Google Book Search - first issue of my new business model innovation example series

During my d"aily lecture of the Financial Times I usually put on my "business model glasses" when it comes to the business section. Every week there are some very exciting examples of business model innovation. I decided to not only share these examples in my workshops, but also on my blog - hence the new "business model innovation example series"...

Enjoy the first issue on a deal that Google struck last week:

Book Chunk Project - prototype

Yves Pigneur's and my book on the topic of "Crafting Innovative Business Models" (working title) is only due in May 2009 (approx.). That is way too long to wait. Many people asked us for early access. Hence, I thought it could be a good idea to distribute the book content in separate chunks before.

The slides below outline the draft of this idea of giving interested people early access to our writing for 24.- $US (or maybe a little more). By subscribing to this so-called "book chunk project" you will get several things (suggest more...):

  • first & exclusive access to raw book content
  • influence authors
  • x installments of book chunks (in a non-linear order - as we write them)
  • 50% discount off the final book (approx.)
  • participate in exclusive book chunk webinars
  • access to templates
  • being part of the business model innovation community

I would be interested in your comments on this and if you would be willing to buy such an early and exclusive access. Do you think the pricing is too low? Any suggestion is welcome. In the meantime have a look at the slides that outline this idea that I would launch very soon if I feel an interest from your side:

Book Chunk Project - prototype
View SlideShare presentation or Upload your own. (tags: book project)

Drawing your Business Model: cooperation with XPLANE, the visual thinking company

I've always been an admirer of the work of XPLANE, the visual thinking company, and its founder Dave Gray. So I'm quite excited to announce that we are now collaborating on visualizing business models. I will speak about the topic at a workshop organized by XPLANE on September 30th in London. The overall theme is "Thinking Visually to Tackle Business Challenges"(flyer).

Find the first XPLANE sketch of how a visualized business model could look like on slideshare:

View SlideShare presentation or Upload your own. (tags: dave xplane)

The XPLANE workshop in London promises to be very interesting. They will apply a creative and innovative approach to problem solving with participants. Personally, I am a firm believer in visual thinking and apply it in all my work. If you want to start learning about this I think the XPLANE event is a good place to start. Workshop goals are:

  • Understand the meaning and value of visual thinking
  • Use a creative and innovative method to solve business challenges
  • Use visual tools to help you generate, evaluate and organise ideas
  • Learn how to use them to contextualise, prioritise and harness change
  • Extend these new techniques and methodology to your team

Find out more about the event in their flyer and if you're interested subscribe on eventbrite.

On XPLANE's website you can also find a multitude of examples of their work. Below just one case study (pdf) that illustrates what they do:

Long Tail Business Models

In today's blogpost I'm sharing a couple of reflections on long tail business models. It is be part of the upcoming book in a section that illustrates some popular management theories & concepts through the business model canvas.

Enjoy the slides:

Long Tail Business Models
View SlideShare presentation or Upload your own. (tags: innovation design)

you can download the slides on slideshare.net:
http://www.slideshare.net/Alex.Osterwalder/long-tail-business-models-presentation/

Slideshare Contest: Why Business Models Matter

I finally succeeded to submit a powerpoint presentation to the "world's best presentation contest" on slideshare.net, after some initial problems with the submission options (they simply disappeared before the end of the deadline...).

Please have a look at my slides below on "why business model innovation maters". If you like them please click on the link and go vote. Thanks! As a Swiss I believe in your democratic opinion - but vote "thumbs up" anyways ;-)

What is a Business Model?

Update: Based on the overwhelming interest this post got, I updated and republished the version from 2005

A business model is nothing else than a representation of how an organization makes (or intends to make) money. This can be nicely described through the 9 building blocks illustrated in the graphic below, which we call "business model canvas".

Insight: In addition to this post check out the business model design template

The business model topic is very popular among business people today because in various industries we can see a proliferation of new and innovative business models (i.e. new ways of making money). In several industries new business models are threatening or even replacing established companies and conventional ways of doing business. Just have a look at the music or airline industry.

Hence, the interest in business models comes from two opposing sides:

  • Established companies have to find new and innovative business models to compete against growing competition and to fend off insurgents
  • Entrepreneurs want to find new and innovative business models to carve out their space in the marketplace

Within this context the business model concept is a particularly helpful unit of strategic analysis tailored to today's competitive business environment. It helps executives as well as entrepreneurs increase their capacity to manage continuous change and constantly adapt to rapidly changing business environments by injecting new ideas into their business model.

But what actually is a business model?

