Ambition: Building Business Models that Matter

As business people we have a powerful tool in our hands: the knowledge of how to build, run, and manage businesses. Let us be ambitious and put that knowledge to work for things that really matter.

But please don't get me wrong. I'm not talking about so-called "social corporate responsibility". Nor am I talking about "pro bono work" for social projects, or about "giving back", a phrase that so many successful business people like to use. No, what I am talking about is the ambition to build sustainable business models that have a social, environmental and/or development impact written in to their DNA. In other words, business models that make a difference by their "mere" success. Business Models that Matter

Take Grameen Bank, to use a very popular and widely discussed business model with an impact. The Bangladeshi institution makes micro-loans, mainly to women in Bangladesh. This allows the women to build micro-businesses and earn sustainable incomes for them and their families. The success of Grameen Bank's business model has a substantial impact on poverty alleviation and the social status of these women entrepreneurs.

A completely different example is Max Havelaar, an originally Dutch and now pan-European fair trade label. The organization behind the concept has been self-financing its business model since 2001 through licensing fees. Products bearing its label (e.g. coffee, bananas, flowers) are sold through supermarkets at a competitive price. The label provides consumers with the assurance that a fair price was paid to the producing farmers in the South. To make that possible a minimum of intermediaries are used to bring those products to markets in the North.

Another inspiring example is Acumen Fund, founded by Jacqueline Novogratz, the author of The Blue Sweater. The fund invests in business models that generate financial and social returns. It particularly looks at business models that can be effective in reaching the “base of the pyramid” (BoP)—or the billions of poor without access to clean water, reliable health services, or formal housing options.

Real Ambition

Business models of this type is what we should really aspire to build as business people. Trying to tackle business issues of this level of difficulty and relevance, is what I call real ambition. "Difficulty", because it's not "just" about weaving profits into the business model's DNA, but also impact. "Relevance", because I sincerely believe that innovative business models can make a substantial contribution to helping solve some of the pressing global issues of our times (poverty, sustainability, inequality, healthcare...).

Building business models that merely pursue profits almost pale as a hedonistic or pecuniary quest aside the grand challenge of building business models that matter. Let us at least allocate some of our time and intellectual capacity to this quest of designing and implementing relevant business models. I am convinced that powerful innovative business models are one of the major tools (besides regulation, etc.) that can bring systems level change and transformation. Let us take up the challenge

Peepoople - a case study to challenge your creativity

To seduce business people to think about business models that matter, I get them to work on a different type of business model in my workshops. I get them to brainstorm on innovative business models for Peepoople, a Swedish organization that has developed a self-sanitizing toilet bag that is biodegradable and turns into fertilizer after usage. With the right business model this organization could potentially bring toilets to over 2 billion people who lack proper sanitation infrastructure.

Check out the video interview with Peepoople's CEO Karin Ruiz and propose some innovative business models that could help her organization to scale and succeed. I use the video to introduce the case study challenge.

(never mind the video quality - we did this interview over Christmas with Skype when Karin was on vacation in Uruguay / also, please note that I didn't really know how to make a natural-sounding voice-over...)

Last but not least: check out our new project on business models that matter: BusinessModelsBeyondProfit

The Music Industry (part II) – two of the new models

It was fun to give a keynote on business model innovation at Eurosonic Noorderslag, Europe’s most important live music industry conference. The music industry is more or less a playground (and battlefield) of new business models

In this second blogpost (read part I) on the music industry I present two of the examples of innovative business models in this area, which I presented during my keynote talk: Sellaband and Spotify. Both companies were actually present during my presentation.

While in the past the music industry was characterized by one dominant business model design (the one of the major recording companies), the future will be characterized by multiple competing business models.

There was also an interesting discussion in the panel after my talk, which hosted Nokia, Spotify and rights holding company Buma/Stemra. One of the elements pointed out was a the competition between business models based on ownership of music (e.g. download) versus access to music (e.g. streaming).

