In the beginning was the problem! How to develop disruptive business models.

A lot is written about digital business models. On disruptive approaches. Expensive evaluations and process models are sold and tried out. What usually emerges are lazy compromises, “digitized” age-old processes. It sounds paradoxical. But in order to construct new, successful, digitally supported business models, the digital tools are of secondary importance. What is fundamental is that you manage to break out of mental and intellectual ruts. Here’s how you can do that – in a nutshell.

(Reading time 6 minutes)

In the beginning was the problem

I have developed the view of the “human problem” in countless workshops and claim that all economic activities are originally based on such human problems. So what is such a problem? Quite simply. It is something that disturbs people. These problems and their combination ultimately create needs.

Now this “disturbance” can be serious or trivial. For example, it can bother me that I always have to turn off the light in the evening or it can bother me that I have an illness that threatens my existence (sic!).

Disturbance can therefore be understood as something that prevents me from leading as good and pleasant a life as possible. Therein also lies the abstraction to the need, which can have an optional character in perception. I consider leading as pleasant and happy a life as possible to be natural. I have never met a person who doesn’t want that.

It should be noted that the definition of happiness and “pleasant” has many definitions. However, what almost all people have in common is that they do not want to experience suffering and that they are basically lazy in a positive way.

Products and services are ways to alleviate or remove disorders

This is where a service or product comes in. It makes my life more comfortable by either alleviating or, in the best case, eliminating the problem.

“Products always rely on technology, manual labor and methodology. Not all three components necessarily have to come from the provider of the product.”

These solutions to problems can come about through the use of technology or through human labor. Or, as is most common, through a combination of the two factors. Usually, unavailable technology is compensated by human labor. What simplifies problem solving as a third component is the methodology of completion.

Examples

Sounds a bit abstract, I know. Here’s an example:

One problem, for example, is “clean laundry”. I want to have fresh, clean laundry every day and do as little as possible to achieve this. To achieve this, I can either wash, dry and smooth manually every day. A huge job. Or I can use a washing machine and tumble dryer to greatly simplify the same process and alleviate my problem.

By organizing myself and only washing every week, I can alleviate the problem further. I have then combined manual work with technology using methodology in such a way that the “clean laundry” problem is the least of my worries.

Evolution of problem solving

As explained in my article on the disruption of industries, the solutions to problems go through a certain evolution. Usually, new technology becomes available that radically alleviates the problem.

It is important to understand that today’s products and services, and therefore also the industries, represent only one evolutionary stage in solving the problems.

To use the “clean laundry” problem again: originally, laundry was “done” on a river, later came the first swinging buckets, later the washing machine, later the tumble dryer. This also reduced the amount of manual work and the methodology behind it.

So what is the development of new business models all about?

Business models that have the potential to disrupt industries start with these problems and do not take previous solutions into account for the time being.

Applied to our example, this means not trying to build the digital washing machine, but analyzing the core problem and then looking for available technologies and methodologies to better solve this core problem.

“The aim is therefore not a gradual evolution of the existing with “digital means”, but a fundamentally better way of solving the “clean laundry” problem.”

Industries are like beaten tracks

Industries develop where different companies develop such solutions. It is in the nature of the market economy that different providers try to participate in economic activity with the same type of solution.

What we also observe is that industries are real beaten tracks when it comes to solving problems. In other words, a certain solution becomes so established that new and therefore unconventional solutions are not pursued at all. This is the reason why many people from outside the industry are successful with new technology. They are not “pre-loaded” with best practice.

So how do you actually go about developing new business models?

1. analyze industries

It makes sense to do something in areas where fundamentally new solutions have not been worked on for a long time. In other words, in sectors where the adaptation backlog is particularly high. If you are active in such an industry yourself, you will probably ask yourself whether you are cannibalizing your business. The question is justified, but the answer is simple: yes, of course. But that doesn’t matter.

You’d rather ruin your own business than someone else’s!

Because if you do, you have at least one chance of remaining relevant with the new business model. Otherwise, you will simply go under. There is so much philosophizing and discussion about this. I understand the fears, but at the same time I appeal to your common sense: at some point, a new provider will come along and do everything differently and better. It’s only a matter of time. So you only have one option: renew and change.

I have described in more detail here how to select such sectors and what the parameters are.

2. identify the core problem

This second step is fundamental and I admit it needs a little training. Detach yourself mentally from the existing products and offers and ask yourself what the user wants. Let’s take the automotive industry. The underlying problem for people is not driving, but getting from one point to another as flexibly, safely and quickly as possible. New technology will be able to solve this better than cars as we know them today.

Once again: in the evolution of finding solutions, cars are merely an intermediate step that solves this problem at a certain cost, which should not be viewed purely in monetary terms. There is no question that this mobility can be achieved in other ways in the future.

3. start on the white sheet

Once you have identified such a core problem, look for technologies and methodologies that can solve the problem. Work mentally on the blank page, away from existing industries, products and legal regulations.

Combine manual work and technology instead of focusing too much on fully automated solutions. Over time, you will be able to replace more and more manual work with technology.

What is fundamentally important is that the product you create must be radically better for the customer. This can relate either to the customer experience, the price or the effective benefit. Preferably all three aspects. The worse a new product compares with existing products, the better.

So the key question is: If we had to solve the core problem today and knew nothing about the previous products and services, how would we solve it?

4. do the math

Calculate the cost of the solution and put it into context with the customer’s alternatives. I rate a new model as good if it solves the same problem better at 30% of the previous costs. This must include a 300% margin for you. I know that these figures are extreme. But keep in mind that you are not developing a “me-too” model, but one that is capable of fundamentally transforming the market in a short space of time.

5. test the model

Formulate the offering in as high a quality as possible. Take it outside and let it have an effect on your most important customers. You will immediately notice whether it has the desired effect. If you can’t let it go, you are of course welcome to make a small study out of it. In the end, however, this will only cost you unnecessary time and money. My experience shows that with 150 pitches, you can tell pretty accurately whether something will work with the customer.

Then, yes then, they just have to do it

And that is the hardest part. It usually involves considerable investment. On the other hand, it usually also involves using existing technology in a new area for the first time. Be prepared for the fact that you cannot calculate all the risks. And take a risk, just as you did when your predecessors founded the company.