Staying Stable and Innovative in an Era of Change

• During a time of continuous change, business educators need to adopt dual mindsets that combine a willingness to experiment with an appreciation of stable, proven strategies.
• As artificial intelligence reshapes industries, educators must rethink how to prepare students to contribute unique value that machines cannot replicate.
• To remain relevant, business schools must make serious investments in innovation and create safe spaces for experimentation, where new models can be tested without expectation of success.

 
How can business schools continue to stay relevant and add value to their stakeholders, at a time when the world is changing by the day? By adopting a dual mindset that simultaneously values both exploring the new and exploiting the old, says entrepreneur and innovator Alex Osterwalder.

Ranked on the Thinkers50 list (along with his long-time mentor Yves Pigneur), Osterwalder is the creator of the Business Model Canvas, a straightforward yet comprehensive model that works users through nine building blocks of business innovation.

Osterwalder first introduced the Canvas in the early 2000s as part of his doctoral dissertation, under Pigneur’s guidance. At the time, he was less interested in publishing the paper in an academic journal than he was in getting it in the hands of practitioners. After he published the research online, practitioners began to download it in growing numbers, and companies invited Osterwalder to present workshops to their teams. Over the past two decades, organizations worldwide have used the Canvas’s nine building blocks to better understand their businesses.

Today, his company, Strategyzer, also offers two adaptations of the model. The Value Proposition Canvas was created for companies that want to define the needs of their customers. The Mission Model Canvas is designed for organizations in which, as Osterwalder explains, “there are no customers or clients, but there are beneficiaries—where there are no revenue streams, but there is impact.”

Osterwalder will be among the keynote speakers at AACSB’s International Conference and Annual Meeting (ICAM), to be held April 7 to 9 in Vienna. Ahead of the conference, he shared with AACSB Insights his thoughts on how business schools can balance experimentation with practicality in the era of artificial intelligence, all while keeping their programs relevant in the face of an uncertain future.

Why do you think the Business Model Canvas struck such an immediate chord in the business community when you first introduced it?

What made it really take off was that we emphasized simplicity and applicability. We really avoided any kind of buzzwords in the doctoral dissertation—we replaced terms like “core capabilities” with terms like “resources and activities” to use just plain common-sense words.

Then, there was the visual aspect. The Business Model Canvas wasn’t just a concept—it was a real tool that you could use. You could print it out, put it on a wall, and get going right away after a two-minute explanation. That made it work.

Have you seen organizations apply the tool in any unexpected ways?

We expected that it would be used in large corporations for strategy and for testing business models and new ideas. But we’ve also seen the Business Model Canvas applied to mergers and acquisitions. That’s not something we foresaw, but it makes total sense.

The U.S. State Department and the Department of Defense also started using the Mission Model Canvas. I didn’t ever think that it would be applied by the Department of Defense for defense challenges, or by the State Department for the refugee crisis or other humanitarian aspects. That was a very unexpected and very powerful use.

How has the Canvas model itself evolved over the last 20 years?

We designed the Business Model Canvas for one job: to describe an organization’s business model. Some people have criticized it saying, “Well, it doesn’t do competition” or “it doesn’t do products.” But we never set out to create a Swiss army knife that does everything, because then it would do nothing really well.

Instead, our approach was to evolve not the Business Model Canvas, but the toolbox that goes with it. So, we created the Value Proposition Canvas to a zoom in on how to create value for customers with a bundle of products and services. Then, we improved the process aspects—we came up with a way to score innovation projects to show evidence that supports the business model.

I love Swiss army knives—I’m Swiss! But what you really want is a full toolbox, so that you use several tools together in different processes. 

How can business schools use the Business Model Canvas not just as a teaching tool, but as a framework for rethinking how they structure and deliver education?

Every institution, whether it’s a business school or a private company, has a business model where its leaders need to think through the nine building blocks. They need to ask, How are we creating value for customers? How are we delivering that value? What are the needs today in the business environment? How are we going to create a sustainable business model?

Traditional business schools are already competing with online course platforms like Coursera, and they’re always competing with the best business schools in their domain. They need to ask, How are we going to differentiate ourselves? What is a sustainable way to create, deliver, and capture value?

“What will be possible in AI in two years or in ten years? Nobody knows. All you can do is create an organization that is ready to adapt.”

We’re going to see a whole ecosystem of different types of models for business schools. Schools can use the Business Model Canvas and the Value Proposition Canvas to think through those questions and adapt to the 21st century.

You gave a recent interview to The Innovation Show, in which you said that in the short term, human workers who are experts at using artificial intelligence (AI) will continue to be in demand. But you added that, in five years, when AI is even more sophisticated, it might be less clear how humans can contribute. How can business schools prepare for that future?