Check out my slides for an illustration of Sellaband's and Spotify's business model:

The Music Industry (part I) - what's broken

Next week I'm giving a keynote on business model innovation at Eurosonic Noorderslag, Europe’s most important live music industry conference and showcase festival for new talent.

While the music industry provides sufficient material for a whole book on business model innovation, I will simply package some thoughts in two blogposts. The first part is on "what's broken". The second part will be on the fact that

Today's music industry is a business model playground - and to a certain extent battleground

It is quite a particular industry because of its high concentration of power. 85% of the recording industry, the most important subset of the music industry, is controlled by only four players, Sony Music Entertainment, Universal Music Group, Warner Music Group, and EMI (source 1, 2). That didn't prevent them to screw up when it comes to business model innovation. In fact, it probably is one of the root problems.

Check out the slides below for a brief outline of the "old" recording industry business model and an assessment of where it is broken. After reacting only slowly to the external pressures on their "old" business model the major record companies are now slowly experimenting more seriously with new models (topic of part II of this blogpost).

Although the major record companies are engaging in new business models, I don't think they are aware of the extent of flaws in their "old" model. Some points that their executives should keep in mind when they brainstorm on new models:

  • Recording companies are fighting piracy, while that won't win them "the battle".
  • Albums sales are out in the digital world - they are unbundled into single songs (e.g. iTunes).
  • The price of albums and songs (not necessarily music in general - e.g. services) will inevitably move towards ZERO.
  • Distribution has become a commodity because of the Internet, attention is the new scarcity.
  • Talent and hits will be discovered by other mechanisms than those that the majors have in place - social networks are what drive music sales today.
  • The old model carries an outmoded legacy cost structure (talent discovery/marketing), which is unsustainable.
  • The balance of power between recording companies and artists is inevitably moving towards artists.
  • The future of music is all about hits AND the Long Tail of music.

Business Model Management - a defining topic for the next decade

Business Model Innovation is on the agenda of many CEOs of incumbent organizations and in the DNA of countless insurgent start-ups. Yet, executives and entrepreneurs should already look beyond "mere" innovation towards managing business models.

Staying ahead of competition requires more than an impressive one-time business model innovation stunt. It requires the careful evaluation and improvement of one's more established business model (cash cows), while proactively playing with a portfolio of new business models. This can be presented as a spectrum ranging from "improving business models" to "disrupting/inventing business models". Managing Business Models

Improve: Continuously assess and improve your more established business models, notably through incremental innovation.

Disrupt, Invent: Pro-actively develop and manage a portfolio of disruptive and entirely new business models that will allow you to maintain a competitive advantage in the future. In some cases these new business models may cannibalize your existing business model in others they may be complimentary. Some companies my prefer an acquisition rather than a development strategy of new business models. However, it still requires a deep understanding of the new and emerging models.

Companies that have failed to manage the entire spectrum of business model management include Xerox who has popularized the dominating photocopying business model in the 60s (see Henry Chesbrough's work for details) or Dell, which has popularized direct sales of PCs through the web. Both have introduced new business models and come to dominate their field, but failed to reinvent themselves.

Managing Business Models - examples

Companies that seem to be managing the entire spectrum of business model management include, for example, Amazon and Daimler. The former is constantly improving it's online retailing business, while building new business models with large growth potential (e.g. Amazon Web Services that allow renting storage space and computing power). The latter is improving it's core business (after some painful merger adventures), while exploring new complementary business models invented by it's Business Innovation Department. In 2009 that department experimented with Car2Go, an interesting mobility concept that allows people to rent and drop-off cars on the fly anywhere in a city. With this concept Daimler intends to exploit the continuing trend of urbanization and problems of congestion and individual transport.

Customer Feedback not on elBulli's Menu

I just came across an interesting post on Harvard Working Knowledge. Julia Hanna writes about a Harvard Business School case study that shows how Chef Ferran Adrià creates innovative customer experiences in his world-famous restaurant elBulli.

elBulli's numbers are impressive:

Each year, some 2 million hopeful diners vie to be one of the fifty customers he serves each evening for the six months that elBulli, his restaurant, is open.

