearly and concisely articulate why you want to develop your product in the first place is simple yet essential step. Understanding whether your design venture is commercially motivated or not is crucial, especially given that the journey from wild idea to tangible product can be an emotional one. For the purpose of this article, we’ll assume that commercial success is a part of your why – by maintaining an awareness of this why as you progress through the development journey, you can ensure any design decisions or project directions align with that why; this helps keep the project on track. What’s more, it’s not just your personal why that matters, if your ambition is to create a commercially effective business, you also, and even more importantly, need to know and deeply understand your end-user’s why.

2. Market Opportunity Validation 

No matter how well a product has been designed, if the market is saturated and the opportunity is slim, the likelihood of achieving commercial success will remain small. On the other end of the scale, if your product will establish it’s very own, new market, it’s imperative to understand whether this is something that is needed or wanted by the world. This point can be particularly challenging when you are personally invested in your product idea; while it’s true that passion can be shared, it’s vital to ascertain whether enough people are likely to buy into your product in the same way that you already have. If the market opportunity is not validated at an early stage, you could invest heavily in product development, only to find upon launch that the demand just isn’t there. If this isn’t something you’re clear on from the beginning, it could be worthwhile to explore this through a commercial feasibility work package. Thinking about the market opportunity through a commercial lens, could also illuminate further opportunities that weren’t previously known, it might even unearth the reality that your product could be more successful in a different market – leading to your first pivot. The scale of the commercial opportunity may also open up a discussion around IP on competitor products.

3. Establishing a Design Approach 

The commercial position of the entrepreneur or business will influence the design approach. While ITERATE has a tried and tested, structured pathway to deliver high quality products, this can, nevertheless, be flexible and adaptable to suit each project. An example of this is the fact that the activities or design milestones could look different depending on whether the Client is self-funding entirely or seeking investment mid-development. New product development can require significant budget, nonetheless, if budget is limited in the early phases, the design approach can be tailored to produce valuable outputs that might help the Client attract further investment. Without this understanding, you could risk investing a sizeable amount of finance and end up with an incomplete product. Balancing this long-term perspective with a step-by-step approach is key.

 

The next four points are in the thick of product development. In this period, it’s all-too-easy to lose sight of the starting point and the target endpoint. Commercial awareness is arguably most essential in this phase of product realisation.

4. Concept Selection 

The first focus of the design journey is concept creation, following which comes concept selection. This is where the Client must decide between a range of concepts (typically, anywhere from 4 – 6), or must identify elements from this range to produce a hybrid design. This concept design will be taken forward for further development (including the detailed and time-rich 3D CAD model creation). In light of this, it’s important to make this concept selection armed with a knowledge or appreciation of the end-user’s perspective. Drawing on the commercial reality of what’s being undertaken will help to identify the concept that best aligns with the user’s habits, mindset, and desires, rather than defaulting to the concept that may be the most personally-pleasing. At the end of the concept stage of the design journey, the Client should receive these designs to take away (often digitally sketched), this output is the perfect resource to share with members of the intended target audience, to garner first-hand feedback and insights to fuel this choice.

5. Channelling the Consumer Voice Throughout Development

The Development and Detail phases are when the product function, usability and aesthetics are refined. It is during these specific phases that the majority of the design trade-offs and decisions will need to be made. This can be the hardest phase of the journey to navigate and it’s easy to get lost in the tiniest of product details. A clear way to manage this is to harness your knowledge of the target audience and decide through their eyes. Not only will this ensure that decisions are made quickly, keeping the project on-track, but it will also create a better final product, one that fully meets the original brief. By retaining an awareness of your end-user’s priorities and desires – often drawing upon foresight market research – you can ensure that the design direction is consistently guided by the consumer’s voice.

6. The Purpose of Your Prototype 

There are a number of approaches that can be taken when it comes to prototyping a design: from a simple desktop-based, proof-of-concept prototype to validate a technical unknown to a refined prototype produced in mimic materials. Returning to a consideration of project finance, different prototypes suit different commercial needs. Do you need 10 product prototypes for a focus group; do you need a proof-of-concept prototype to intrigue a potential investor and prove that a ground-breaking step is possible and technically viable; do you need a more polished prototype because you plan to launch an attractive crowdfunding campaign. The prototype outputs are likely to be determined by the commercial position of the business and communicating this is key.

7. Prototype Testing 

The point in the development journey when you receive a working prototype is a critical moment from a commercial perspective. This provides the perfect opportunity to collect real market feedback and to drive any design changes with direct suggestions from the target market. Being able to place the product in users’ hands will also allow you to gauge, for the first time, a sense of how much they’d be willing to pay for the product. And here, you have a chance to not only ensure the product meets a market need, but that, in practise, it delights users, surpasses their expectations, or surprises them in a novel way. At this point, the question should not be is the product effective, but how could the product be made more compelling? Even if the refinements cannot be integrated into V1 of the design, this prototype testing process could help to tease out and capture ideas for V2 or for a related product to expand the business. It’s a prime opportunity to be influenced and inspired by the market you will serve, to listen and respond.

 

The last point is an important one, IP is an integral part of commercial strategy but knowing why and how you plan to use it is vital.

8. Filing Your IP

Filing your IP may take place prior to prototyping, but if you are seeking to register your design, it’s important that the design being filed does not change. The point in your design journey when any IP rights are registered is likely to prompt a commercial conversation, potentially around brand identity and trademarks. Design protection is inherently part of your commercial strategy and leveraging your IP will help to create the conditions for a successful launch. Design Registration specialist Michelle Ward explained this in detail in our recent interview; when we asked what should be considered when settling on IP, she advised, ‘there’s the question of what elements in the design have the real commercial value and I understand that sometimes that’s difficult to gauge … And some of it is a fundamental emotion.’ When it comes to design protection, it’s a good opportunity to evaluate what matters most about your product, this clarity and prioritisation can feed into the launch and marketing strategy.

 

This list is not exhaustive, commercial considerations can help in every aspect of the product design journey. Breaking the journey down however, helps to illustrate that it is achievable and that the business opportunity will solidify and grow as you continue to move throughout your design journey.

 

gethin@iterate-uk.com

holly@iterate-uk.com

Contact: 01291 408283

Can I Patent My Idea? Exploring the Inventive Step

Patents are often top-of-mind when it comes to conversations about realising an idea. The entrepreneurs driving the idea, the designers working to bring it to life, and the investors funding the development, will all be thinking about – or at least considering – patentability. Many entrepreneurs reach out to share their concepts and ideas, many of which are genius, imaginative or needed. But not all are patentable. So, what does it take for an idea to have patent potential?

The answer: an inventive step.

What is the Inventive Step? And Why Does it Matter? 

One key aspect involved in a successful patent application is that the product or technology includes or delivers an inventive step. Given how vital this aspect of patentability is, we need to understand what exactly is this requirement and what counts as an inventive step. Many innovations that crop up across today’s R&D scene could easily be revered for their inventiveness, but here is where the concept of the inventive step becomes relevant. In the context of patentability, the inventive step refers specifically to the invention being ‘not obvious to a person skilled in the art’. Thus, for a product feature or technology to be granted patent protection, the novel aspect must be novel not just to anyone, but it must be not obvious to those who are skilled in the field or art in which the product exists.

It’s essential to fully consider this aspect of patentability. There are countless products that are genuinely clever, intuitive, imaginative – capable of delighting or compelling users; there are products that offer a much-needed, highly effective solution to a problem the end-consumer might be experiencing. This however, doesn’t automatically align with the patentability of the idea. For patent eligibility, the idea must be surprising or not obvious to someone with expertise in the sector, to a person ‘skilled in the art’. Understanding this precise requirement can help you think more critically about your invention, what it does, and where its usefulness or innovation really lies.

Often the ability to patent a product or design is seen as the ultimate validation and risk reduction which can spur an entrepreneur to pursue the idea on a commercial scale. This can be somewhat misleading though. When it comes to new product development, despite their publicity, patents are not the only option; if your design idea doesn’t fulfil the inventive step requirement, there are numerous other avenues to look down. In a recent interview with Design Registration Specialist, Michelle Ward we unearthed just how valuable and diverse a source of IP, Design Registration can be. Investor Christian Kumar also shared with us, that product iterations are another strategic way to gain market protection through the cultivation of brand loyalty. The point here is that just because an idea can’t be patented, doesn’t mean it won’t be a success.

Upon first impression, it may seem that this requirement for an inventive step can make it harder to patent a design, but importantly, the inventive step also plays a vital role in enabling innovation to take place and remain accessible. If the requirement of the inventive step didn’t exist, barriers to innovation could be far more frequent as even regular or obvious iterations and product developments might result in an infringement.

