Bas van Oosterhout's Business Innovation Blog

Simplification of businesses: Business Model Convergence

Bas van Oosterhout — Thu, 10 Jun 2010 20:00:37 +0000

As stated in one of the previous posts: coping with a crisis is no sexy business. Traditional approaches to stay financially in shape concentrate around cost cutting, very often leading to reducing headcount by layoffs. Many major companies such as IBM (5000 people), Bombardier (10% of work force), GM, and many others saw themselves forced to let people go. In fear of layoffs at a French Caterpilar site four bosses were even helt hostage for several hours.

There is an other way to cope with market decline and even crisis while building stronger businesses: Business Model Convergence.
Most companies run a portfolio of products and brands, active in various markets, across the globe. In terms of business models they have numerous.

In itself this is not really a problem… as long as markets are growing. When growth seizes to a halt this can become a problem. The organization that needs to deliver all these business models is by all means not the most focused one. Maintaining all the business models is extremely challenging.

When converging business models it becomes apparent that a company basically has a few generic ones that apply to most businesses. Focusing on the implementation and how to run these effectively enables a company to distinguish between the activities that seem important and the ones that are.
Elaborating capabilities around the activities that are truly important grows a organization that understands the most important aspects within the core business models and that is able to implement them flawless.

Companies that aim to simplify their businesses first need to create an overview of all of its’ (most important) business models. From there an assessment needs to be made to highlight the main commonalities and discrepancies and captured into core business models.
Next is to translate the generic business models into implications they brings to functions and functional domains within the organization all the way till the level of concrete actions. Implement those and you will have an organization that is better able at delivering its’ core business models.

Side effect is that the business models that are more distant from the core ones are recognized based upon their true merits which enables them to choose and pursue their own business model without being forced into a core one that will not do the job.

Business Model Convergence is a way to strengthen business by simplification of the portfolio of business models aiming to build stronger businesses based upon outperforming, excellent organizations by focusing, freeing up potential to spur new business growth.

Empathy: One thing that strong business models have in common

Bas van Oosterhout — Sat, 15 May 2010 10:02:15 +0000

Recently one of my business contacts pointed me towards the Best Global Brands report by Interbrand. In the discussion we had on how to enable new business model implementation he posed the statement that any strong business model basically gave away one of the 4Ps out of the classical marketing mix.

Giving it some more thought there are numerous examples of strong brands, set by convincing business models that basically all have a certain WOW factor. Most of the WOW comes from an empathic component within their respective business models.
More and more companies involve their customers in their business model, stepping away from classical transactional mentality moving towards strong customer experiences. Meanwhile the relationship between company and customer is further tightened, making it almost impossible to switch, not based on product specifications, but on the firm’s lovemark.
By opening up business models to consumers of products and services companies are able to provide experiences that can be tailored to one’s unique preferences. The late management guru Prahalad labeled this as N=1 in The New Age of Innovation.

Empathic business models examples

Product
Nescafé (#25) let’s you create coffee to your own preferences with their new Dolce Gusto system
Nike (#26) provides customers to design a tailor made sneaker based on the offered options
Price
Google (#7) provides you everything you needs for free, you only need to provide google with your personal data for advertisement purposes
IKEA (#28) is able to offer its’ products at an extremely low price; you have to do the assembly yourself
Place
eBay (#46) provides possibilities to globally auction and bid on running auctions detached from place and time
MTV (#54) is offering most of the content also online, so that it can be viewed anytime, anywhere
Promotion
Amazon (#43) recommends products based on other people’s buying behavior
Nokia (#5) has numerous online fan communities that support users in the use of their devices; totally separate from the company

Being successful is about being connected. For this purpose you as a company do not be in close proximity of your customer 24/7, but you need to find a mechanism that they share their hopes and dreams with you.
Based on those you know where to focus and distinguish between the must-haves, and the nice-to-haves. Then find ways to involve your customers in your business model. Maybe they will not even notice, but they will appreciate it. For sure!

