ILC Model

The ILC (Innovate-Leverage-Commoditize) model is a sensing mechanism that empowers your business to identify new opportunities without taking unnecessary risks while making it incredibly challenging for competitors to keep up with you.

At its core, the ILC model is about monitoring your most successful customers and copying their solutions. They innovate, you leverage the success-indicating data (like their bill size), and then you commoditize their services (make it easier to use for everyone).

Since your customers identify market needs, the risk of your product misfit is nearly non-existent.

How the ILC Model Works

The ILC model doesn't begin with creating something entirely new. Instead, it starts with a service that can be easily adopted and consumed by others – your customers. These customers are incentivized to build innovative solutions that address existing or emerging market needs.

The Three-Phase Process

1. Innovation (Customer-Driven)

• Customers build innovative solutions using your platform/service
• They identify and address market needs you haven't yet served
• You track data indicating customer success (billing volumes, growth rates)

2. Leverage (Data-Driven)

• Monitor success indicators like billing data to identify winning solutions
• Recognize customers who have achieved product-market fit
• Use this data as a lighthouse showing where market opportunities exist

3. Commoditize (Scale-Driven)

• Launch competitive, industrialized services before customers solidify market dominance
• Ensure your offering is easier to use than the original customer solution
• Attract new customers who will explore new market opportunities

Key Examples

Apple & Google

Both organizations have massive app stores. Through payment analysis, they identify which apps are most heavily used, revealing market opportunities. Apple's development of Apple Music while making it difficult for Spotify to be approved demonstrates this pattern.

Amazon

Amazon's cloud services evolution shows the ILC dance in action:

• Started with basic computing (EC2, 2006)
• Smaller organizations continuously create new services using Amazon's platform
• Amazon identifies successful patterns and includes them in their offering
• This creates the "startup death" effect at re:Invent conferences

Simon Wardley

Simon developed Wardley Mapping for his own work and released it under Creative Commons. This created a self-selection mechanism where smart people contribute to mapping practices, making mapping better and attracting more smart people. This talent pool enables addressing increasingly difficult challenges.

Conditions for Application

Initial Commodity Offering

Your initial offering must be used to build solutions that address needs for which you have no offering. If your initial offering is an end product, ILC cannot work.

Domain Stability

The model works best when you can stay within your domain of expertise. Amazon stays within IT infrastructure, making it easier to master the pattern and build new products.

Observability

You must be able to identify your successful customers. If you rely on resellers without robust analytics, you may struggle to understand which use cases are worth replicating.

Strategic Implications

Competitive Advantage

• Risk Reduction: Customers identify market needs, reducing product misfit risk
• Speed to Market: Leverage existing customer innovations rather than starting from scratch
• Continuous Innovation: The cycle repeats at larger scale with each iteration

Protection Against ILC

If you're competing with organizations using ILC:

Speed and Running Your Own ILC

• Release new products faster than competitors can copy them
• Force competitors to constantly rework their products
• Eventually, they'll either acquire you or focus elsewhere

Constraints

• Secure critical capabilities not widely available
• Increase costs for competitors, making their efforts unprofitable

Size

• Specialize in very narrow niches
• Make reverse engineering unattractive due to limited profits

Application to Wardley Mapping

When mapping ILC strategies:

• Position customer innovations in the Genesis/Custom Built stages
• Track evolution as successful solutions move toward Product/Commodity
• Identify timing for when to commoditize customer solutions
• Map competitive dynamics between your platform and customer solutions

Key Insights

1. Customer-driven innovation - Let customers identify market needs
2. Data-driven leverage - Use success indicators to spot opportunities
3. Speed-based commoditization - Industrialize faster than competitors
4. Domain focus - Stay within your expertise area
5. Continuous cycle - The process repeats at larger scale

Conclusion

The ILC model provides a systematic approach to identifying market opportunities while minimizing risk. By leveraging customer innovations and commoditizing successful solutions, organizations can create sustainable competitive advantages while making it difficult for competitors to keep pace.

The key is maintaining the right balance between encouraging customer innovation and timing your commoditization efforts to maximize value capture.

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The ILC model is a powerful strategy for identifying market opportunities. Learn more about value chains and evolution stages to understand how ILC fits into broader strategic thinking.