business model innovation

Innovation is about being different

Tuesday, April 15th, 2014

What is innovation?

Innovation is a strange beast. Most people say innovation is about new technology or bringing new things to the market. Some might think of better processes.

Schumpeter went further and defined it as “The introduction of new goods (…), new methods of production (…), the opening of new markets (…), the conquest of new sources of supply  (…) and the carrying out of a new organization of any industry”. (Source: Innovation Zen)

Innovation is about being different

However, what most of the time is missing, is that innovation has something to do about being positively different from your competitors. When every body in your industry is bringing out new products like in the TV set industry or in the PC industry, then this is no innovation. It is just daily business. You have to do it to survive. It’s a rat race.

Innovation is about being different in a way customers love.

Innovation is about being different in a way customers love.

However, successful innovation is different. Successful innovation is about being different.

Innovation is….

Innovation is when you just offer one telephone handset when your competitor offers 118 devices. Innovation is when you update your one phone only once a year a bit and a major overhaul comes every second year while your competitors bring new devices to the market every months. Innovation is when you see your “telephone” not as a device but as an access gate to whole new world. That’s Apple vs. Nokia. By the way Apple spent only a ninth on R&D than Nokia (more…)

Business Model Innovation and Story Telling: How to get the story right!

Friday, March 21st, 2014

Framing the business model so it can be quickly but well understood by others is core. So, how do we do it? By Paul Hobcraft

You have come to end of a fairly long week. You have finally finished your Business Model Canvas. Finally you have a working hypothesis of something that is going to challenge some of the existing business models around. You should feel pleased; it took a lot of hard work to get to that point.

Laid out on one piece of paper is something that could have real business value yet although you can see where the dots connect, you begin to wonder if others will see the same compelling value, to invest in it, to back it, to simply support it and encourage you to continue.
Tell Your Story

Completing a business model and identifying its critical parts is only that first step, the hard part is getting it off the ‘drafting board’ and making it something tangible and potentially commercially viable for those around you to engage with.

What is the next step in executing this potential game changing business model

Each new business model needs a compelling story – a narrative..

We really need to learn how to craft a story, to tell the narrative around why your business model idea stands out and is worth other people’s time and consideration. This business model narrative along with your business model you are potentially better placed to test it, to talk about it, to validate it, to make it ‘sing for others’. You are out to get engagement and contributions everywhere, from everyone, as you tell the story, describe your potential new business model you gain from their reaction and improve your understanding of the real need for your idea. (more…)

The abundance of choice. A call for a fresh value proposition: The need for the right choice.

Friday, December 20th, 2013

Ever since we have the Internet everything is abundant. So many information at your fingertip, billions of webpages, millions of articles on Wikipedia, millions of articles at Amazon and other hundred of thousands of specialized ecommerce shops with even more articles. But is more choice always better?

Abundance of choice is today the norm. That is due to the Internet. A physical shop is always limited by its physical space. The Internet knows no limit.

The right choice not more choiceWhen I started my research on business model innovation in 1997 we were pretty much alone in this field. Actually, we had no word to describe the profound changes in industry structures due to the emergence of the Internet at that time. The term business model innovation just popped up in 2000 as a pure academic accident. I just added innovation to business model, a term that emerge in the 1990s and I secured the URL business-model-innovation. Today, Google gives me 190.000.000 hits for the term business model innovation. So you have abundance of sources of information about business model innovation. However, can you use them all?

More choice the better: The value proposition of the first wave of Internet ventures

The first battle cry in e-commerce and on the web was that now people have more choice than ever. More choice, the better was the value proposition. There was no limitation any more. You find any product today on the web in thousands of variations.
Sport Conrad, one of the largest online shops for skis in Europe, (more…)

Business Model Innovation in the EU and beyond

Monday, October 14th, 2013

Business Model Thinking is coming more and more mainstream. On Friday, I was at a workshop sponsored by the EU commission on Business Model Innovation and Policy Making. Here are my takeaways.

