One of the beauties of the business model thinking is that we learn to see a business totally different if we really apply stringent thinking and dissect a business into its building blocks. And one of the most important concepts is that the value proposition is not the product. Why?
It’s not the product that creates value but the value proposition. The whole value architecture including the product, the revenue model and the team & values all have to deliver the value the value proposition is proposing.
Deadly business with a value proposition that customers and democracies need
A simple, a bit eccentric example illustrates this. Take manstopper ammunition that is for very good reasons banned by the Hague Convention in international warfare.
Manstopper ammunition does not sound like a lovable product and in terms of Alex canvas as a good value proposition?
Actually, manstopper ammunition is the offer and not the value proposition. A good, and even meaningful value proposition depends from your customers, the job-to-be-done and the benefit you create for your customers. Continue reading The offer is only one building block to fulfill the value proposition
So you need to know what your customer will love? What excites them? What moves them? This of course allows you to begin the process of designing a business model that delivers to both the customer and the business. Traditional business motivations are usually a push approach. But is this the future? Guest post by James Streeton-Cook
Right now, let’s make something better than what’s out there, something really cool and we’ll beat the competition and make a mint.
Since you are reading this post then we can assume you know better.
Current business thinking it is all about what the customer needs. So let’s pull out the Henry Ford standard about ‘faster horses’ for that one. Enough of the push!
Power of Pull – It’s a Lean Thing
Lessons from Lean Business have taught us the power of pull systems. »The core idea of lean is to maximize customer value while minimizing waste.«
When creating something new, some new value, be that a business model; product or service; or even a new industry platform – value is pulled into arrangement (not pushed) by Attractors involved.
The same thing happens in nature and as far as I know is current thinking for the formation of the universe. So with a bit of imagination, pull will also be relevant in business model innovation. It is a non-linear thing and most of everything is made up of non-linear systems. A river flows down hill. Why?
The pull in a good value proposition: 3 Types of Attractor
There are 3 types of Attractors to look for in your discovery, insight and understanding of what will excites your customer.
- Point Attractors
- Path Attractors
- Strange Attractors
Continue reading The pull in business models: 3 types of Attractors to look for
’Our industry is unique and should not be compared with other industries!’ This is a common phrase I have heard countless times throughout my consulting career. But is it true?
Strangely enough the most successful companies become prosperous not by excluding comparisons, but by leveraging other industries success factors and applying them in a new context. Many other companies that innovated within the boundaries of their current industry logic often left the stage early. When looking at new business models it is often clear that they have not been developed from scratch. Many models that have changed an industry are merely refurbished versions of another model by another industry.
Business Model Innovation is about combining successful models from various industries as well as finding completely new ways of doing things.
Re-imagine your organisation with a different leader
When you design your future business model you need to find ways to overcome the current thinking patterns or dominant logic of your industry. Famous leaders are often responsible for defining a new way of thinking in their industry. How would Rupert Murdoch or Frank Lowry run your business? What new customer segments would Robin Hood develop in your organisation? How would Pierre Omidyar lead your not-for-profit organisation?
Google didn’t apply the business model from the software industry, yet their first product was nothing else than software packaged as a service. Airbnb.com didn’t use the business model of the hospitality industry, yet they offer hospitality services. Kickstarter.com didn’t use a banking or venture capital business model, yet they fund new endeavours all the time.
They all applied models from a different industry and combined them with a new approach that broke the dominant industry logic.
Understanding another industries business models is only the first step
Companies should always look beyond their traditional industry borders to learn. Could you learn from Nespresso’s direct sales model? Could you do the same and sacrificed some reach of your sales channels for a much more rich interaction with your customers?
Could you learn from Ikea and outsource some core activities to your customers? Could you learn from Gillette and their “razor and blade” model? Could you learn from the newspaper industry with their subscription model that makes customer pay you in advance before they get the product? Continue reading Rethinking your industry logic: Cross Industry Business Model Innovation
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. Continue reading It’s not the price, stupid. It is the value (proposition)
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.
Apple is the poster child of business model innovation. Apple has reinvented several business like music with itunes and the ipod, the telecommunication industry with its iphones and currently, the publishing/news/information industry with the ipad. But success is also associated with costs we should consider.
Apple has a market capitalization of 576.79 billion USD. There are 43’400’000 search results at Google when you look up Apple Business Model Innovation. Apple is the household name for innovation for sexy products and services for which people camp in front of stores to be the first to get the latest gadgets.
But it is also interesting to look at the cost associated with Apple’s success. Take a look at infographics made by mbaonline.com.
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. Continue reading Fighting for the next business model in the pets industry
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.
Continue reading What business are you in? Business models as social constructs
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
The case is different for startups where Continue reading Can you copy a business model? Groupon and its clones