ITODAY SUMMIT 2020 THE INVINCIBLE COMPANY

STEPH CRUCHON : For the last talk of itoday we are so happy to welcome two of the most inspiring business thinkers in the world. And like chocolate or mountains they are our national pride of Switzerland.

Professor Yves Pigneur and doctor Alex Osterwalder are considered mastermind
among business strategists, their tools have been used by numerous companies, such as P&G, Amazon, Google, Bosch, Tesla… They are true legends in entrepreneurship. Just a number- more than a hundred thousand of people follow them on twitter, they are ranked number four of the Thinkers50 and this is the oscars of management.

Together, 15 years ago they’ve created the business model canvas that you all
know. This canvas! And they wrote this book- Business model generation which sold more than 1.5 millions of copies in 30 languages. Again, for business book it is one of the most influential book in business and every young entrepreneur, a startup, or even designers has to read it!

They are also creators of the value proposition canvas and this book is
amazing. Flip the book it’s even more amazing and in april this year, during
Covid19 lockdown they have published their new book. The invincible company
which is amazing and also beautiful and I’m a designer, so I can recognize beauty!

Im so proud and happy to welcome on this conference Alex Osterwalder and Yves Pigneur- the Invincible Company. Big round of applause please!

YVES PIGNEUR: We are very happy with Alex to be here online with you today.
I will try to share with you some thoughts that we had on this idea of the Invincible company.

We could have called also maybe called it the Resilient company. I will explain that a little bit later. As Stéph just told you, we started to work together more than 20
years ago now and trying to create some visual tools, corresponding to some business concept. And we created the business model canvas, the first tool that we published 10 years ago now. Inside this book Business model generation to map out your business model then we came with the value proposition canvas and helping people to design and test your value proposition.

Last year David J. Bland with Alex wrote this book Testing business ideas was to
provide the readers with some techniques for testing and de-risking business
ideas. We will come back on this issue a little bit later.

This year we came with the Invincible company to help people to manage their portfolio and create an innovation culture.

What’s an invincible company for us? Three characteristics: invincible companies
constantly or at least regularly reinvent themselves, second they are able to compete on superior business model, and not only on product or technology. And finally they’re able to transform industry boundaries to go away of their traditional
sector of activity. 

We think that those three characteristics is also good for what we could call the resilient company, which is especially of actuality in during this last six months.
Everything started three years ago in fact in this small village in Lausanne and we sketched some ideas on this idea of business model portfolio.I will just briefly explain this concept and then we will deal with the topic for today. 

In our mind we have this explore exploit continuum. If you’re a startup, you have an idea and you try, you search the right business model. Okay and it’s a design and a testing activity with a lot of back and forth iteration.

If you are able to find it you can launch, and you can grow or sustain, or survive for an existing company. And this is a quite messy process. But if you are an existing company this one is for you. Mainly you execute your existing business model, but it also means that maybe you have to deal also with this exploration activity.

Playing the game of the startups just for replacing some declining business model or coming with new activity that you could like. A new business model that you
could create. We mean that companies need maybe to be ambidextrous and based
on this idea. We wanted to have a visualization of those business models so we came with two blocks here: one with the different business model that you are searching. So you try to invent, to design, to test. We call that the explorer portfolio

In a second portfolio where you can visualize, analyze assets the existing business
model that you would like maybe to improve or sometimes to kill it. We will see that in a few moments. A very quick example even if it’s not the main topic for today. As I will explain, this ideal portfolio is the following one and we will try to illustrate it
with the logitech portfolio.

So here you have what we call the return, so it means that you have the most
contributing business model on the top and the less contributing at the bottom.
In this case productivity means a mouse, keyboards and so on. It is the highest contributing business model for logitech and smart home is a very small one, but
we can also use this axis for trying to evaluate the risk of those business models, the disruption risk.

And so you could consider that gaming and video is very well protected. Again there’s disruption risk, but maybe smart home could be at risk. So the idea
for the business model here on the left-hand side is to improve mean pushing that on the right hand side, on the top. But there are some other action that you
can take on a portfolio.

Another action is diverse. Logitech has decided to diverse last year. Lifesize which is video conferencing special systems. Another action that you well know for the executing or exploitation portfolio is to acquire the existing company. In that case
they have acquired two years ago Saitek and Astro for reinforcing the gaming business model. And last or two years ago, they have acquired Jaybird and Blue speakers and earsets to reinforce the music.