What to do if you already have a Business Model?!?

Bas van Oosterhout — Fri, 15 Jan 2010 14:31:31 +0000

Recently the book Business Model Generation has received much attention. For many people it has truly caused a disruption in the way they look at Business Models. Discussing the book and the model it is striking that most people concentrate solely on how to create new business models… For most large corporations this provides challenges, they already have at least one Business Model, but most often many more. Typically Business Model are found within large organizations at the level of a Product-Market Combination.

The slides below provide some first guidance in how to optimize your Business Model; change it to better fit with the inside and outside world. Most important to bear in mind is that a Business Model in term is success is valuated by its’ customers and ecosystems, changing it requires closing the gap with requirements from the outside world and the current Business Model basis. Doing this in a more consistent way will increase performance and strengthen the brand.

Business Model Generation

Bas van Oosterhout — Sat, 03 Oct 2009 14:14:00 +0000

“Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers” is now on the market. You can preview it below or buy it at www.businessmodelgeneration.com

Business Model Innovation: DIY (do-it-yourself)

Bas van Oosterhout — Thu, 02 Apr 2009 13:39:38 +0000

Mid of 2008 I was present at the kickoff in Amsterdam of a new book around Business Model Innovation. Together with Gert Steens, Patrick van der Pijl, and Mick Walvisch the first step on a new book from Alexander Osterwalder and Yves Pigneur was set.

Without going into all detailed steps Alex has made since then I would like to point you to a great initiative.

Alex has started together with Patrick: the Business Model Innovation Hub. The Hub is used as a community which not only reviews the chunks of the book as they come out. It mainly is a place where people with a strong common interest on Business Models meet. Therefore, besides the good stuff Alex produces, a lot interesting content is created by the community itself. Just to tickle your brains a bit:

Deliberately unsustaining Business Models
Tools for Business Model Innovation
Open source licensing
Business Model Patterns
…

Just have a look at the presentation and see you at the Hub!

Growing business value during economic downturn

Bas van Oosterhout — Sun, 15 Mar 2009 13:59:53 +0000

For the last couple of months no news program or website is talking about hardly anything else the the global economic crisis and the effects it has on every kind of business within all sectors. Surviving for many companies suddenly became key rather then expanding portfolios.

Traditionally companies need to grow value in order to keep Mr. Shareholder happy. Growth means higher demand for shares and therefore higher rates. Mr. Shareholder sees his total share value growing.
Most companies have basically two ways to achieve value growth:

Increase market size and share, by innovation or acquisition
Reduce costs

The last way is normally not that popular during economic upturn, but is immediately on top of mind during economic downturn. Cost reduction programs tends to be rather spreadsheet driven hunting for the large cost chunks rather than assessing cost versus value.

Together with Daan Giesen I have come to an approach which enables growth by setting a stronger brand experience based on reduction of number of current business models. Organizational functions and capabilities can bebuild around these strong business models, showing opportunities to reduce cost without weakening the organizational capabilities.

Within the coming months more on the Business Model Convergence approach will be shared with you. However, if you cannot wait feel free to use the contact form.

The brand is the business

Bas van Oosterhout — Tue, 24 Jun 2008 16:57:29 +0000

According to thought leaders within INSEAD customers are really in the driver’s seat when it comes to making or breaking a brand. Also different consumer trends indicate the same, such as Trendwatching.com for example. In the past people could be earmarked to fit within a certain stereotype, e.g. punkers during the 80′s. During this period brands were successful because the companies behind them choose those brands to grow successful.
People now shop their own identity together where trends are now merely used as an input. They do not fit within one simple box anymore which makes it more difficult to target segments in a traditional way. Furthermore customers become increasingly demanding every day. Failing to meet their expectations results worst case in them scandalizing your firm in public (example: BusinessWeek). They will share their grieves through the internet with the rest of the world more likely than they will call you.

So it is more difficult now to clearly segment customers and they have become more demanding and less forgiving, what can companies do?

