Alexander Osterwalder: “Barcelona is very attractive to startups because of its talent pool”
Alexander Osterwalder, the creator of the Business Model Canvas and author of ‘The Invincible Company’, was the keynote speaker at Exponential Day #3, a landmark event focused on disruptive innovation in Barcelona-Catalonia.
Osterwalder is one of the world's most influential innovation experts whose work has changed the way established companies do business and how new ventures get started. In this interview, he presents tips and practical actions to help companies become “invincible”.
What defines an invincible company? What are its main characteristics?
Three things define an invincible company. The first one is that invincible companies constantly reinvent themselves, and their business models, because they actually don't believe they're invincible.
Number two, they compete not just on products, price, and technology, but on superior business models. They don't just do technology innovation. They come up with better business models all the time.
And the third characteristic is that they transcend industry boundaries. They don't just play in an industry anymore. They don't just call themselves a bank or a car company or a pharmaceutical company. They go beyond industry boundaries.
Could you give us two practical tools that could help a company become invincible?
The number one action is that the CEO needs to take at least 20% to 40% of his or her time every week to work on innovation - not to create the ideas, to pick the ideas, or to test the ideas, but to create the environment for innovation to flourish.
The second action is that to give innovation power, you also need a full-time person who is dedicated to innovation and reports to the CEO. If you don't have that, you're not going to get innovation.
How do you see the startup scene in Barcelona-Catalonia?
What makes any startup scene vibrant is entrepreneurs who exchange their experience, who learn from each other and the talent pool that you can draw on.
So, if there are a lot of people who've done it before, when you start a new startup, you can hire people who are good at scaling.
And from what I hear, Barcelona is very attractive to startups because of that experience in that talent pool.
What role do business models play in disruption?
It is a huge role because when you say innovation, people think technology, but innovation is about creating value for customers in new ways.
If you take Apple, you can say they make mobile phones. That's how they make most of their money, but they're also an entertainment business. They make many other devices - they're now in the health sector with Apple watches. A business model is a unit of analysis and better business models protect you from disruption.
Oftentimes companies think that innovation means only innovating in technology.
Technology is an enabler, but technology is a small piece, and you can come up with new business models with inferior technology.
Technology innovation is a subset of innovation; business model innovation and innovation, in general, is a larger kind of thing.
My favorite example is the Nintendo Wii. When Nintendo launched the Nintendo Wii, they were competing against the Sony PlayStation 2 and the X-Box at the time and their game console was inferior in terms of processing power and graphics, but they came up with a completely different business model.
Their console was focusing on the fun factor and targeting an underserved segment, casual gamers, with a great value proposition, fun motion control, and those devices were not as good from a graphic point of view or processing point of view, which means they were a lot cheaper to produce, which means Nintendo was actually earning money from royalties, from the games, and the consoles.
So, with inferior technology, they disrupted an industry.
Can business models be copied?
In short, yes, business models can be copied, but they're a lot harder to copy.
Why is there only one Ikea in the world? Why are there only two, big, really successful mobile phone operating systems on the planet, Apple iOS, and Google's Android? Because those business models are incredibly powerful and make it hard to be copied.
What is most interesting is to copy a business model from one industry into another industry. A good example of that is Hilti.
They traditionally made machine tools for builders. They would manufacture and sell, and they became a service company by allowing customers to rent a fleet of construction tools.
And Hilti would make sure that the construction companies had the right tool at the right place at the right time.
They manage the whole logistics. They took away the whole headache. So, they copied the subscription business model with that logistics services into the industry of tools.
What are the main challenges that companies have had to face to innovate after the pandemic? How has COVID-19 affected disruption?
Some industries have been heavily affected by the pandemic. Let's take travel and hospitality. And my favorite example there of a company that was really good at adapting was Airbnb.
Airbnb saw their revenues going down substantially because, with the pandemic, there was no more long-distance travel. So, they had to do two things: They had to make their company more efficient. They had to let go of 25% of staff, but they did it in a very respectful way, and they explained why they had to do it. And they're also respectfully doing that so they can hire them back again when things start growing.
And they pivoted the business model from short-term stays and for long-distance travelers in different cities and regions to something that came up as a new trend, which is long-term stays closer to somebody's home because they want to move out of the city and work from an apartment in the mountains or at the beach.
So that's an amazing case of a company that adapted rapidly because they're very agile.