The Art Of Opportunity with Marc Sniukas

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Innovation Secrets with Jonathan Rosenthal

Episode Summary

Today’s guest on The Successful Pitch is Marc Sniukas, the author of The Art of Opportunity. He’s an expert in helping big and small businesses learn how to innovate and scale. He said, “When someone’s not buying, that’s an opportunity to see if you can solve that problem.”

He also talks about you need to think big, start small, and scale intelligently. Listen to find out the number one mistake companies make when they scale and how to avoid it. You’re going to really enjoy learning the three different types of ways to launch from inception to evolution to diffusion.

 

Listen To The Episode Here

 

The Art Of Opportunity with Marc Sniukas

Hello, and welcome to The Successful Pitch. I’m very excited today to have Dr. Marc Sniukas. He’s a global expert on strategic innovation and corporate entrepreneurship. He’s the author of one of my new favorite books called The Art of Opportunity and the co-founder of the Business Model Gallery, which is the world’s largest business model database.

He partners with leadership teams and their organizations to help them discover new growth, develop breakthrough strategies, and innovative business models. Let’s face it, who doesn’t need that? Once he does that, they can seize on these opportunities, and their organizations are able to execute on new growth. He is the expert on growth, and that’s what keeps a business alive. Marc, welcome to the show.

Hi John, thanks for having me.

Yes, I always like to ask my guests to flush out a little bit of the bio that’s certainly impressive. I’m interested in the story of origin, Marc, so would you take us back to your early days at university. Did you know you wanted to write a book? How did you get where you are?

Yeah, sure. I was at university and I studied business administration in Vienna, Austria, and I was always interested in these topics of strategic innovation, the early works of Gary Hamel, for example, Leading the Revolution, this kind of topic. I’ve always been interested in the topic of strategy and strategic innovation. I wrote my master’s’ thesis at the time already on the topic of strategic innovation.

It was more of a literary review of looking at what has been said and written about this topic, what the state of research in the topic was, and synthesizing this into a framework that actually managers then also use in their work. After university, I founded my first company. It was a company, which was focused on management education and management development where we also did a lot of strategy programs like innovation programs, but also very hands-on business acumen programs, for example.

I did a lot of finance for non-financial managers training. I built a solid foundation on the business administration and finance of the company. I did that for a couple of years and actually successfully sold that company because I wanted to move more into consulting. I started working in consulting. I started working with executives on how to transform their companies, on how to develop and implement new growth strategies.

I got more and more interested in the topic. At some point I realized, always going back to the literature and the academic research, at some point we realized that a lot of the stuff was written. The state of the research didn’t really answer the question of how to come up with new business models, for example. The business model topic was a hot one at the time. I started working with people on that, and we looked at the research and said, “Yeah, well, this doesn’t really work.”

I got interested in the question of so how does it really work. How to established companies successfully reinvent their business models? We know a lot about how startups do it, how they come up with new business models, but we didn’t know much about how established companies actually can change their business models and implement new innovative business models.

I was interested in that particular question and was very serious about finding an answer to it, so I went to Manchester Business School. I did a doctoral program answering that particular question. The outcome of the doctoral research then turned into the book. The research was very focused on the topic of business model innovation.

What I saw is that most established companies, they come up with new business models in order to find new growth opportunities, in order to seize new growth opportunities so that turned into The Art of Opportunity where we outline step-by-step approach on where to find opportunities, how to seize these opportunities, and where to innovate but also where to innovate customer experiences, innovative business models, innovative revenue models. We also show how you can test these ideas, validate such ideas, and implement them in a very low-risk fashion.

It sounds like you were able to turn your Ph.D. dissertation into research that became a book, and not everybody is able to do that. If I heard you correctly, is that what you did?

Yeah, that’s what I did. The doctoral work is very rigorous or very relevant, so to say, because I tried to answer that question the executives are interested in. How to find the growth and how to develop innovative business models. It’s not that theoretical per se. It’s rigorous in the way it’s been done, but the outcome’s very practical, and that’s also why then it was relatively easy to turn it into a book.

The Art of Opportunity is not only for big companies that are looking for ways to reinvent themselves, to have new sources of revenue, which I’m completely interested in talking to you about, but I think it’s also for companies that are starting out and trying to make sure that their business model is working, or if it’s not how to pivot. Would that be correct, Marc?