Last year they have invested in Streamlabs and it seemed that this year they will
Acquire Streamlabs putting that inside their portfolio. Here is a short video by the CEO of Logitec Bracken Darrell. It will give us a very nice metaphor or analogy
-VIDEO- BRACKEN DARRELL – CEO LOGITECH: Its called trees plants and seeds. And trees plants and seeds was the really really overly simplistic analogy that virtually any company that’s been around for more than 10 years is doing.

Whether they talk to people in public about it or not, but this was mainly for us internally. So the tree was the big old tree which was on its way to its deathbed in my view it’s going to fall over and turn into lumber. This was the pc peripherals business. The plants could be new businesses and the seeds would be things we try to create that might be do businesses one day. It’s really that simple.

YVES PIGNEUR: So they took 75 percent of the resources out of the plant business of the traditional business. They re-allocated 75% of resources from old business to new growth opportunities.

Okay on the top here, on the top right and to push that in the explore portfolio.
We will see that a little bit later. Just an amazing fact Bracken Darrell spends between 40 and 60% of his time on innovation. So i have a question for you
and Steph will launch a poll how much time does your CEO personally spend on business model every week, last week for example.

And if you are the CEO of your company how much time would you spend on business innovation exploration of business model. So now you add the poll you can vote 15 seconds and i will show the results.

So how much time you’ll see you personally spend on innovation every week? Okay vote vote vote! Steph you can stop, okay so here less than 10 for 50
between 10 and 25. Let me continue. So the question was this one. We asked this question to all the masterclass we had with Alex and last year he launched a poll on twitter. And the result was roughly similar to what you have presented here. So
70 % spend less than 10% of their time on innovation every week and only seven percent spend more than 50% such as Bracken.

So the question- is it possible to have ambidextrous CEO, not sure. And this poll last year has been confirmed. Alex launched a poll with a question – do you agree that the leaders in your company have no clue how to manage innovation? And the
result was spectacular! 40 percent agree or strongly agree that leaders in their company have no clue about how to manage.
There’s a reason why we came with a suggestion that i will not comment too
much today. It is fine to address and to manage the present of the company, the execution, portfolio, and maybe we need to have a chief entrepreneur or chief corporate entrepreneur with the same power to address the future of the company the exploration.

So the tool we developed inside this book is first the portfolio manager. The portfolio map I presented very rapidly. We came also with some design techniques that we call design patterns or business model patterns. I will come back to this a little bit
later. Also we wanted to address or to create an innovation culture inside your company and we used a tool we developed a long time ago with Dave Gray
called the culture map.

Today we will focus mainly on business model patterns. What does it mean? It means the agenda for today.

Alex will present you the business model design and business model testing
a couple of ideas that we had on this topic then he continue and he will show you and illustrate some invention patterns with some exercise that you will do and finally at the end, I will come on this idea of shift pattern to help people transform existing
business model. I will just stop sharing here and Alex will continue.

ALEX OSTERWALDER: So as you’ve seen with the intro by Yves you know it takes more than just few “tools and processes” to actually get innovation right. But nevertheless we believe that innovation is in this whole professionalization phase, where we can improve the way we work. And you know, this conference you have seen quite a bit of that already, but at the same time you know besides the bottom up we need the top down. If leaders don’t create the conditions for success, nothing will happen.

So let’s look at the process now that Yves started to talk about. This idea of inventing new business model and value propositions or improving. There are actually two phases to this, or two cycles. If you want and you go through them all the time. Okay so the first phase is business design, which has ideation business prototyping assessment, where you think about how you create value for customers
and how you create value for your business. We’ll zoom into that a little bit today.

Steph showed the book one of the books that we wrote testing business ideas or
Yves mentioned that one this whole idea of hypothesizing, what needs to be true for ideas to work and then experiment, but that’s not the core topic for today actually.

What we will show today is the potential you have here with business model design. So how can you compete beyond just “products and services”. That’s what we’re going to look at a little bit today and we’re going to see how to better decide.

So two tools we’ll just look at one today and we’ll look at the patterns there
the business model canvas. I’ll do a quick repetition for those of you who
don’t know it. This is all about making explicit how you create deliver and capture value, but then there’s the second tool which is the value proposition canvas
which makes explicit how you create value for customers.

