How to bust the innovation myth

Whether you work at a modest startup or a multimillion dollar company, chances are you have heard of the Business Model Canvas (BMC). Similar to architectural blueprints or circuit diagrams, these standardized templates provide simplified overviews of complex organizations, and can be used to turn an ailing company around, or design a healthy one from the ground up.

First developed by business theorist Alex Osterwalder and computer scientist Yves Pigneur in the early 2000s as part of Osterwalder’s PhD thesis, the BMC framework has since developed into one of the most well-known and widely used business modeling tools on the planet, embedding itself in MBA curricula and guiding decision-making processes in C-suites and incubators alike.

In addition to authoring several bestselling books on business modeling — including 2020’s The Invincible Company — Osterwalder now serves as the founder and CEO of Strategyzer, an innovation consultancy and software development firm that helps companies design, test, and scale new business models.

Osterwalder joined Big Think over Zoom from his native Switzerland to talk about the merits of “optimizing happiness,” what many people continue to get wrong about Steve Jobs, and the mentality that allowed Jeff Bezos to set up Amazon for future success.

Big Think: Business modeling is about breaking down complex ideas into digestible, actionable information. How can we develop such a skill?

Osterwalder: There are biological rules to how people digest information. An example: people make complex slides for presentations, show them on a screen, and talk you through them. Your brain can’t listen to you and understand the slide at the same time, so you switch back and forth. That’s a meltdown. So what do you do? 

You chunk your information, build the slide gradually. It starts with one piece of information, then you add another. You’re like a voiceover to a movie. These are principles you can learn and apply easily. The other part takes more practice: how to go beyond complexity and make it simple. People frequently quote Steve Jobs when they talk about simplicity. But when Jobs gave a presentation, everything was calculated, everything was practiced. Anything that looks seamless and easy is usually the result of hard work.

When you don’t take time to simplify what you have worked on, you waste all the time you’ve spent before. Especially for an entrepreneur raising money, or a team trying to get $10 million for a project, not taking the extra time — that’s criminal. It’s common sense, but not common practice. That’s where exceptional people stand out. They go the extra mile. It’s not hard. It’s just hard work.

Models are a lens to simplify, to create structure. Knowing what a good, simple structure looks like versus a complex one — that’s practice. You don’t learn that overnight.

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Big Think: There’s a quote from Albert Einstein you like to repeat: “Make it as simple as possible, but not simpler.” How do you know when you’ve hit that sweet spot?

Osterwalder: Once it’s simple enough that people understand it immediately. For example, when we created the Value Proposition Canvas, we did workshops and asked: can we explain it in 2–3 minutes and people get it, or do they have lots of questions? Once the questions disappeared and people could apply it, we knew it worked.

Big Think: Do you have any advice for young entrepreneurs?

Join four or five startups before starting your own. See what works and doesn’t. Talk to founders, learn from their successes and mistakes. That experience is critical. It’s like with doctors. You don’t want a doctor who hasn’t done any internships or residencies. It’s not just theory; it’s application.

When doctors start, they work on cadavers or computer models before working on real people. Business should be the same. The good news: nobody dies when you experiment in business. But sometimes we experiment with too much money given to too inexperienced people. So we should be careful.

Still, look at people’s experience. Those who failed with their first startup are often more successful the second time.

Big Think: Many people are terrified of failing and looking foolish in front of others. What advice do you have for them?

Osterwalder: If you’re going to be an entrepreneur, get comfortable looking silly, stupid, and wrong for a long time. Some of the biggest entrepreneurs have stories of being dismissed. Take Airbnb’s Brian Chesky. People said, “No one’s going to rent out their apartment to strangers.” And now Airbnb is huge.

You also have to listen and not ignore all advice. There’s a difference between vision and hallucination. Be willing to selectively listen. Test your vision constantly to ensure it’s not a hallucination. Some people blindly follow their vision and fail.

Big Think: When it comes to selective listening — how do you distinguish good advice from useless criticism?

