How to build an invincible company through business model innovation

00:00That's where the real competitive advantage is. It's not in products. It's, you know, still a bit in business models, but ultimately the real competitive advantage of companies is their ability to constantly reinvent value propositions and business models. You're listening to the Growth Manifesto podcast, where we host in-depth interviews with business leaders, authors, industry experts, and entrepreneurs with a singular focus around business growth. At the end of each podcast, we want you to walk away inspired, to think bigger, and to have actionable takeaways you can apply to improve your business.

00:34Each episode is like a masterclass on a key topic, so make sure to browse the episodes to find the topics that are most relevant to your biggest business challenges today. This podcast is brought to you by Web Profits, a digital growth consultancy that helps challenge your brands drive growth in a complex and fragmented digital landscape. You can find out more about Web Profits at webprofits.io. Now, let's get into it. This is Alex Kleantis and today we're talking with Alex Osterwalder, who's the author of the

01:06best-selling books, including Business Model Innovation, which is this fantastic book. This other book called Value Proposition Design and his latest book, The Invincible Company. And quick shout out because these books are very easy to scan. They're very visual and they've sold millions of copies across the world and they're being taught across a number of business schools around the world. So this is going to be an interesting conversation because today we're going to be talking about how to build an invincible company and we're going to be talking about the

01:40role of business model innovation, right? And I think it was you, Alex, who first put the body of work around the importance of the business model and how to think about it. So this is going to be a really fun conversation because you have so much content. My challenge is how do I just condense it into like 45 minutes so that the listeners and the viewers actually can have some really key takeaways. But I have no doubt that you have the content there. So with that intro, hello and welcome. Pleasure to be here. Thanks for having me.

02:12Yeah, fantastic, fantastic. I'm going to get straight into it because we have a lot to cover. Let's start straight with the headline. Yes, what do you mean is when you talk about an invincible company. What does that mean? It's a very arrogant book title, but we believe in testing and adapting. So we tested different book titles. And this is the one that resonated most with CEOs, one of our target audiences. And the point is that you can't be invincible. It's impossible. So when you are humble enough to know that you constantly need to reinvent yourself,

02:47you get closer to invincibility. So if you stop reinventing yourself, you're very vulnerable to disruption. And business malls expire like a yogurt in a fridge faster than ever before. So today to be successful, you need this ability to be world-class at execution at the same time, constantly reinvent yourself. If you're able to do that systematically, that's when you get closer to invincibility. Yeah. Because to be an invincible company means to have something

03:18to protect. So, okay, let me ask it like a different way. The mind's already started, right? So, cool. So is the concept of an invincible company the same for a startup as it is for an established company that's been around for 30 years? Of course not, right? Because when you start, you have nothing. You're actually on the search for a value proposition or value propositions and a scalable business model. So you first have to focus on the one thing is to create a value proposition that customers care about and a business model that can scale.

03:53That's your number one goal. But the thing is, once you start to find that you scale your business and you're successful, well, you can get arrogant, right? You focus just on that while there are other competitors and maybe just your team, and you forget to reinvent yourself. So every established company today was once a startup. So the challenge is that when you're a startup, you need to find that business model. But when you're established, you need to reinvent yourself. And for a long time, this wasn't important.

04:26But now you actually need to create startups within your established company. So, you know, there's similarities between startups and established companies. But when you're a startup, you just have one goal is to find those value propositions that customers care about and embed them in business models that can scale. That's the only thing as a startup that you need to focus on. Perfect, perfect. And so that it frames the conversation to established organizations that have something to protect. Right. And that have something to lose, because in the beginning, you don't have anything to lose except for basically everything.

05:00off the back of your shoulders and everything in your house. But apart from that, there's no organization yet, right? So now we're really talking about established companies, right? Now, to be an established company, you talk about the need to constantly try to reinvent yourself. What do you mean by that? What does that mean from just from a high level perspective, right? Like, and I think, you know, just for the listeners, check out the books, right? They are super visual.

05:31They've got a lot of fantastic stuff in there, but I'm thinking this is going to be high level, you know, just give you some, some, some key takeaways about how to think about it. So with that in mind, how do you, also could you speak about how a company constantly tries to reinvent themselves? Yeah. And I'll push back on a word you used before you said, protect, right? Something to protect. I think that is exactly the challenge of established companies, that they try to protect what they have rather than try to invent, you know, new value propositions and new business models.

06:05So this ability to reinvent yourself is very different from protecting. And actually, if I may, I'll quickly draw something to make this a little bit clearer. I always like visuals. Sorry. And just for the listeners. Yeah, no, no, just for the listeners. He's got this cool kind of setup where he's just got himself in the little corner now instead of on the main screen and he's sketching on a whiteboard. I don't know exactly the technology there, but I want it. Okay. So I'll make it, you know, I'll talk about it so the listeners can follow, right? So

06:39when you are established, that means you have a business model, you have value propositions that customers care about, you actually have to manage what you have. And I'll just draw a business model canvas or tool here to, you know, manage existing business models. So here you manage and improve. We call this exploit, managing the existing. And that's what most established companies are really focused on. And they're pretty good at it. And it's not that this is not important. This is crucial. You need to manage what you have.

