Business Model Zen If problem discovered, then business also discovered

Author. Brad (Yongho) Cho

businessmodelzen.com

copyright @ Brad (Yongho) Cho 2013

PROLOGUE Business all begins with the customer 7

Chap. 1 Keep simplifying, see the business essence 10

01 Philosophy of Business Model Zen 11

02 Why an insightful business model matters 15

Chap. 2 Business Tao, Business Model Zen 25

01 CONCEPT begins and ends with the customer 26

02 PLAN is forming strategic views 38

03 DO is looping execution and learning 52

04 3 step approach of Business Model Zen 57

Chap. 3 Zen Canvas 65

01 Introduction of Zen Canvas 67

02 ZEN IDEA stage 72

03 ZEN DESIGN stage 83

04 ZEN ACTION stage 97

05 Business Model diagnosis framework 106

Chap. 4 Zen Patterns 114

01 Introduction of Zen Patterns 115

02 BM#1. Collaborative open production 120

03 BM#2. Mass-customization 124

04 BM#3. Bundled experience 128

05 BM#4. Stake division 133

06 BM#5. Spatio-temporal division 137

07 BM#6. Simplification-Innovation 142

08 BM#7. Targeting pyramid’s bottom 147

09 BM#8. Shared economy 152

10 BM#9. Ohjakkyo (Connecting Bridge) 157

11 BM#10. Fluidization 162

12 BM#11. Mass-social value 167

13 BM#12. Temporal value optimization 172

14 BM#13. Off-the-box system 177

15 BM#14. Reverse ideation of constraints 182

16 BM#15. Premium 187

17 BM#16. Alternating subsidy 191

Chap. 5 Zen Cube 196

01 Introduction of Zen Cube 197

02 Practical applications of Zen Cube 205

Chap. 6 Playing with Business Model Zen 212

01 Business Model Zen’s equation for external links 215

02 Link to Blue Ocean Strategy 217

03 Link to Business Model Canvas 219

04 Link to user-centric service design 222

05 Link to Lean Startup approach 225

EPILOGUE Some subtitle is needed 229

APPENDIX 231

01 The business model of Business Model Zen 231

02 Zen Canvas approach 232

03 Zen Canvas flows 233

04 Zen Cube 236

05 Zen Patterns – SOFT approach 238

BIBLIOGRAPHY 240

Foreword

I’m holding on the palm a little cube just arrived from overseas

two days ago. This regular hexahedron of 5 cm in diameter

represents a new customer-centric framework of business

model ideation that we will discuss herein. We call it ‘Zen Cube’.

As we will take a close look into it from now on, this cube begins

with the customer and ends with it.

In ideation of a business, the customer shall be not only buyer

but also a fundamental driver for the ideation itself. Because

customer’s problem simply means a business opportunity.

And identifying it and its implications becomes no other than

market research. A right kind of approach to solve it makes the

customer pay and in turn proves the business. Therefore

the customer is an entity who proactively enables generating a

business, rather than one to be just satisfied.

Despite a long-winding opening, this book has a single

motivation only. That is, hindsight from my earlier days of

coaching industry experts with service design: ‘Market-proven

business models do not really guide their practitioners into the

essence, i.e. customer-centric business ideation’. Yes, it did

strike me that these common business models were in discipline

devised to sophisticate existing concepts and testify their

structural components, never to help with ideations. However,

without a tight concept in place, these tools help execute

something wrong effectively after all.

‘How to help generate good business ideas’ – it has been the

question spinning on top ever since, over the year of coaching

through more than 100 business plans. Thereafter, I had to

publish a few more copies of books while often engaged in

consulting and lectures but never stopped the research to

answer the question. And, as if planned from the beginning, it

suddenly flashed on me. That is, however premature it was, a

logical framework of guiding through business ideation just

popped up.

It then took great amount of time in having this ‘embryo’ idea

grow into due sophistication, testing against earlier examples

and building execution tools. It’s been interesting yet

meaningful time and I am grateful to present the result under the

name of ‘Business Model Zen’.

Business Model Zen intends to be an insight-centric business

model framework. It has simpler yet more stereoscopic structure

than existing ones. It also provides three execution

tools of ‘Zen Canvas’, ‘Zen Patterns’ and ‘Zen Cube’. These

tools will help build business models, connect them with market

opportunities and scale the ideas in a flexible manner,

respectively.

