“Business models are like food in the fridge. They have an expiry date,” says Yves Pigneur, co-author of the best-selling book, Business Model Generation.
In the video interview below, he suggests that leaders need to be design thinkers, not just decision-makers, as they reinvent business models that have passed their use by date.
The book is on track for 1 million sales later this year. In a little more than three years since the book was published, Yves and his co-author, Alex Osterwalder, have worked with many key companies around the globe to help them reinvent their business models.
Yves gives some very practical insights into how some leaders are successfully changing their business models to adapt to the disruptive times we are experiencing.
Highlights of the interview with Yves Pigneur
Full interview with Yves Pigneur
About Yves Pigneur
Dr. Yves Pigneur is Professor of Management Information Systems at the University of Lausanne since 1984, and has served as visiting professor at Georgia State University, Hong Kong University of Science and Technology, and the University of British Columbia. He earned his doctoral degree at the University of Namur, Belgium. He is editor-in-chief of the academic journal Systèmes d’Information & Management (SIM).
Together with Alexander Osterwalder, they authored the international bestseller Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (23 translations) BMGEN.
In 2012-2013, he was visiting professor at the National University of Singapore (NUS) Business School and at HEC Montreal. In the last 12 months, during his stay in Asia and North America, Yves gave 70 keynotes, talks and workshops on Business Model Design (Singapore, Tokyo and Kyoto, Beijing and Shanghai, Seoul, Kuala Lumpur, Vienna, Paris, Lausanne, Brussels, Berlin, Montreal, Toronto, Boston and New York).
About the Book
You’re holding a handbook for visionaries, game changers, and challengers striving to defy outmoded business models and design tomorrow’s enterprises.
Designed for doers, it is for those ready to abandon outmoded thinking and embrace new models of value creation: for executives, consultants, entrepreneurs, and leaders of all organizations. If you’re ready to change the rules, you belong to “the business model generation!”
BRIAN: Yves Pigneur, it’s great to have you online here from Lausanne in Switzerland.
YVES: It’s a great pleasure. Hello.
BRIAN: Thank you. Thank you Yves. And I should introduce you together with Alexander Osterwalder, you’ve authored an international bestseller now, “Business Model Generation.”
BRIAN: Handbook for visionaries, game changers and challengers. It’s been translated into 23 languages and I think now six hundred and fifty thousand copies sold Yves?
YVES: Maybe more. I think we will be reaching one million maybe this year.
BRIAN: One million this year. It’s amazing. And look it’s a really great book for leaders I think, I love the introduction in the book where you talk about you’re holding a handbook for visionaries, game changers and challengers striving to defy outmoded business models and design tomorrow’s enterprises. And it just really says it for me Yves. You’ve been working with some major companies worldwide, 3M and Ericsson, CapGemini and Deloitte, a whole lot more, the list goes on. It’s really great to have you and I think it’s a very timely conversation to have about game changing business models. We really need that right now.
YVES: Great pleasure to be with you today.
BRIAN: Thank you. And I’m just wondering Yves we start off and its three and a half years now since the book was published. What have you learned since the publication of the book?
YVES: I think initially, in fact we developed this model with Alex mainly for startups and young companies. And what we have seen in the last three years is that major companies also adopted the business model canvas for redesigning their business model or for creating new ventures or new businesses. And for me it was quite a surprise, because at that time we thought that all those major companies have all the possible models and consulting firms and so on. So it was a little bit strange to see that they use in a fact a very simple model for designing their business model. A model initially designed for startups.
BRIAN: That’s very interesting isn’t it?
YVES: Yes, yes it’s funny.
BRIAN: It indicates that there’s a real change going on in the major corporate.
BRIAN: And how do you think businesses should approach a review of their business model?
