Seizing the White Space

Mark Johnson co-founded Innosight with Clayton Christensen and wrote this on business model innovation. The white space of the title is the range of opportunities a company cannot address with its current business model, which he distinguishes from opportunities requiring new products or new markets alone.

His framework has four elements. The customer value proposition specifies the job a customer needs done and how the offering does it. The profit formula specifies the revenue model, cost structure, margin model and resource velocity required to deliver that proposition profitably. Key resources are the people, technology, facilities and brand needed. Key processes are the recurring ways of working, including metrics, norms and rules. Johnson argues that these four interlock, that changing one requires changing the others, and that the profit formula is where most incumbents fail because their existing cost structure and margin expectations cannot accommodate a different model.

He treats the jobs to be done concept as the entry point, and argues that a company should start from an unsatisfied job rather than from its own capabilities. The prescription for incumbents is to build the new model in a separate organisational unit with its own metrics, because the existing organisation's processes and profit expectations will otherwise kill it. The cases include Hilti's shift to tool leasing, Dow Corning's Xiameter low-service channel, Tata's Nano and several others. The framework is clear and usable; the evidence is case-based and several of the examples have since performed less well than the book implies.