I want you to keep this in mind that even with the best product or service you can actually still fail, if you don’t have the right business model. Think of Nespresso, an example we use a lot, with the same product Nespresso machines and the pods they almost went bankrupt. They had to find a better business model, so if you’re just focusing on products and services you’re not doing your job right.

Product services and price is part of your job, but the rest of the job is to figure out
the right business model. If you don’t do that well, you’re not doing the best you can. So let me just quickly do a repetition for those of you who haven’t seen the
business model canvas yet.

It has nine building blocks. First one is how do you create value for your customers so value proposition, customer segments and then you need to ask what do i need to have and what do I need to do to create value. So key resources what you need to have – factories, brand, etc.. Key activities is what you do and the partners is who you work together with once you’ve figured that out.

That gives you the cost structure. This is what we call the backstage, everything you need to kind of do behind the curtain to get your business going. Then we have the front stage- how do you reach customers with the channels, and what kind of relationship do you establish once you’re working with customers. And then how do you capture value from that. Nine building blocks so we’re not going to go deeper into this, because we actually want to go in a more sophisticated way into business model patterns.

But let me do a little quick exercise with you to see how good you actually are with the business model canvas. So we’re going to use the Ted conference as an example. One of our friend Bruno Giussani, he’s helping here with the Ted conference and he’s talking about the conference. We’ll see also about the shift from conference to video, but we want to focus on the very first business model
which was a conference model.

We want you since it’s the end of the day and you need to do some work so you
stay fully energized. And we can see you on the screen, so if you’re not working
we’re going to stop right here, right now!

So I want to see everybody working and in addition if you’re not working it means you don’t care about business models. You don’t care about your company or your work. So let me give you the Ted conference building blocks for the conference
business okay only the conference business and you’re gonna have to map it
out.

So value proposition ted conferences at the beginning it was only for invited people, invite only influencers. I’m going to give you the building blocks here so we have on the left side all of the building blocks of the ted conference.

You have numbers here so you need to put the right letter with the right number to
figure out which building block goes into which number. All I want you to do is write down on a piece of paper the correct sequence of letters which one goes with one which one, goes with two, which one goes with three. Once you have finished you type it into the chat window.

So we’re gonna give you two minutes to do this exercise, let’s see who gets it right
first. Let’s get started. Anybody who’s not working doesn’t give a damn about their business model and will most likely fail in the future, so you better get working.

Let’s see who gets it right first. When you have the full sequence you can type it into the chat window but only when you have the full sequence, and then we’ll see who gets it right. The first person who gets it right will be called master of the workshop today!

I can see people working that’s great. Yves, Marcus, Alex everybody working that’s
great! Don’t worry if you’re not done yet we still have 40 seconds no time pressure.
The only thing that’s missing is a little bit of background music, right? I won’t start singing because otherwise everybody will log out, turn off the sound.

Ithink that’s good we got quite a few answers here, five seconds left the correct answer was as many of you got right, this was an easy exercise d-f-a-c-e-b. We’ll have a more complicated exercise afterwards. We started simple.

Let’s look at this of course d-f-a-c-e-b was right. So conference fees is the revenue stream, the channel it was at the beginning, personal invitations you couldn’t just
go even if you paid you had to get invited to the ted conference. So it was a very privileged relationship, you had to be part of the network, and then of course in the key resources, you know we could have put a couple of things, we kept it simple. You have staff, and curators in the key activities, we had the staging of the conferences, and that leads to the conference logistics talks, and as key partners we put ted’s speakers.

Now first thing granularity we could have been a lot more granular but we wanted
to keep it relatively straightforward here. What we could add to this, of course, is
the second part of the business models. When they started out, they needed sponsors. What’s the value proposition to sponsors? Visibility and the revenue stream is sponsoring.

A lot of people use the business model canvas now around the world, literally
millions, to map out their business model. But when you start out with a new idea or you improve an idea, you need to make sure that your vision is not a hallucination.
So what looks great on paper or in a business plan might actually not work.

So you don’t actually know at the beginning the difference between a good idea or a bad idea, you don’t know. So here i’m quoting Steve Blank the inventor of the
whole lean startup movement with customer development. The question to you is very quickly we’ll do a poll here- how many business ideas do you think you need to invest in? So invest in not just ideas but projects to create a mega success. How many projects would you need to invest in small amounts of money to create and really really big success.