Yes, exactly. As my research came from established companies I was always more interested in that. As I said there was a lot of research, and we know a lot about how startups do it. Nevertheless, yes, so although the primary target audience for the book was corporate the methodology works just as fine for startups, and if you come up with an idea to launch a new company.

Well, I work with people on their pitch to get funded or their pitch to get new customers, so the business model is near and dear to The Successful Pitch podcast audience. We love stories because, as you know, that’s what brings people in, and they understand things. Would you mind revealing a little bit of the secret that you tease out about the American rock band Nine Inch Nails, how they were able to achieve $1.6 million within a week even though the music was available as a free download?

Yeah, that’s always one of my favorite examples. I like to start up conversations with that one. The trick was actually freemium at the time. You have to remember that the Nine Inch Nails model, it’s about 10, or that particular example is about 10 years old. They were one of the first companies or first rock bands to try the freemium model, so to say. The music was available as a free download, but you could some limited edition CD and DVD boxes hand-signed by Trent Reznor, the mastermind of Nine Inch Nails. That’s where the money came in.

Well, that’s even more impressive $1.6 million is a lot, but 10 years ago, it’s really a lot, right?

Yeah, right, and just in the first week. It was in the first week it came out, that the album came out.

Is the concept of if you get something enough away free and they like it enough, maybe it’s one song. Is that the concept? Then they want to buy the whole album, is that the gist of it?

They had the whole album available for free as I said, and they had the limited edition CD boxes and DVD boxes with original footage from the concert and fans just wanted to buy it. Basically, they gave away for free to create a fan base and they wanted to have the new stuff and have the CDs.

Are those lessons learned from that experience certainly are applicable today, are they not?

Yeah, so another example that we have in the book is the German TV media company called ProSieben, the leading TV station, public or free TV station in German and one of the leading channels in Europe. The revenues they do is by selling advertising, right? They thought about how can we grow. We are the market leader.

We have like 30% market share. The market is very dominated by them and a second company called Arch. They were looking into how can we grow our business. They asked themselves, who is not buying TV advertising, right? The obvious question was Starbucks and other medium companies, they don’t buy.

They came up with also a very innovative revenue model, which is not that different maybe from Nine Inch Nails in the sense that they say, “We’re going to give away advertising for free to the Starbucks and smaller medium companies. We’re going to help them even with the production and everything. Then we’re going to get a cut of the revenue share we create.” Basic service, you get it for free. Then if it is successful, it’s performance related pay, so to say, and ProSieben got money out of that.

They have been very successful with this, and they grew by two billion Euro revenues within like five to six years with ideas like these. They basically doubled their revenue in six year’s time, with innovative ideas like these coming from growth outside of the core, coming from growth businesses and new businesses that did not exist yet five, six years ago.

You know, I love your whole journey poster, would you walk us through the five steps on a journey? I think that would be very helpful for people to get an overall picture of that.

Yeah, sure. One of the things that I wanted to have in the book is I want to make it very visual so that it’s easier for readers to orient themselves and grasp the contents. That’s why we work with these journey posters, for example, and throughout the book, we use a very visual language to explain concepts. It’s not just visual in the sense of being good, but the visual has actually helped to understand the content.

You talk about five steps, and that’s basically the outline of the book. The first step in a journey is to understand the concept and get a high-level overview of what it is that we’re going to be talking about. We introduce that concept of saying when thinking about strategy you have to think about where do you want to play, how do you want to play, and then how do you want to win.

That traditional strategy offers a certain approach to answering these questions, but what we see in these innovative and high growth companies is that they take a different approach to asking these questions. Three questions are pretty standard for strategy, classic strategy questions that you need to answer yourself, but we take a different approach now.

Then we go through to the second chapter which is all about answering that question of where to play. We say that where to play, it’s all about looking at your customers, looking at non-customers, looking at dissatisfied customers to discover new growth opportunities. The idea is that if you’re really looking for big time growth, like doubling your revenues, or you’re looking for a billion or two billion plus in revenues, that’s not likely to come from your existing and most satisfied customers.

Although you need to keep them happy, obviously, right? That’s what we’ve been taught in marketing. If you’re really looking for the big time growth, you need to go for non-customers. You need to go for unsatisfied customers. It’s about looking at those. We have different types of those we talk about, for example, want-to-be customers. They would like to have your product or service, but there are some barriers to consumptions, so maybe it’s price, maybe it’s access, maybe it’s usability, this kind of things.