Osterwalder: Advice is tricky. My friend Michael Bungay Stanier wrote a book called The Advice Trap. Advice often isn’t useful — everyone has an opinion. What you want is facts. If someone says, “That’s a stupid idea,” it doesn’t matter. But if you’re talking to a customer and they say, “I like this,” don’t just trust it. Ask: when’s the last time you used a similar solution? Have you spent money on this problem? Dig for facts and experiences.

Opinions can inform you, but facts are what matter. Don’t ask, “Do you like this product?” — that’s opinion. Ask, “Are you struggling with this challenge? Have you tried solving it before? Did you spend money on it?” If you talk to 100 people and no one has the problem, you’re probably not on to something.

People say Steve Jobs didn’t ask customers, but that’s not true. Apple was obsessed with understanding what customers were really trying to get done. That’s why their solutions became simpler and simpler over time. And Jobs failed, too, many times. He was even kicked out of his own company!

Big Think: You have argued that large companies should welcome innovators-in-chief into the C-suite. Isn’t it strange that this kind of position doesn’t yet exist?

Osterwalder: There’s a myth around innovation. People don’t understand what it really is. They often equate it with technology. Innovation can involve tech, but it doesn’t have to. It’s about trying fundamentally new things to create value for customers and for the business.

So when people say “innovation,” they usually mean tech. But the real question is: are we creating new growth engines? Are we improving margins in new ways? Or if the goal is impact, are we getting closer to that? Then look at which companies actually invest time, energy, and budget into that. The list is short. Companies spend on R&D, yes — but most of that is used to improve existing business models, not create new ones.

Take Google. People think Google is world-class at innovation. I’d qualify that. They’re great at tech innovation, but they didn’t reinvent their business model. They’ve always been ultra-reliant on ads, and now that’s changing.

Compare Google to Amazon. They’ve systematically created new growth engines. They’re not reliant on just one or two revenue sources. They’ve built a conglomerate of business models that feed each other. A true flywheel, like Disney had in the past.

Big Think: Why don’t more companies invest in reinvention, if it’s the surest way to long-term success?

Osterwalder: Because they don’t understand two key things. First: when you run a successful company, you get better and better at what works. You improve efficiency. Anything new looks inefficient, so you kill it. You serve a specific type of profitable customer, and ignore the rest. That excludes everything that’s new. You won’t go after underserved customers because they look less lucrative at first.

Second: most large companies don’t understand how to explore new business models while running a successful core. It takes a certain paranoia. One reason Amazon has been successful at this is because Jeff Bezos has always said, “We’re going to die.” They were at the top of their game and he said, “We’re going to die. We need to reinvent ourselves.”

If you want to create new growth engines, you have to explore new business models. That means you need to create a space, not a physical space, but a cultural space where that can happen, and the way you do that is to invest.

Big Think: More and more people are thinking about “optimizing happiness” in the same way we’d talk of optimizing productivity. In your view, is that a good thing?

Osterwalder: It’s more about figuring out what you want. If you’re a company, you define a strategy, a vision, what you want to achieve — growth, financial goals, impact. I think the same kind of thinking can and should be applied to life.

There’s a Japanese concept called ikigai that’s become very popular. It’s a framework that balances what you’re good at with what you like doing and what can earn you money. That’s a conceptual approach. Whether I’m working or not working, I’m the same person, and so I think the same way. What do I really want to achieve? I need conceptual tools to think that through.

Big Think: You recently wrote that AI “scares the hell out of me as a CEO, a dad, and a global citizen.” What specifically frightens you?

Osterwalder: It’s changing the nature of work and the nature of organizations. Today, I don’t think it’s quite clear if humans are still going to create the most value, or how fast existing companies can adapt to completely new ways of working with completely new ways of value creation.

As the CEO of an established company, I know that, by definition, it’s easier for a startup to start with completely new ways of value creation and completely new business structures. As a father of two kids, I’m wondering if I am equipping them with the right tools.

One recommendation I always give to leaders and teams is: experiment. Just start trying things so you can understand the power of the technology. Unless you’re personally experimenting with AI, you just won’t get it. And I think that’s the biggest issue: A lot of people talk about AI, but they haven’t seriously experimented with it. So their opinions are uninformed. My advice: try, try, try. Make your opinions informed by experience.