Business Model Innovation on the top of the agenda for policy makers

I’m very happy that the topic we started more than 15 years ago will be part of the future innovation policy of the EU. 15 years is a long time for me as a person, but as the business professor Christoph Zott is pointing out in science and policy making 15 years is a short time particularly when you want to introduce new units analysis to understand how firms outperform or create über-returns with (business model) innovation.

Policy making in need for innovation by xkcd

Business Model Innovators as outperformers

While we as entrepreneurs do not care much about measuring the impact of business model innovation on a societal level, the EU or the OECD, that also participated, want to measure each countries performance on business model innovation and then define policies to foster business model innovation on a governmental level.

Most papers presented at the workshop had a strong focus on the technocratic parts of a business model like Value Creation, Value Capture and Value Proposition but were missing the human side to business, the people who run a business, make the difference in innovation but are also the biggest impediments to change.

Pieter Perett and his team from the University of Applied Science Northwestern Switzerland, who organized the workshop, presented their findings that business model innovation make a strong impact on the long-term performance of firms. They use statistical data to identify business model innovators and they try to calculate if there is a über-return for these business model innovators.

Edward Giesen, Head of BMI at IBM, presented their study on business model innovation. They use a different method. Instead of measuring the impact of business model innovation from statistical data, they interview CEOs on the importance of business model innovation, and they see that companies that are consider themselves as business model innovators are outperforming traditional product or process innovators.

Christian Zott, who published one of the first works on business models in 2001 and is a strong advocate for business models, criticized from a scientist point of view the methods to measure the impact of business model innovation. His main point is that business models are often defined too broadly so it is difficult to understand where the real impact was in the business model.

I liked his criticism a lot from a scientist point of view and his focus on rigidity, however his proposal to focus only on the activities might be rigid but then the concept of business models looses its relevancy and its magic to see new boxes, entrepreneurs have never thought of as points of innovation like the revenue model, the value proposition or the Team & Value side of a business.

Where’s the beef?

Hans-Jörg Bullinger, former Head of the German Fraunhofer-Gesellschaft, criticized that the studies are interesting from a scientific point of view, however, they do not help to overcome our technology bias. His call for action was that we need better tools to design business models for entrepreneurs. Of course, I loved his objection, since this is exactly, what we do with the upcoming tool box for entrepreneurs. (more…)

Knowing the Value within your Business Model is vital

Thursday, July 18th, 2013

Knowing where to start in designing a business model or simply just even trying to describe it to others can be difficult. You need to explain its value. The great advantage of explaining this through a business model canvas that looks for value constantly does help. This a guest post by Paul Hobcraft, an Agility Innovation Specialist.

Business Model Canvasfluidminds approach to exploring and explaining the business model does just that- it focuses on focusing the mind on the value within the business model.

The first value point is in the Value Proposition

Naturally we all look to the Value Proposition to explain the business model but like a car you should always look ‘under the hood’ to see the engine and what gives a car its performance. Equally you should stand back from the proposition and ‘take in’ all that makes this up. For a car it is the styling, the design, the promise and what or who is behind it. We look to buy on a given ‘promise of value’ and in having the benefits explained it allows us to believe and ‘see’ the potentials. A business model, well designed and described, does just that. It confirms the (new or existing) value that makes up the new business model.

The value proposition shapes much; it identifies and defines where this business model is providing new offerings that advance on existing benefits to customers. The fluidminds business model canvas seeks out the customer and the customer benefit- it is looking to provide value by identifying where there is a clear fresh, new proposition.

Value Proposition on the Business Model CanvasWe do have to recognize a value proposition is not just looking to resolve the known jobs-to-be-done. In many new business models can be bringing together often fragmented parts of existing offerings and combining them in new ways, or deliberately and completely disrupting existing businesses through adapting new insight, technology advancements or understanding, into new business models. We only need to think of Apple and how it combined different technologies, revolutionary design and applied new materials into stunning, game changing products that changed our thinking of the actual jobs we thought about into totally different ones, which totally undermined existing business value or perceptions. Those become game changers. (more…)

You do not have to be loved by everybody – a great value proposition

Wednesday, May 15th, 2013

Most people want to be liked or even be loved. But a good value proposition for a firm should not attract everybody but only the ones you intend. And that means that a lot of people might even hate you.

