Compete Through Business Model Innovation to Become an Invincible Company

MARC SLEEGERS: Welcome to my Autodesk University 220 class, compete through business model innovation to become an invincible company. First, what I need to show you is this safe harbor statement.

My name is Marc Sleegers, and I'm a customer advisor for Autodesk Consulting. In my 15 years with Autodesk, I've worked on geographically and culturally diverse projects in over 30 countries, spanning industry from AEC to food, pharmaceutical, and then to media and entertainment. I have extensive technical and business knowledge in the software industry and cloud platforms, and then combined technical background with strong business administration capabilities

We have a packed agenda today, so let's go ahead. We will first speak about the current world we live in and position, why we need to change now and why we should not wait. We will highlight why business model innovation is important and the essential components of our toolkit and how to get there in a practical example. And lastly, we will leave time at the end for a Q&A.

These are the learning objectives, which we will covering during this AU class. Explaining how invincible companies not only know how to design superior business models, but how they constantly reinvent themselves.

Explain why it's important to invent new businesses and shift existing ones in the digital platform world. Implement strategies to develop a new business models with a practical toolkit designed for leadership and teams to collaborate. Implement a library of hands-on techniques for rapidly testing new business ideas to reduce the risk of failure.

The pandemic has exposed areas of organizational and social fragility, forced people to work in entirely new ways, and expanded the meaning of business resilience. We have adjusted to working remotely. Supply chains and economies have been tested in unprecedented ways.

But adapting to the severe change is just the first step. On the other hand, other side of the pandemic, the transformation from physical to digital will continue in the architectural, manufacturing industries, and then the construction industry will be permanently digitized.

We humans aren't great predictors of the future. For most of history, our experience has been local and linear. Not much change appeared generation to generation. We use the same tools, eat the same meals, live in the same general place.

As a result, we have developed an intuitive outlook of the future. Against our intuition, today, the future is unfolding not linear, but exponential, making it challenging to predict just what will happen next and when.

There is the saying, variants of which are often attributed to Albert Einstein. The world we have created is a product of our thinking. It cannot be changed without changing our thinking. Today, our world is a result of thinking that no longer supports the times we live in.

So why wait? Today, platform companies like Amazon, Alibaba, Apple, or Google dominate our economy. It's also evident that many more platforms are on the rise with potential to disrupt entire industries, from construction, engineering, transportation, to regulated industries, such as insurance.

What about your industry? So it's not a question of if. It's a question of when. In fact, eight of the 10 most valuable companies worldwide are built upon platform business model. Platform companies were able to outperform traditional businesses over the last decades as they established themselves as digital intermediaries.

Amazon and Alibaba, for example, facilitate transactions between sellers and buyers. Apple facilitates transactions between app developers and app users, and Google facilitates transactions between ordinary web users and advertisers.

However, it's not just about digital companies that have embarked on a platform comp. journey. Established AEC companies are just as affected by the shift to platform business models. Many AEC companies, such as Lendlease or [INAUDIBLE] have tried to extend their traditional business models and launch their own platform business.

One reason is the platform business models are just very different from traditional so-called pipeline business models. Pipeline business models are characterized by a linear value chain with a well-directed value flow from supplier to customers.

In comparison, platforms are intermediaries that bring two or more sides of a market together. They provide the infrastructure and rules that facilitate transactions between the respective sides. More specifically, the success of every platform heavily depends on network effects. For example, more users lead to more value. In the case of Amazon, for example, more buyers lead to more seller to actual demand for sellers and for more sellers lead to more buyers.

We see that many companies, in particular established AEC pipeline businesses, struggle with this new notion of doing business. This is why business model innovation is so important for AEC companies.

In the following section, I would like to deepen this topic. For many years of experience working with customers, I see some misconceptions [INAUDIBLE] that, unfortunately, prevent organizations from investing in innovation the right way. When I listen to customers, I often can notice the five innovation misconceptions.

