Posts Tagged ‘business model innovation’

Fighting for the next business model in the pets industry

Monday, January 30th, 2012

I had in the last months the chance to apply business model thinking & innovation on several, very diverse industries: the airline and travel industry, the pets industry and some time ago on the media industry, particularly newspaper.

In the upcoming three next posts, I will share some insights I gained from using the business model canvas on these industries. The series will start with the pets industry.

A word of warning to all industry experts: I am not an expert for these industries. I’m not a pet industry expert. I am an expert for the process of re-thinking and re-inventing business models.

Pets Industry – A revolution in the making

The following slide deck is my presentation, I gave on January 27th, 2012 in Berlin at the Pets International conference. Enjoy some insights in a very interesting industry where the core is all around living creatures and the close relation we have to them.

Enjoy also my new design of the business model canvas I have created together with Gottschalk & Ash, a designer with the support of the Wolfsburg AG, an innovation incubator in Germany. You will see more in the future.

 

Pets are man’s best and dear friends

Pets are highly emotional and men’s best friends. Pets are members of your family. Sometimes they are treated better then human beings. (more…)

Top 10 in 2011

Tuesday, December 27th, 2011

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.

Personal Highlights

  1. 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.
  2. 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.
  3. 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.
  4. 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.


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Four core questions you need to answer for any great business

Monday, November 28th, 2011

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 technocratic approach is useless for finding love (source: http://xkcd.com/55/)

The four core questions on your business model canvas

  1. 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?
  2. 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.
  3. 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.
  4. 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.

What business are you in? Business models as social constructs

Wednesday, June 8th, 2011

“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.

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Can you copy a business model? Groupon and its clones

Thursday, April 14th, 2011

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.

Business Model Copycats

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

The case is different for startups where (more…)

Architectural Innovation: Taking control of the value chain

Tuesday, January 4th, 2011

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

At the same time as the IT and electronics industries are following the mantra of “concentrating on core competencies” other firms in other industries do just the opposite. Let’s look at food companies. (more…)

Culture and the Business Model: We are humans

Tuesday, October 13th, 2009

In the discussion on business model innovation an important point is missing: the culture in which the business is conducted. A business is all about people “creating” customers.

Businesses are not a technical machine with input and output factors. Businesses are places where human beings work together for a common goal and therefore the culture in a business is a defining part of a business and therefore also for the business model.

Most definitions of what a business model is are rather technical. We talk about components, patterns, building blocks. We make a lot of fuss about how we rearrange the components as if they were just Lego bricks. We believe that having in mind a great new business model is already a business model innovation.

Where are the people?

Ups, no! That does not work. Somehow the most important “building block” of a business is missing: The human being that designs, shapes and makes the business work and the customer who has to buy into the new value proposition and pay. And here again we have the human factor. “[I]nnovation is not what innovators do but what customers adopt.” We always have to remember what Michael Schrage is saying. It is the customer acceptance that makes an innovation. (more…)

Dell and Perot: The end of a business model (innovation)

Friday, September 25th, 2009

Dell announced on September 21, 2009 that it will acquire Perot System for $3.9 billion. Dell was the poster child of business model innovation. It had “invented” the direct sales model for PCs. Instead of going via resellers Dell sold its computers directly via telephone or the Internet to its customers. Now, Dell is extending its traditional business into services. Will this work?

I feel very ambivalent about the announced deal. First, Dell pays a premium of a 61% for Perot Systems. That is a huge premium and from my time as an investment banker at Lazard I know it is very difficult to recoup and justify such a premium. But even more problematic is that with the purchase Dell does not solve its problem with its current business model.Quo vadis Dell and Perot Systems

The deal makes sense from a corporate strategy perspective. Dell is suffering in its core business a steep fall in prices. For many years Dell was the price leader but now HP tries to undercuts Dell [update: link no longer available]. The first time in the history of PCs, the new Microsoft operating system Windows 7 will need fewer resources than the previous version, Windows Vista. That is bad news for computer makers that usually expect a big boost in sales from a new operating system.

Dell’s former business model innovation

In the past Dell’s value proposition was to sell individually configured PCs and servers at a low price. (more…)

Who says paper is dead? business model innovation in the newspaper industry

Thursday, September 17th, 2009

The newspaper industry is suffering these days. Besides the economic crisis that leads to less advertising spending the traditional business model is under attack by the Internet. The large papers have reacted with large Internet activities that attract a lot of traffic. But the revenues of the online ventures are not sufficient to compensate for the decline in print. So what shall they do?

I had the pleasure recently to be invited back to my university, the University of St. Gallen, to give a speech on business model innovation in the media industry. Prof. Martin Eppler was so kind to sponsor the discussion. I used 8 theses to present my thoughts. Below you find the slides of my presentation.

 

 

Tradition is not a business model

The media industry is an interesting case since their traditional business model is under attack by new technologies. I use the music and the newspaper industry as cases to make my points. Although both are affected by the Internet, they face (more…)

Business model innovation show superior impact on performance

Friday, September 11th, 2009

Good news for all the evangelist of business model innovation. McKinsey has developed an innovation performance score (IPS) that shows that “a significant degree of business model innovation seems to be necessary for superior innovation impact.”

The idea of business model innovation was not developed at the large consultancy companies like McKinsey, BCG or booz. Probably they were too busy optimizing the current business of their current clients. And usually their clients are the incumbent in their respective business. Probably, the large consultancies are trapped what Clayton Christiensen calls resource dependency. Christiensen and others argue that you are dependent in your strategic decision from your main sources where you get your resources from and most of the time it is from your existing clients. In the case of the large consultancies the customers are the incumbents that lose the most from business model innovation.

Business model innovation as new strategy type

The idea stems from researchers like Alex Osterwalder, Gary Hamel (business concept innovation), W. Chan Kim and Renée Mauborgne with their blue ocean strategy or me. In stead of looking at the incumbents we were looking at entrepreneurs/ outsiders that created industries or changed their industries forever. While Alex and I came from New Economy side where we saw that new media allows new business models, Hamel, Kim and Mauborgne came from the traditional strategy schools at universities.

Measuring the impact of innovation is old subject but most measurement systems had severe shortcomings. (more…)