We talk about that, what is keeping the customers from being a customer actually. We talk about “job to be done theory,” for example, so we picked that up. We talk about how can you map out and visualize jobs to be done, how can you visualize customer experiences. Then we dive into what are the barriers to consumption, as we called it, what are the hurdles to satisfaction. Basically, understanding why a customer doesn’t buy, that’s your opportunity.

Here, you have an opportunity that you want to get. This is the where to play. Then we come to how to play. How to play is all about how are you going to seize that opportunity. We talk about, we take a very holistic approach to innovation, if you like, so we say it’s not only about product and services, but it’s also about customer experiences. It’s about your business model, and it’s about the revenue model.

We go into these three elements, so to say, of how you define how you want to play. We talk about how to win, which means traditionally you win by being different or by being cheap, for example. We say that nowadays, that’s no longer the case of being different or being cheap, but the real competitive advantage comes from offering value and offering value not only to your customers. We talk about of customer value proposition, obviously.

Whatever strategy or business idea that you come up with, it needs to deliver value to you as a company. That’s why you go there in the first place. Again, we take a very different approach to talking about financial value only, we also talk about operation value. We talk about the strategic value that some business model ideas, for example, give you of others. We talk about the increasing importance of creating value in the ecosystem you’re involved in so if we apply it in the circumstances you’re working with.

This is all about how to play. Then we finish off then with, where to play, how to play, how to win, and then we outline a process, which comes very much from the research that I did about how you can implement this, and how you can take such an idea through iterative cycles and increase the maturity, and the sophistication of your idea as you go through these cycles.

Source: Pexels

Wow, you’ve given us so much great content there. I love the fact you said why someone doesn’t buy is an opportunity. We’re going to tweet that out from the episode. That’s a great line. It’s really a great sound byte, and I’m also really fascinated by this whole validation option card you have going on. They always talk about executives getting out behind their desk. If you’re working at a retail store, go work the floor and hear what the customers are saying one on one.

Let me bring it down to a specific example. I’d be really curious to get your input on this. There’s a family that’s thinking of starting a fashion line based on their daughters’ wanting to be entrepreneurs. The daughters are I think 8 and 11. They’re at the launch stage. They’re tinkering around to see is the audience girls their age whose moms would buy the shirts? They’re on Instagram, and they’re using social media to try and create some branding. Any thoughts on what would be a good way to use your book for them?

Have they launched already or are in-

No, they’re still in the mode of discovering who’s the avatar, and who’s going to buy this, and what should we offer first, and all that.

They are using already a great approach by not building a business fast but by trying out through Instagram and through this kind of things, what is it that people respond to before you invest a lot of money. I think that’s turning the traditional approach and the conventional approach around.

The conventional approach would tell you okay, we do market research. Then we know this is the target audience, and we believe this is what they’re going to buy, and then you build the business, right? You build the products, you fill up your inventory, and then you go out, and you try to sell. We see here is a lot that people before they even build something, so that idea of the minimum viable product, but before you build something, you test and check out whether there is some interest.

I think it’s brilliant to go out and say, “Let’s post a couple of pictures on Instagram and see if the people like them or not.” To pick up that example of ProSieben again that I introduced, ProSieben, to test the idea of giving media for free and getting a share of the revenues, what they did is just issue a press release advertising that idea.

They got dozens of companies that called them up and said, “Hey, this is something that you want to do?” Only then started they building out a contract and what would it look like, and how can we structure this legally, and so on and so forth. Yeah, I think it’s brilliant to test something. Today, with social media and online and everything, it’s very easy to test something without having to spend a lot of money.

That’s great. It’s interesting because you want, in this particular case, the ideal client is the girls their own age, but obviously the mom or the dad or both have to be the ones to get asked to say, “Oh, I want that t-shirt, or I resonate with that message or I like that design.” It’s an interesting challenge from a marketing standpoint to figure out are we targeting the moms or are we targeting their peers because that’s a completely different strategy.

Right, this is where the idea of the ecosystem idea actually comes in. You look at who are the partners selling or who are the partner lobbying. In our business model, it’s obviously the end customers or the girls, but you need the parents to be on board because otherwise, it’s not going to work, right?

The question is what group can we offer them and provide to them. The need the parents have is obviously a different one than the need that the girls have. You need to figure out what are the different stakeholders, and what is the value that we provide to each of them.