07:10You need to improve what you have. But at the same time, you need to have this ability to invent. And that's what we call explore. And the logic here is very different. You try something, you explore, you experiment, and you have to adapt because generally your ideas are wrong. Your innovation projects that look good in a spreadsheet and good on a PowerPoint are not going to work. So it's this idea of testing and adapting your ideas until they work that you need to focus on.

07:42So in an established company, you need these two universes. You need exploit and explore. And the challenge for most established companies is that they forgot how to explore. Again, they were one startup sometimes 100 years ago, sometimes two years ago. But we generally, when we start to manage our company, we develop these antibodies towards anything that's new. So we're not good at exploration anymore. So it's not either manage the existing or explore the future. It's an end. And here, the challenge is that, you know, this end is very challenging because these are two different cultures under the same roof.

08:21So, you know, what's interesting to watch these days is that this is a challenge even for young companies that just emerged out of the startup phase or scaling. But then because they're so focused on scaling, they kind of forget that, you know, you need to invent the future while you're scaling because otherwise you might hit a wall. And for established companies, this is a huge challenge because, you know, 99% of their team members of their talent is focused on execution.

08:56But that means you're probably going to lose the best innovators. They're going to leave your company if you don't build an ecosystem, an innovation ecosystem where innovation talent can thrive. So that's the challenge is to create, you know, this dual kind of culture, world-class at execution and world-class at exploration. This exists in very, very few companies today, but it's changing. The good news is it's changing rapidly. You know, there's a lot of good work that has been done. And leaders are now really starting to try to build these ambidextrous organizations like academics like to call them.

09:33So this kind of thinking, it makes sense at the multinational, the behemoths that already have hundreds of product lines and portfolio companies. But this should also be happening for any established business that's also just been around for 20 years that just sells the one thing, right? Correct. It's not a matter of size. This challenge is the same for small companies, even young companies that are just emerging out of the startup phase. and multinationals. Of course, the numbers will differ, right? If you're a large company,

10:09because you need big returns, you actually need to invest in hundreds or better even a thousand innovation projects to get one winner that will be an internal unicorn. If you're a smaller company, it will just be a different dimension. You might explore three different possibilities for one to emerge. And that is the challenge that the smaller we are, the more we say, yeah, but we don't have the time, energy, or resources to focus on innovation. And that is just wrong because it's part of your job today, in particular, if you're the CEO in

10:44the leadership team, to establish the future. Managing the existing should just be the kind of basis that allows you to even play the game. But to stay ahead and to survive for the next five or 10 years, you need to innovate. And that's the CEO's job. They need to take care of building this innovation ecosystem. And that goes for a 10, 50 person company all the way to a company that has 50,000, 100,000 or a million people, or 1.5 million people like Amazon. I have lost count.

11:17They're probably beyond that now. So it's the same challenge, but at a different size. And the responses, kind of the approach is very similar. It's just a different numbers game, of course. I have another question, but every time I kind of ask a question, my premise is wrong. So I'm going to keep going down that path because this is how I ask questions. But let me ask another one now. So when a company is growing quickly, they still have to focus on this part of it, right? Because this is the challenge for lots of organizations. I'm focusing on the growth

11:49right now. And then all of a sudden there's an insurgent that comes and just, you know, that is wipe it out completely. So, you know, so when, like, that's when is this something which somebody should focus on? Or are there stages in, you know, what's it called? The business cycle that makes sense to start exploring? Yeah, I think, you know, with our company Strategizer, we're in a scaling phase. Scaling is very hard, right? I think it's relatively

12:19easy to go from zero to 1 million or a couple of million, but then to scale to a larger size, that's really hard and it's a different ballgame. So it's all consuming. But once you've figured out actually how to scale and you're on path for some type of profitability and you're not profitable because you're reinvesting in growth, but you figured out the numbers, that's when you actually should start thinking about the next wave. And I like founders who already have a very

12:52long-term vision. So I'll give you the example of Netflix. It's a big company today, of course, but they were small one day, right? So we should use that kind of as an inspiration. So when the founding team started, they already had this vision of a streaming video company where you could watch video over the internet. But they also knew that at the time when they created the company, the infrastructure was just not there. So they got the timing right and said,

13:23this is not possible today, but we're aiming for that business model ultimately. But they started with, which was also a disruptive idea, but not as technologically advanced, was this idea of DVD by mail, right? And that disrupted Blockbuster. So they started with something that was feasible from a technology point of view, disrupted the field and worked towards, you know, the next wave, which was streaming. So they already had this long term vision. So you can think of consecutive business models.

