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
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.
To be honest, I get a bit bored about the mantra that design thinking will solve the problems of large corporation. Well, when I go through the case studies at Ideo I am extremely impressed by their client list but not about the output. I have seen several design thinking sessions and I am not impressed at all with the output. The results are very often: More-of-the-Same but with fancier design.
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.
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?
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.
The German retail and travel conglomerate Arcandor AG formerly known as KarstadtQuelle AG filed on June 9th 2009 for insolvency. It claims that the financial crisis is the reason. It had asked the German government in May for state aid but the government refused. But is the financial crisis the real reason for the dire situation? I do not think so. The business models of its retail activities (Karstadt and Quelle) are just dead. The management did not innovate on its business model and that is the reason for failure.
Most writers and bloggers take the music industry as a prime example for an industry that failed to innovate its core business model. But there are many other industries where failure to innovate its core business lead to their decline. A sad prime example of missed innovation is Karstadt, a large department store chain in Germany and Quelle, a German mail order powerhouse.
Business model innovations sound great as a strategy and if successful you can create a new market and escape the traditional competitors in your ex-industry. But the most important point in any innovation is not to have an idea, is not great execution, but the adoption of the innovation by customers. And that is the crux of business model innovation: The diffusion of the innovation. The TiVo is a perfect example.
Ten years ago the TiVo digital video recorder was presented at a broadcasters’s convention in Las Vegas. People expected that the TiVo as an easy time-shift machine would change the TV industry for ever. The great opportunity for TiVo’s users was to watch a show whenever they wanted and without commercials since they could skip that annoying part. The latter was seen as the death of the TV industry as we know it today since their revenue model is based on these commercials that nobody needed to see anymore with a TiVo. As predicted the TiVo sold well particularly as the price fell. But since 2007 the user base has fallen and the the TV industry is still existing as we know it.
The THESUS program seeks to develop technologies and applications for the Internet of services. The program is sponsored by the German government and supported by German IT heavy weights like SAP or Siemens and technical universities in Germany.
The program is based on several use cases where technology is supposed to solve a real world problem. The aim of the program is to build with semantic technologies a new and better knowledge infrastructure. For webbies you can also call it Web3.0.
I was invited to give a keynote on business model innovation at a THESEUS workshop at the Fraunhofer Gesellschaft, Institut für Arbeitswirtschaft und Organisation. Interesting at the workshop was that most use cases have a clear benefit, but it was unclear who the customers will be that are willing to pay for the service; very typical for government sponsored and technology driven programs. During the breaks we had a lively discussion how to commercialize the results of the program.
Here you find the slides from the keynote (in German).