The first one is innovation is new technologies and R&D. The truth is, based on research, shows that technology may or-- may play a role in a particular innovation. Another misconception I often see is innovation is finding the perfect idea, the big idea. Good ideas are easy, so that doesn't count.

Innovation is building these products customers love. The reality is products, services, and value propositions, customers [? care ?] are a pillar of innovation, yet they are insufficient to their own. Innovation is a creative genius that can be learned. The fact is innovation is not black magic that depends on creative genius.

And lastly, innovation is business and strategy as usual. What the fact is most organizations have done traditional R&Ds for decades. However, that worked in the past, and isn't fit for the future. Hence, business models and value propositions are expiring faster than every industry boundaries are disappearing. Therefore, it's time for a new type of business or business model innovation.

There is a big difference between playing defense, business as usual, working on your bottom-line agenda, like productivity improvement, cost savings, or business optimizations, and playing offense, working on your top-line agenda. When you play offense, you need to rethink your priorities and efforts. You grow engines, market differentiation, or radical reinvention are much more interesting for a company.

What happens is incumbent firms are conflicted. Their efforts lack a focus and prioritization. They suffer because they need to play offense and play defense at the same time. Yet, there is no opposition between playing defense and playing offense. You have to execute both plays at the same time to be successful.

What is also interesting is this piece of data, the funding in startups in the last few years. What you can see is that startups are becoming more and more expensive. This means buying startups as the only innovation strategy is also not any more viable. Therefore, it's important to have a good process in place and an organization in place to playing offense.

What I also see from many years of experience working with customers is that many organizations in the AEC industry still adhere to the Big Bang annual funding style of the past. It heavily limits the nimbleness of organization and incentivize bad behavior. Let me explain why.

The statistics on this page stem from the early stage venture capital investments into startups. It shows the maturity of early stage investments won't return capital or only provide small returns. So when you take an example, and we invest into 250 initiatives over 100k each, 162 will fail. 78 will find some success, and 1 will become your new growth engine.

This means you can't pick the winner without investing in initiatives that will fail. The larger the return you expect, the more initiatives you need to invest in small sums. The same is when you want to develop in your business, in your company.

Let's take an example of a digital platform company, Amazon. This is a selection of businesses that Amazon has explored and retired since 2001. You can see that Amazon has retired many businesses during that period.

And they have successfully established two businesses, the two cash cows of Amazon today, the Marketplace and Amazon Web Services. So the conclusion from the Amazon example is that big winner pays for thousands of failed experiments and that you need to have a culture of innovation and experimentation and figure out very fast which business you want to retire and which business you want to keep. And you need to learn through the process, so there needs to be learning in the process. That's very important as part of this process.

The Amazon example shows that every successful company needs to have an innovation funnel with a culture of innovation and experimentation. The innovation funnel is a mechanism that enables a constant stream of ideas. Solutions can be validated more quickly and more flexibly.

The approach allows us to kill not successful business and focus on future growth engines. It also embraces an innovation process that motivates for ideas blooming, a process that drives ideas sharing, transparency on how ideas are evaluated and prioritized, and having a good process to manage these ideas and creating environment to ensure generation of business ideas.

After we have seen that it is important to rethink how to approach innovation, in the next section, I would like to talk about essential toolkit components which helps companies to develop business ideas in the platform world.

Unfortunately, to build a platform, it's not easy. According to Wall Street Journal, over 80% of the platform initiative fails. One reason is platform business models are just very different from traditional so-called pipeline business models.

We often see that companies start to develop a platform business model but have not fully understood the platform concept, not only from a conceptual point of view, but also from a practical point of view. In essence, they are not aware of the diverse nature and mechanics of existing platforms.

But what do you have to do, really? It is about doing the right things at the right time, building the right business model, building the right ecosystem, building the right platform, and building the right culture, and data all at the same time. This is not easy to do.

