Point: Experiment with new business models in a “connected adjacency” before committing to them.

Story:  Saul Kaplan, founder of the Business Innovation Factory (BIF), just wrote a new book, The Business Model Innovation Factory.  Kaplan shares 15 business model innovation principles, weaving in his personal experience (from Eli Lilly to Accenture to BIF) as well as experiences from numerous presenters at BIF’s Collaborative Innovation Summits. My favorite chapter in the book was “R&D for New Business Models.”

In the chapter, Kaplan describes how to deal the challenges of testing a new business model.  Organizations can’t easily jump from an entrenched business model to a new one.  There’s too much support for the old model and too many unknowns about the new one.  The solution is to test the new business model in what Kaplan calls “connected adjacencies.” A connected adjacency is like a real-world sandbox or living lab. For example, Kaplan details how Accenture changed its business model from being a systems integrator to being a business integrator.  Accenture (Andersen Consulting at the time) started to rapidly build a strategic capability alongside its existing systems integration business. As Kaplan writes,

“It was a connected adjacency that was given the autonomy and resources necessary to scale a rapidly-growing strategy practice from scratch – right next to the huge systems integration practice.  We were an entrepreneurial business unit within the context of the behemoth. The emergent strategy practice would never have worked if it had to live by the rules of the core business model at the time.  If not protected, it would have been swallowed alive by line partners from within the core business model. The new business model needed to be shielded, at least temporarily, within the relative safety of a connected adjacency.”

Part of the success of experimenting in a connected adjacency is letting employees self-select to participate.  In Accenture’s case, the company went so far as to hire partners directly from outside the company – something the company had never done before in its “promote from within” philosophy of the past.  The connection between the existing business and the innovation sandbox is vital, however, because it lets ideas and experiences be transferred between the two spheres.

In another example, Kaplan describes Babson College’s creation of Babson Global, an entity separate from Babson’s core business model that serves as an R&D platform for creating, prototyping and testing new approaches for teaching entrepreneurship and creating entrepreneurial ecosystems in communities worldwide.  The entity is separate from the college but adjacent to it – faculty and staff from the college self-select to participate.

Action:

• Nurture the new business model in a “connected adjacency” — a sandbox, living lab, or side unit of the main business.
• Protect the developing new business model effort from the old model’s metrics and pressures.
• Allow staff to self-select or volunteer for the new model, or hire outsiders so that you have open-minded enthusiasts for the new model rather than adherents to the old.

Point: Additive manufacturing (also called 3D printing) technologies enable new design methods and local manufacturing by entrepreneurs.

Story:  When designing a new part to be manufactured, designers traditionally had to define the shape they wanted and then pick the material that could support that shape (based on strength, flexibility, etc.). That is, they designed the piece separate from picking the materials. For more complex products, designers had to decompose the product into semi-independent parts that were designed and manufactured separately and then assembled with screws, welding, clips, glue, and so on.  This deconstructive process risked incompatibilities between the parts, added complexity, and increased costs due to a assembly labor.

But, nature does not design in this deconstructive way. A tree trunk, limbs and leaves aren’t built separately and assembled. Rather, nature designs and grows the entire tree in a progressive, additive fashion, and largely from one material. Nature starts with a material (e.g., cellulose is the material for trees) and deploys that material in various densities, shapes, thicknesses, and modified formulations to create an integrated object.  The same basic building-block material that makes the thick rigid truck of a tree also makes the broad, flat leaves of the tree, thin flexible twigs, and hard shells of the tree’s nuts.

Additive manufacturing mimics nature (unlike traditional reductive manufacturing that removes material to make a form).  Additive manufacturing can build almost any shape that can be drawn on a computer, including hollow and contorted forms impossible to make in other ways. Specialized machines (essentially 3D printers) lay down layer after layer of material or draw with a bead of molten material to grow the part the 3D shape that was downloaded from the computer. Virtually anything that someone can imagine, draw or compute in 3D can be made with additive manufacturing.

Several competing 3D printer technologies let designers and manufacturers choose between clear resins, colored opaque thermoplastics, powered metals, and even powered ceramics.  Companies can use the technology to create prototypes, customized shapes, spare parts, and intricate parts in low quantities.  For example, Boeing used metal hybrid additive manufacturing processes and powdered metal manufacturing to create parts that reduced the weight and fuel consumption of its aircraft.

Although industrial printers like Boeing’s cost upwards of $500,000, consumer-grade printers cost only $1300.  The low price point creates a vast new opportunity for entrepreneurs to provide 3D printing services.  For example, online service company Shapeways prints any design that its customers upload, from fashion and jewelry pieces to gadgets and art. Even better, Shapeways lets is members open virtual storefronts on the site to sell their products. Some of the most popular products for sale include a PirateBay ship model, a Dymaxion world map, and a customized metal branding iron that will brand any text you want when attached to a BIC lighter. In addition, open source communities (such as MakerBot Industries, RepRap, Thingiverse) are dedicated to creating ultra-low cost printers and sharing designs for cool additive manufactured parts.

Action

• Think about how in-house 3D printing (or in-home 3-D printing) might change your business.
• Design new additive manufactured products based on shapes that would be “impossible to build” with traditional manufacturing.
• Create new business models based on products or services that support additive manufacturing or that transcend the curse of economies of scale needed by traditional manufacturing

Point: Innovation tournaments can be run either competitively or collaboratively, with each approach yielding better results for different purposes.

Story: In his second book, Best Practices are Stupid: 40 Ways to Out-Innovate the Competition, (named the 2011 best book on innovation by CEORead) innovation speaker Stephen Shapiro offers 40 tips on how to innovate efficiently.  His tip #11, for example, tackles the topic of innovation competitions and tournaments. The tip focuses on what role, if any, collaboration should play in these bounty-driven events.

Innovation tournaments can be run either competitively or collaboratively, Shapiro says.  In a competitive tournament, such as ones run by Cisco and LG Electronics, no participant can see rivals’ submissions.  In a collaborative tournament, such as GE’s Eco-Imagination challenges, anyone can see a submission and comment on or vote on the entry. The Netflix Prize and X Prize use a hybrid version, running the tournaments as competitions for prizes but allowing for collaboration within each submission.

Which approach generates the best solutions? Collaborative tournaments work best in areas where problems require “cumulative knowledge” or “building on best practices,” Shapiro says, citing research by Kevin Boudreau and Karim Kakhani in the Sloan Management Review. The collaborative approach lets players build on to each other ideas and create more refined ideas based on feedback from other participants.

Competition, in contrast, is most effective when the problem requires broad experimentation with an emphasis on truly new ideas rather than refined ideas  The competitive aspect means that many different ideas are pursued simultaneously. Whereas collaboration enjoys the benefits of players influencing each other, competition enjoys the benefits of players being independent of each other, thereby avoiding problems like groupthink, which might artificially narrow the ideas along the basis of the first idea suggested.  In some cases, a hybrid approach will use competition in phase one of the tournament to gather a lot of ideas and then use collaboration during a second phase to flesh out and refine the most promising ideas.

Action

• Hold an innovation tournament to access the innovative energies of suppliers, customers, and smart people from around the world.
• Use a collaborative tournament if you need ideas that are cumulatively built and more carefully refined by the players.
• Use a competitive tournament if you want a wider range of “left-field” ideas and plan to do your own refinement or hold a two-stage contest in which the second stage refines the ideas of the first.