Here are the Top 10s of this blog in 2011. I hope they give you some insights. More than 45.500 visits and 72.458 pages impressions were recored in 2011 (12/26/10-12/25/11) on this blog. Thank you very much!!All of you are a great motivation to me and inspiration to the field of business model innovation and business model design.
I have prepared my personal highlights and the Top 10 of post you have visited during 2011. The other Top 10s are about the search terms around my blog and the countries where all the visitors come from.
It is amazing how knowledge dissemination has changed over the last years thanks to the internet. Today, relevance counts more than pure marketing or brand power. A big thanks to Google that made it possible that readers find the blog. Today, knowledge disseminates from students to professor, from lower ranks to CEOs. A revolution in knowledge management.
Thanks to the blog and its readers, I got assignments all over the world. This year, I loved particularly to work in Seattle, Singapur and Cairo (shortly before the revolution). Good luck to all my friends in Egypt and keep up the free and entrepreneurial spirit I felt there.
Thanks to all my readers and clients, 2011 was a very exciting year. 2012 will be exciting as well. I have found with with the innovation campus of the Wolfsburg AG, a public private partnership between the city of Wolfsburg and Volkswagen AG, a sponsor for a tool box for entrepreneurs. The tool box will be out by mid 2012. The tool box will be in German and is targeted at all entrepreneurs that what to make a difference in life.
fluidminds has launched a new product, a five day workshop for intrapreneurs in large corporations. First pilots in 2011 and more to come in 2012. It is fantastic to see how fast you can find customer insights and then develop great business and growth initiatives on top of them.
If you are interested in the Toolbox, please subscribe here. The news will be in German.
Thanks to the business model canvas people are enthusiastic to build new business models and find business model innovations, but often they get lost in technocratic details. They just see building blocks but they forget the overal logic every great business needs.
Actually, you as an entrepreneur have to answer just one core question: Why should your firm exist on this planet? You need a Daseinseinsberechtigung (right to exist) for your firm. This is a very philosophical question. To be more operational, you can break down the Daseins question into four core questions. But still the answers will not come with a pure analytical process but with creativity and lot’s of empathy for your customers and their jobs they want to have solved.
The four core questions on your business model canvas
Why should customers be excited to do business with you? That is the value proposition. You could almost go as far as asking: Why should customers love to do business with you?
How do you create the excitement of your customers in a productive way? That is the value architecture or operating model. Here you describe how you fulfill your value proposition.
How do you earn money? That is your revenue model or the profit formula and here you should be able to explain why you as the owner should be excited about the business.
What are your values you live up to in your team and with your customers and partners? That is the human side of the business and of utmost important, since it is the most difficult part to copy. I call it the culture and values of a business.
For these questions, you need compelling answers and the nine or elven building blocks are very helpful in answering the questions but do not get lost in details but look at the broader picture and see the interdependencies. If you can answer the questions you have a great strategy that is customer-oriented, profitable and sustainable.
The bad part for any mediocre business is that you cannot answer the questions. Please all mediocre business, why don’t you try harder and work on “why should your customers be exicted about you?” instead of optimizing a dull business.
Do you have to be market-oriented or is this again one of the buzz words that hides more than its reveals? Or should you be customer driven? Let’s take a look at the two words and concepts and see why Alex and I have chosen not the term market but customers for our canvases.
I just return from a workshop for entrepreneurs in Wolfsburg, the birthplace of Volkswagen. We used the business model canvas to focus the entrepreneurs and their coaches on the core building blocks of a business models.
Interestingly, most participants of the workshop always talked about markets, that we need to be more market oriented, that we have to conquer new markets. But is this true?
Markets, top-down approach
Markets are the sum of customers that spent money and therefore have shown a demand in the market. But a market is abstract and impersonal. You can not sell your product to a market. There is no Mrs Market to write a bill to and that is exactly the problem for entrepreneurs. You might be in a great, growing and profitable market but that does not mean you have one single customer who pays your bills.