Because of that, we have developed a rapid business model design toolkit. It's based on literature review and customer engagements. And it's there to identify opportunities for your own platform business, designed for leadership and teams to collaborate from.

The rapid business model designed toolkit has four phases. The first phase is inspire, and it's all about what opportunity exists. The second phase is formulate and sketch. This is all about how do we create value?

The third phase is develop a prototype, and this is all about how does our business work? And the last phase is validate and learn. Are we on the right path? Do we attract the right customers? Is this a successful business? These are all questions we would like to answer in this process.

The tool is designed to run in iterative sprints. The lengths of time of your sprints will be based on the goals and the needs of the team. Sprints can range from 2 to 14 days. And it's important to do this in an agile iterative way so you learn, and you learn fast, and you learn through the process.

In the following slides, I would like to show how to apply the rapid business model design toolkit on a particular example of a platform business. When I talk to many customers, a big topic is digital twin. Now, to make this an applied tool as a concrete case, I have taken digital twin in my following slides as an example.

First, what we need to have in order to build a new business is the right team. Assembling the right team is essential to generating effective new business model ideas. In order to do that, we need a cross-functional team that has all the core capabilities needed to shape the solution and learn from customers.

Members of the team should be diverse in terms of seniority, age, experience level, discipline, customer knowledge, and professional experience. A lack of diverse experience of perspectives on the team will result in backing your bias right into the business.

The team size should not be bigger than 4 to 10 people. And as we grow, there are maybe more teams in place, but they should not be bigger than 4 to 10 people in one team. Yet team design is necessary, but not so efficient. You can have entrepreneurial experience, but how to interact with your team needs to be explicit and to [INAUDIBLE] characteristics as well.

Team behavior can be unpacked in six leading factors. Customer centricity. The team needs to know the why behind the work. They require a constant connection with the customer. They rather deliver-- they rather than deliver, they co-create solutions with the customer together. So it's a very important part of your system. The customer is part of this whole journey. Better is even that the customer is part of the team.

The second one is rapid decision and learning cycles. So it's important that you rapidly iterate on things. And even if you don't know what the end solution is, you use different kind of tactics to achieve that outcome. And you iterate and iterate until you have achieved the goal.

The second one is experimenting. Teams are willing to be wrong and experiment, focused on crafting experiments to learn about their risk assumptions. Match experience to what the teams are trying to learn over time.

The third one is entrepreneurial. Teams need to move fast. They need to have a sense of urgency and create the momentum to the viable outcome. This includes also problem solving at speed.

And the fifth one is question assumptions. Team needs to be challenged the status quo. They need to try to test it out. They need to really be big thinking behind that. And the last one is impact driven. They need to be data-influenced so they can decide the right things. They shouldn't be feeling-influenced, but they should really be data-influenced behind that. And this will generate and shape their backlog goals and strategy for the future iterations.

To successful develop business ideas, teams need to have a supportive environment. They cannot be held to a standard where failure is not an option. Failure will occur, but failure isn't the goal. The goal is to learn faster than the competition and put the learning into action.

One of the pillars for such an environment is the team needs to be dedicated. They need to have money, so they need to be funded. And they need to be autonomous, so they need to have the end-to-end responsibility in their team. They shouldn't be dependent on other teams or other organizational parts.

But also the company needs to provide the team with an environment that has the right type of relationship and the right type of leadership in place. Direct access to customers. Better to have the customer part of the team, as I mentioned before.

They need to have the right resources to be in place to be successful, and they also need to have direction and strategy from the leadership. And finally, the team needs to have constraints to focus on the experimentation and to really focus on the end goal.

So let's start with the first phase, inspire. In this phase, it's all about generating as many possible ideas as you can. It requires expansive thinking. In the initial phase, it could last several weeks, or it also could be short as a couple of workshop exercise.

What are good examples of inspiration? So first of all, of course, Autodesk Consulting and also Autodesk University, with various talks of innovation, business model innovation, and digital platforms, which you can see in those two examples.