In management meetings the question of what a business model is (even what “our” business model is) often remains relatively vague. The main reason for this is because business people have an intuitive understanding of business models. Normal, since the business model is about how an organization makes money, which is a manger’s job after all. However, there is often a lack of a more precise and shared understanding of what a business model is. Yet, such a common understanding is required if we want to have high quality discussions of one’s business model and make important business model decisions.

Therefore we have come up with the 9 building block approach to describing business models. It has the characteristics of any other type of model (e.g. in architecture or engineering).

Like other models it is a simplified description and representation of a complex real world object. It describes the original in a way that we understand its essence without having to deal with all its characteristics and complexities. In the same line of thought we can define a business model as a simplified description of how a company does business and makes money without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.

Based on an extensive literature research and real-world experience we define a business model as consisting of 9 building blocks that constitute the business model canvas (readers of this blog will realize that this is an updated and slightly adapted version of the model):

  1. The value proposition of what is offered to the market;
  2. The segment(s) of clients that are addressed by the value proposition;
  3. The communication and distribution channels to reach clients and offer them the value proposition;
  4. The relationships established with clients;
  5. The key resources needed to make the business model possible;
  6. The key activities necessary to implement the business model;
  7. The key partners and their motivations to participate in the business model;
  8. The revenue streams generated by the business model (constituting the revenue model);
  9. The cost structure resulting from the business model.

Origins of the term business model

The term business model became popular only in the late 90s, which, personally I think is related to the rapid erosion of prices in the IT and telecom industry. The roots of my assumption lie in Transaction Cost Economics (TCE). Because it became so cheap to process, store and share information across business units and other companies all the way to the customer, many new ways of doing business became possible: Value chains were broken up and reconfigured; Innovative information-rich or -enriched products and services appeared; New distribution channels emerged; More customers were reached.

Ultimately this lead to globalization and increased competition, but, as described above, it also led to new ways of doing business. In other words, today there is a larger variety of how companies can make money: this means new in terms of what they do, how they do it and for whom they do it...

For managers and executives this means that they have a whole new range of possibilities to design their businesses. This results in innovative and competing business models in the same industries. Before, it used to be sufficient to say in what industry you where in, for somebody to understand what your company was doing. All players had more or less the same business model. Today it is not sufficient to choose a lucrative industry, but you must also design a competitive business model. In addition, increased competition and rapid copying of successful business models forces all players to continuously innovate and adapt their business model to gain and/or sustain a competitive edge.

Companies that thoroughly understand their business model and know how the building blocks relate to each other will be able to constantly rethink and redesign these blocks and their relationship to innovate before their business model is copied.

Business Models & Innovation

The term business model is also closely related to innovation. As I mentioned, the business model concept is related to a whole new range of business design opportunities. There are examples of business model innovations in each of the 9 building blocks described. The most obvious is innovating in the value proposition. When mobile phones appeared in the market they offered a different value proposition than fixed line phones. In the early days of the Internet popular indexes like Yahoo! helped people find information on the Web. Regarding target customer segments, low-cost airlines like EasyJet have brought flying to the masses. Dell became really successful by exploring the web as a distribution channel. Gillette has made a fortune by establishing a continuous relationship with customers based on its disposable razors. Apple resurged based on its core capacity of bringing design to computers and electronic gadgets. Cisco became famous for its capacity of configuring activities in new and innovative supply chains. Intel thrived for its capacity to get partners to build on its processing platform. Google tapped in an innovative revenue streams by linking highly specific search results and content with text ads. Wal-Mart became dominant by its ability to slash cost throughout its business model.

For conference or workshop engagements on the topic of business models, please contact me at alex@businessmodeldesign.com and consult my speaker's profile (pdf)

Business Model Innovation Book (book structure prototype)

The reflections on our book on business model innovation are advancing daily. Yves Pigneur, my co-author, and I have come up with a first rough prototype book structure. We will refine our thinking this Friday and we are, of course, curious to hear your feedback.

You can check out the structure in the slidecast below. It gives you an idea where we are heading, though this first draft structure only sketches out the rough outlines.

To listen to and visualize the slidecast, please hit the play button. All the rest is automatic.

I'm looking forward to your first feedbacks...

"The Wall is the Desk of the Future"

Last Friday I ran a workshop on business model innovation with the management of one of the 5 regions of a top Swiss bank. In the break-out session the bankers split into groups and were supposed to work on huge posters to sketch-out the business model of an innovative bank. That is when I realized how uncommon it still is for executives to think visually and use the wall/poster as a visual thinking aid.

They had lively discussions around their table, but it needed some stimulation from my side to get them to use the posters. I insisted on this because I think visualization of business issues is increasingly a requirement to tackle the complex problems of our time.

