The Invincible Company | Alexander Osterwalder

Summary of: The Invincible Company: How to Constantly Reinvent Your Organization with Inspiration From the World’s Best Business Models
By: Alexander Osterwalder


In ‘The Invincible Company’, Alexander Osterwalder demonstrates the importance of constantly reinventing your organization by balancing exploration and exploitation to stay ahead in today’s rapidly changing business landscape. Delving into the dual cultures of the Explore and Exploit portfolios, this book shows how they both play a crucial role in fostering innovation and refining existing business models. Additionally, the book covers practical steps organizations can take to generate new ideas, allocate resources, and adapt to market trends while maintaining their core strengths.

Innovate and Renovate for Business Survival

Successful companies must manage Explore and Exploit portfolios to strengthen their business models and achieve long-term success.

To survive in today’s business world, companies need to be innovative and adaptable in the face of disruptive changes. The key to building a robust business model is to have two distinct portfolios – The “Explore portfolio” and the “Exploit portfolio.”

The Explore portfolio is all about innovation, focusing on new ideas and experimentation, measured according to your firm’s anticipated return on investment and its level of tolerance for uncertainty and risk. The goal is to find new ideas that can potentially yield strong financial returns.

On the other hand, the Exploit portfolio aims to improve existing business models by using strategic planning to bolster the steady, predictable returns of existing product lines. The metrics used to evaluate this portfolio are financial, social, and environmental benefits, vulnerability to disruption, and changing economic conditions.

Companies must maintain a culture of Day One, with a start-up spirit even as they grow to manage large teams and multibillion-dollar businesses. Each portfolio requires different staffing; innovators should focus on exploring new ideas, while strong organizers and planners should work on improving existing business models.

In conclusion, businesses should aim to continuously innovate and renovate their products by managing both portfolios successfully. By doing this, they will be well-equipped to withstand any existential threats that come their way.

Bosch’s Accelerator Program for Innovation

Bosch’s innovation program, located in its Business Model Innovation Department, was created for jump-starting new technology and innovation projects. The program offers funding for multiple project teams to experiment with new ideas and test them for consumers’ interests and product viability. Only a few projects move into development. Still, Bosch’s experimentation and refinement process leads to faster turnarounds and effective innovation.

Bosch understands that innovation rarely follows a straight line from idea to consumer-ready product, and limiting new ideas at the start closes off potential opportunities. To achieve successful innovation, the program follows specific actions: generate ideas as potential opportunities and value propositions, offer resources such as time, funding, and staff, persist in testing ideas, be agile to change business model depending on test results, know when to abandon a poor strategic fit idea, sell a promising yet high-risk idea to external investors, and move a proven idea into the organization’s Exploit portfolio as an addition to an existing product line or a stand-alone venture.

The message is clear: new business models evolve through iterative testing, validation, and refinement. Organizations can achieve successful innovation by implementing Bosch’s specific actions.

Strengthening Existing Business Models

Organizations face both internal and external risks to their existing portfolios, making it crucial to assess strengths and weaknesses. Nestlé’s actions in acquiring a global license from Starbucks and enhancing its Gerber baby food products demonstrate ways to bolster existing business models. Companies can purchase an extension, create a partnership, acquire an asset, make upgrades, find a merger, go to market, or retire a product line to maximize their portfolio. To protect, improve, and reinvent existing business models, companies need to support separate Explore and Exploit functions within their organization. By managing these two portfolios differently, leaders can evaluate new ideas and refine existing product lines while strengthening their businesses against external threats and disruption.

Building Corporate Resilience

Executives who lead business models require a clear understanding of their organization’s corporate identity to integrate it with their strategy, culture, and image effectively. A prime example of this is the success of Ping An Insurance, managed by Peter Ma, during the 2008 global financial crisis. To achieve his goal of building resilience, Ma implemented a three-pronged approach that integrated strategy, culture, and branding. He shifted the company’s objectives, incorporated a start-up mindset into its culture, and rebranded it. Building resilience requires leaders to seek growth opportunities, which may involve improving existing business models or creating new ones. In conclusion, executives should steer their organizations towards desired markets and technologies by defining their corporation’s identity and prescribing the necessary resources and skills. Furthermore, they must determine the best way to integrate successful innovation projects with existing businesses.

Navigating the Uncertainty of Innovation

Explore portfolio teams seek to minimize uncertainty in the process of bringing new products or services into profitable business ventures. To achieve this, they adopt two iterative processes: the Design Loop and the Testing Loop. The aim is not to measure time and budget but to reduce the risk and uncertainty of new business ideas before investing heavily in them. Teams document their progress using detailed metrics that ensure consistency and give leaders a holistic view of the portfolio’s potential returns. Strategic alignment is also a critical factor in measuring the value proposition of the projects. Ultimately, teams allocate more resources to ideas that generate positive results, while discarding those that fail to show promise. Through this approach, Explore portfolio teams minimize uncertainty and maximize their chances of success.

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