Not everybody needs to love youTake the latest controversy about Abercrombie & Fitch, an American retailer for casual wear. See here (forbes.com), here (Los Angeles Times) or here (Daily Mail, UK).

Abercrombie & Fitch offers no women’s XL or XXL because they don’t want big women to wear their brand. Their value proposition is clear: They want the cool kids as customers. They do not consider big women as cool.

Mike Jeffries is the man behind A&F. In an interview with Salon Magazine in 2006 he told, when asked about the emotional experience in his shops:

“It’s almost everything. That’s why we hire good-looking people in our stores. Because good-looking people attract other good-looking people, and we want to market to cool, good-looking people.”

That is the reason why they offer nothing for big ladies. That is their choice. They discriminate big ladies, but you as customers have the choice as well. You are not forced to buy at A&F. I do not buy at A&F because I do like their attitude. However, they have a value proposition that is clearly distinguished from their competitors. And that is what I like and adore. They stick to their mantra even under severe pressure from the public.

Take other firms, Apple or Zara. They also discriminate. Apple’s Operating System is a closed system and either you take or leave it. At Zara, you also have no extra large sizes.

H&M, Dove: The opposite can be right as well

Interestingly, other firms like H&M or Dove have a different approach to big or natural ladies. H&M offers a H&M+ collection for larger women. (more…)

It’s not the price, stupid. It is the value (proposition)

Tuesday, October 30th, 2012

We always hear that the customer is not buying because the price is too high. Is the price important?

Of course, most clients will say yes in any survey or in sales negotiation. Actually, there are departments at your clients that know only two words: Too expensive!! Give me rebates! That is the purchasing department and it is their job to negotiate the price of a purchase. However, is this true, that even for B2B customers only the price is important?

Observe the jobs-to-be-done of your customers. Don’t ask the customers

Let’s take an example from RWE, a huge German utility firm. Let’s take the case they need to purchase electronic testing equipment. Nothing fancy, just a plain vanilla device for 30 to 50 Euro. Traditionally, this purchase would be a C category purchase. C means not critically important to the firm and therefore the firm usually shops around among different suppliers for a good price.

So you would assume that price is the decisive criteria for a firm to purchase from you. And yes, if you survey customers what is important in their decision to purchase C goods, the price will be on top.

So, all B2B marketplaces of the late 1990s and early 2000s like Onvia had the value proposition that price of the goods are the most important criteria for the B2B market. So they offered everything economics told them what to do in a price sensitive market: Make auctions, offer pool buying for larger quantities or make requests for proposals.

Not the price of the good is important but the whole cost of purchasing

However, they had to learn the hard way (most disappeared from the market) that this is not the case. Let’s go back to the testing device of 30 to 50 Euro at RWE. Saving an extra 20% on a purchase of 50 Euro is great. But is it just 10 Euro. But the costs for the internal purchasing process can easily be 150 to 200 Euro for the traditional process according to Karl Czech from RWE purchasing. (more…)

Banking 2.0: Call for help: Ideas for unsolved or badly solved jobs in today’s banking

Thursday, July 19th, 2012

Dear readers, this time I would like to tap to your collective and swarm intelligence. It’s a bit like open innovation but in a quick and dirty version.

The challenge: boring and uninspiring banking

The challenge is simple. Retail and e-Banking in the current form is quite 1.0. Most eBanking or payment systems use the traditional business model and transferred the traditional model online. So we have a banking 1.0 online. Boring, dull, uninspiring.

Now, the challenge is: What will be banking 2.0 look like?

What would make you say: “Wow, they really got it. You have to try it. It’s cool and just helped me to make my life easier and better.”

Your unsolved or badly solved jobs in personal finance

But before we look at the solutions I would like to raise the questions what are unsolved jobs in your personal finances. What annoys you? What is great and more people should know about? What are needs you think are so obvious, that there should be solutions to it?