However, what struck me most about the article was Ferran's focus on creating a unique customer experience. This includes a two hour travel from Barcelon to the restaurant on narrow, twisting mountain roads. Another example is elBulli's mysterious reservations system. It's more like a lottery system. If you are lucky to "win" one of the 8'000 available bookings a year, you are given a date and time to show up. This is everything else than convenient for customers.

elBulli seems to violate any common sense marketing rule (e.g. good location, listening to the customer, etc.). More interestingly, what elBulli does is also the opposite of the new "design thinking mantra" of observing customers and then designing services according to the gained insights.

In fact, elBulli's magic and success ultimately lies in Ferran Adrià's passion and his desire to create a one-in-a-lifetime experience. Now that takes real leadership! And in my opinion leadership is one of the most under-discussed ingredients of innovation. Other great examples of innovation leadership include Steve Jobs at Apple or Elmar Mock at Swatch in the 80's.

Business Model Generation Now Available

The waiting is over. Our new book "Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers" is now on the market. Yesterday we shipped over 1'000 pre-purchased books to more than 55 countries.

Enjoy the extensive online preview below and the FREE 72 page pdf preview of Business Model Generation. In order to keep the price affordable we are selling it over our book website for the first few months before distributing it through Amazon.com.

We are curious to hear about your feedback regarding content and form. You may also want to have a closer look at the story and business model of the book, which are very special - more on that at the end of the preview.

How Business Models Help Generate Business Plans

In this blogpost I explore the close relationship between business model and business plan. A business plan’s main role is to plan, outline and communicate a business (or not-for-profit) project and its implementation internally or externally. The motivation for the business plan may be to “sell” a project to potential investors or internally to top management and also serves as a planning document.

In fact, when you have designed and thought through your business model you have the perfect basis for writing a good business plan. Structure your business plan into five main sections: The team, the business model, financial analysis, external environment, implementation roadmap, and risk analysis.


The Team

One of the elements that particularly venture capitalists look at first is the management team of a project. Is the team experienced, knowledgeable and connected enough to pull-off what they propose? Highlight why your team is the right one to successfully build the business model you propose in the document.

The Business Model

In this section you showcase the attractiveness of your business model. Use the Business Model Canvas to give an immediate overview of your model. Ideally you sketch it out with drawings. Then describe the value proposition, outline why you believe potential customers need it and explain how you are going to reach the market. Use stories. Then highlight the attractiveness of your target markets to get the reader of the business plan interested. Finally, outline what key resources and activities are required to build and operate the business model.

Financial Analysis

This is traditionally an important part of the business plan that will attract a lot of attention. It contains the financial information that you can calculate based on your organization’s Business Model Canvas and a set of hypothesis of how many customers you can reach in a specific time period. This includes elements such as break-even analysis, sales scenarios and operating costs. The Canvas also helps you calculate capital spending and more generally how much it will cost you to implement the business model. Based on all these calculations you outline your funding requirements.

External Environment

In this section of the business plan you outline how your business model is positioned regarding the external environment. Outline market forces, industry forces, key trends, and macroeconomic situation. Summarizing, you need to stress what the competitive advantages of your business model are in this landscape.

Implementation Roadmap

This section gives the reader an idea of what it takes to implement your business model and how you will do it. It includes a summery of all projects and the overall milestones. A project roadmap, including Gantt charts, then outlines the implementation agenda. The projects can be directly derived from your organization’s Canvas.

Risk Analysis

At the end of the document you describe limiting factors and obstacles, as well as critical success factors. These can be easily derived from a SWOT analysis of your Business Model Canvas.

This is a brief excerpt of the "outlook part" of my Business Model Generation book.

Scanning Your Business Model’s Environment

Business models are designed and operated in a specific environment. Developing a good understanding of this environment helps you conceive better, more informed and likely more competitive business models.

Scan your environment by mapping out four main areas. These are a) market forces, b) industry forces, c) driving trends, and c) macro-economic forces. Each can be divided into sub-areas that allow you to draw a picture of your business model's environment (see image below).


