“BCG-­‐Business  Model  Strip:  A  Visual  Tool  for  Continuously  Improving  and  Innovating  on  Profit  Margins”  By  Dr.  Rod  King  (rodkuhnhking@gmail.com  &  @rodkuhnking)      

“The greatest challenge, which every business leader faces, is to continuously

improve and innovate on profit margins.” Rod King

BCG: an iconic name in the field of Strategic Management as well as

Management Consulting. Whenever I hear or see the abbreviation, “BCG,” I’m

reminded of the Boston Consulting Group’s (BCG) popular business tools such

as the Growth-Share Matrix, Experience Curve, and Advantage

Matrix. In recent months, I’ve added the tool of “Strategy Palette” to my

library of popular BCG tools. The Strategy Palette can be used to continuously

improve and innovate on a business’s profit margin. But, what is the Strategy

Palette?

Featured in the recent Harvard Business Review Press book, “Your Strategy

Needs a Strategy” by Martin Reeves, Knut Haanaes, and Janmeya Sinha (all

of whom work at BCG), the Strategy Palette is a collage of five archetypal

approaches to strategy: classical, visionary, shaping, adaptive, and renewal.

The type of archetypal strategy, which an organization selects, depends on

trade-off that is based on three dimensions of a given

environment: unpredictability; malleability; harshness.

My key insight from the book is that a mature organization should use

an Ambidextrous Strategy, that is, a mix of strategies to facilitate

continuous improvement (exploitation) projects and continuous

innovation (exploration) projects. Exploitation projects deal with

formulating, executing, and managing classical and visionary strategies

while exploration projects deal with formulating, experimenting with, and

managing adaptive and shaping strategies. In my work, the goal of an

Ambidextrous Strategy is to relentlessly pursue sustainable

competitive advantage (top profit margin) or an ideal win-win

solution that eliminates a Big Urgent Market Problem (BUMP).

A simplified but dynamic graphic of the Strategy Palette is presented above;

the strategies are mainly organized around a double loop (“rollercoaster” or

ambidexterity lifecycle) and according to unpredictability of the

environment.

The strategic why, what, how, and when of the Strategy Palette are described

in detail in the Your Strategy Needs a Strategy (YSNS) book as well as in BCG’s

website (https://www.bcgperspectives.com/yourstrategyneedsastrategy). The

YSNS book offers a “Self-Assessment” (checklist of questions), “Four

Ambidexterity Techniques” (separation; switching; self-organization;

ecosystems), Ambidexterity Tactical Approaches, and “Eight Critical

Roles” for identifying and translating strategies on the Strategy Palette into

reality. However, the book’s approach is largely qualitative and not

directly related to visual templates for systematically managing

Business (Profit) Model Improvement and Innovation projects. In

other words, a Business (Profit) Model is not offered as a unit of

analysis/design for formulating, implementing, and managing every strategy

on the Strategy Palette. Rather the book presents BCG's Business Model

Innovation Framework as a tool for mapping and managing business

model innovation as in the case of Visionary Strategy on the Strategy Palette.

In a slide deck , which is entitled “The Ambidexterity Principle: How

Ambidextrous Leaders, Strategists, and Teams Create Win-Win Solutions,” I

present a comprehensive portfolio of tools for holistically solving problems

using the Ambidexterity (Win-Win) Principle and Ambidextrous Strategy. I

regard the description of “Your Strategy Needs a Strategy (YSNS)” as a

strategy-centric way of expressing the Ambidexterity Principle, which is

about creating ideal win-win solutions. The Strategy Palette can be regarding

as a means for translating into reality the Ambidexterity Principle. Ideas in the

YSNS book such as “Eight Critical Roles” have been translated into visual tools

that are easy and fun to use as well as scalable. In this article, my objective is

to highlight the tool of the BCG-Business Model Strip which uses topics

from BCG's Business Model Innovation Framework and in particular, BCG’s

components of a business model. The topics are presented on visual business

system templates that I developed. BCG’s components of a business

model are presented below.

The main topics or “windows” are related to the three engines of a business

model including their functions of creating, delivering, and capturing value.