Personal finance can anything from cash management, expense management, payments, saving and investing, financing your house or your car, saving for the silver age (pensions) etc… If you have a family, think about your family financial affairs. If you are a patchwork family, what are special jobs there?

Your solutions, please!

The second question is about solutions. What solutions do we need in banking 2.0? What products or services you would love to see?

Please use the comment function for your unsolved-jobs or ideas or the open innovation platform atizo, where I have set up a project “banking 2.0” for us. Please feel free to use both or just the one that suits you most.

Leaving blanks blank: The art of accepting blanks on the canvas

Thursday, June 7th, 2012

Recently, I spent time at the most international and diverse university of Germany, the Jacobs University in Bremen with Prof. Steven Ney. I did a seminar on entrepreneurial design. The students were trained already to use the canvas and the course was great. However, their inability to leave blanks on the canvas was striking. What do I mean by this?

We do not like blanks. Long pauses in a conversation confuse and stress us. And since we do not like blanks we fill them. In a conversation, we do small talk. On the canvas, we just fill in the blanks with a kind of small talk as well.

We just don't like blanks! by xkcd (Source http://xkcd.com/608/)

Small talk on the canvas is to just fill in something which sounds good, but has no base, no facts supporting it, not even being a smart idea. If we do not know exactly who our customers are, we wirte Business-to-Business customers or advertising in the box to communicate with our customers. B2B sounds sophisticated but for an entrepreneur who wants to build something on top of her canvas, this is useless at best, dangerous at worst.

While small talk is socially accepted and even expected, filling the blanks on the canvas is dangerous since it pretends we have solved this problem and we move on to another building block to fill. That is deadly if you really want to execute your idea into reality. (more…)

The strange business model of airlines

Monday, May 7th, 2012

The airline business is a strange business and in desperate need for business model innovation. On the one hand, more people fly than ever to prices lower than ever. IATA, the industry body, states that the real cost of travel has fallen in the last 40 years by about 60% and the number of travelers increased tenfold. Air freight has grown in this period by a factor of fourteen. (See IATA Vision 2050) That sounds like a very successful industry. Is it? However, on the other hand, airlines are notorious to not even earning their cost of capital and producing unhappy customers.

 

During the 2000s the average airline generated an EBIT margin of just 0.7%. Taken a longer perspective, the figures are as drastic. From 1970 to 2010 the airline industry generated over USD 12,000 billions of revenues in today’s prices, but only a total of USD 19 billion of net post-tax profits; a margin of only 0.1%.

Another dull figures: Around USD 500 billion of investors’ capital is tied up in the airline industry. Normally, investors would expect a return on capital of around 7-8%. Taken the 500 billion that would mean a return of 40 billion annually to cover the cost of capital. But what did the airlines earn? 20 billion or 20 billion less that the capital would have earned elsewhere. The airline industry is a big capital destroyer. Interestingly, other firms along the travel value chain like airports or computer reservation systems earned excess returns. So there is profit in the travel industry but not with the capital-intensive airlines. Airlines are a dismal industry.

So are customers at least happy? Just type in Google the search “airline experience” and enjoy all the customer stories about flights. And watch the film “United breaks Guitars” like 12 million others did on Youtube.

What went wrong and is there a solution to it? And think about it why we all hunt of low prices on traveling while we spent USD 5 for a latte at Starbucks. Why are we so price conscious on travelling and not on coffee?

Here are some thoughts I presented at the 17th international airline conference last fall in Seattle. Thanks to Nawal Taneja, Dietmar Kirchner and Rob Solomon for the kind invitation.

Thesis 1: Airlines are masters of transportation economics, not customer experiences

It seems that all airline managers are great students of economics but not of entrepreneurship and marketing. Since they have a perishable good (empty seats on an upcoming flight are like perishable goods), they believe strongly in variable pricing by exploiting the maximal price customers are willing to pay.

That sounds very reasonable at first, since who wants to argue with economists and their theoretical models, but what airlines have forgotten over time is, that if you treat customers like rational customers then you will get rational customers and extremely price sensible customers in the end.  However, there is a good reason why economics is called a dismal science. So if you follow economists, (more…)