Wednesday, May 05, 2010

Book Review: Seizing the White Space

I was happy to accept the invitation to participate in a book blog tour, especially when the invitation came from my friend Renee Callahan at Innosight.  Renee asked me to review the new book from the Innosight team, Seizing the White Space, by Mark Johnson.

I've written frequently, and recently, about the importance of innovation and strategy.  While we at OVO stipulate that innovation isn't a strategy, it is an enabler to strategic goals.  Thus, good strategic thinking is a predicate to successful innovation.  Even more so, good strategic thinking is critical to set the stage for working in the "white space" - those gaps or green fields that your business does not address today.  Mark Johnson's new book deals with two fairly interesting, intertwined and complex issues - white space innovation, especially business model innovation.

Johnson's topic is important because it starts to move our discussions away from the "mundane" innovation (if there is such a thing) of new products and services.  Any firm today that isn't focused on product and service innovation has one foot in the grave already, and the need for product and service innovation is well understood.  Johnson is going after bigger, more elusive game - can an organization effectively innovate its business model to renew itself and its offerings?

Given the importance of a business model to how a company thinks about its value proposition, how it is organized, how it serves customers and how it makes money, changing a business model is a daunting proposition.  Fortunately, Johnson simplifies the task by first identifying the four key factors for business model success.  According to Johnson, a business model is made up of these components:

  • Customer Value Proposition - this is the offering that helps customers do the jobs that they are trying to do
  • Profit Formula - defines the way the company will capture value for itself
  • Key Resources
  • Key Processes
Johnson states that "successful businesses devise a relatively stable system in which these elements interact in consistent and complementary ways.  A change to any one of the four affects all the others and the system as a whole."  This statement identifies the reason why business models are so robust, and so difficult to change.

Once he has defined the business model and its components, Johnson takes us on a geography lesson.  We go looking for the mythical "white space", that Shangri-La that all consultants and executives seek, but rarely find.  Johnson identifies three locations to seek white space:  within an existing market space, examining opportunities that have been ignored or overlooked in existing markets, opportunities beyond the existing markets, either as entirely new untapped markets (think geographies, countries or continents) and the white space "between" two markets or industries.  Once he has established that "white space" exists and that a business model can be manipulated, he turns his attention to the really important stuff in the book - how to innovate a business model.

For those of you Christensen fans in the audience, it will come as no surprise that he frames this challenge with a "jobs to be done" approach.  This is the same framing technique that Christensen and many of his followers use to think about new opportunities or new needs that customers have.  Once a new job to be done is identified, Johnson recommends rethinking the Customer Value Proposition.  As the customer value proposition is understood and addressed, the firm can then determine how to review the profit formula, and this then leads to changes in key processes and resources.  In other words - start with the strategy, define how you'll make money and restructure the organization.  Simple to say, but relatively hard to do.

I'm impressed with most of the book and the thinking behind it.  Johnson has approached the challenge methodically and has given us a model for business structure and business models which seems to be internally consistent.  He's also identified where the white space exists and given us a recommendation on how to change the model.  Where the book falls down slightly is in the evidence of success of the approach Johnson recommends.  I'd like to see more case studies of businesses actually working through this change.

One example he provides is the comparison between Southwest Airlines and the short-lived airline Song, which was an attempt by Delta to create a low cost competitors to Southwest.  Delta focused on making an inexpensive, fun airline targeted at "discount divas", women who wanted low costs but some perks.  Johnson points out that Delta adopted some of the Southwest model, but not all of it, and eventually Song could not compete, attempting to be both a low cost and a high touch airline.  I'm not convinced this is a good comparison, or that Delta really was able to engage itself to create an airline that would compete with or perhaps cannibalize its own business, so this doesn't appear to be the best example for me.

What Johnson does well is establish that innovation is closely linked with strategy, but really is an enabler to business strategy.  While writing about business model innovation, he has really written a book about strategy and the key components of a business model that must be considered and refreshed constantly.  The geographic "white spaces" aren't unknown - in fact Blue Ocean Strategy has mapped these previously.  His key insights are more about thinking about the interplay between the components of the business model and how innovation will impact those components.

This book is probably more attuned to the executives who want to innovate or change their organizational structure, rather than the folks who've been called on to build new innovation capabilities.  That said it is a great addition to the literature around innovation and builds nicely on work by Christensen and others in the space.
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posted by Jeffrey Phillips at 5:55 AM

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