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.
During the Internet Bubble Business Model was one of the buzz words. Companies did not need a real strategy, a special competence, or even customers. The only thing needed was a web-based Business Model making vague promises about wild profits in a distant future (source Joan Magretta, HBR, 2002). Not strange that the term itself lost most of its power.
Now years further and wiser we know a business model definitely matters. Without a sound Business Model firms can launch as many new products and services they want to, only confusing customers more.
Companies with a sound Business Model know the value proposition, what the target client group is, which channels to use to approach them, what kind and type of relationship to maintain, what capabilities are required in-house or at a partner, how value is configurated, and of course how cost and revenue stream flow.
Having a proper Business Model not only clarifies things for you as a company; it helps to build and manage your reputation among your current and future clients.
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.
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]
For their latest album the band all bands want to be, Radiohead, has taken a totally different approach for bringing it to market with a new business model. Artist linke Prince and the Belgian singer Sarah Bettens have experimented with including their latest CD with the Saturday’s newspaper, respectively the Daily Mail in the UK for Prince and De Morgen in Belgium. The number of newspapers sold almost doubled in Belgium.
Radiohead’s In Rainbows can now be obtained in two ways; downloading the CD and a Discbox, which includes a vinyl album, bonus CD, and assortment of other trinkets, both ways only available through the In Rainbows site. Radiohead is able to do so because it is not tied to any record label at the moment. The new CD is offered on a “it’s up to you” basis, letting the fan downloading determining what to pay.
comScore, Inc. has released a study of the online sales of In Rainbows. Their study is on the first 29 days the album was available. In this period 1.2 million people visited the In Rainbows site. A significant portion of them downloaded the album. Off all people that downloaded the album 38% was willing to pay, with an average of 6.00 USD. Further the study showed that in percentages fans from the USA are more willing to pay for the download and also a higher amount.
Looking at it from a Business Model perspective Radiohead innovated it both from the Client Perception side (choosing a different distribution channel), as well as from the Eco System side (not working with a record label, changed their partner network, and their core capabilities from making great album to also publishing them). This all has resulted in different cost and revenue streams still with financial success.
For more info please see one of my previous posts about a generic business model.