Continuously scanning your business model’s environment is important because the economic landscape is driven by growing complexity (e.g. networked business models), increasing uncertainty (e.g. technology innovations) and market disruptions (e.g. new disruptive value propositions). Understanding the changes happening in this environment help you more rapidly adapt your model to shifting external forces.

You should apprehend this environment as a sort of design space. It is a context in which you conceive or adapt your business model by taking into account a number of design drivers (e.g. new customer needs, new technologies, etc.) and design constraints (e.g. regulatory trends, dominant competitors, etc.). This environment should in no way limit your creativity or define your business model upfront. However, it should influence your design choices and help you make more informed decisions.

Friends of Business Model Innovation

Business Model Innovation is a hot topic these days. I thought I'd post a note about some of my fellow bloggers who focus on the topic and who are friends or colleagues...

Anders Sundelin who launched the Business Model Database Blog
Patrick Stähler the sharp brain behind fluidminds
Peter Froberg who focuses on the freemium business model
Saul Kaplan of the amazing Business Innovation Factory

For all others who have a special focus on business model innovation, who read this blog and who blog about it themselves: don't hesitate to post your URL as a comment...

Upcoming Workshops

I have two public workshops coming up, besides my work for companies and conferences. It would be a pleasure to meet you there! There is an attractive "early bird rate" until December 19.

Public workshops:

  • 21. January '09: Zurich "Crafting Innovative Business Models" in German (info & sign-up here)
  • 22. January '09: Geneva "Crafting Innovative Business Models" in English (info & sign-up here)

Public Talks:

  • 15. December '08: VizThink Madrid - short keynote on business models and visual thinking together with XPLANE

Also, in April I will do another North America tour. Toronto and New York are sure stops. Others will be defined in the coming weeks.

Are we all Creatives?

If you want to be successful at innovation in companies today you have to involve everybody!

That is one of the strongest quotes that I take away from Sir Ken Robinson's keynote that I attended in Toronto today. Michael Dila of Torch Partnership invited me to this event and I'm glad I accepted.

Sir Ken is an authority in the field of creativity and innovation. In his talks he shows how we are taught to become uncreative throughout our educational systems. We have practically lost our ability to be creative by the time we arrive as so-called "knowledge workers" in companies ... In essence, this means that we don't have a creativity crisis in companies, but a structural crisis. Our educational system and our companies lack the structures it takes to make creativity flourish throughout our organizations.

"saying that not all people can be creative is like saying that not all people can be literate"

I could not agree more. That is also one of the reasons I think we have such difficulties to achieve business model innovation. We believe only the "creatives" can come up with new and maybe disruptive ideas. However, inventing innovative business models requires co-creation and diverse teams from all hierarchical levels, divisions, age and gender groups. Everybody's creativity within an organization should contribute to strengthening and renewing the business model!

Taste a sample of Sir Ken's amazing ability to entertain while addressing a highly important issue:

Sorry if this post does not seem fully cooked and ready to serve. I have several hours of travel behind me, but absolutely wanted to write about this inspiring event I attended...

The Business Model Innovation Platform

This blogpost is a question to you: would you like to see a business model innovation platform emerge for a community of practitioners around the topic? A place to share experience, tools, examples and insights...

Context: I'm just done with a series of 3 workshops in a row at Toronto's Rotman school, the MaRS "incubator" and an event in New York. It was GREAT! The topic is hot, people are hungry to innovate business models and my business model canvas is spreading. Multiple groups and companies are applying the canvas in their own setting and extending its use (e.g. IBM is experimenting with software-supported business model design). One person in Toronto has even told me that the canvas has opened up a whole new career for him. Yet, there is no one place to go to share experience around the topic...

This all led me back to an idea I had a while ago: the creation of a Business Model Innovation Platform. It would be a place where people could share their ideas around the topic, share their experience with business model innovation and show how they applied the business model canvas. A vibrant community of practitioners where all the necessary tools are available for download (some would have to be paid, though). Tools could be templates, training videos, industry specific business model reports, etc. The MySpace of business model innovation...