Down on a personal level, I had to mull things over before finally

resorting on the name ‘Zen’.

I was at first looking for something Korean that nicely represents

‘meditation’ or ‘contemplation’, but no word perfectly fits. The

extent went naturally beyond Korea to Orient, eventually to

come across Tao and Zen. Whereas common perception was

that Chinese Tao is somewhat close to Taiji (i.e. Yin-yang) or

Taoism by Lao-tzu, while Japanese Zen is identified with

minimalism by most civilizations in West.

Zen was the choice because, after all, this book deals with

customer-centric simplification which in turn approximates

minimalism. Therefore the Zen mentioned herein stays in the

context of Orientalism, minimalism or insightfulness, no more or

no less (i.e. nothing national).

Got it, no more talks. Let’s get into the Zen.

Homepage: businessmodelzen.com admin@businessmodelzen.com

!

Chapter 1. Simplify and Focus

on the Business Core

Business Model Cube

01 The Philosophy of the Business Model Zen

Before we go into the main text, let’s briefly discuss the

philosophical roots for the Zen Business Model, because a

thorough understanding of the philosophy helps to achieve more

in the end. The word ‘Zen” herein reflects a sense of simplicity,

balance, and integrity of the utmost degree. These are also the

values that were sought by the ancient Orient’s Dhyana and Zen

Buddhism.

While today’s modern businesses tend to be hugely

complicated, the Zen Cube, which is the iconic object for the

Business Model Zen, represents an extreme simplicity. The

core of the Business Model Zen is abstracted into a simple and

visible image, the cube. Now imagine this simple hexahedron

effectively representing your business, releasing you from the

huge stress of a complicated business plan.

Balance begins with the knowledge that the Business Model

Zen addresses the entire course of a business, including its

concept, plan and execution. Unbiased (or equally biased)

opinions on customer value, strategic components and loop

learning lets the Business Model Zen help you achieve a

balanced success. It also provides links to external business

methodologies to maximize the mutual benefits.

Integrity means that each component of the Business Model

Zen is linked in a reciprocal and organic way. These links

connect the business concept, plan and execution, as well as

the apparent structural components and the inherent strategic

ones. Thanks to loop execution and learning, the components

and their connections are confirmed and coordinated towards a

better logical coherence, which allows for a higher success rate

for your business.

02 Why an insightful business model matters

Let’s define this first. What is a business model? Simply put,

a business model is the collection of all the essential

components of a business. Commonly included items are:

organization, revenue model, process flows and products. Our

modern trend is even simpler: value generation, value carriage

and value monetization.

Why are people interested in business models? It’s because a

business model contains practical contents in line with the

objectives of a business. For instance, let’s say you just found

something of value for a customer. The next steps of

generating, carrying, and monetizing can get complicating as

there are thousands of different ways to go about them. A

business model is simply a set of choices and the relationships

that surround them. More importantly, they are never fixed

choices; they may and should change over time. A business

model is not something that is chosen by externalities, but is

rather an active framework that helps make right choices against

them.

Why a business model alone does not always guarantee success

A good business is always based on a good concept. We

shape a concept into a plan and then realize that plan into

execution. Out of the three: concept, plan, and execution, which

one do you think a common business model framework is

intended for? Most likely, it’s a plan since a business model by

definition is a kind of plan where the core business components

are chosen and then organized. However, to make a business

successful, all three domains must be in harmony:

- good business concept

- plan to shape a concept

- execution to realize a plan

A business plan only shapes as existing concept, it does not

beautify an unattractive concept nor does it improve a lousy

execution capability. As an example, let’s compare a good

business concept to a gemstone. The actual gemstone is the

business concept, the jewelry design is the business plan, and

the craftsmanship of the gemstone is the business execution.

As shown above, jewelry requires that gemstones go through

a design and craft process; similarly, the success of any

business requires concept and execution to be seamlessly

integrated with a solid business plan.

What about the common practices in the industry? Shouldn’t

there be existing models or methods to help integrate these

three domains? Companies typically employ a business

proposal to brief a business concept. They then devise a bulky

business plan that focuses on detailed execution and financial

projections, where the execution is played by ear with no

particular set of tools put in place. In this scenario, the business

concept, plan and execution operate in silo and lack due

efficiency and integrity.