13:58And sometimes you have to change course, right, because you'll see that that vision is not achievable and you're kind of going that direction. But think of it this way, consecutive business models. There is no one business model that will, this doesn't exist anymore, that will help you survive for the next 10, 20, 50 years. You constantly have to reinvent. And that's really, really crucial that you have this in mind. Of course, again, it's very hard to scale. So you're so focused on the scaling of your organization that you tend to forget, you know, you might want to work on the next wave. So the best companies today, I believe, they keep that innovation culture while they're scaling and they experiment with new stuff while they're, you know, ultra focused on scaling.

14:44So in that case, exploit doesn't mean managing a portfolio of businesses. It just means scaling at the same time they invent the future. We're doing the same thing. You know, we are now somewhere between 50 and 100 people, depending on how you count. But we're ultra focused on experimenting with new things while we're scaling a business model that, you know, today is making money. Because we want to play somewhere else than where we're playing today. So you just have to think of consecutive business models. So it doesn't matter what size you are. Once you have a business model, you should already start thinking of the next wave. So, you know, as soon as you feel like, okay, this is the right one to start with, you should already start thinking about the next wave, at least experimenting to learn.

15:28It sounds like when you're scaling and when the growth is there, you can reinvent yourself on the same path as what you're already on, right? But if the company has been around 10, 15 years, it's not hitting the double digit numbers anymore in terms of growth. Now it's going to single digits and it's been there for a couple of years and you're thinking what's going on, but it takes so much effort just to maintain the engine. that's when you need to really start having a look at a whole other exploration pathway potentially right or the options for exploring expand much further than I'm scaling something that's already

16:00working and it could leave there or it could leave there or it could leave there so it's within that frame versus I've been around for 30 years I sell energy now what are we going to do right Yes. And it's becoming a real pressure. So last week I was in Sweden and worked with the portfolio companies of an investment fund. And, you know, they were ranging in size, you know, from a couple of 10,000s of revenues to, you know, a couple of hundred millions in revenue.

16:33So they were all at different stages, but we worked on mapping out existing business malls and creating that muscle, that innovation muscle and innovation ecosystem to already do the next thing. And for many of these leaders, CEOs and CFOs were there. This was something new, right? So innovation today is still, for quite a lot of leaders, a black box. they don't really know how it works because it looks like you know business oh we're just gonna

17:04you know create a new business isn't that similar to running a business it's fundamentally different it's a different profession it's as if you kind of you know compared a knee doctor to a brain surgeon it's a little bit there's some basic things that are similar right it's about making money etc but that the fund the fundamental things they look similar but the profession is different And in innovation, the culture is different. The metrics is different. The whole approach is different. And because there's this confusion a bit, sometimes people still, in companies, startups, this rarely happens, they still insist on business plans.

17:43I'm going to take this idea, I'm going to map it out, and then I'm going to execute from idea to business. I'm going to treat it as if it's an execution problem. But innovation is not an execution problem. It's a search problem where you need to test and adapt your idea. Ideas are worthless, right? So it's not about the idea. Looks great on paper, but then I need to test and adapt, test and adapt. That requires a completely different process, requires a completely different approach. And I will actually draw another thing and I'll put the voiceover for the listeners because this is a really important thing to understand the difference between innovation, exploration, and managing the existing exploit.

18:28So when you start with an idea and you want to go towards an existing business, so one that makes money. In the past, we used to create these business plans. And then we had these curves going upwards. It's going to make money. The idea is great. And when you are a charismatic founder, you will make everybody believe that it's impossible that this thing is going to fail. And you raise money. And that was actually a bit of a problem because there's so much money around.

19:00Same thing actually in existing companies. They invest too much money too early in ideas because the ideas look great and the PowerPoint looks great and the spreadsheet looks great. But what you really want to do is you actually want to admit that risk and uncertainty is incredibly high. And venture capitalists actually know this. That's why they know that they can't invest in one company because the probability that it's going to fail is huge. You need to invest in many. But as an innovator or as a founder, you actually have one task.

19:35That's not to implement your idea. That's not to build a first version of your product, sometimes known as MVP. No, your task is very simple. It's to reduce the risk of building something nobody wants. And when I'm saying building, I mean business model, right? Creating a business that nobody cares about. Customers don't care that that is a huge risk. And that's the risk you need to reduce. So how do you do that? Well, what if you just started talking to customers and you never ask them, what do

20:07you want? Customers don't know what they want. They're not experts of the solution. You ask them, what are your problems? What are you dealing with? How does the day look like? What are your biggest struggles? What are your objectives? sometimes related to your ideas, sometimes a bit beyond that. And what you thought you knew about customers usually turns out to be wrong, so you just reduced risk. The risk of exploring some kind of challenge or objective that customers actually don't have. Okay, just learn something. You're going to change your idea.

20:37You're going to adapt it. Well, what if I now made a paper prototype, a PDF, that doesn't visualize the product. It just actually describes the spec sheet. My product or service does this, this, this. It has this quality, this performance, and this price tag. You just created a brochure of your product. Wow, okay, you can now talk to customers. And they say, well, you know, maybe this, I would never do this, or I tried this. And then you might ask them, hey, why don't you get back to me if you're interested, you know, by email or by phone?

21:11They never call you back. You just realize, okay, they're not interested, right? You learned again. So then maybe at one point when you learned enough, you make a digital prototype if you're in the digital space or whatever. It could be a physical prototype if you're creating engines. So you increase the investment with the decrease of risk. And so this drawing here where you start with maximum of risk, you admit, I don't know if this is going to work. But I'm a founder and a founding team or an innovator with the right team.

21:46that will test and adapt the idea until it works. And you actually only invest in this as a venture capitalist or as a company when the team produces evidence. And a PowerPoint and a spreadsheet is not evidence. It's evidence from testing desirability, feasibility, and viability. Different aspects, different risks. So that's the kind of process coming from Steve Blank with customer development and then popularized with Eric Ries' Lean Startup,

22:19that's the kind of process, together with the tools from us at Strategizer, Business Small Canvas, Value Proposition Canvas, that you need to put in place. And you actually measure the reduction of risk and uncertainty. How do you do that? You look at the evidence that the team produces over time. So it's a completely different way of running the process, measuring different KPIs than you do in running a business. And this is how you open up that black box.

22:50We now know how this profession of innovation and entrepreneurship works. They have very strong similarities. They're not exactly the same. Innovating in an existing company is different from building a startup, but there are very strong similarities in these professions. They're very different from managing a business that is established. yeah i really like um that chart that talks about kind of trying to de-risk in the beginning to get the insight by doing customer research i mean it seems that customer research is like

23:21the golden thing that everyone tries to avoid like the plague but actually have 50 conversations have 100 conversations you know try to sell something before the thing is actually created and see what happens. And then there's some context there. Then there's some confidence there. It's not a hundred percent, but it's a hundred percent more than what you had before. Right. And here's the thing. Here's the thing. It sounds very trivial, right? It's almost like back to the basics. Oh, but you know, that's not very groundbreaking to, you know, to start

23:54with customers or, you know, to explore that. But the thing is, okay, the principle is pretty basic, But how we do that, the different types of experiments we do, the evidence that we measure, that's getting very sophisticated. So today, if you look at the processes in companies, they're very rudimentary. When we say, oh, we're very customer focused, we still do very outmoded stuff like focus groups. That's not what testing and adaptation is about today.

24:28It's about creating stronger and stronger evidence. If you've done 100 interviews, well, that's just the start. That's very basic in information. And we call that light evidence. If you get customers to start to prepay, oh, that's already stronger evidence. They have skin in the game. And there's two examples here that you can take. One is called Better Place. Used to be a startup with a very great goal, making electric vehicles commonplace. And they created battery swapping stations.

25:00So the idea was great. and they raised a lot of money, but they didn't test and adapt the value proposition. So they blew, you know, $850 million, well-funded startup. Then you compare that to Tesla from the start, the founding team had testing in their DNA. They actually, you know, did a couple of things. They bought a Lotus Elise, they took everything out and started to, you know, call it an electric vehicle and see how customers reacted. But they also created a so-called landing page where people

25:31could sign up with their email if they were interested. So that's not a big commitment, but you don't give away your email if you're not interested. So it's slightly stronger than just talking to people. And then they went a step further and they had this club where they would pre-sell a hundred, you know, Roadster, Tesla as the first electric vehicle they built for a hundred thousand dollars and that was sold out you know pretty quickly so they had real evidence and skin in the game and then later on you know elon musk you know played around with the same idea by getting

26:03people to make down payments for the the model three and you know over a week they had 300 000 people make a down payment that's evidence right and that's evidence at scale so not everybody's going to get there but they have testing and adapting in their dna that's very different from better place to see how these things differ. And today we're getting more sophisticated, light evidence, talking to customers, strong evidence, prepaid. If you're in B2B, you can't always do that. So you're going to have letters of intents or pre-orders, et cetera, et cetera.

26:35So we're getting sophisticated at this profession. It's not just about the principles anymore. I like it. And it is getting sophisticated, but yes, it's like you said, like it is kind of simple as well right you know just you know create a landing page and see if people want it and ask for a deposit up front you know these are all things that they speak about is you know instead of creating a course and then trying to sell it pre-sell the course and then create it right like that's been around for a while but it's good that these larger organizations have

27:06some processes that create systems around actually how this is actually expanded across an organization within an organization but let's jump to the second part of which of creating an invincible company so the first part was um to constantly try to reinvent yourself the second part is to compete on superior business models yes yeah business model generation is how i first heard about you was that 12 years ago now almost um okay but that's that was the first time i was like oh

27:38finally someone has put all the business models into like a book it's great um so how would you define a business model? Let's start with that. Then what makes a superior business model? You know? So, you know, when we started, so you said we were the first to talk about business models. That's actually not true. We were not the first. What, you know, when I started, I did a doctoral dissertation with Yves Piner, who became my co-author and friend on business models. And we took all this stuff that was existing, but we took a slightly more rigorous approach. And we created this visual model to visualize business models. And we tested

28:15and adapted that until we had something that would really resonate with managers and startup entrepreneurs. So we went a step further and we made it incredibly simple. And that's why our approach with the business model candidates kind of emerged as the most successful one. So we weren't the first, but we paid attention to the usability and user experience, if you want, of the concept and tool itself. So I believe in visualizing business models by mapping them out with a very simple language.