So think you’re at Logitech or at Nestle. Do you invest in what? Ten projects?
Twenty five? Fifty? Hundred? Two hundred fifty? Or a thousand?

Let’s take the the yardstick of a hundred thousand swiss francs or dollars you’d have to invest. A hundred thousand swiss francs – how many projects would you invest in? So let’s please vote! Let’s see what comes out of this, and those of you who know the answer it’s kind of easy, you might have been at some of our talks.

Do we have enough votes then we can switch to the results? Okay so most of you say a hundred projects, but the correct answer is actually 250. Let me show you why. If you look at early stage venture capital, the investment of small amounts of
money in projects early on. You can actually see that six out of ten projects they lose money, they’re failures. Three out of ten they make some money, only four
out of a thousand become big successes.

That is the law of venture capital that very few investments actually make up for the
entire return. What does that mean if we go map it back to the numbers. We have 250 projects: 162 fail, 87 some success, only one out of 250 is a big success. It means you can’t pick the winner so in innovation many of you will fail and that’s okay.

The challenge is of course kill those projects early and throw them away. So if you’re in a smaller company, obviously it’s not 250 projects it’s maybe 10, but you can’t pick the winner in innovation in growth innovation, in efficiency innovation making better processes for your amazon warehouse, of course, you can pick the winner. But for new business models new value propositions you can’t.

The good news is well failure can be the beginning of something beautiful, so
we can improve the process, and of course we need to kill the projects
that are not successful. And this is an art that we won’t go into deep here, but you need to be able to kill projects.

Very briefly before we go into business model patterns, very quickly on this idea of
testing and decreasing the risk of innovation. This is now a profession, we can even
measure the reduction of risk and uncertainty. It’s not just this fuzzy lean startup
concept we can actually start to take these big ideas and break them down into smaller pieces that you can test. And here’s a mistake that many of you are making.

You probably think if you’re an engineer, put your hand up let me see, put your hands up if you’re an engineer. Any engineers in the room? Okay what do engineers traditionally do? They build stuff, so they build stuff to test things. But
you don’t need to build stuff to test things.

What you need to, actually, ask is what needs to be true for this idea to work and you will have a ton of hypothesis, the hypothesis that the customer has this problem, a hypothesis that they have the budget, a hypothesis that they will pay for it, and a hypothesis that your value proposition creates value.

These are the things you need to test. And for that reason we said ok, we will write a book about the topic and one of the big things is here you want to admit that when you start out, you actually have no clue, if your idea is going to work. So the
risk of failure is big. What do you do when the risk of failure is big? You don’t build
something you test with the cheapest possible ways of doing things, for example, a customer discovery interview before building something right. Even before building whatever, like a landing page.

Now we saw that not that many people were good at this process, so before execution they did testing, but what they didn’t really do well is a systematic approach with a whole variety of experiments. So we wrote this book with 44 experiments, a library of 44 experiments so you can actually do these two phases
of testing which we take from Steve Blank’s work customer discovery.

When you don’t know yet what’s going to work so you do very cheap and quick tests like interviews, like card sort, like speed boat i won’t go into details here and only afterwards do customer validation. Where you actually build stuff, so building is not the first thing you do because it’s a waste of time, energy, and money.

Too many people start too quickly with building this. It is actually the biggest and most expensive mistake we see in many many companies. Then people say
Alex but you know we actually need to spend a million dollars on a prototype and I say well that’s a reason, more to do good customer discovery before you build anything. So testing again is not the topic here, but I just want to show you the things you need to ask yourself in an experiment, customer interview, simple
experiment. You can actually start to understand the cost of an experiment, so customer interviews are cheap, set up time is fast, run time is fast, but the problem is the evidence, strength is relatively low. What people say and what they do is not the same thing.

The topic of today which we really think we can help you with a breakthrough and
the rest you can go and buy our books and have a look at it. So what you’ve already addressed with this idea of business model patterns that you can actually create better business models to out-compete others.

Let me repeat myself- it’s not enough anymore to compete on great products, great services, at great price. Nobody wants to buy a crappy product right who have ever wanted to go buy a crappy product? Nobody anymore. You can even check online
what’s good what’s bad, so today having a great product is just a matter of survival,
a matter of staying ahead is beinge xtremely good at business design, beyond product design. Okay so you need to add it of course product design is core, but it’s
not enough to succeed anymore. So Roger Martin who actually pushed this idea of business design, used to be number one business thinker of the world. I think he’s number two now. So he likes to say- you need to become designers as business people, or designers need to become business people, right? So what do we mean with this?