Global tip: in the UK and Europe this requirement is referred to as the inventive step, while in the US it is more commonly referred to as non-obviousness.

Who Can We Count as a Person Skilled in the Art? 

According to the Intellectual Property Office this so-called ‘skilled person’ is neither a Nobel Prize winner nor the lowest common denominator; they must be competent and capable but are unlikely to have an awareness of specific patents. This is expanded into a consideration of the skilled person’s creativity level: the IPO states that this person should have sufficient knowledge and skill to make ‘routine developments but not to exercise inventive ingenuity or think laterally’.

How is the Inventive Step Assessed? 

Understanding how the presence of an inventive step is assessed is a useful question, and the answer depends on where you are filing your patent application. The Intellectual Property Office (UK) assesses whether or not an inventive step is present with a focus on objectivity, evaluating whether objectively, the invention would have been obvious to a person skilled in the art. By distinction, the European Patent Office (EPO) is slightly more specific. The EPO evaluates whether or not an inventive step has been taken based on a problem-solution framework. This means exploring the core problem at which the product, invention or technology is aimed, and then analysing whether the proposed solution to the problem is an obvious solution or not. Of course, not every patent application or sector is the same and there are a number of factors that are considered in every case.

Final Thoughts

If you think there might be patent potential in your design idea it’s always worth consulting a patent attorney (ITERATE Design + Innovation has a network of connections across the IP services to help you start the conversation), but if you are in the initial stages of exploring an idea, then, assessing the wider sector and questioning whether your concept, technology, or design breaks new ground in terms of conventional wisdom, can help you understand whether there might be patent potential in your idea.

For more specific information on patents, visit: www.gov.uk/topic/intellectual-property/patents.

 

Email: gethin@iterate-uk.com

Email: holly@iterate-uk.com

Contact: 01291 408283

The Business Case for Using Additive Parts as Your End-Product

Experimentation and exploration are the hallmarks of innovation. They’re also made more viable for businesses through additive manufacturing. 

Additive manufacturing has long been used and respected as a vital technology within research and development. In particular, 3D printing techniques help product designers validate their ideas through rapid prototyping; this makes it possible to iterate quickly and refine designs within a highly compressed timeline. But the benefits of additive manufacturing don’t end in the world of R&D. In fact, many of its advantages – think flexibility, agility, innovation – are the aspirations of most businesses. Beyond this, the layer by layer composition of additively manufactured parts offers far greater design freedom. The opportunity here? To completely transform the nature of what products can be created. Yet, despite the potential offered by additive as a manufacturing method, still a surprisingly small number of businesses have seized the opportunity to use additively manufactured parts as their end-product.

Read more

Design Registrations: Interview with Michelle Ward, Part Two

Here, we continue our interview with Chartered Trade Mark Attorney Michelle Ward, founder of Indelible IP. Read part one if you haven’t already where we covered the scope of protection provided by a design registration. Michelle’s insights demonstrated that for a relatively low cost and straightforward application process, design registration can provide a lot of value. In part two of the interview our focus shifted to considering design registration from more of a commercial perspective.

 

Read more

Design Registrations: Interview with Michelle Ward, Part One

Recently, Holly and Gethin from the ITERATE team sat down over Zoom to interview Michelle Ward. Michelle is a Chartered Trade Mark Attorney; she has more than 28 years’ experience advising brands on intellectual property. Michelle specialises in trade marks, copyright, design registrations and unregistered design rights and in 2016, founded Indelible IP. Michelle shared her wealth of knowledge on the value of design registrations within the wider IP landscape. She made a compelling case for raising the profile of design registration and explained how this particular design right can be used in clever ways to not only protect your design but also to enrich your brand.

 

Read more

Using Initial Conversations with Your Consultancy to Explore Market Opportunity

Your product design journey will start before any official kick-off. The very first call you have with your potential product design consultancy will be an exciting moment. It could be the first time you actually share your idea or explain the story of where that idea first began. Or, you may have an established business already and have started product development by the time you reach out to new partners. Your design project will technically start when the first phase begins (this could be foresight, concept or another). However, this formal kick-off often comes after several discussions, the creation of a proposal and possibly further conversation after that. By this point, your product design journey is well and truly under way already – or at least it could be … If you’ve seized your opportunity early on, you’ll have created extraordinary momentum with which all parties can begin development.

Read more