Oh, I love that. Who are the stakeholders and the different values we provide? Really great insights. Let’s jump if we don’t mind, Marc, to a bigger company obviously that has been around for a long time, but since you’re the expert on this as well. I used to work at Conde Nast for years publishing magazines, GQ, Wired, W, Vogue, Art Digest, etc. Dwindling print-dollar budgets have caused them to have to reinvent themselves where not only do they have websites that they sell, ads on those, but they’ve gone into a whole entertainment division now.

They’re creating content from the articles into TV shows and movies and have snack-able things to try and have additional sources of revenue. It’s totally changing the business model, so it’s not dependent just on print. The big challenge they’re facing is, of course, whether it’s digital or the entertainments, it takes a while for that to scale up, to make up for the losses in print. That’s rampant across Time and Hearst. Have you looked at that industry at all? Any thoughts on that?

I was indeed the example as I said that we have in the book, which is around media is seven, so looking into new areas of growth. Actually, they use the model to nowadays create the strategic portfolios of investments of companies they work with. Over time, they switched the model a little from media for revenue share. They went into media for equity.

They said, “We’re actually going to use our media power, and we’re going to invest with that power into start-ups.” And they created a portfolio of categories where the model actually works very well. Over time, they learned that it works, for example, very well if everything that’s online instead of offline, retail-based things because they could track whether if it’s an online business, they can track very well, “We broadcast the ad at 8:00 PM and at 8:10 PM, the clicks on the website and the sales on the website go up,” so that’s made them focus, for example, on online business.

Anyhow, nowadays, they use this model to invest in strategic areas, and actually, at the last annual conference, they said that they want to be the number one online trip provider in the next couple of years in Europe. They’re completely switching the traditional advertising business to using their assets, the media, to invest in other areas and build up new revenue streams, there.

When talking about Conde Nast, I think you have the expertise in certain areas like travel, for example, you have the access to the reader, so the question is how can you leverage that and go into completely different areas, which bring you different revenues, and you’re not so much relying anymore on the advertising on the one hand. On the other hand, ProSieben always profits from the ecosystems that they build in these offerings because they can do some cross-selling there and there.

Yes, I think that’s fascinating. Do you see a lot of differences between what’s going on in Europe versus the US with launching?

I think in Europe we’re still a little bit more in that risk averse mode, I would say. The culture here is not entrepreneurial as in the US. We tend to be more careful also with the money, I would say, depending on the country. I used to live in Austria as I studied there. If you’re a startup and you get 500,000 in venture capital in funding then nobody would talk about 500,000. That’s the difference, I would say.

Let’s go back to The Art of Opportunity, this road map because there’s just so much wealth of information here. We’ve got the concept of finding the opportunity. Then this whole concept that you said of understanding who your customers is and who your customer is not, and why somebody wouldn’t be buying it. Then you craft a strategy. I’m really fascinated by the three phases of launching: inception, evolution, and diffusion. Can you expand on those three for us for a minute?

Yes, sure. That was really the core of my research, so when I did get the research, I looked at companies that have successfully launched new business models. I looked at what it is that they actually did. So I mapped out all the activities that they went through. I read hundreds and hundreds of recalls of minutes from the meeting, from workshops, and I did interviews, and I did product planners, and so on and so forth.

What really looking at what it is that they did. Having been trained in traditional strategies, I tried to look into where did the analysis happen, where did the development of the strategy happen, where did the implementation happen. Obviously these categories of that kind of thinking, it didn’t help me to explain what was going on in the data. I couldn’t make sense of the data. The analysis was all over, planning was all over, they started implementing already before planning was done. The traditional strategy approach just did not explain what was happening.

Then I looked into, I thought, “Okay, it sounds a little bit more like lead, for example, design treating and agile because it’s these iterative cycles of doing things. Then I also saw that it’s not all iterated, like this build, measure, learn that entire lean, that doesn’t go on forever. There was some stuff that happens before, and there’s some stuff that happens after.”

That’s when I came up with these three stages that I called inception, evolution, and diffusion. The key thing is that in the inception phase, this is where you do some research, and you try and figure out what is your opportunity, as I said earlier. Then once you have your opportunity, you develop an initial idea. Like ProSieben, we’re going to do media for revenue.

At that stage, it’s just that idea. It’s not very sophisticated, and you have not planned out and flushed out all the details. You haven’t built anything. It’s really just about testing that. Once you start testing that, so you validated with these Instagram pictures like the family fashion business that we spoke about or issuing a press release like ProSieben did, and then you get some feedback. Then you start working. This is where you enter the evolution phase.

