Business model innovation will be the next big differentiator for companies aspiring innovation leadership. Innovation leaders are breaking away from the pack by allocating increasingly more resources to business model innovation1. And they are right. Research has illustrated that more value is to be expected from business model innovation, than from any other form of innovation. Business model innovation has a higher impact on business results.
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!
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!
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
[pro-player]http://www.youtube.com/watch?v=ce9f0JP6eks&feature=fvst[/pro-player]
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.
Recently HBR published an article about the difference in competition between the US and Europe and emerging markets, China in the article. Where in the US and Europe most customers demand excellent quality in China the largest segment is the “good enough” segment (62% share of market in 2005). The good enough segment is defined as “products of good quality, produced by local companies for a rapidly expanding group of value-seeking consumers with mid level incomes.” Distinguishment is made between premium, good enough, and low-end market segments.
The difference between “good enough” products and premium products is that “good enough” comes with only a limited number of features, rather than the full range, at a price significantly lower that foreign brands.
The shift in China towards “good enough” comes from two directions: Consumer that see their incomes grow shift from low-end products to the “good enough” segment, and consumers with a higher income move away from expensive foreign brands, towards locally produced products at an acceptable quality level.
What should multinationals seeking way into the Chinese market do when entering the market in China? When the market segment’s state is strong, companies should either maintain their premium status by holding of the “good enough” segment by lower costs and innovating to create a niche position. More interesting is the situation where the premium segment is weak or eroding. Then companies can choose to enter the market either from above, enter the market segment in order to hold off local competitors and the erosion of the premium segment, or enter the market from below. Entering from below means seek an alliance or even merger with a Chinese partner or even develop new products specifically for the Chinese market, applying new business model tailored to the Chinese situation. Doing so they can steel share from Chinese players and become market leader.
This all seams quite far away. After all it is about China. Why would “good enough” not apply in non-emerging markets? A large company like Philips now uses “Sense and Simplicity” for a slogan. Underlining the fact the company produces technological products that enhance life, without the hassle, complexity and frustration. The story goes that the company came to this shift in strategy when managers were given a DVD recorder to try at home. Most of them were no able to install it, let alone use it.
It is probably only a matter of time until more and more customers in the US and EU crave for simplicity, cutting out all features they will not use at a lower price, making the “good enough” market segment expanding far out of China. Consumer Vigilantes are already on the rise when their products and services bought are too complex to install it themselves.
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.
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:
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]