Another good resource of inspirations are books. What you can see here are all books that I can highly recommend to read-- the deal about business platforms and construction, construction transformations, economics of platforms, and entrepreneurship, how to innovate with a minimum viable business idea and rapid customer feedback to a successful business.

Another good inspiration is the construction block digital builder. It's another place to get inspired with, for example, those three examples or titles. Yet another inspiration are websites. For example, the Nordic Circular Economy Playbook. Nordic Innovation is an agency for Nordic governments and works to promote sustainable development through supporting entrepreneurship, innovation, and competitiveness among Nordic companies.

The green transition is coming fast, and all companies need to adapt to a new reality. On the way to do it is to join circular economy and implement the circular economy business model. A crucial business model that can help both retain and create new values for you and for your customers to give you a competitive advantage. There are many different business models that could work for your company, so please have a look. And the Nordic Innovation has made this circle playbook to show some of them to you.

Another good inspiration is the Forge website. It has tons of AEC success stories of companies building their own platform on top of the Autodesk Platform [? Forge, ?] and they are also a very good inspiration.

Instead of reinventing the wheel, when identifying new business models, it's often so efficient to recombine. For example, transfer, combine, or repeat existing business model patterns. Analyzing a broad variety of companies, the Business Model Navigator website has identified 55 business model patterns that are either, individually or together, build a fundamental or major currently existing business model.

In this example, what I have taken is the company Hilti, a multinational company based in Liechtenstein which has five different business models, direct selling, guarantee availability, rent instead of buying, a solution provider, and subscription.

After all this inspiration, it's good to summarize and visualize all this information. A good framework is the industry map. We use the industry map to help understand the context, to map out trends with your teams, and to have different perspectives. It will help you to look for drivers outside of your own company and have conversations about the forces that could shape your business now and in the future. The industry map is meant to help you and your team expand your thinking beyond the boundaries of your business and organizations to have a deeper conversation about what is going on in the world and what is changing that will affect your business in the future.

The next phase is formulate and sketch. This second phase is all about formulating and narrowing down the alternatives from inspiration and the team finalize the direction or concept to be prototyped to turn it into the best possible value proposition in business model. Good design involves the use of strong business model patterns to maximize the return, compete beyond product technology or price.

The first tool I would like to present is the business model canvas. It is a great tool to help you understand the business model in a straightforward and structured way. Using this canvas will lead to insights about the customers you serve, what value propositions are offered through what channels, and how your platform make you money.

You can also use business model canvas to understand your own business model or that of your competitor. To determine your business platform, you have to ask yourself the following questions. How do we create value? When you embark on a platform journey, you need to understand that there are two fundamental different types of platforms.

On one side, there are transaction platforms, also known as marketplaces, where you have buyers and sellers-- for example, eBay-- or providers and consumers-- for example, Airbnb. On the other side, there are innovation platforms, like Autodesk Forge. Forge is a cloud platform that serves as a basis for others to develop applications and innovate on top of it.

Designing transactions and innovation platforms requires different principles and choices. Given this nature of transaction platforms, a variety of value proposition exists. In fact, platforms often combine them.

The other question you have to ask yourself is, how do we capture value? In the long run, every business needs a solid monetization strategy to capture value. Platform businesses often defer monetization as it can certainly harm network effects.

And another question you have to ask yourself to fill out the business model canvas is how do we grow? Every platform business faces the famous chicken and egg platform problem. In case of a new marketplace, for instance, no sellers means no supply and hence no customer demand. No customers, on the other hand, means no demand, and hence no sellers will engage in such a marketplace. Platforms must overcome this deadlock situation.

A subelement of the business canvas is the value proposition canvas. When it comes time to really understand your customers and clear that there are jobs to be done, pains and gains, as well as your offer to them, the value proposition canvas is one of the best tools available to help you in this regards.