28:46In our case, that's the business model canvas that allows you to describe how you create, deliver, and capture value with nine building blocks. And every business, startup, or established company has nine building blocks in their business model. It's the same, right? So value proposition for customers, how you reach them, What do you need to actually create and deliver value? It's the same, same business model. So the point is that we have a shared language to discuss our business models, either the ones we have to improve them

29:18or the ones we want to invent to test and adapt them. So again, very simple, nine building blocks to describe how you create, deliver and capture value. So what makes a superior one? I mean, I've got it here in front of me just in case we were gonna talk about it. Is it something which we want to just quickly just list or is that part of kind of like, you know, because I'd like people to start understanding about the components of a superior business model, right?

29:48And so is it better that we talk about the parts or is it better that we just jump straight to what makes a superior business model? I think the parts are less important than the business model story, right? So sometimes people say, yeah, but the value proposition is the most important part of the business model. That's not true, actually. If you don't have a value proposition that customers care about, well, you don't need to bother about the business model, for sure. But today, what we see is superior business models are those that have mechanisms.

30:20We call them patterns. Patterns in them that outcompete others. That could be that you have a business model that locks in customers, right? And, you know, the Apple with the iPod created that. They locked in customers in their ecosystem. So you had to buy an iPod if you wanted to keep your music library, right? So that's one type of superior business model where there are high switching costs, where you lock in the customer in a positive way. Then there are other patterns, you know, business models that are more scalable.

30:52Guess what? Airbnb has the most scalable hotel, if you want. technically it's not a hotel, but we perceive it almost like a hotel, but they don't have the inventory. All the rooms are managed by their partners, the hosts, right? Millions of hosts around the world. So technically it's actually the biggest hotel. Again, you classify it as a hotel. So that's a very scalable business model. So that's another aspect that you can look at. So I don't think, you know, sometimes people ask Alex, what's the right business model? Everybody wants this recipe. There is no recipe.

31:24I like recurring revenue. I think anything with recurring revenue helps grow up. But again, Procter & Gamble, they don't have all the recurring revenue streams and look how big they are, right? Exactly. So that's why there's no right and wrong business model. So typically, of course, if you can generate recurring revenue, that's more stable than transactional revenues because you sell once and you earn money again and again and again, right? That's why the subscription models became so popular. But again, you can say, oh, that's the right business model. No, it's not.

31:57You need to find the right business model for you in your arena. And that could be whatever type of business model. But the more you can integrate some of these patterns, the better. If you can create a business model that locks in customers, creates recurring revenues, and is scalable, of course you have a home run. And that's what you should aim for. And that's exactly the reason why we try to inspire people to think beyond products and services, because it's getting

32:30harder and harder, if not impossible, to stay ahead just based on technology and product innovation. If you don't have a business model that is superior, it's going to be hard to stay ahead. So if you take Apple today, why are they so ahead and so hard to compete against? It's because they have an insanely strong business model with the App Store, right? Or you take, you know, other organizations, take Amazon, they created a collection of business models that

33:00mutually reinforce each other. E-commerce on the one hand, and then Amazon Web Services on the other, two different business models that use the same infrastructure. Of course, that's insanely difficult to compete against. So today, the best companies are not product companies. They have world-class products and services, great value propositions. But in addition, they actually compete on business models. And that's a big challenge typically for banks and pharmaceutical companies, because all their business models look similar because they think industry. And that's

33:33kind of the death penalty, I'd say. Industry classification and competing on five forces, That's stuff from 1985, right? Porter's Five Forces, supply chain, value chain. Today is a different world. The best companies create superior business models that transcend industry boundaries and are insanely hard to compete against. So that's the ballgame that you need to play if you want to stay ahead. And too many entrepreneurs and companies are focused just on products and services.

34:07Again, I'm not saying products and services don't matter. but it's just your entry ticket to even compete. So, you know, if you, if you don't have a great value propositions, you probably can't even survive for longer than a year. So in addition to that, you want to build great business malls, scalable ones, profitable ones. Ideally, I believe in business malls that also have a positive impact on the world. Yeah, sure. I'm going to ask you a question that's just popped to me now. We had Roger Martin on the podcast. I'm sure that you know who he is because I've saw that. Great fan, good friend. Yeah, he's great. And then also

34:40there's a guy called Richard Koch who talks about the star principle, right? And they both are all about to be the best within a segment, right? And ideally that segment is expanding and growing, right? How does the business model actually overlay to being the market leader within a niche segment, let's say. I have a wonderful example of that. And it's actually a physical company. It's called CitizenM. So, you know, different from Airbnb, which is ultra scalable,

35:12they created actually a hotel chain focused on one segment, which they call the mobile citizen. That's a person, you know, whatever age that goes, who goes to a city for either partying, for culture, for business, or for shopping. So you'd say, well, I have very different segments. But actually, they're very similar. They'll go for two days, and they have very similar jobs to be done. They want to sleep in a place. They want to pay an affordable price, but they don't want the hotel to feel cheap. So they want kind of a standing but an affordable price.