Why an insightful business model matters

While existing business methodologies help to mitigate the

aforementioned structural issues, they still have room for

improvement in terms of consolidating the business concept,

plan and execution. Granted, there are experts that are capable

of combining various methodologies geared towards different

business contexts, however, this is not a method of convenience

for everybody. This shortcoming becomes more obvious when

we take a comparative analysis across some of the well-known

methodologies that deal with innovation.

As shown above, no single methodology covers all three

domains like the Business Model Zen. However, it does not

mean that the Business Model Zen solves all business

problems; its core value, simply put, consolidates the business

concept, plan and execution into a single canvas, thus restoring

organic links among their components.

Nonetheless, the unique virtues of each of the existing

methodologies will hold effective, since their legacies also laid

the conceptual foundation for the Business Model Zen.

Accordingly, and rather organically, linking them with the due

reciprocity and synergy came to be of great interest. Chapter 6

will address the details of such links.

The Business Model Zen is not just an extension of existing

research on innovation and business models, but is also the

outcome of the daunting challenge of integrating the three

domains: concept, plan and execution. We hope that it will

become a practical and integral solution for everyone, and not

just one of the many theoretical methodologies out there.

Design disciplines of Business Model Zen

Although the main goal of Business Model Zen was to

integrate the three basic principles to make a successful

business, what makes this model truly unique is its fundamental

concept. Let’s take a closer look as to what that is.

CONCEPT'

- Take a customer-centric approach into business

- Take the Customer–Problem–Solution–Market

perspective

A concept begins with customers at the heart of a business.

Putting yourself into their shoes and their glasses, not yours as

a provider, may allow you to snatch it. No wonder, customer

observation gains growing focus in marketing simply because

customer’s potential needs, when discovered, means clear

success in differentiation.

Product augmentation, which is provider-centric, does not help

to drive success like it used to. A customer-centric view isn’t

always a success magnet for a business either. It usually

requires ideation to be articulated into the shape of a customer-

problem-solution-market. Such an approach has a clear

advantage: It makes it easier to modify things as you go along

with the business. This framework of the customer-problem-

solution-market is probably the most important foundation for

Business Model Zen.

PLAN%

- Simplify it into a single page

- Assess the strategic components

It takes no more than a single page, not a full-blown business

plan, to write out one’s core business strategy and plan(s).

Companies recently point out that bulky reports often impact the

business efficiency and the time to market. Some of them allow

single pagers while oral reports only. Business model canvas

variants also help to simplify the core business components into

a single page.

Also important is to sustain a strategic focus within simplicity.

Shaping a concept into a plan alone can hardly achieve the goal

of planning. It also requires the measures to review and

diagnose the process, from a strategic point of view, so

concepts have due feedbacks.

EXECUTION)

- Measure the gap between a business concept and its

reality

- Establish a loop learning mechanism

We need an effective frame that can help feed back to the

concept and plans the knowledge that is acquired during

business executions, e.g. the gap between a concept and its

reality, its root cause, etc. No concept is born to be a success.

No plan can be made perfect either. Only execution may prove

concepts and complement plans through practices. Accordingly,

an ‘execution study book’ comes as important as a business

plan. (But we all know that no company carries such a

handbook.)

Business Model Zen also plays the role of the execution study

book. Business execution should be fed back to the original

concept and plan so that a loop execution mechanism of

correcting the concept and revising the business plan is made

complete.

BUSINESS'SUCCESS'

- Eliminate the gap between market and solution

- Secure the integrity among concept, plan and

execution

Succeeding in business doesn’t mean achieving the financial

targets given in a business plan. These numbers must employ

inaccurate assumptions thus make no valid metric to measure a

success in most cases. In fact, the success of a business lies

where the gap between a real market and company’s solution

disappears. It also means migrating from early adopters to an

early majority market.

In a majority market, concept, plan and execution should be

perfectly harmonized with due integrity. A loop learning

mechanism as well should run on wheel without a hitch. A

market exists where a concept to solve customer’s important

problems is correct. There come along profits too. This is how

you measure the success of a business, where profits are only a

byproduct. On the contrary, profit alone cannot be viewed as a

success, for a profitable business that lacks due integrity fails to

enter a majority market and is vulnerable to a crisis at any time.

!

Appendix.Business Model Zen Canvas Approach (English)

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Business Model Zen Cube (English)

To change your perspective to customer oriented

will change your business destiny .

businessmodelzen.com