The Subtraction Technique: Reframing Your Business Model

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The Subtraction Technique: Reframing Your Business Model

I had just finished a talk on Systematic Inventive Thinking in which I had stressed the usefulness of the Subtraction technique. Just then, a group of seven men approached the stage. They introduced themselves as the management board of Standard Bank of South Africa. They liked the idea that innovation is something that can be learned and applied. They were especially interested in Subtraction. “Do you think it would help us with our problem?” asked one of the delegates.

I had just finished a talk on Systematic Inventive Thinking in which I had stressed the usefulness of the Subtraction technique. Just then, a group of seven men approached the stage. They introduced themselves as the management board of Standard Bank of South Africa. They liked the idea that innovation is something that can be learned and applied. They were especially interested in Subtraction. “Do you think it would help us with our problem?” asked one of the delegates.

I answered the same way I always do when asked this question: “I don’t know. But there is only one way to find out.” We found an empty meeting room in the conference hall and made ourselves comfortable. The executives explained their problem.

“We want to grow by acquiring other banks,” said one of the managers, who seemed to be the appointed spokesperson. “We agree about that. We just can’t seem to agree on the best approach. Some of us want to buy another bank in South Africa, while others like the idea of acquiring a bank in North America or Europe. How can we use this innovation method to resolve this problem?”

I thought about it for a minute. I had never faced this type of strategy problem before. I really didn’t know if Subtraction would work as well with business model innovation as it did with traditional product or service innovation. But I was willing to try.

So I jumped in. “Okay, let’s be true to the process and start from the top. The first step of Subtraction is to list the key components. What are the components of a bank?”

The directors looked around at one another. It was such a simple question that it seemed to take them off guard. “Staff. We have employees of many types.”

“Good. Let’s write down ‘staff.’ ” I picked up a marker and began making a list of bank components. “What else?” “Assets,” said one. “Liabilities!” chimed in another. “We have buildings, ATMs, locations—we call it PPE, for property, plant, and equipment.”

“Keep going.”

“We have systems, and, of course, we have customers. We also have a reputation—our brand.”

I wrote this on the whiteboard:
•    Staff
•    Assets
•    Liabilities
•    Property
•    Systems
•    Products and services
•    Customers
•    Brand

“Now let’s use Subtraction and remove one of the components, preferably an essential one.” I noticed some of the men smirking. I had gotten used to this reaction. And many times, using these techniques will create a product or service configuration that seems silly. In humor and joke telling, the human mind makes a connection between two unrelated themes to form the punch line. This causes people to laugh. But even in serious situations such as this one, actually applying a technique results in a chuckle or two. Two unrelated ideas regarding a bank were about to collide, and the men just couldn’t resist the temptation to laugh.

“Let’s subtract the staff !” said one of the senior members. He said it half-jokingly, but he was genuinely interested in where the thought process would lead.

“All right. Imagine that your bank has no employees. It has all the other components, just no staff. Now ask yourself: What bank could you buy that has the ideal labor force for the kind of bank that you are? Given your customer base, your brand reputation, products, and services, what bank out there has the perfect group of employees that fit well with the rest of your components?”

One of the executives said, “We could find an employee base that is more diverse, for example. Perhaps we want employees with a global perspective. We could acquire a bank with employees who would meld with our employees but give us a broader perspective.”

Just imagining their company without one of its essential components helped these senior executives gain a whole new perspective on how to solve their problem. It no longer mattered where the bank was located. Geography had nothing to do with it. Applying the Subtraction technique (with the replacement feature) on just one component created a more useful dialogue about acquisition targets. Seeing the problem in this new light made merging with another bank even more interesting.

I let the discussion go on for a while. “Now let’s try it again. Pick another component from the list—any one of them.”

“Brand. Let’s subtract the company’s brand.” No one was chuckling this time.

“Very good. You have all the other components of your bank, but no brand. Now, what bank could you acquire that has a brand reputation that is ideally suited for the rest of the components: your staff, customer base, and so on?” The men thought about it for a moment, each of them pondering the various banks that might fit this profile. They were silent, actively thinking about other components written on the whiteboard.

After a few minutes, the leader of the group shook my hand and thanked me. Politely, he asked me to leave the room. “We have some work to do,” he said.

Following that meeting in 2004, Standard Bank of South Africa went on to acquire banks in Argentina, Turkey, Russia, and Nigeria. Note that it did not actually get rid of its staff, brand, or any of the components with these acquisitions. The point of using Subtraction was to mentally imagine the bank without these components as a way to reframe the problem and see opportunities in new, creative ways.

It worked!