A couple of questions to you:

  • Are you interested? Is this a worthwhile idea?
  • What functionalists would you want from such a platform for a community of business model innovation practitioners?
  • What business model innovation tools would be useful?
  • What name do you recommend for this platform

Another series of questions to the "techies" on my blog:

  • Are there open source platforms out there that could be easily used for such a platform (non-branded, so the platform could have its own brand...)?
  • Where can I get my platform developed through crowd-sourcing?
  • Where can I get a good and cheap design crowd-sourced?

I'm hopeful you can spare a moment to share on this topic because such a platfrom could have a nice impact on how we do business. We could create more value through new business models, we could have more fun doing strategy and business models through design thinking and we could find new and innovative ways to make money...

By the way, there is one particular reason why I am so supercharged: 4 years ago I used to sit at the Wawee Coffee Shop in Chiang Mai, Thailand. That is where I relaunched my blog on business model innovation. Since then I have never looked back. Many people know my blog and use my canvas. I am now invited for keynotes and workshops around the world.

4 years later I am sitting in a coffee shop in Brooklyn, New York, surrounded by entrepreneurs and students working on their Mac. I feel like this is the next stage for my work after those days in Chiang Mai. It's the launch of another stage: Together with Professor Yves Pigneur we want to lauch a new type of business book in 2009 on business model innovation. In addition to that I would love to connect the business model innovation community on a platform. There is just so much exciting innovation around business models going on at the moment... We need to bring that experience together!

Best Management Book 2009: "Business Model Innovation" by Osterwalder & Pigneur, produced by ULURU

The title of this blogpost is probably a bit cocky and it would certainly be completely off the mark if it were just about another management book...

What will be different about this book that Professor Yves Pigneur and I are writing in collaboration with ULURU is the business model. We are launching this book based on an innovative business model, which is quite different from any other management book published to date.

However, before revealing any ideas that we have come up with during our brainstorming sessions, I would like to get some inputs from you. Please help us design a great book by telling us what you would expect from a book by us on the topic of business model innovation. What will make you buy it?

Take this survey to tell us what you would like to see in this book

An important element of this book project will be that you can buy the book in advance, during the writing process to benefit from special features & services (e.g. video-interviews, web seminars, draft book chapters). If you are among the advance buyers you can influence the book content and will be mentioned as contributor.

Interested? Stay posted to find out what the innovative business model for the book is about...

Victor Lombardi and Jess McMullin speaking in Europe

Two people who are at the forefront of thinking on the intersection between business and design will be speaking in Europe this November. Though this is not 100% related to business model design, I believe they promote the kind of tools & techniques that are necessary to come up with sound business models. I very much value their contributions of bringing design thinking to business.

Victor and Jess will be first speaking at the IA Konferenz 2007 in Stuttgart, Germany (9./10. November).

Jess will also speak at the Italian IA Summit 2007 in Trento, Italy (16./17. November).

Some of the Brightest Bloggers I Know and Follow in the Blogosphere

I've scaled down on reading blogs recently, but I still follow some blogs and people in the blogosphere... Here a selection of the ones I like most:

  • Laurent Haug: Laurent is a frequent guest at arvetica (the consulting boutique I work for). He's the founder of the top-notch social technology conference LIFT and the best connected man in Suisse Romande. A great source on new web tools - speak Web n.0.
  • Nicolas Nova: Nicolas just passed by at our offices today to chat and to work on the final touces of his PhD dissertation. He's the best input you can imagine on the value of the latest technologies - particularly in the field of group collaboration. Nicolas is also part of the founding team of LIFT.
  • Irving Wladawsky-Berger: Vice President, Technical Strategy and Innovation at IBM Corporation. Though he probably doesn't know me, I know his blog ;-) It's a great source to understand where IBM is heading - interesting material. I'd love to have a chat with him.
  • Pascal Rossini: Pascal is one of the top Web (2.0) entrepreneurs of Switzerland and I had the great pleasure to do some consulting work for him. His newest coup is ADS-click, Sky-click and Skippi. Follow his ventures.
  • Ralf Beuker: Ralf is at the forefront of design management. When we met last December we had some great discussions on design thinking. A true source of inspiration.
  • John Hagel: John is a well known management guru. I don't know him personally, but I felt honored that he referenced one of my blogposts last year. His blogposts highlight his out-of-the-box strategic thinking. I hope he stops by in Geneva some time...