YVES: I think the companies have to consider that they need the kind of major shift between two different vehicles, from decision-makers to designers. I will try to explain. Most of the companies, most of the executives and top executives in the companies are trained for decision-making. And so they choose between different alternatives. And I think when you want to create something new, when you want to innovate; you have to change your mind, because you need to design something. And so it means that you need to be designers in a way and to adopt this idea of design-thinking, design-attitude which is a little bit different. It’s not choosing among alternatives, but it’s creating new alternatives, and then you decide later. And I think this shift is quite important and it’s not so easy to do for large corporations.
BRIAN: That’s a different way of thinking about it isn’t it.
YVES: Yeah I think. And they need it to acquire these skills to be able to design something and not only to decide between two or three different possibilities.
BRIAN: And to think newly about things.
YVES: Yeah that’s a little bit of what I have in mind. And we’ve also observed in some companies, trying to create those innovation centres, innovation institute or this kind of thing because they know, some of them at least know that it’s not possible to do only with the traditional skills they have inside those large corporations.
BRIAN: Hhmmm yeah it really needs a re-think of management structures.
YVES: Uh-huh, uh-huh.
YVES: And also it means that for leaders they have also to become in a way designers and not only decision-makers and I think it’s a big shift.
BRIAN: Which is why I like the foreword in your book, that really the job of the leader is to change the game. So that’s the challenge isn’t it?
YVES: And also to change the game, to be a kind of intrapreneur inside their corporations if they want.
BRIAN: Yes. And are there some significant examples of turnarounds Yves that you’ve seen since the book was published.
YVES: I think one of the most exciting examples I’ve seen is maybe the Valve company. Valve company used to be a major software developer in the game industry and progressively they shift from this business model towards a business model for which they are clearly the world leader in game distribution. So they transformed, a company making games towards a company helping other companies to distribute games. And I think it was quite funny to see in maybe four, five or six major change that progressively switched from this game developing towards gaming distribution, if you want. And I think there’s another example I’ve seen. I’ve seen another one in Canada, it’s called Rideau. This company used to be an award manufacturer. So it means creating some physical objects. A couple of years ago they have seen that the Chinese companies are able to produce this much cheaper. And so they transformed themselves in a company which is now a major actor in employee recognition program. In a way a software company if you want. I think going from a traditional manufacturing company towards a more virtual company if you want or more software-based. And I think it’s a big shift.
BRIAN: Interesting examples.
BRIAN: Yeah, ok. And are there some good examples of business models that are emerging that you see that are interesting.
YVES: You know there are no recipes for success. So we have seen many different examples. We have seen so many examples of companies having changed their business model. But you know it’s always experimenting in a way. And some are successful, some are not. But I think there is no “always successful” business models. And I think in business, and you know that better than me, there is no recipe to be successful. So it’s a kind of, you need to have different skills, the business model design is one of them, but you know also that execution is key. And so I’m not convinced that there’s a general or generic answer to say, “Okay this kind of business model is clearly a success.” We could observe later or afterwards that okay some are good or not. But I think the message for the company is they have to find, they have to create by themselves the business model which will be successful during a couple of years and then they would change again and they will change maybe quicker than before to have something. But I’m not convinced that there are, except some examples afterwards, you can say Valve is clearly successful they changed their business model and we have seen so many others but I’m not convinced that it’s possible to reply – this kind of business model is always successful. But what I’ve seen is there are some kind of emerging business model. And one of them is maybe in a collaborative consumptions such as Airbnb, Uber, and these kind of things. Which is clearly a new way of doing business which seems to be at least trendy and we will see if they are successful on the long term.
YVES: I think that this kind of business model is emerging in different countries worldwide with also some difficulties such as, for example in Europe we have a lot of fighting against Uber which is this taxi or kind of company by the traditional established companies, taxi companies and they try to fight. It was the same for Airbnb in New York and some major cities where the traditional actors try to fight against them to say it’s not, it’s an unfair competition and this kind of thing. We will see, this kind could be an emerging kind of business model.