Let’s take this idea that comes from design. We took it from architecture, from this whole idea of oarchitecture prototypes and patterns in business. These are repeatable configurations of the business model building blocks to strengthen your idea so two types of patterns. One in event and one in improve.

Here we’re trying to create new business models around a new idea, and here we’re trying to, many of you work in existing companies, improve existing business models. We call this shift patterns. Let me go into the first one.

What do we mean with this here, we mean the improvement of an idea, by applying
a business model pattern something that will make your business model around your technology, around your product, around your service stronger and better. And we created an entire library of patterns. We have some that are in the front stage more customer related, we have some that are more on the backstage more infrastructure related, activities resources and we have some patterns that are
related to profit formula.

How to make more money and spend less. Now let me make it concrete this is a little bit conceptual. Let’s go to the concrete stuff. Type into the chat window what these three business models have in common: amazon web services, dyson or waze. Amazon web services you know what that is dyson you know with the home appliances they start with vacuum cleaners and waze the navigation app.

What do their business models have in common? Quickly type it type into the
chat window what do they have in common. Not so easy, right? They have a
part of their pattern in common. They have a similar pattern. Let’s see if anybody figures it out. I’ll just give you 20 seconds, disruption could be. It’s not what we’re looking for. On demand subscription? I didn’t see a dyson
subscription yet, freemium? What they have in common- is all three in a different way created a resource castle, they created resources that are very difficult to
copy.

Let me take the simplest one. We’ll look at Dyson, most straightforward other twos have actually a similar principle. So here’s what we call a pattern, where we have three building blocks hard to copy resource. The first billing block we need to invest money into that resource and that will allow us to come up with a value proposition that is protected, because the resource is protected. That’s the pattern.

Let’s look at an example here, Dyson it’s the most straightforward. It’s a very simple pattern. If you want because we’re talking about patents so now another thing here it’s just quick side remark dyson is a company that understands failure and success
extremely well. They know they need to try out a lot until they succeed but what’s
powerful actually is not just the product, but the pattern behind this.

So what they understood is, if they come up with great intellectual property, and patents that protect their devices, guess what? They can start to create premium
consumer appliances like these vacuum cleaners that they will be able to send
sell to a high-end market at a premium price. That’s what they do. What is part of this pattern? Here’s where we go beyond the product is in terms of key resources.
They need two key activities: they need to spend a ton of money into R&D actually six times more, six times more than any of their competitors, which leads to a higher R&D cost.

But they make that bet, because they know this pattern will keep them ahead. Now you’ll say, well it’s trivial, but they were the only ones to do it in household home appliances. Okay pretty powerful, so what did that lead to to an immensive kind of
scaling of home appliances. They sold over 100 million machines until 2017.

So now let’s look at what you need to do, you need to work because i talked
too long, so front stage disruption we’re going to look at channel kings. So here we’re talking about a business that radically changed. How to reach and acquire a large number of customers. The pattern here is very simple, a value proposition that you’re selling to a customer segment, but you’re going to disrupt the intermediaries and you’re going to sell through an innovative direct channel. So direct to consumer.

If you want and the examples here that you might know, dollar shave club, tupperware, nespresso. We’re going to zoom into the dollar shave club. We’re going to look at that pattern. Now let me give you a little bit more help with this pattern. So the secondary aspect of a disintermediator, so you can understand how it works.

The first one is here that we have a direct relationship with the customer and we capture the full revenue because there’s no more intermediary, no more retailer that takes some money. But of course for that to work we need to do something in the backstage. We need to replace this direct access what the retailers used to give us, by innovative marketing and selling with an incredibly powerful own brand.

This of course means a lot more money spent on acquisition, because now you need to reach the customer you don’t have the retailer anymore. Let me give you an example you might have heard of dollar shave club. So this is the example we’re going to use maybe a little bit more attractive for the men than for the women. I see a couple of you don’t need one, you’re very bearded there.
– VIDEO-

So the point here is why do we use this example, actually if you want inferior technology the razors are probably not as sophisticated. Now task for you. You got two minutes to map out the business model of dollar shave club and you’re going to use the pattern. So you’re only going to map out the aspects of the pattern. So we’re going to give you the affordable men’s shaving products, selling it to the mass market and the rest of the building blocks we’re going to give you based on
the pattern and the little video that you have seen.