35:44They don't need a spa. They don't need a sit-down restaurant because all that stuff, you know, they don't have time for it, or they're going to go to the best restaurant of the city. So very similar, you know, kind of characteristics or jobs to be done of what you traditionally call very different customer segments. But no, Mobile Citizen, very focused customer segment. And they optimized the hotel experience for that particular customer segment. So, you know, Vitra designed furniture and in the lobby, a bar with great espresso and food all around the clock, but not a sit-down restaurant that costs a lot of money.

36:20And the rooms are very functional, high tech, but relatively small. It's the width of a bed. And now mobile citizens don't care because they're not going to spend a lot of time in the room. They came there to go to the city. So they optimized that part. And then here's where it gets really interesting. They created a room factory when they started to build rooms and ship them out to plots around the world. You know, Amsterdam is where they kind of started, but now they have hotels around the globe and they build these rooms, ship them out.

36:55So the building costs and maintenance costs go down as well. So there you have a business model that is optimized for one segment. That's, you know, really interesting case. But then another case would be Amazon with Amazon, the e-commerce that they have for end customers, the marketplace that they have for merchants, and then Amazon Web Services to sell infrastructure to companies. So it's a very different segment. And they become very good in each one of those segments.

37:28But in the backstage, what we call backstage of the business model, they have really strong synergies. So you can actually be very good at different segments if you create a business model that has strong synergies to support all of them. So you can see, you know, Citizen M, one focus, and Amazon, several focuses, but with a very strong kind of synergy in the back end. You can almost call it the modern conglomerate. So in both cases, they're really good at creating customer value for very particular customer segments.

38:03And that's ultimately how you win. You create a superior business model for different types of customer segments. Yeah, it's the same with Amazon specifically. They started with the e-commerce shopping and then they said, all right, well, of course, let's expand it and let everyone else start to sell on the platform. And so then that expanded on their portfolio of products or the inventory of the products. And then because of all of the investment into their tech, they're like, this is good tech.

38:35We should sell the tech, right? And so they constantly, they reinvented themselves through their own growth. So that's interesting because that was the conversation that we had at the start, right? So this is a company that was scaling, but yet was still able to reinvent actually how it thought about customers, the segments, the services, and so on. And that's not an accident, right? So I think we can replicate that kind of culture. I mean, Jeff Bezos, in his letters to shareholders, you know, over the years, he wrote explicitly, you could copy the game plan.

39:13he was very explicit to explain why are they so good at innovating? Some very basic principles, you know, obsession about customer, but also focus on long-term. So, you know, when you innovate, you're not going to get, you know, results in the next, you know, quarter, next year, next two years. Amazon Web Services wouldn't have happened at most companies because it did require very long-term focus. So you can love Amazon or hate Amazon, depending on what you're looking at,

39:46but you can't say they're not world-class, one of the best companies when it comes to innovation. So when they're able to constantly churn out new business malls or copy business malls and then create superior ones, that's because they have innovation in their DNA. And I think that's the real competitive advantage these days, are you creating this ecosystem in addition to your execution engine that can constantly churn out innovations? That's where the real competitive

40:18advantage is. It's not in products. It's still a bit in business models, but ultimately, the real competitive advantage of companies is their ability to constantly reinvent value propositions and business models. That's where you're going to see the real winners emerge. companies that can create that, weave that into their DNA from the small age, you know, company of one, 10, five, you know, a hundred people all the way to, you know, becoming a company with thousands or hundreds of thousands of people. That's where, you know, we need to

40:53focus our energy is to become innovation machines in addition to being execution machines, which should just be a given, right? Yeah. And I think it's becoming critical in today's world. I think there's so much, what's a will of disruption and change happening outside of any industry, right? But the third one, the third one, the fourth one is what the fourth one is and create more value, right? That one we can talk about quickly. But the third one, which is interesting is transcend industry boundaries. Is this like what Amazon did with, you know, Amazon web services? Like,

41:28is that what they did? Hey, so we're in e-commerce, but now we're going to go and we're going to disrupt the hosting industry. Is that an example of what you mean by- It's absolutely, yeah. It's absolutely an example. And, you know, stock market analysts at the beginning said, why are you investing in this stuff? Because you're an e-commerce company. Why don't you focus on staying an e-commerce company? Because they think industry analysis, right? They classify Amazon, or they did back then as, you know, player in one industry. But what happened is, they didn't really care. They have this principle that they will explore anything that could be as big as their existing businesses and creates value for customers and for Amazon. So they branched out into different arenas that had very strong synergies with what they were doing.