It's quite funny that I tried to convince a number of other friends to start blogging last year ('06)... Actually the motivation was a bit egoistic: It's the most convenient way for me to follow their latest innovative thinking. Some have actually followed my advice, like Gerry Schnyder who is currently in London working on his PhD about comparative corporate governance.

At arvetica we also set-up a new blog (which is actually our company website!!) and I'll be writing there more and more in the future...

(disclosure: I don't know the real source of the above image which represents the blogosphere... Sorry if it's breach to anyone's Intellectual Property Rights (IPRs))

Subscribe in Bloglines

Interview on Business Models

Yesterday freelance writer Clint Witchalls interviewed me on business models. The chat was quite fun and Clint asked some good questions. Among many other things we came across the following topics:

  1. Product/service innovation vs. business model innovation: While the former is - no doubt - important, I believe the latter is much more powerful. Take (once again) Apple's iPod as an example. The reason why that thing is so competitive is because it's not just built on a product. It is also grounded in a powerful business model (at least to date), which includes their iTunes software & shop. Some of Apple's competitors are lining up terribly impressive products and are still staying miles behind...
  2. Why has the business model concept and business model innovation become so important: I believe business executives have much more choice than 10-15 years ago in designing their business model. Each business model building block allows for a wide range of choices. An executive can design various distribution channel strategies, he can opt for many different types of customer relationships, he can build many diverse revenue streams, he can enrich physical products with information services and, and, and. Much of this was more limited just some years ago.
  3. Wich people should join the group leading a firm's effort on business model innovation: In my opinion the selection should be as a large as possible. The people should definitely come from different areas of a company. The business model concept is an overarching construction and can help overcome the still dominant silo-thinking that has many companies in its grip. In order for innovative business model building blocks to become reinforcing people must work together from various company backgrounds.
  4. The different evolution of technological disruption and business model disruptions: I pointed Clint to an article from Constantinos Markides which compares the former to the latter (ref: Disruptive Innovation: In Need of Better Theory). While I don't think the article is very good, it does make one particularly interesting observation: Disruptive technologies tend to replace incumbent technologies, whereas disruptive business models tend to co-exist with incumbent business models. Examples are numerous: airline industry, computer sales, etc. This leads to another interesting point: Various economic areas are increasingly characterised by multiple (innovative) business models.

A last thing I believe is terribly important to understand, but which we haven't discussed in the interview, is the difficulty to classify certain business models among an industry sector. In which industry would you say does Apple's iPod/iTunes initiative operate? Should we classify Apple's business model in the hardware industry, software industry, music industry or even design industry?

What is disturbing is not so much the fact that we can't classify their business model, but that analysts and consultants still largely use methods referring to "industry", while the concept is becoming outdated... Michael Porter's five forces model is such an example. I predict that in the future we will see more and more business models that will be impossible to be classified in specific industries. This means that methods of industry analysis will be of less and less value.

Subscribe in Bloglines

Strategic Distribution Channel Design and Customer Care at Alfa Romeo

Today's FT ran an interesting article about Alfa Romeo, the Italian carmaker. The story makes a nice showcase for outlining how important it is to align the different building blocks of one's business model.