BRIAN: Yes that’s a very interesting observation. Yes. And this whole area of how ‘before and after’ so, I don’t know whether that’s going to be a feature of the new book. I know that we’re looking at the walls in your office there, of the new book.
BRIAN: Will there be anything in that about these kind of before and after models. I know you’re focusing in this new book on the value proposition?
YVES: Correct. We have observed in the last two, three years, that it’s not so easy for a company to define a good value proposition. And you know when, which is in the middle of the canvas, of the business model canvas. And we have seen that it’s not so easy to do it, to design this value proposition and we are convinced that if you want to define a great value proposition you have to consider or to project yourself in the mind of your customers in trying to have a kind of good idea of what’s the job they will do in your area. What are the pains, the gains, and try to consider that your value proposition will relieve the pains, or create the gains or corresponds better to the jobs that he has or she has to do. And I think this kind of things could be interesting for companies and the goal that we have given to ourselves to create this book. And we created a new canvas called value proposition canvas that we tested in the last, roughly two years. First at the university with students and then doing some workshops that we have done in the last two years. And it seemed that the canvas, it’s helpful for business model designers. And that’s the reason why I think that the note or the ideas are mature enough to write a book. And that’s, what we have behind us, is the structure of the book, when you see something which is white it means that it’s already written. When it’s red or orange it means that we still have to write it. But normally the idea is to finish everything roughly for May. And so the book could be on the market published for the summer or during the fall. That’s the idea, that’s the plan.
BRIAN: Okay, oh very good. It looks like you’re using agile methodology there with all of the swim lanes.
YVES: Right! We are convinced that writing a book is designing a book. Last week we were with Alex but also with Allan and Trish which are two designers that they have designed the previous book. And so we were working together with Greg trying to come with the book but merging both the writing and the visuals and the structure of the book and the visualization of our ideas.
BRIAN: Alright. And well talk about agile models, so some of these agile models, do you think they require a more, a different style of leadership to implement this sort of more agile model?
YVES: Yeah. I think as we mentioned at the beginning of our talk, I think if you want to innovate and to create new business models for an established company, you need, as a leader or as executives or top executives of those companies, you need to acquire different skills. Let me explain. I think most of the leaders have been trained for decision-making and executing and trying to manage just those projects. And I think if you want to innovate, you need to become designers. It means that those leaders need to consider that they have to invent something. And if you invent something the traditional techniques that they have in their toolbox is maybe not enough. It means that they need to be able to prototype, to throw away good ideas and I think this kind of thing is clearly one skills that they need to acquire or to practice. And second, you know, if you consider that the entrepreneurs are people in charge of creating new things, new ventures, new startups; maybe the leaders of the traditional, large corporations could become some kind of “intrapreneurs”.
YVES: Means that they need to be able first to create, design something. And then to try to pull people behind them to create something and new ventures. And I think this kind of things could be a big shift inside those leadership skills or capabilities.
BRIAN: It is a fundamental shift isn’t it. I was reading about Google talking about they’re hiring leaders and saying they want leaders who can relinquish power.
YVES: Hahaha I see that’s good.
BRIAN: Yeah it’s a similar thing isn’t it.
YVES: Yeah yeah.
BRIAN: And what about in the technology sector Yves that’s the area I work with mostly with technology leaders so CIOs and CTOs and you know technology is a major disruptor of businesses. What do you say, what do you suggest there about giving them a voice, how can they be heard around the table?
YVES: Two, three weeks ago I was in Atlanta, in front of I think 30-35 CTOs and CIOs of large corporations in the United States and I was presenting this idea of business model design, business model innovation. And one thing for me which is quite clear, it’s, if the role of the CIOs and the CTOs is trying to convince and to show the other CXOs that the technology could be there for supporting the business models. So it’s a little bit of shift in their mind because most of the time they come with solutions, applications, systems, IT solutions. And I think if they could adopt a vocabulary, trying to show their colleagues that with this technology you could better support the business models or you could leverage your business model, or you could change your business model, or you could be more flexible or more agile with the IT. I think it could be a new role for them. And I’ve seen in some companies some of them now have adopted this way of presenting their job or their contribution to the company that speaking in term of business models more than in the pure IT solution.