Markets is a top-down approach very well suited for analyst and consultants. The market is great for analysis but not good to sell something to.
We have a great tool for visualization of a business model: the canvas. There is a hype on visual thinking and business model design. But can the tools deliver?
In the last years, I have seen many uses of the business model canvas to real cases. Some showed astonishing results, others were disappointing. Why? Any tool is only as good as the user. A fool with a tool is still a fool. But also: A genius without the right tool might be a fool. So let’s see, what makes the difference.
Visual Thinking = Thinking with Visual aid
Visual Thinking is often mistaken as nice visualization. A bad idea does not become better by visualization. Visual Thinking is great since you think in pictures. Visualization can help to make your thinking better, to see more options and see the interdependencies among all components. But you still have to think!
There was a reason why god gave us two brain hemispheres: Visual Thinking is the combination of analytical and creative thinking. So do the thinking.
Be precise in your thinking
Due to the limited space, people tend to be pretty imprecise when filling out the canvas. They fill the canvas as if it is just a form, not the master plan for a venture or for the future of your firm. That happens particularly often in large corporations where the people are so stuck in their old thinking. Continue reading The Art of Painting on the Business Model Canvas
“What business are you in?” sounds like a simple question. But it’s not. How you define your business determines which direction your firm can go. Based on your answer, you define and limit your strategic options.
In a company, the business model is defined by a dominant group of people. They have a common understanding of what business they are in and how they create value. However, the business model is not an absolute reality. It’s a social construct of dominant opinion makers, e.g. your top management. This is important to understand.
By taking a different look at your business, and thereby challenging your dominant logic, you can identify more and different strategic options for your firm. But beware; by doing so, you are also challenging the top dogs in your firm.
Life is not that simple. Changing perspectives by xkcd.com
How you define your business depends on the dominant logic of your management
Considering the definition of what a business model is, it seems easy to describe the business model of a company. You can use the business model canvas (Alex Osterwalder‘s or mine) and then you describe how value is created. Often we assume that regardless of who describes the business model, we will end up with the same description. This is a mistake.
Particularly on the web, we see a lot of copies of successful business models. How many clones are there of Groupon? How many competitors and incumbents wanted to copy Amazon in the late 1990s and failed? The core question is: Is it possible to copy a business model? In this post, I will elaborate on this topic.
During a recent interview for a bachelor thesis, I was asked: Under which circumstances is the transfer of a business model e.g. from a different country or from a competitor a useful strategy?
I must admit, I am skeptical about the outright transfer of business models from one firm to another. The reason is very simple. A business model is more than its technical components like your value chain, revenue model, your product etc. The business model also includes soft factors like the value proposition, your values and corporate culture or your core competencies. Remember the definition of core competency: core competencies have to be rare, difficult to copy and valuable.
Many strategists, VCs and purely analytical people think that it is easy to copy a business model. What they forget is that a business model is not just a technocratic combination of components, in fact, humans are involved with their values, cultures and hidden assumptions. You can copy the hard components, but the human aspect of a business model –values, culture, tacit knowledge – is difficult to copy.
Business Model transfer from Start-ups to Start-ups
I just had the pleasure to spend sometime with two passionate freaks and both have built a business around their uniqueness and idiosyncrasies. The idea behind this post is to inspire you to find YOUR business model for YOU. Do not copy somebody else but find something that fits YOU and YOUR unique skills.
I spent the last week ski mountaineering in Italy in Valle Maira (south east of the piedmont region, east of Cuneo). It was a very enjoyable vacation with lot’s of fun, work and pleasure but also with learnings I want to share with you.
I learned from two people, Lucas Iten, our mountain guide and chef Enrico Crippa from the two Michelin star restaurant Piazza Duomo in Alba. Both are passionates. Both are freaks.