On the right, the converse profiles the customer by asking, what jobs are you trying to accomplish? What's the hard and unpleasant pains about your current way of doing it? And what desirable and delightful gains in the ideal solution?

On the left, we map out the value proposition by asking, what is the product or service, and how does it create the gains the customer wants to sooth and the pains they don't? In our example here, you can see a value proposition canvas of a digital twin example.

In this particular case, we have mapped out a digital twin for AM and FM. And you can see the gains and pains and also the jobs to be done on the right-hand side. And you can see, basically, the services which will be provided on the left-hand side.

In a speech, 1962 at the Rice University, JFK told the world about his dream to put a person on the moon by the end of the decade. The genius of the original moonshot was the sheer identity and challenging inspiration, motivation, and passion in a way that smaller goals never could do.

Throughout the course of history, we have seen that when people set their minds to wildly ambitious goals, the seemingly impossible start to become possible. Moonshot thinking is about just that, pursuing things that sound undoable, but if done, they could redefine humanity. In an ever-evolving world, it's important to have an [INAUDIBLE] to people, or a person have a purpose and move fast.

In the spirit of moonshots, objectives and key results are a powerful goal-setting methodology that drives alignment, performance, and results in a growing and high performance business. The objective is always aspirational and of quality of nature-- and qualitative nature. The key results are the benchmarks, and outcomes you can measure that tracks your progress towards objectives.

The benefits of using OKR for your platform business ideas that it defines and tracks objectives and their outcomes for your platform. It brings focus to that for the team to make an impact. It's also a tool to make things highly visible and with that create better team alignment because of transparency.

And it's also useful to communicate your goals on organizational, team, and individual level. And it also helps to stretch, achieve beyond what is expected. And it's also a powerful tool that helps you to continuously improve yourself and continues overachieve your aspirations.

Let's take another platform example. In 2008, Google set an objective to build the next generation client platform for future web applications. Sundar Pichai decided the key results to track the objectives was the numbers of users and set an ambitious goal of 20 million by the end of 2008.

He missed it, achieving less than 10 million users. In 2009, Pichai raised the bar to 50 million, but reached only 37 million. In 2010, finally, the year of [INAUDIBLE] obejection, Pichai set the result, key result, to 100 million users. But he overachieved it by 20 million users.

And this because he aligned his team, working according toward this objective and the super objectives. And with that, basically, he improved this team by working with this example. Today, Chrome is the most popular browser used by people than all other major browsers combined-- used by more people than all other major browsers combined.

I often hear there is a confusion about the difference between OKR and KPI. This is a great analogy to understand the difference between strategy OKRs and monitoring KPIs. The Strategy North Star is a process of deciding your destination. It helps you decide where you want to go.

OKR is your GPS, the navigation system of your car. It will help you to track if you are on the right path and course correct if needed. And just like a GPS, OKR does not help you decide the destination, and it will not help you to formulate your strategy. And KPIs. KPIs are health metrics, and you can monitor those KPIs or the dials on your dashboard of your car that tells you if everything else is OK in your system.

And with that, I would like to show the third phase about developing and prototyping a business idea. In this context, we use the word prototype in a slight different way than, for example, standard product development.

The prototype is a facade of experience you have envisioned in formulate and sketch phase. You are building just what you need to make the prototype real enough to an authen-- to get an authentic response from potential customers in the validate and learn phase.

In the first instance in this phase, we usually develop a persona. The persona is an important tool for describing your target customers. The persona is an archetypal character who embodies certain essential characteristics, such as behaviors, motivations, and goals of particular subset of users of a platform.

Personas help to ensure that all activities involved in acquiring and serving your customers are tailored to target customer needs. Personas help to ensure that everyone in your company who is involved at the platform is aligned on the same customer.

Personas help also the team to make decisions about what is important, what is less important, and how to design the experience. In this example, I have taken an owner as a persona, and it's showing basically this as part of the digital twin.