42:15So today, the unit of analysis is the business model. Same for Apple. I find it fascinating where you can say, well, they make phones. Yeah, of course. But there are a lot of companies that make phones. Why were they so successful is because they built an entire ecosystem. And it actually started with the iPod and music, where they locked in customers, because once you put all your music into iTunes and on the iPod, you're kind of locked into their ecosystem. And then they grew that and grew that with the iPhone, which was a product innovation.

42:50But then what emerged around that was the app ecosystem. By the way, something that Steve Jobs didn't want. So, you know, everybody thinks he was enlightened. Actually, the executives had to push him towards accepting, you know, the app store. So that's something that emerged. Also, you could say, oh, was it luck then? No, it was exploration. So they're constantly exploring and learning. And now you can't classify Apple anymore. You can say, well, full manufacturer. Sure. App ecosystem. You bet. That's what makes them so strong. Entertainment business. Absolutely.

43:24So you're starting to see different business models compete against each other in the same arena, but with very different business models. Apple, Amazon, Netflix, Disney, all substantially different business models playing in the same arena. You can't call that industry anymore. It's an arena where you have different business models competing against each other. And then you can ask, well, which one's superior? Is it Amazon? Is it Apple? Is it Disney? Is it Netflix? well they're all different and we're going to see you know which ones can survive longer and that's

44:00you know going to be determined by their ability to innovate and what's interesting is because apple started off as the disruptor um because like you could buy a song for $1.49 and that you know that lasted for quite a while um depending on which country you are that's how much it costs in australia then spotify came and now there's apple music which is a subscription uh service so they had to defend themselves against the insurgent who came in i'm sure that would have affected all their revenues i know that i stopped spending money on apple as soon as there was spotify there

44:33and spotify i'll pay the ten dollars just to not have the ads and now they've got all these subscriptions um and it's not perfect i'm sure there's artists who say that the funds are not enough and so on but still you know from the customer perspective massive value and it's all there and so they've started to disrupt it as well and so the per the company who disrupts can also then be the disruptee as well right and so this is why you constantly have to reinvent yourself right like because because you think hey i have one and that's the thing where you said now they

45:09become complacent and then there's spotify that comes along and they you know they they cause problems, let's call it that. Let's put that. Absolutely. Absolutely. So the foundation there is that success, you know, is the root for future failure, because when you start to become arrogant and complacent, you're going to get disrupted. That could be through an insurgent like with Spotify, or it could be, you know, through another incumbent that is just better at innovating. So I think there is no more place for complacency today. And that's, you know, one of the reasons

45:43why Amazon is good at innovation, because Jeff Bezos always said, Amazon's going to die, we're going to disappear. So they're so obsessed with reinventing themselves because of this fear of disappearing, of overall failure, that they're actually condemned to innovate, right? So I think when you don't have that, when you chill too much, lean back, you know, future failure will happen. And there's some interesting examples where companies tried, but they maybe didn't try hard enough or the wrong way.

46:16So take GoPro. GoPro used to be, you know, Cherise has an amazing company. They made these great cameras. My kids, you know, love them when we go skiing and so forth. But it was a product company. There was no superior business model. And while they tried to become a media company, which kind of would have protected them through a superior business model, they couldn't pull it off. And by staying a product company, they got into huge trouble. So they tried to innovate on the product side with different things, but that's just not good enough.

46:46And it's a good example that leading with product innovation is insanely difficult. Sony, another example of a bigger kind of conglomerate that tried that approach for a long time and almost became irrelevant. Now, I think they're getting a lot better at starting to understand business models, starting to understand the different pieces in the Sony empire, putting them together just like an Apple would do. So I think we're going to see great things from companies that move away from a product-only focus or technology-only focus towards a business model focus.

47:24And typically, Sony is one where I have huge expectations, starting to see some things emerge. Well, let's see what happens to their car idea. But at the end of the day, it's exploration. Some things will work, some things won't. Again, Amazon had a lot of failures, big failures. The Kindle Fire Phone was a bomb. But out of that came Amazon Alexa. So you need to explore and accept that you'll fail a lot to create a few big winners. The big winners come from a lot of small failures.

47:57You can't win in innovation without investing in failures. And that's why there's the venture capital industry in the startup world. We need to create the equivalent for established companies. From small to big, we need to find that risk capital to invest in internal teams, not just in startups. Just a quick one on the transcending industry boundaries before we wrap it up. when should you be focusing on transcending an industry boundary? Is that basically when there's some capabilities internally

48:29which could be applied across industries? Because it seems like that would be the most riskiest approach to think about, right? It's like, hey, I'm in this industry. I understand this industry. I've got all these capabilities. Hey, let's go to this completely other industry with no expertise. So it seems like they would have to have something there that can apply. Is that right? Is that wrong? I think so. You know, I wouldn't bother too much about, you know, trying to transcend industry boundaries. I would just focus on value propositions and business models.