Who got it right? So online store and viral videos is the channel. They needed to replace the access to retailers through a direct channel that is a direct relationship. That’s the type of relationship they established. Customized subscriptions is of course the revenue stream. Innovative marketing is the key activity. Innovative marketing means what creating viral videos again and again and again. The brand as a key resource and we added one more the e-commerce.

Around your products you need to think of these business model patterns in this case, this pattern actually led to a 69 retention rate which was incredibly high in this particular domain. So very powerful business model now in these patterns we actually have sub patterns. Here you’ve seen one of the two and we add for every one of these trigger questions so you can come up with better business models.

What’s really important here is when you’re working on a product or service, and the related business model, you can ask yourself an access assessment question,
meaning is this a very good does it score well on this pattern or does it score not so well. And you can do that across all of these patterns so you can start to assess the design of your business model, not just the product or service.

Let me repeat- the successes in the business model so you can start to assess the design which doesn’t mean you shouldn’t test it because the design can be great but customers can still hate it and here is where i’m gonna hand over to Yves. I think I took a little bit of time.

YVES PIGNEUR: We’ll try to finish in a few moments. The idea was to deal with this idea of shift pattern. Trying to transform an existing business model, why?
because the idea is to adopt a strategy to be ready to change regularly your business model, to adapt to your environment, or to grow.

So the idea compared with the diagram we use at the beginning, the idea is to
deal with this idea of improving existing business model, so in a shift pattern we have an existing business model, and we try to apply this pattern for creating
a new business model. And in the same way, as we have done it for the inventing pattern we came with a library, where the the pattern is mainly based on an epicentre, a block inside of the business model canvas, value proposition. Shift is from product to service, from low tech to high-tech, sometimes is the reverse from high-tech to low tech. Think for example nintendo wii, we had also some front stage
driven shift from niche to mass market from b to b, to b to c, or from b to c, to b to b.

We had also some backstage driven shift based on the resources, on the activity, the partnership, that you could have. And finally some profit formula driven shift that i will not explore today and i will mainly focus on one of the front stage driven shift.

A radical shift, a transformation of your business model, of who is targeted and all products and services could be delivered. I will focus on what we call from niche market to mass market. It means that we have a niche value proposition for a niche
market, small market. High price high revenue and we could switch towards a mass market with maybe a low price but higher volume revenue. And maybe using a different channel and using some different backstage, such as different activities or different resources. You need to acquire to be able to adopt this mass market, and for each of those pattern shift we have also we had for the invent pattern some
strategic reflection or trigger questions.

If you want it will be our last exercise for today. We will try to illustrate when Ted
decided to shift from niche conference to streaming video for all in 2006. And I’m sure that you have watched those, some of those ted talks and i will ask you how they changed their existing business model to adapt it to video streaming.

You remember with Alex you briefly maped out the existing business model the conferences. I will give you the different blocks here ted talk talks production and so
on and the same question we had so far. So the idea is to write on the full sequence of the seven letters matching the numbers. You have two minutes so
let’s go. As soon as you have the seven letters, you can type it in the chat window.
I think it’s time to wake up, it will be the last one so we will finish in two minutes.

You will see the solution the ted talks is what you offer it’s your value proposition,
global audience you are member of this audience large audience worldwide and then they had to adopt a new channel for reaching this one because you can
watch those videos and titles on the ted.com. Then revenue that’s keep that in mind
it’s free streaming sometimes it’s free okay you know google is free, but somebody else maybe could pay something.

But why they came with a new business model so sophisticated but with a free streaming. Ted talks production. Because they had two come to create a new activity that they never done before for the conferences. And the mass marketing and not the niche marketing with invited only influencers and finally there to over develop and to adopt a key resources, huge infrastruction with collaborations with YouTube and etc.

So what we can see here, they have in fact adopted a pattern from niche to mass market for creating this one, with you can see the Ted talks, the global audience, the streaming. Keeping the two_ gray is the conference, yellow is the new one.
They were quite successful three thousand Ted talks online, more than 50 billion views, two years ago or one and a half years ago. But we still need to explain this one: why they kept this for free and they build this sophisticated business model?