Mountain guide Lucas Iten
The first freak I encountered was our Swiss mountain guide Lucas Iten also called Mountain Geier. Actually, Lucas is not really customer-oriented; he is just the best in finding the best run under the present circumstances. And the best run is not really defined by the customer but the possibilities of the day. And if that means to climbed 1700m than you better ascend.
You have to fit to Lucas. When you do, you have one of the best times possible in the mountains. He loves the runs; he is like a child with all his enthusiasm and joy. He is childlike but very professional in regard to planing and the risk of avalanches. He loves the days out in the mountains and loves to share his enthusiasm. We found runs local alpinist were surprised that you could make them.
Architectural innovations are often what customers do not see immediately but there are core of any good strategy. While in the last years we saw a trend toward concentration on core activities like marketing and branding, some companies take the opposite route. And that is good.
I was recently in Egypt to give a workshop on business model innovation. I received an invitation from the Executive Institute, a young and upcoming executive education institute based in Cairo. I was absolutely intrigued by the participants and their entrepreneurial drive. We can all learn from them in the so-called developed countries since they are true entrepreneurs and risk-takers. Participants came from different backgrounds ranging from food and telco, real estate development to plumbing and fixings.
Concentrate on the core
The traditional view on the value chain is to concentrate on the core activities. So almost all consumer electronics, computer or mobile equipment firms have outsourced their production to specialized manufacturers, so-called contract manufacturers or electronics manufacturing services (EMS). The western firms like Apple, Dell or IBM concentrate on the design, R&D, marketing and sales of the devices and leave the manufacturing to EMSs like Flextronics(165.000 employees) or Foxconn (113.000 employees). Outsourcing manufacturing to specialized firms is the norm in their industries. Foxconn manufacturers for Apple and Intel while Microsoft is a customer of Flextronics.
This architectural or operational model looks very convincing since the story line “Concentrate on the core” sounds very plausible. By concentrating on your core capabilities, you focus on what you are strong at. In the case of Apple, that is design, usability, marketing and branding.
The perils of the “core”
However, there is a peril in this model as well, particularly when you are not as strong in core capabilities. E.g. Hong-Ta Corporation was the manufacturer of the innovative Palm Treo 650 or of the Compaq iPaq, one of the first smartphones. Today, HTC as the firm is known today is very strong in smartphones and was one of pioneers in phones with Google’s operating system Android. Interestingly, Palm and Compaq are today irrelevant in the growing markets for smartphones. And both former pioneers are now part of Hewlett Packard.
Backwards Integration: You can do the opposite as well
How do brands and business model work together? That is a key question for successful companies because if they do not align brand and business model it will backfire, probably not in the short run but surely in the long run.
Branding is a hot topic. Brands give products the magic touch. With branding regular, normal products morph into highly desired status symbols customers are willing to pay a premium for. Branding worked very well in the last years but is branding sustainable?
Brands are not sustainable if the foundation is missing
Branding is not sustaining when you have a business model that does not support your brand or vice versa, your brand promises something you cannot fulfill. If you focus too much on branding you create over the long run, a perception gap between what you promise and what you deliver. It is like the icing on the wedding cake. It looks great but very rarely does a wedding cake taste as good as it looks.
Let us look at one example.
The Ergo Insurance Case
The German insurance company Ergo Gruppe is the holding company of the well-know household brands Victoria Insurance and the famous Hamburg Mannheimer Insurance. Lately, Ergo decided to consolidate its brands under the fresh brand Ergo. Ergo tapped into people’s discomfort that insurance companies are great in sales but very bad when it comes to ease to understand the policy condition and in the case of a claim.
From this customer insight of discomfort with traditional insurance companies Ergo created the claim “Versichern bedeutet verstehen.” or in English “To insure means to understand”. Ergo used all communication channels and very well made commercials to establish the brand Ergo among German consumers. In the ads, people ask why it is so difficult to get insured, why the agents do not take them serious. Continue reading Brands are the icing on the business model