49:02What's the best business model we could create, you know, to capture value and create value for customers at the same time? And what you will see is that ultimately some of these will transcend industry boundaries, right? So I'm convinced. I'll give you an example. Interesting one. Mr. Beast, you probably know your famous YouTuber. I didn't know. And then my son told me about him and he's like, let's watch Mr. Beast. I'm like, that doesn't sound like what a nine-year-old should be watching. Anyway, it's great. But you know, that's the point. We don't know Mr. Beast. I asked my kids and said, of course,

49:35of course, why wouldn't you know that? But our generation doesn't know. But there's this interesting thing that he started, which was a burger chain, you know, Mr. Beast burgers. How did that happen? Because there's this company, Virtual Dining Concepts, I think it was called, that is that we're going to use famous people like YouTubers or music stars and help them create a food brand by using our infrastructure with restaurants across the US.

50:11And they created this business model that isn't just a marketing concept, but it's actually a food chain created based on some influencers. And this completely transcends industry boundaries. And the goal was not how do we create industry, how do we transcend industry boundaries? The goal was, how do we actually help these influencers monetize while we use the infrastructure that we have? So at the end of the day, you just constantly need to ask, how can we create value for customers?

50:42What would be the right business model? Sometimes that will transcend industry boundaries. Sometimes it won't. But you just need to focus on creating insanely good and powerful and new business models. That should be the focus. And what you'll see is that many of them will start to transcend industry boundaries. That's the way I'd look at it. Because it's about the customer segments. It's about the value proposition. that's about how you extract revenue and it's about actually how do you protect, protect is not the right word, but how do you create something superior,

51:12something superior that is extremely hard to compete against, almost like a moat. That's what they think about, right? And what I'd add to that is if you just stay product focused, you're probably going to stay stuck in an industry. Think about, you know, banks. They're thinking about banking products for their established customer base. Well, what if you asked, how can we as a bank create value for this customer segment and just open it up like that? Oh, what if we work together with, you know, whatever, music festivals or this and that, not just to do marketing, but to create an entirely new value proposition that has never been seen, right?

51:54differentiation beyond industry boundaries. But today, in particular, banks or even pharmaceutical companies don't think like that. It's not easy because they're in a highly regulated environment, but it's feasible. And I can guarantee you, customers are just waiting for stuff that is different. Like how many times did you ask yourself like banking products? Why do they all look the same and they're all pretty bad, right? Why can't they really start to focus on what I really need as a customer and explode the traditional boundaries? Well, they will say,

52:28we can't, it's regulated. But that's changing. If I look at our customer list at Strategizer, we have five of the top 10 pharmaceutical companies that are trying to do business malinnovation because they know the traditional way of doing things is not going to work. That's one of the most highly regulated industries on the planet. And they're trying because they have to. So it's going to happen everywhere. If pharmaceutical companies can pull it off, there is no more excuse.

53:00And what's been good about this conversation is that for established companies or even for companies that are scaling, it's always trying to question the assumptions that you have. It's always trying to create a superior business model that is harder to compete against, that can create more value just for the customer, right? And it's constantly trying to figure that out. And if you're established, then having a look at the current resources, the current assets, the current capabilities, and then trying to see how they can be applied across a different customer segment to different areas,

53:40just to continue to innovate and to push and to not just assume that how it always was is how it's going to be. How's that for a summary of our conversation? Great summary, great summary. And I think you ended with a very, very important point. One of the challenges for leaders is to unlearn what worked in the past, not going to work in the future. Marshall Goldsmith, number one leadership coach on the planet, likes to say that what got you here won't get you there. That's the hard part, right? In particular for

54:10manager CEOs who are used to managing a set of business models, they need to unlearn. They need to unlearn how to run a company and they need to unlearn the business models that have succeeded so far. So you really ended on a very, very important point to reinvent. We need to unlearn. Such a great conversation, Alex. I truly tried to cram a lot in there. I think we got super high level the first few chapters of your book. But this has been such a great conversation.

54:41So for people that are listening who want to find out more, how did they get in touch with you? Just google strategizer.com. We give a lot of stuff away. All of our tools are available because we're moving towards a platform business for the largest corporations around the world. so you'll find a ton of resources you'll even find parts of the book for free you'll have online courses so just google strategizer.com and you'll you'll find everything you need and just so you know i just heard in there there's a platform um there's kind of the freemium model there's there's

55:16so many things inside of your business model i just heard you say which was great you know corporates and so on but look the content is fantastic um it's highly recommended for anybody for anybody in business that is past the startup stage. But even as a startup, it's good to understand the areas which you need to figure out extremely well to get something that actually works. Thank you so much for the conversation. These books, like they're super impressive books. They're super easy to read and they're a fantastic resource. So highly recommended that all the listeners

55:48and the viewers actually purchase them. But again, thank you so much, Alex, for coming on the podcast and thank you for talking about the cool stuff around all the business models and how to build an invincible company. Thank you so much. Thanks for having me, Alex. A great conversation. Thanks for listening to the Growth Manifesto podcast. If you enjoyed the episode, please give us a five-star rating on iTunes. For more episodes, please visit growthmanifesto.com forward slash podcast. And if you need help driving growth for your company, please get in touch with us at webprofits.io.