What you can observe with this audience, they had here it means that it’s possible to consider this audience as a resource, so means that those people could be
interested and ready to pay more. And it’s very visible now: you have to pay twenty five thousand and two hundred and fifty thousand if you want to be member for five
years. So a huge amount of money and with this one they were able to increase their total annual revenue reaching something like 70 million.

So what we have done today: i briefly explained the tool very quickly we focus on those two kinds of patterns. Invent pattern shift patterns and we didn’t cover this one. Just before ending you know we have seen, especially during this crisis, a lot of prediction and we know prediction is very difficult especially if it’s about the future.

We have seen a lot of them! A lot of business will be the same as before,
business will never be the same. So a lot of predictions. But do not forget when we have predictions, it’s stays prediction.

Remi: Well if Alex it’s an honor to talk to you. Thank you for all your work this
last decade. That’s probably your work which led me to my current work and what i’m doing all day long. So thank you very much. This final book is great uh it’s finally linking all you’ve been talking for more than 10 years now. About how companies operate in order to create generate and capture value and how we deliver before all value and how we can validate idea and go from diminishing systematically the risk.
And now i will say there’s a next stage which is we know i know and you probably know as well for operating with big corporations that are using traditional and conventional finance piloting tools and ways to measure the efficient value and current margin and low term profits. How could we do in order for the chief of the one with the powers to integrate this notion of innovation evaluation and
innovation value description even if the product is not here yet? To better integrate it in order to make it less an experiment and more a day-to-day current activity, integrated little by little into the group philosophy.

ALEX OSTERWALDER: I’ll share an anecdote. So i mean you’ve seen the numbers we asked the question right. You know how many CEO you know how much time they spend on innovation and it’s still too little. But what’s encouraging is it’s changing and you know we try to make that happen. So before Covid19, before the lockdown I was with one of the biggest financial institutions in europe, with the CEO
and his leadership team and i talked about the ratio right 250 to one. To show you can’t pick the winner and then you know gave the solution that kind of that you need to start to manage your portfolio and that you can measure it .

So if we try to keep it in very simple worlds words, there’s two worlds exploit and explore and in explore the ratio is different, the culture is different ,and we show that we don’t try to make it complicated, we don’t try to sell consulting. So you know, you need us to do this and that so it is encouraging. Because you know the guy walked out of the meeting and he said oh wow we really need more portfolio management
and i have a couple of stories like this to share.

It’s just that right now they until now they didn’t always really know how to do it.
Some did like Bracken Daryl as an example, many of them didn’t, because they grew up in a different world. The world where the disruption was not as big. However with Covid19 we all got disrupted. With all the negative side effects
the probably positive thing is that it has really shaken everybody to the core, because they realized how the system is very fragile and that’s why Yves also
mentioned we could have called our book the resilient organization. Because
companies that do this are actually, you know many of them, thriving today because they’re ready for uncertainty with exceptions if you’re in the travel industry. Pretty tough. But if you take Airbnb they are actually getting through this pretty well.

Of course they had to manage the core, they had to let go unfortunately people, but they are very at ease with this kind of system. So things are going to change very rapidly and i’m actually pretty positive even if the numbers still look pretty bad.

Yves, maybe we could add something as you mentioned for the exploit portfolio

YVES PIGNEUR: we have all the numbers, kpis and for the regular business as you know for the exploration as Alex mentioned. The culture is different means also the measures the metrics have to be different. So that’s the reason why we developed a kind of innovation metric system in which we are much less focused on customer satisfaction and finance, but much more on the expected return and the risk or uncertainty. So the idea is to measure or you have reduced the risk for the different business model in your explore portfolio and so based on this one we can plot the different pieces using the risk uncertainty the expected return, the learning velocity for the different projects.

You have the cost of the different hypothesis the different experience you manage.
And this kind of innovation metrics we didn’t mention that today, but we have developed a kind of conceptual framework for helping people to define those metrics to measure the different business model inside their exploit portfolio and

ALEX OSTERWALDER: just one thing add. So why did we come up with metrics?
Because you know i think the innovation community, maybe in general the business community, the innovators they’d use buzzwords that CEO couldn’t care less. About a lean startup, sprint.. This sprint that like CEO like their head explodes when they
hear that and they say look, I’m just gonna do another merchant acquisition. So bad swiss humor… But you know, it does turn out we we should learn how to speak the language of leaders, which is why we came up with a business portfolio map and we need to use the word risk and uncertainty and return. If we don’t use that there’s no chance innovation is ever going to make it into the strategy of companies.