BRIAN: Yes, yes that’s very good. And also it really means upping their level of influence.
YVES: Correct. Because if they speak the same language and if they are able to convince their colleagues that with their IT it’s a major contribution to the agility of the business models or the innovation, I think their influence could be higher than a few technical people in the room.
BRIAN: And what about the other group of stakeholders at the board level Yves what’s your view there. Because they’re typically an older generation, do they get this whole thing about the shift, the need to shift business models?
YVES: It’s less clear. As may be for older generations. But you know sometimes you have to consider that you could innovate, or you have to innovate just because of the pressure, pressure of the competition because your business model has been expired and so sometimes those board people or board chairmen recognize that – “Oh we have to change something.” And if we change something without changing the vocabulary, without changing our way of doing, traditional way of doing, it will be very tough to change something. So I think the role of the CEO and the executives inside of the company is also to in a way educate the board and to say “Wow it’s time to change” – and if we want to change it means very often to innovate, innovate a little bit more quickly than before and so we need to be able to change a little bit the mindset of the executives, the companies, but also the board of those companies. It’s not something that you do from one day to the other but I think it’s maybe a trend that we have observed in some company which are maybe more aware of some others that they need to change something.
BRIAN: And what’s the best way, what advice do you have for CEOs to do that education of the board level?
YVES: I think it’s a way of convincing them that if we need to change, and if we need to acquire some capabilities for example in innovation or design, design-thinking. It means that we have to go back to school in a way and trying to have some kind of workshops, some activity to be just aware that there are some way of doing which are a little bit different than before. And maybe we could also try this kind of vocabulary exactly as they have changed in the last couple of years, the way of making finance. And so I think in different sectors of the general management, the business change over time. And one of them is design or innovation kind of things for which they could acquire something by workshops, maybe talk or lectures or a discussion between the top executives of the board. I think..
BRIAN: Yes that’s a good solution really.
YVES: And we have in many large corporations, even established ones, because they have observed that their business model have to change just because the competition is different and recently just today in the newspaper in Switzerland we have seen, okay, the pharma business model have to, the pharma industry have to change their business model or have to adapt their own business model. And the pharma industry is huge in Switzerland and even them have recognized that they have to change some of those pieces and they have to innovate and to create something and for which maybe they have also to acquire the skills for doing it.
BRIAN: Yes that’s well on that point which sectors do you think face the biggest risk of disruptive business models?
YVES: It’s maybe difficult to say because depending on the time scale I guess all of them.
BRIAN: All of them, yes.
YVES: Have to find again some new way of doing so but I think the music industry was one of them. The movie industry now where this area is. The pharma industry I think with the new way of, we have seen, we mentioned this collaborative consumption, we have seen that even the classical hotel industry have also some way of, they have observed new competitors, new entrants coming in their games and in their sector. So you know I think the business model have always changed over time. And we know that in the interim. But what we have observed more recently maybe in the last ten, fifteen years, is that the business model is like the food in your fridge, they have an expiration date. And so it change depending on the kind of food, it’s changing depending on the kind of business model. But this expiration is maybe shorter than before.
YVES: So you are..even when you’re successful you have to invent the next one which you could be the better or the first and you could be successful. I think it’s a good lesson also for companies to say, even if you have a successful business model, you know that this expiration date will be coming and so be prepared to have the new ones ready.
BRIAN: And it’s coming quicker than you would have ordinarily expected.
YVES: Quicker than before yeah.
YVES: And it’s always easier to prepare something for the future when you are in a good shape, in a good position, that if you are sick and you have to reinvent yourself it’s maybe more difficult.