The evolution phase is really about that iterative cycle of you design something, you develop something, you put it out, you test it, you gain some insight based on the reactions from customers. You use that to work it into your strategy and into your business design. As you go along and as you go through these cycles of doing something, learning from it, using the learnings again to go into the next cycle, you go through these cycles and the maturity of your idea keeps on going up.

The idea becomes more sophisticated and you have flushed out all the details until you hit a point where you say, “Now I know and have validated that it works sufficiently well. Now we’re going to switch gears and we’re going to switch from designing our strategy in our business toward scaling up.” That for example, for ProSieben, was the moment, so that was about two years, they had about 20 million euro in profit, and they said, “Now we’re sure that this works well. Now we’re going to scale it up.” That was the moment where they found a dedicated company. They started hiring more people. They started standardizing the processes to be able to scale it. This is the diffusion phase. That’s where you diffuse everything, and you scale it upward.

Source: Pexels

What mistakes do you see when people scale?

Scaling too early, I would say, is definitely a mistake. If you think that we have something, we invest a lot of money in it, and then you scale it up, and then it doesn’t work, and then you’re stuck with it, and now we have to pivot. You might sort of make a lot of customers angry when you pivot. The example that comes to my mind now is Medium.

Oh yeah, the articles.

Yeah, right. They convinced a lot of publishers to come to their platform and did some advertising model behind that. They had some idea of guaranteeing revenue for the advertisers I think and for the publishers. At some point, they saw that, well it’s not working, and they pivoted. Now they had a lot of startups and were relying on these revenues.

Obviously now they’re all angry of having been failed by Medium. In my mind, I would think that was scaling too early. You have an idea, and you’re not sure whether it works, and you scale it and you try to get a lot of customers. Then you see, oops, it doesn’t work.

Wow. Thank you. I love the example. Thank you. Well, before I let you go, let’s just tab the highlights. I know there’s business-designed thinking. If you had to describe that in a few sentences, Marc, how would you describe mastering the art of business-designed thinking?

I think it’s all about a new way of working and a new mindset that you need. What we do in the business-designed thinking chapter, we kind of summarize what we believe are the ways of working and the mindset that we need to apply more and more. Coming from designed thinking, it’s obviously all around visualization, visual thinking, but it’s also about co-creation, which means, on the one hand, a more cross-disciplinary team from your company.

It’s amazing when working with companies, I did an innovation workshop not too long ago at a North American manufacturing company, and I worked with the R&D guys. One of the outcomes of the workshop was actually, well, we ought to talk to marketing and sales. They had never done that. You won’t know what R&D is doing if they never talk to you.

Yeah. In their own little bubble, their own little silo.

So co-creation with your customers, asking your customers for constant feedback to validate your ideas. To me, these are the two most important ones. Then obviously, as we discussed that being comfortable with the iterated approach. You don’t need to have all the answers when you start, but you need to be able to collect the feedback and be willing to iterate on your ideas.

Got it. Don’t need all the answers when you start. That’s another great tweet, really great. It’s interesting, one of my clients is Gensler, which is one of the world’s largest architecture design firms, and they have 20, 30-some different practice areas, airports, and sports, and law firms. What I found working with them is one of their key strengths is that they compliment each other.

The knowledge they learn in research on airport security, they can then translate that when they’re designing a sports stadium. If you only specialize in one thing and don’t share that information across practice areas, then you’re having to start from scratch every time. I really think that what you’re talking about there is a great example.

Yep, very good example of it.

We’re going to put The Art of Opportunity link to buy the book in the show notes. Do you want to give us the website address and your Twitter handle so we can follow you and all that good stuff?

Yes. The book website is at theartofopportunity.net. You can sign up for free to get access to downloads, so we have a lot of the content that is in the book like the exercises that you can do with your teams, the templates to visualize your opportunity, to visualize your strategies for free. Download at www.theartofopportunity.net and my personal Twitter handle is @sniukas.

Got it. All right, Marc, well thank you so much. Do you have any final word of advice or suggestion for people as they’re on this path?

Let’s close with one of the quotes from the book. It’s about you think big, so you think plus a billion. You start very small with one or two people and maybe just the press release, and then you need to scale in an intelligent way.

Source: Pexels

That’s fantastic. I love it. Thank you so much for sharing your wisdom, your research, and more importantly your stories because that’s really what connects us. We can see and get inspired on how we can take what you put together in it. To me, this is a must read for everybody in the entrepreneurial space and even those obviously big companies who are looking to innovate. Thanks again, Marc.

Thank you, John.

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