The next tool we use is the customer journey canvas to help you get insight and to track and discuss how customer experience a problem you are trying to solve. The customer journey helps to make things real. How does this problem or opportunity, show in their lives? How do they experience it? How do they interact with the platform?

Mapping this journey will provide you insights into how customer experience a product or service, as well as how they be better served or even delighted. This is especially true when co-creating the journey together with your customer, or when validating your assumptions of them.

What are the circumstances? How do the customer feel? What are the moments when they experience? What can be best improved? The underlining goal, to solve our customer's problems and make them happy.

After we have done the customer journey, it's important to visualize the business idea so that it can be communicated to potential customers and stakeholders. A good tool that is using-- for this is using wireframes. With very little effort, you can create your idea of your digital platform and visualize it. In this example, you can see the different scenarios of the digital twin example where you can visualize that to customers and can directly get feedback from them and can also directly validate if your business idea is validated now.

Now, I would like to move on to the last phase, the fourth phase, and this is all about validating your business idea. In the validate and learn phase, the team will put your concept in front of customers. This is your moment of truth. You will gather feedback from customers who interact with your prototype, and if relevant, you will conduct stakeholder business feasibility reviews.

You will end your sprint with a validated concept or an invalidated the concept, so you can go on another sprint and improve it. Either way, you have made progress. And you have provided value to your customer, and this is the most important thing.

Testing business ideas dramatically reduce the risk and increase the likelihood of success for any new venture or business project. Through the whole process of this toolkit, predictions about the world are made. The underlining assumptions require testing and validation on an ongoing basis.

We recognize that it is impossible to validate all assumptions. However, we recommend to make the degree of certainty assumptions very transparent to everyone in the team and to all your stakeholders. It is crucial for the success of the project to critically review and test assumptions at each stage.

In our experience, when you test the business idea, you have to ask yourself the following questions. Desirability, does the market want to have this idea? The risk is that the market the business is targeting is too small. Feasibility, can we deliver it at scale? The risk is that the business cannot manage scale or get access to key resources or key activities or key partners.

Viability, is the idea profitable enough? The risk is there that the business cannot generate more revenue than costs. And finally, adaptability. Can the idea survive and adapt in a changing environment? These are all things which need to be tested and validated when you are testing your business idea.

To test your business idea, you need to have a good process in place. The process we recommend to customers is the following. First, identify your assumption. Based on your idea, the business model canvas and value proposition could be used as a first starting point to create your assumptions.

Second is to identify and formulate and prioritize your hypotheses. We usually use an important evidence matrix for this where we lay out all the different hypotheses and we order them according to importance and unimportance and have we evidence about this or have we no evidence about this.

And lastly, we create-- we analyze the results, and we create, basically, the experiments, and we execute on them. And we go to customers, and we conduct all those experiments. And with that, we basically validate our assumptions and our business idea.

Well, you can see on this slide are three examples of experiments you can do to test your business. The first one is the five act interview. It's a structural one-on-one interview format developed by Google Ventures. The moderator builds a narrative arc, walks users through a high fidelity prototype of the business to gain valuable insights. By immersing your customer into the experience, you can increase the chances to get the most realistic feedback.

The second example is the stakeholder review. It's a matter to use to confirm buy-in on a prototype from key stakeholders. In this scenario, invite the stakeholders to join for a 30-minute meeting to provide feedback on prototypes and early sketches in your concept.

And the third example is called the simple landing page, a simple digital page that clearly illustrates your value proposition with a call to action. This is ideal for determining if your value proposition resonates with your customer segment.

And with that, I would like to conclude my presentation, and thank you for your attention. Before that, I would like to summarize. Sudden change is hard, but we can get there one step at a time. What we see is the nature of innovation changed. The nature of disruption is changing.

AEC already entered the platform economy, and the culture is at the center of this transformation and very important. This is why we need to discuss about business model innovation and platform thinking to successfully master digital transformation. We just need to go there, through the process. But why wait?