Innovate or die

Anneli Knight
June 4, 2013
The Age

Blockbuster, Betamax and Kodak: three reasons why you should be scared of disruptive technologies.

There is a significant difference between invention and innovation, and for a business to survive in this fast-moving landscape it is vital to not only understand the difference, but to also put the principles into practice.

US innovator and founder of the Business Innovation Factory Saul Kaplan is author of The Business Model Innovation Factory: How to stay relevant when the world is changing. He is in Australia this week to speak at the Amplify Festival, a gathering of leading innovators from across the globe.

Kaplan says business model innovation requires constant reassessment of the positioning of your business in the market, and an attitude of redefining the market you are working in, not simply trying to improve your market share.

An example of this is US video store Blockbuster, which Kaplan says was so focussed on market share – growing to 5000 stores at its peak – that it left itself vulnerable to disruption and suffered dramatically when DVD technology was introduced and Netflix rapidly dominated the newly defined market.

“Netflix is itself vulnerable to being interrupted – the next new technology is streaming rather than needing a DVD. The only way to avoid being interrupted is to constantly be exploring new business models, while still working on the current one,” Kaplan says.

Rapid technological changes drive the need for continuous business model innovation, Kaplan says.

“Business models don’t last as long as they used to. I talk about the ‘half-life’ of a business model and I think leaders will have to reinvent their business model several times over the course of their career.”

Kaplan says entrepreneurs in startups are natural innovators, making multiple attempts to find the business model that will ultimately enjoy traction in the market place.

“But once you’re a successful entrepreneur, you’re really not a startup anymore. You have a stable business model and what you should then be worrying about is how you will be disrupted,” he says.

Kaplan recommends larger organisations establish a ‘sand box’ or ‘innovation factory’ with a key brief to explore, create and test new business models, even if they threaten the core business.
“Even if it will disrupt what you’re doing today, if you don’t figure that out, you’ll bet someone else will and that will disrupt you,” he says.

While this type of separate ‘sandbox’ structure is difficult for resource-stretched small businesses to establish and maintain, Kaplan says entrepreneurs are wired for business model innovation and real world experimentation, giving them a head start over corporations.

“Most successful entrepreneurs I know have it in their bloodstream and are always working on several business model concepts at all times.”

Kaplan recommends small business leaders tap into local networks of entrepreneurs who are creating their own communities of innovation sandboxes to test new business models.

“All leaders have to learn how to reinvent themselves, their organisations and their communities to stay relevant in the 21st century. If we want to avoid disruption and to transform anything we must get better at experimenting with new business models and social systems in the real world,” he says.

In his book, Kaplan writes about three stages to successful business model innovation: connect by bringing ideas together across industries; inspire by tapping into people’s passions and emotions; and transform by putting something completely new in the marketplace.

Australian business, Axiflux, is working at the cutting edge of engineering technology, in the final stages of testing and producing an electric engine. Serial entrepreneur and Axiflux chief executive, Chris Mosely, and engineer and director, David Jahshan, are transforming the market for the electric engine.

“The electric motor hasn’t changed in about 100 years. This is a game-changer,” Mosely says.

The Axiflux engine replaces the gearbox, engine and invertor at an average cost of $26,000, with a single motor that costs less than $5000.

“This gives you more space, allows you to put more battery technology in there and it’s a lot lighter too: from 100 kg down to 60 kg in weight,” he says.

The breakthrough in design fits Kaplan’s connect criteria because creator Jahshan is a control engineer, bringing a different perspective to solve the problem to the traditional power engineers, therefore connecting ideas across industries to come up with a new solution.

“[Jahshan’s] unique approach or perspective, because his background is in micro-controllers, is to put a small computer chip in there and program that chip to digitally create the effect, rather than a circuit diagram,” Mosely says.

Axiflux also meets the inspire criteria, with its ability to tap into the passions of the environmental movement, with applications for the new technology reaching far beyond car engines.

“If you can encourage people to use electric vehicles, you’ve pretty much solved the environmental carbon problem,” Mosely says.

“It’s not just a motor, it’s also a generator. There are applications in green energy production – wind generation and hydro-power – applications to power trains, trams and buses, and it can reduce the amount of energy used in mines because of the greater efficiency rates of the motor.”
The Axiflux system has been in production since 2011 and in three months will have extensive testing within a motor vehicle, and Mosely expects this technology to be available in the market within the next two years, in a shift that will transform the market.

“From this point onwards, it would make sense for every generator or every electric motor to be designed in this way.”

Read more: