Many of the people following the Business Innovation topic online already know TED. TED (Technology, Entertainment, and Design) is an online platform which is used to spread ideas. Basically talks, such as presentations are made available to the public, for free. The main goals is to inspire others to start thinking differently, as Apple will probably put it.
February 27th in Aspen the 2008 TED Conference was held. Here 21 year old Ben Kaufman was present. Ben is the initiator of kluster, which is an online collaboration and decision making platform. Kluster aims at being a new social network which generaetes new ideas, products, and designs (source: Businessweek). Kaufman heavily relies on what trendwatcher call tapping into the global brain, getting labor for free!
In the past he has already been succesful with the concept. In merely 72 hours he and his team have created the Bevy, of which 40,000 items were sold in 28 countries (again Businessweek). During the process 30,000 people voted for the Bevy, so Kaufman knew demand was there. At the TED Conference he hoped with the help of people like Al Gore, Sir Bob Geldof, to create a new big product, hopefully aimed at solving a large problem such as fighting disease, global warming or poverty and hunger. However the result was “Over There.” A game which aims increasing cultural awareness.
Last week news spread that Ryanair’s profit could be halved due to ever risen fuel cost and a weaker UK pound. Last quarter 2007 net profit dropped with as much as 27%. This is not news that is typical for Ryanair. Applying the Southwest business model it is well know for being a “no frills airliner” generating sound financial figures. The business model is mainly focused on the price sensitivity of customers. On the one hand this is created by cutting costs out of the traditional airliner model; use Internet for reducing channel costs, no food served and additional charges for luggage, use of smaller airports and a single model aircraft. On the other hand the business model focuses on stimulating revenue streams by maximise utilisation of air crafts (as much air time as possible with heavy loads of passengers) and yield management pricing strategies (price discrimination or price targeting to maximize revenues from passengers) (source).
The ever rising fuel prices drive costs, but not in the parts of the business model Ryanair controls. And a weakening position of the Sterling has its negative effect on the utilisation of the air crafts, where possibly the cheaper seats will still sell out, but the more expensive ones will become harder to sell. The combined effect in addition to the downturn on the whole industry of these recent developments result in weakening profits and possibly what Ryanair’s CEO Michael O’Leary calls “a perfect storm.”
But is the business model defeated then? According to the financial analysts it is not. Yield maybe flat for next year, or even drop 5%. Budget carriers are most vulnerable to broad economic dips.
Low cost carriers are used by the most economically sensitive travelers, but probably Ryanair’s yields will survive the dip.
According to O’Leary Ryanair now considers hedging of its fuel if oil dips below $80 a barrel in order to be less vulnerable in case of very volatile oil prices. So hedging makes the business model survive in these turbulent times.
Recently I stumbled upon an interesting article which states that we should not focus on the things we are good at, but concentrate on the areas we are not so great at. The theory behind it is based on researching to-be chess masters. Of course this differs 180 degrees from our common sense.
Applying this line of thinking to business it even becomes more interesting. Most companies have a strong focus on what they are good at, mainly because here the largest part of the cash flow is generated. In the excellent areas firms want to become ever more excellent, with trajectories such as Six Sigma. Nothing wrong here, unless you want to stay on top of business and innovate. Then you have to be aware of your current strengths, and more important where the room to grow is.
In the presentation I have plotted this concept on different Business Model areas.
Growth is something which can be realized in many different ways: operational excellence with Six Sigma trajectories; product or technology innovation, either incremental or radical; business model innovation; or plain old mergers and acquisitions (M&A). Of course calling it plain old does no justice to the complexity of these kinds of transitions. But fact is that when you only focus on bringing value which directly shows in your balance sheet M&A can provide you with a quick fix. The real challenge start then with Post Merger Integration (PMI), so after the purchase. According to Strategy Business to road to successful PMI goes by the cities Vision, Architecture of Change, Architecture of the New Company, and Leadership. Further research has shown that when success of M&A is compared to industry peers only 48.7% resulted in increased value. Most of the times M&A is quite costly, so how to increase the success and value?
In many cases failure of PMI is said to be based on things such as cultural differences, not only between companies, but also countries of origin. When failure is due to cultural aspects the new organisation lacks a common language which normally grows quite organic during years and of course a company’s leadership. Cultural differences can only be resolved through long, extensive projects in which everybody needs to get to know everybody and all have to agree, basically not an option when the goal is to increase value on the short run. Setting up a new business model, based on competencies and capabilities, does provide such a common language. Moreover PMI is the moment to set a new business model. Due to the central position of a business model in the ways business is done, this also reflects on the culture. Cultural differences can be overcome by creating a new common language, and culture, by setting a new business model.
Googling the internet “Blue Ocean” was already quite popular (12,900,000 hits). “Business Model Innovation” is a risen star here (6,800,000 hits). Combining the two only generates 75,400 hits. A bit strange… Not only do the two serve the same purpose, deliver growth and innovation to a company. The first can serve as a means of achieving the second.
Nowadays it is not just about mastering one approach; it is about mastering the ability to combine multiple and deliver growth. Perhaps a bit late, but why not… 2008 will bring more mixed models. Let me be the first to kick it off with a combination of the Blue Ocean Strategy as a methodology to come to Business Model Innovation.
The Sky Commuter, built by Flight Innovations Inc., which never left the prototype stage is now for sale on eBay. The fantastic machine, built in 1990, was intended to replace traditional car traffic. It is said that one of the engineers is now offering it at eBay. Current selling price around 50,000 dollars, which is nothing compared to the 6 million that was put into it. The machine offered is said to be one of originally three. The sad story behind the Sky Commuter is that for some reason the production plant was closed down before it ever went into production and present in the hangar then was either taken or destroyed. Due the the fact that this machine was at a different location this beautiful dream is still around to inspire. (source:
Back from the Austrian slopes there was the news that China has introduced its first commercial passenger jet, the ARJ21 (Advanced Regional Jet). Not really strange; China is evolving its industrial capababilities is almost every business segment so why not commercial jets. China Aviation Industry Corporation start in the 70-90 passenger segment, in which demand is expected to reach 3,700 jet of which China”s contribution will be 330.
First jet is expected to take of end of 2009.
What is the new in this news? China Aviation Industry Corp (AVIC). is not just one company; it is a large conglomerate of 100 companies, Chinese as well as European and US based.
Bloomberg mentions the necessity of a strong network for maintenance and parts. “Even certification from overseas regulatory bodies is unlikely to guarantee sales for the ARJ21, which will need an extensive network of maintenance and spare-parts providers, industry officials have said.”
“The challenge would be bigger because the network doesn’t exist,” Robert Laird, senior vice president of greater China sales for commercial airplanes at Boeing, said in September. “They’d have to establish it through partnerships.’” (Source: Bloomberg)
AVIC already does business with GE and Rockwell for parts, so the basis for the network is there. If all goes well AVIC will create a new type of Ecosystem in which it will collaborate with its partners to develop new jet, also for other segments. And with development costs just above 1.1 billion dollars (8 billion Yuan at the current rate), compared to 20 billion which would be needed in the west there future will probably bring more news about Chinese commercial jets.
For the snowboarder or skier who is seeking the cookie cutter winter wonderland megaresorts there is a alternative: Echo Mountain, Colorado. When caught in a bruising sustaining battle that gives clear advantage to powerful incumbents, other players looked for new business models that might enable them to beat the market in new ways – by satisfying underappreciated dimensions of performance. In the world of winter sports, smaller resorts do well to consider the disruptive new business model developed by Echo Mountain Park in Colorado.
The lift tickets at Echo are priced for teenagers on a lawn-mowing budget, and the cuisine is spartan even by cafeteria standards: energy bars and nuke-able burritos from vending machines (source: NY Times). The concept of Echo was not aimed at competing with the large resorts operated by companies as Intrawest and Vail. It focusses on delivering a great experience by offering excellent snow park facilities without having to pay for many thing the visitor does not use, all within driving range of a metropolitan area. It is all about the basics: newest, closest, cheapest.
From the 3rd till the 14th of December the United Nations Climat Change Conference was held in Bali. Again loads of attention were given to the subjects of sustainability. Nowadays the topic has really found grounds in society; it is even fashionable to concentrate on environmentally friendly goods and services.
In this light there is a new way of designing goods, called cradle-to-cradle. The concept is launched by Wiliam McDonough & Michael Braungart in their book Cradle to Cradle: Remaking the Way We Make Things. They advocate in favour of uncycling, not recycling. Why settle for the least harmful alternative when we could have something that is better–say, edible grocery bags! They offer several compelling examples of corporations that are not just doing less harm–they’re actually doing some good for the environment and their neighborhoods, and making more money in the process.
The basic idea behind the book is that we should eliminate our environmental footprint as much as possible. The book itself is a great example of the concept. It is designed in a different way than we are used to. It is printed on material which can be fully uncycled; the pages can be cleaned so that the ink can be re-used, the pages itself can be re-printed and fully re-used. In essence it is all about design.
Cradle to cradle requires re-thinking each part of the design, and the design as a whole. Using it as the new standard for design will lead to a necessity for innovating our business models as well. Firms core capabilities need to change, possibly also the partner network, leading to a re-newed value configuration. Companies applying the cradle-to-cradle philosophy will be able to create different, more intense, relations with their customers. Applying cradle-to cradle brings maximum benefits combining it with a new business model.
[pro-player]http://www.youtube.com/watch?v=IoRjz8iTVoo[/pro-player]
Recently, perhaps in a reaction to the iPhone, buzz started to spread that Google was also working on a mobile phone. Many different blogs showed pictures that were leaked to the press. Of course Google’s Business Model is all about generating traffic, and more important offering adds to this traffic. The PC Internet market is pretty covered… and where to find a new source for traffic… the mobile phone!
Let’s start with a small rectification on the buzz: the is not going to be a Google Phone, but a Google Mobile Phone Operating System called Android.
Since a couple of years the so-called smart phone is becoming increasingly popular. HTC has set the standard with their Windows Mobile operated phones. Companies like Nokia are also trying to get a piece of the pie with their Symbian operating system based phone, such as the E-series from Nokia.
So the market is quite mature so why would we consumers go for this latest gadget by Google?
First it will probably be the must have gadget for 2008 (launching Google Android enabled phones in Europe probably mid 2008). Second, the thing Google is great at, and what we users like, is that the company is able to integrate the whole lot into a new experience. And the best thing is that with running Google Android as an operating system on your mobile, when you need an additional tool, this tool will available free of charge. Google Android is open source. The software development kit is free of charge. And at the moment you read this someone somewhere is already building the killer app you want on your mobile. Google has reserved 10 million dollars, in chunks varying in amount from 25,000 till 275,000 for people that develop applications that are picked up by their panels of experts. Doing so will stimulate to formation of a community, and boost innovation.
[pro-player]http://www.youtube.com/watch?v=g4m73NXn7hY[/pro-player]