Although other visualizations of a business model exist such as in the Business

Model Canvas and 4 Box Business Model, I prefer the hierarchical

structure of topics in BCG’s business model diagram. This higher

hierarchical structure combined with granular topics means that a business

model can be presented at multiple levels such as at strategic, tactical, and

operational levels. Thus, the BCG-Business Model Strip is a multi-level

template for improving and innovating on the profit margin at both

enterprise and industry levels.

As illustrated above, BCG’s topics can be structured into three windows, each

window of which has three panels as follows:

• PROFIT MODEL: Profit Margin (Strategy); Cost Model; Revenue Model

• VALUE PROPOSITION: Product/Service; Channels/Relationships; Customer

Segment

• OPERATING MODEL: Value Chain; Organization; Suppliers/Inputs (Key

Partners)

Incidentally, the three windows of Operating Model, Profit Model, and Value

Proposition respectively correspond to activities of the Lean Startup

heuristic of “Build-Measure-Learn.” The above hierarchical topics including

windows and panels are presented on a BCG-Business Model Strip that uses

the universal system framework of the Business Ecosystem Story Tool (BEST).

The logic (flow) diagram for the BCG-Business Model Strip is presented

below. Thereafter is a template of the BCG-Business Model Strip that contains

9 topics that describe the “panels” of a business (profit) model.

To facilitate use of the BCG-Business Model Strip, I’ve added a checklist of

questions, most of which are obtained from BCG’s article, “Business Model

Innovation: When the Game Gets Tough, Change the Game.”

The above BCG-Business Model Strip, which visually synthesizes ideas from

myriad business tools, has several benefits and uses. A key benefit is that the

BCG-Business Model Strip provides a common visual language for

mapping a project’s business model (profit margin) at strategic,

tactical, and operational levels. Another benefit is that the BCG-Business

Model Strip can be used for managing continuous improvement

(exploitation) strategies such as in Six Sigma projects as well as for

continuous innovation (exploration) strategies such as in Lean

Startup projects. Each strategy on a Strategy Palette can be systematically

managed using a BCG-Business Model Strip.

To date, business model or system visualizations, which are used for

improvement projects such as the SIPOC diagram, Fishbone (Ishikawa)

diagram, Five Forces, Value Net, and Balanced Scorecard, differ from

visualizations and tools used in continuous innovation projects such as

the Business Model Canvas and Lean Canvas. As a versatile business

system and communication model, the BCG-Business Model Strip is the

only template that can be used to present a large percentage of business tools

in the literature. The BCG-Business Model Strip can even be adapted to

present and facilitate the popular technique of SWOT Analysis. Lean Startup

concepts such as Problem-Solution Fit, Product-Market Fit, and Business

Model Fit can also be illustrated using the BCG-Business Model Strip. In

short, the BCG-Business Model Strip is a visual tool for universal

problem discovery and solving especially in business.

In practice, the primary use of the BCG-Business Model Strip is

to collaboratively visualize, document, analyze, improve, and

design Business (Profit) Models. The BCG-Business Model Strip is the

only template that explicitly considers documentation of trade-offs in an

environment with a view to not only developing an ambidextrous strategy but

also managing a business (profit) model for eliminating those trade-offs at

enterprise and industry levels. Consequently, the BCG-Business Model Strip

can be used for financially planning and managing projects for

continuous improving and innovating on profit margins. The BCG-

Business Model Strip provides an alternative as well as a

complementary tool during the lifecycle of a

business/strategic/financial plan.

The 9 panels of the BCG-Business Model Strip are visually arranged to

facilitate supply chain analysis, process (SIPOC) improvement, and business

(profit) model innovation as well as performance management such as in the

Balanced Scorecard. Three “ROD Storyboard” questions facilitate use of the

BCG-Business Model Strip for any project. The ROD Storyboard questions are

as follows:

• Present System (Business/Profit Model): Where currently are we?

• Future System (Business/Profit Model): Where must we go?

• Strategy: How best must we get there?

A comprehensive presentation on the BCG-Business Model Strip is

available here (http://www.slideshare.net/RodKing/the-bcgbusiness-model-

strip-rapidly-manage-profit-improvement-and-innovation-models) .