Building a strong brand does not necessarily involves bringing the best proposition, product or service, to customers, it involves bringing your propositions consistently to your customers. How? By making sure that every Business Model Building Block is aligned with a clearly defined overall goal. So it not about bringing a product to the market and enhance it along the way to the extend that people do not recognize the initial proposition anymore. This makes customers feel disconnected. They will loose interest and will start doing business elsewhere.
In order to keep the connection with the client vivid firms should really ask themselves or even better their clients what it is they will bring to the market? Which problems will be solved? What pains will be relieved? Doing so and shaping the Business Model around it provides the basis companies need to be consistent to their clients, which will contribute to building their brands and reputation.

For laughter have a look at the complaint about SEARS below.

Business Model 2.0: Manage your Value Chain

Bas van Oosterhout — Thu, 12 Jun 2008 21:18:53 +0000

Working together with companies on various innovation projects and reshaping their Business Models it is often the case that a new project explicits a need to move into a different part of the current value chain. With Value Chains in this case I mean different organizations and enitities, consisting of resources and knowledge stream, all involved in the creation and delivery of value to customers (source: ValueChains.org).

Moving up ahead of the current value chain and tap into it requires organizations most often to work together with different parties, already present in the chain. Strange situations occur that organizations that are presently treated as customers, become in fact new channels for approaching end-users further down the chain. The current customers need to become partners with which driving business is taken to the next level. Of course this sounds more simple than it in fact is. Existing relations need to be re-shaped in way that also for the current customer, so the new channel, the still is a sound basis for doing business. Thinking win-win is key here. In establishing new partnerships companies try to reduce risks as much a possible, preferably in a early stage. Concentrating on possible financial benefits, this results in trying to create a position in which most of the value created together with the partner is heading in your direction. In contrast with this real partnerships first try to build maximum value together, and then divide this between them.

Creation process breakdown; building new Value Propositions

Bas van Oosterhout — Mon, 19 May 2008 11:34:12 +0000

Many people are interested in how a new Value Proposition is created. Of course, understanding this process and being able to execute it, provides a basis for continuously staying ahead of competitors; it would be the Holy Grail of business. In workshops I have used various methods such as Blue Ocean and TRIZ. These methods help to frame thoughts and give directions. What they do not do is provide you with a new Value Proposition gift wrapped.

Creating a new Value Proposition can be done in several ways, each of which differently partitioned into stages. Here is an example of how the creation process is broken down, brought in a very creative way; in an animated Chinese painting style. The movie clip is by Ada Kwok and is presently really popular on youtube. Clicking tot Ada’s website it is clear that the company does graphic business design. Ada has used succesfully as a mechanism to draw traffic to her site. This is yet an other example of how youtube can significantly boost the number of potential customers.
I really like how each of the creation phases is broken down and expresses in the video:

Imagination
Visualization
Formation
Transformation
Bring to life

How to succesfully manage your innovation portfolio?

Bas van Oosterhout — Sun, 27 Apr 2008 19:13:40 +0000

Recently Business Models and Business Model Innovation received increased attention. The term devaluated during the high rise of the Internet Bubble, when all you needed to get venture capital was a new type of Business Model, without any sanity check.

Now in an era of ever increasing competition from emerging markets, re-thinking your Business Model seems very appropriate as being an incumbent player in your market. Difficulty is maintaining the relationship with your current customers while achieving growth. Key is consistently managing your identity.
Traditionally companies focus on technology when driving innovation. This is not strange from a R&D perspective, but what to do with the great new technology created? Will this sell itself?

The answer is NO. Look at examples history provides us with such as Philips’ Video2000 system. With the hindsight from today many people state that Philips did have the superior system, but lacked the capability to successfully sell it, loosing the battle to set to standard to VHS.

This presentation shows the necessity to take Business Model Innovation into account as well as Technology Innovation. Building a portfolio which contains provide a sound basis for future growth and success.