I think we need to take ourselves by our own hair, and you know say that we do
need to change instead of blaming the leaders. How do we help leaders okay so
it’s too easy to say it’s their fault, no it’s not- it’s our fault just as much, because if we can’t make it happen it’s our fault. Let’s stop blaming others and try to help and create this into a real partnership. So i’m being provocative deliberately because i think we’re part of the problem just as much as we are part of the solution.
JAN: Such an interesting topic! Just to jump on what you just said Alex and what Yves said at the beginning, you were talking about a CEO that of some kind of a
chief position that was leading the innovation side and that would kind of produce the future business that would then cannibalize with the existing portfolio. But you say it could be two person. But every case is where you said it’s a success most of the time it’s a single person that is able to I would say couldn’t balance you know
the pressure from the existing business, having politics, existing portfolio, jobs at stakes, economies at stakes, and having someone that comes in with new ideas and pushing.

I see that to a be as a single person job because you know being in bin districts you can in a certain way prioritize, but do you see really a possibility where you could have the two position coexisting together and working together hand-hand with their own pressure and their own business priorities?

YVES PIGNEUR: it’s clear but i think it’s what we wanted to express. You could have one people doing both and you have seen Bracken Daryll were spending maybe 50 of his time on the innovation. So you could have what we have seen is very few companies have this kind of one people doing both. So it was a suggestion to say maybe we could consider to have two different persons and we have seen some company having implemented this kind of thing. We have one good example you know Ming An which is an insurance company, they have two different ceos and what they call co-ceo. One for the exploitation and one for exploration.

So i think maybe five three years ago when we suggested that they said- oh Alex and Yves you are crazy, it’s impossible to have two people doing this kind of job.
And I know in the last couple of years we have seen some companies legal
or here in switzerland maybe uh some company that we have Laurastar, where we have co-ceos co-directions. It’s clear when you have two people you need to have some balancing mechanism, we have what we call also the chief ambassador to be able to manage this diplomacy between the two different people. So i think it’s possible to come with some different mechanisms to be able to take the best of the two people. One in charge of the future, one – in charge of the present.

ALEX OSTERWALDER: yeah I would almost not frame it in terms of people, but in terms of the problem. So the problem is actually that innovation doesn’t have enough power. The solution means we need to give innovation power that is either the ceo himself or herself, or somebody at the same level. And as you’ve said there are starting we are starting to see examples where the co-ceo is a great example,
where that happens so i don’t care if it’s the ceo or if it’s the chief entrepreneur. The power needs to be at the very top and i wouldn’t even blame leadership, the people i blame are the boards of companies, the board of nestle, the board of whatever.

They are not doing their job holding the companies responsible to actually you know give innovation power now. This is going to happen, I hope there’s not that many victims in the process because companies that don’t start to do this, they will start to disappear. The pharmaceutical industry and the banking industry is going to be a big victim of change, and hopefully some of the swiss companies to be a little bit nationalistic, since you know other countries are I hope they can survive but you know that is a question of the boards holding the leaders responsible for thinking
long term and not just in terms of words but in terms of actions. There’s a lot of talk
there’s not enough let me put it this way there’s not enough informed action. There’s a lot of money but there’s not a lot of informed action yet.

What if i don’t want to grow 10-50 times, what if i just want a business model that works for my SMB has its current size. Do I need to care about exploration at all?

So i think it’s a great question in the sense that you know, you don’t have to grow if you don’t want to. If you think you can actually survive without growing, you know be my guest i think that’s super important. The problem is when you think you have a stable business model and you realize you’re getting disrupted. So sometimes it’s not even about growth, it’s just about survival. I know a couple of ceos of small and medium-sized companies, they say innovation is a matter of survival for them, not a question of growth. So just to stay alive you actually need to innovate now if you want to grow or not that needs to be a decision. But you know, you do need to innovate just to stay alive. It’s getting harder and harder to stay alive with the same business model for longer than three years.

Even I like to say small business expire like a yogurt in the fridge. You don’t want to consume an expired yogurt not very good.