Below, I have presented an example on visualizing Apple’s business

(profit) model for the classic iPod. The example can be extended to

illustrate how Apple uses an ambidextrous strategy to continuously improve

the profit margin of the classic iPod while continuously innovating with a

view to disrupting the iPod Profit Model with introduction of the iPhone and

iPod touch.

Other ideas such as from Porter’s Five Forces and Brandenburger &

Nalebuff's Value Net can be superimposed on the Apple’s BCG-Business

Model Strip to facilitate multilevel industry analysis as well as supply chain

analysis and value net analysis.

So, for leaders who want to adopt an ambidextrous strategy, which focuses on

continuously improving and innovating on profit margins, the most cost

effective approach may be the BCG-Business Model Strip. Other approaches

that use a business (profit) model as unit of analysis require disparate tools

which require greater time to understand and use. Using the BCG-Business

Model Strip provides a common visual language for collaboratively and

rapidly translating ambidextrous strategies into reality.

As our environment including industries gets more unpredictable, malleable,

and harsh due to increased entropy, the need for rapidly developing and

managing ambidextrous strategies would increase. In such a volatile,

uncertain, complex, and ambiguous environment, the traditional, rigid, and

voluminous documents of the business/strategic/financial plan become

increasingly irrelevant for exploration strategies and

programs. A lifesaver may just be the BCG-Business Model Strip which can

be used not only for facilitating the formulation and implementation of

exploration (Adaptive and Shaping) Strategies but also for facilitating

exploitation (Visionary and Classical) Strategies. In short, the BCG-Business

Model Strip is the single tool that can be used at any stage as well as

throughout the lifecycle of an Ambidextrous Strategy for rapid profit

improvement and innovation.

You can freely download a copy of the slide deck on the BCG-Business Model

Strip here (http://www.slideshare.net/RodKing/the-bcgbusiness-model-strip-

rapidly-manage-profit-improvement-and-innovation-models).

Your feedback is appreciated.

One more thing …

“Unidextrous competitive advantage, which follows the shape of a single S-

Curve, is increasingly temporary or transient. Ambidextrous competitive

advantage, which follows a fractal S-Curve (S-Curve of S-Curves of S-Curves of

…), is sustainable.”

A "Sporting" Visualization of BCG's Business Model Diagram

In the article above, I present a visualization of BCG's business model diagram

using a tessellation, the visual format of which is similar to that of the 9-

panel tessellation of the Business Model Canvas. However, different

tessellated "interfaces" as well as process (flow) diagrams can be

used to present the structure and logic of a system including a

business (profit) model. My favorite tessellated interface is a

zoomable "fractal 3x3 grid" which, in theory, is an infinitely scalable 9-

panel tessellation. Consequently, a business model diagram, which is based on

a fractal 3x3 grid, can be used for massive collaboration projects on improving

and innovating on business (profit) models.

Below, I present another tessellation, that is, a "tennis court" on which I

show topics of BCG's business model diagram.

The BCG-Business Model Court most closely maps the structure and

topics of the original BCG-Business Model Diagram. The BCG-Business Model

Court contains only two topics that are not on the original BCG-Business

Model Diagram: "Suppliers/Inputs (Key Partners)" on the side of

the Operating Model and "Channels/Relationships (Distribution)" on the side

of the Value Proposition.

It's interesting that in the referenced BCG’s article on business model

innovation, the article's title uses a sports metaphor: “Business Model

Innovation: When the Game Gets Tough, Change the Game.” Staying in the

realm of sports metaphors, we could visually define an enterprise using

the layout of a ping pong (table tennis) table in the center of the BCG-Business

Model Court. The enterprise or "ping pong (table tennis) table," which consists

of four central panels, is highlighted in yellow as follows:

The above business (profit) model diagrams provide a richer visual language

for discussing how to rapidly improve and innovate on business (profit)

models. In addition, any strategy on the Strategy Palette can be rapidly

mapped and managed using the visual template of the BCG-Business Model

Strip as well as BCG-Business Model Court.

Rod King, PhD

August 25, 2015

rodkuhnhking@gmail.com & @rodkuhnking