Alfa's cars have a very distinctive style and are known for their high-quality workmanship. However, as the FT article points out, Alfa has a tarnished reputation for distribution and customer care. The former, car perception, is high-end while the latter, car and distribution, has been handled carelessly. Both are completely unaligned. It is as if Alfa Romeo thought it's sufficient to through a nice car model on to the market and success will follow by its own. However, JDPower, a consumer ratings group, has helped Alfa understand that their existing and potential customers had a huge problem with customer care and the way the cars were sold. For example, some dealers

sold the luxury cars alongside cheaper brands, with vehicles crowded into small spaces

and

Potential customers' expectation of the brand was that it was like Audi or BMW, but it was being sold alongside volume brands

This is clearly a case of unaligned business model building blocks... In my language of describing business models this means that "distribution channel" and "customer relation" are not aligned with the "value proposition" and the "target customers" (as outlined in the slides below). The open question is if Alfa's managers were unable to understand this or if they were simply sluggish in the execution.

However, today the company is serious about its strategy execution. As the FT outlines, this reorientation is part of a broader turnaround at Fiat, the Italian industrial group that owns Alfa. The initiative has been led by Sergio Marchionne, Fiat's CEO since '04 (by the way, Marchionne is very well known to Swiss business as a turn-around manager...).

Alfa is now taking care about its distribution channel design and is, for instance, reviewing all its UK car dealers to assure a high-end distribution style. They've hired SGS, a Swiss auditing company (formerly turned-around by Marchionne) to improve compliance with the required quality and in case necessary replace existing car dealers with new ones.

An example of this new channel design is Alfa's collaboration with HR Owen, an upscale chain, whose other brands include Bentley, Rolls-Royce and Ferrari...

Subscribe in Bloglines

Business Model Design Laboratory: The Music Industry

While moving homes has dark sides it also has bright sides: In a huge pile of unread and half-read magazines (who doesn't know that phenomena ;-) I stumbled across the September issue of Wired. The cover story was about the "rebirth of music" and triggered a lot of ideas in my mind.

First of all, I realized at what point the music industry is currently a huge business model design laboratory. It's not new that old and new business models are clashing in this domain, but the richness of all these new business models is astonishing. I believe it might be the industry with the most different types of business models competing against each other these days.

Sedondly, while reading I understood that other industries MUST follow the evolution of business models in the music industry if they want to be prepared for business model innovation in their own industry. I'm not only talking about intellectual property rights (IPRs), peer-to-peer (P2P) music sharing platforms and lessons for the film industry. I'm talking about genuine insights into business model innovation.

Finally, The music industry transformation is giving us lessons about business model innovation in many different building blocks, such as distribution channels (mobile phones, P2P, USB-sticks, TV series, MySpace, game consoles, ...), service & product innovation (free remixing platforms, ringtones, communities of interest, recommendation engines & music DNA...), revenue streams (various forms of advertising, live-streamed concerts, ...) and so on.

One of my favorite business model innovations picked from the several Wired stories is the one where movie theaters offer live streaming of sold-out concerts on their big screens (Big-Screen Bands).

With help from National CineMedia, your local cineplex can show live footage from a sold-out concert in New York City. Sure, you may not get away with smoking a joint and sipping a flask, but for $15, you’ll get comfy stadium seating and a view of every wrinkle on the aging rocker’s face.

WOW - this simple innovation involves new value added services, new distribution channels, reducing fixed costs, partnerships and new revenue streams. My advice: go out and learn about the business model innovations taking place in the laboratory of the music industry today - then apply the lessons to your own field.

Merry Christmas, Alex

Subscribe in Bloglines

Christensen on Business Model Innovation

I found reading this short interview on business model innovation with Clayton Christensen, the renowned Harvard professor and author, quite worthwhile. He offers some trenchant advice on business model innovation. Even more important: It shows how hot the topic currently is. I saw Christensen speak at a conference a few years ago and he certainly isn't a person who jumps on a topic just because of the buzz.

The most interesting part is Christensen's answer to the question if the creation of new business models are substantially different from the innovation of new products or services. His answer:

Yes. Most new products and technologies can be sold through the existing business models. In fact, the corporation will reject process or resource allocations that don't fit its business model.

A powerful reason why companies aren’t good at business-model innovation is because the kind of products that are required to be the seed of a new model can’t get through the resource allocation process.

This is food for thought, particularly for successfull companies...

Subscribe in Bloglines