It goes back to fundamentals: Where can humans still create value? Companies will need fewer people to deliver value, because more of the basic tasks will be done by artificial intelligence. Predictions now show that in just a few years, AI will combine the top 1 percent of experts in several domains into one large language model.

What will be possible in AI in two years or in ten years? Nobody knows. All you can do is create an organization that is ready to adapt—to constantly explore your business and continue to iterate your business models to adapt to a changing world.

In the same interview, you also make a distinction between “managerial CEOs” and “entrepreneurial CEOs.” Why has that distinction become so important?

In a world that is constantly changing, managing what already exists is not enough. Entrepreneurial CEOs can see what’s going on in the future. They don’t know all the answers, so they will constantly try out new things, and when something works and sticks, they will scale it.

That doesn’t mean that CEOs do not need managerial skills. But they need to have a dual mindset—or at least hire somebody who can do the managerial part—so they can stay flexible.

For instance, as a CEO, I sometimes need to be a manager and ask, Are we on plan? Are we on budget? The goal is not to create chaos, but to orchestrate execution. But then, five minutes later, when I’m talking to my innovation teams, I need to ask different questions. What did we learn? Is this working? Should we kill this project and reallocate the resources?

Should business schools encourage all students to view themselves as entrepreneurial, regardless of their chosen career paths?

Organizations will increasingly need both aspects—the ability to explore and the ability to exploit. When managing existing business units, people still need to know how to explore in an uncertain world.

Not everybody needs to be an entrepreneurial leader or an explorer. But explorers need to speak the language of managers, and managers need to speak the language of explorers. They need to collaborate harmoniously.

Today, these two groups often clash because people do not have dual mindsets. They’re either entrepreneurs or managers. At the end of the day, a person might be better at one or the other; few will be good at both. But students still need to understand each other and be able to navigate between both spaces.

What are the most effective methods for helping business students (and business faculty, for that matter) cultivate entrepreneurial, innovative, and experimental mindsets?

The only way to do it is to do it. Just like medical students don’t become heart surgeons just by reading, business students won’t become experts just by reading. They need to apply what they learn—to learn by doing. They don’t need to start companies, but they could be a part of a startup.

“Explorers need to speak the language of managers, and managers need to speak the language of explorers. They need to collaborate harmoniously.”

It’s also not enough to listen to other great entrepreneurs. No one is going to become a great entrepreneur or develop an entrepreneurial skill set through assimilation.

That said, I’ve also never seen a heart surgeon experiment without learning the theory. Students will need to do both—they need to learn the theory and learn by doing at the same time.

What tools and support do you think business faculty need most from their institutions to encourage them to experiment with innovative teaching practices and promote adaptive ongoing learning in their classrooms?

Two things. One, schools need to show that they’re serious about this. They shouldn’t just talk about innovation, but invest in innovation. At every big meeting, their leaders can spend at least a portion of the time on innovation and exploration. They can adopt dual mindsets. They can have areas of reliability and predictability where they’re not going to experiment and spaces where people can experiment and learn.

Two, schools can create experimental vehicles where everything’s allowed but where they know that things could go wrong. Perhaps they have a portfolio of ten projects in this space, and they know that most of them are going to fail. They can create experimental courses where people play around with technology. These will be their vehicles of exploration—companies call these vehicles “accelerators.”

Without giving too much away regarding your upcoming keynote, what’s one idea or challenge you hope will spark the biggest discussion among educators at ICAM next month?

My hope would be that everybody—everybody—understands the difference between exploration and exploitation. Between inventing the future and trying out new stuff on the one hand and running the more reliable stuff on the other hand. I want them to know that it’s not an “either/or.” It’s an “and.” 

A school might ask, “Well, where are we going to do the exploration? And how are we going to create a safe space to experiment, where we know that only one out of three projects—or if we’re bolder, one out of ten projects—will succeed?” But if schools create more experimental vehicles, it could become a competitive strength to say, “We’re going to try out new stuff. We don’t know how it’s going to turn out, but we can experiment alongside the stable stuff that we know is going to work.”

When you can achieve that dual mindset—if you can manage the stable and predictable while experimenting in a safe space—you really understand how to do exploration in ways that are manageable and in ways where you can foresee risk without wasting a ton of money.

The other thing that I really want people to take away is that this doesn’t have to be expensive. If you end up scaling an innovation that has been proven to work, this can even become profitable.

Implementing what others do, because you’ve seen it work and know students like it—that’s just copying. That’s not innovation. It’s not that you can’t implement something that you’ve seen work elsewhere, but at the same time, explore things that are completely new and unique to you. That’s what will give you a competitive advantage.