YVES: And I think it’s a good lesson for leaders to say okay even if you are a leader of a very successful company, maybe prepared for the next one.
BRIAN: Yes, yes. Well history is littered with examples of people who didn’t do that thinking isn’t it? They are companies that are no longer with us.
BRIAN: And what about at a national business model level. You know in Australia for example, we’ve got a history built on resources and mining and it has a limited lifespan, takes generations for major projects to pay back. We need to shift to a more of a knowledge-based economy. You know, how do you get a nation to do that kind of change?
YVES: I know. I agree with you that many countries and I come from Belgium and we had also this kind of transition between a very physical activity with mining and manufacturing towards a more knowledge-based kind of country. And I know it’s a big issue. But I’m not an expert in policy-making and so, for me it’s too complicated. I agree that in a way it could be like changing their own business model, but it’s too simple to say that the country has a business model, they have a social model, they have a political model, an environmental mode. It’s not only business.
YVES: It’s not about business. And so I prefer to say okay I agree that is a big issue for a country but I think I’m not an expert enough to say something intelligent.
BRIAN: Yes that’s a very good political answer. Maybe its better that businesses do the adaption, businesses tend to be more nimble. What about Yves, just a final observation about broader implications for businesses that you’re seeing, the messages that you would like to leave with businesses here and around the globe that they should be thinking about.
YVES: Maybe three shifts that I’ve observed and I think could be helpful for companies is first, a shift from product innovation towards business model innovation. I think product innovation is one big piece of this but I think that’s not enough. And we have many examples in which the pure technology innovation, product innovation, service innovation, are not enough, you have to empower this kind of innovation inside a business model. That’s clearly a shift. The second shift that we mentioned during this interview is from decision making towards design thinking attitude. I think it’s very important and it’s not so easy for companies to be able to prototype, to come with different alternatives, to throw away alternatives of their own business models, or their future business models. That’s the second shift. And the last one could be business planning is not enough. We could observe a kind of shift between business planning towards business model innovation which is not exactly the same. And when I say business model innovation it’s also customer development. This idea that we have something, we need to test this business model outside and trying to see if it corresponds to the hypothesis on which you designed this business model. And this kind of gained skills is not so easy for large corporations to acquire. Because they prefer to have one single idea, one single plan, and to execute. And we have seen many examples where this way of doing is much more difficult now because of this changing environment. And I think it’s maybe good to come with different alternatives to test that outside the building and with customers and trying to adapt this business model toward the environment and to be able to change more quickly than before in your trajectory of business model for your company. I think three kinds of shifts.
BRIAN: Yeah that’s a good summary.
YVES: Okay yes.
BRIAN: Yves it’s been wonderful talking to you. We would love to have you come to Australia and I’m sure there’ll be a lot of interest from people here in Australia to talk to you.
YVES: Yeah this, the next two months I will be in Asia, in Japan and Singapore. And I have this idea, okay Singapore is not far away from Australia.
YVES: Finally I accepted different workshops, some keynotes and lectures in there and I think it will be for next year or next spring. But I would like to do that in fact we never organized a workshop there, except Alex went once in Sydney maybe one or two years ago and it was quite short. But we never organized a traditional business model generation workshop there. So we have to.
BRIAN: We have to rectify that. That would be great. There would be a lot of interest and we will stay tuned. And we look forward to the release of the new book.
YVES: Yeah yeah we hope also. We have to finish this book.
BRIAN: But congratulations first of all on the first book and the great success of it. It’s a well deserved success. And I’m sure the second book is going to be equally successful. And I really appreciate you making the time today. I know you’re….I was looking at your schedule of addresses and workshops and it looks pretty exhausting but you fitted in some time to speak to us today – I really appreciate it. And it is a very practical application of your methodologies that is going to help a lot of businesses.
YVES: Thank you, thank you.
BRIAN: Thanks for your time today.
YVES: Have a nice evening and bye-bye.