Understanding not only the issues, but also the links between issues is a must in today's complex world. Yet, this is very difficult to achieve without a visual aid. That is where the wall is very helpful and gives all participants of a meeting a common reference point... When Dave Gray, CEO of XPLANE, was visiting us in Geneva he said one thing that I don't stop quoting:

"the wall is the desk of the future"

Have a glance at some images I put together in a Power Point presentation illustrating the above quote:

Video Trailer ULURU Workshop on Business Model Innovation

In April I ran a workshop at the ULURU innovation theater, which was fully booked out with over 20 participants. The team at ULURU made a great trailer of the event which you can enjoy here:

I would also like to use this opportunity to make a pre-announcement of a book project that ULURU and I are planning on the topic of business model innovation. The interesting part: We won't just write a book (there are already so many), but we will design an innovative business model around the book. I think it is the best way to make a case for a book on business model innovation.

In a first phase we are looking for 4 corporate sponsors that are willing to finance the launch of the book. They will get access to a global public of managers and entrepreneurs interested in business model innovation. They will be associated with probably the most innovative management book project to date (including global viral marketing through web videos). Finally, they will get a special workshop on business model innovation designed for them and/or for their clients. All that in return for a modest sponsorship fee that is well below a 1-day/1-page ad in the Financial Times...

More on the book project to come soon... By the way, this blog (once redesigned) will certainly play a major role during the writing phase of the book.

Don't hesitate to post comments if you have ideas or recommendations for the book on business model innovation.

Video: Business Model Innovation in Private Banking

This week I participated in a high-level panel on strategic and operational private banking models in the 21st century in Zurich Switzerland. I talked about business model innovation in private banking (not meaning the innovative financial products that provoked the current financial turmoil, of course).

Enjoy the video:

You can check out the videos of the other panelists on www.privatebankinginnovation.com.

Business Model Innovation Workshop in Amsterdam at ULURU Innovation Theatre

I'll be giving a full day workshop on business model innovation at the ULURU innovation theatre in Amsterdam, Netherlands, on 3. April 2008.

The invitation (image left) shows that ULURU is a company that does things differently. They have a strong network among Dutch multinationals (including Heineken, TomTom, ING , KPN and many others).

Workshop Take Away: After this workshop you will know and understand innovative business models from various industries and be able to apply the business modelling methodology to your own company. You will also be able to use a pragmatic framework to innovate within your own business model.

Content: Help (senior) management foster business model innovation at large; Give (senior) managers a broad overview of innovatieve (disruptive) business models in various industries; We will show examples from various industries (including in wealth management, private banking, telecom (Skype)); The participants will learn how to apply a simple and pragmatic approach to achieve and implement business model innovation.

If you're interested in participating click on the invitation image and contact them directly. Of the 25 available seats, only 10 are left after 4 days of workshop announcement. I'm sure it will be a great experience.

See you in Amsterdam!

4 Questions for Roger Martin

Today I came across this quite interesting video interview with Roger Martin (hat tip to Ralf Beuker), dean of the Rotman School of Management. What you must know (if you don't already) is that the Rotman School is very design oriented and aims at bringing design to business.

Enjoy the video where Roger talks about the design & business overlap:

I very much apply what Roger says in my consulting work and I also taught it in my last workshops in Mexico.

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European Corporations, their Leaders and the Challenges ahead in a Global Market Economy

Today I had the pleasure to chat with Jean-Pierre Lehmann, professor at IMD and founder of the Evian Group. Jean-Pierre is a person who I very much admire for his deep knowledge, broad global vision and tireless action to promote global prosperity through an open trade regime.

In this short "interview" I asked him about how he sees the role of European corporations in the global market economy and what challenges lie ahead of them.

At the end of the "interview" I didn't fail to ask Jean-Pierre for two book recommendations for today's global leader, since I know nobody else with such a large global literary knowledge (fiction & non-fiction).

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Visual Thinking in Strategy Design & Communication

The last few days I have been thinking of the value of visual tools in strategy quite intensly. When I was standing in front of our business strategy library I realized how few of these books use visual techniques to make things clearer. Often there is not much more than charts and quite a number of strategy books are text only. The topic of visual techniques and communication has been on my mind because we are currently in close contact with XPLANE, a company whose tagline is "the visual thinking company". They help businesses communicate complex business issues with simple images. One thing I realized was how XPLANE and Arvetica each create value through visual techniques in different areas with different tools.


Arvetica
: Our main strength is to synthesise the essence of business issues, such as strategies and business models in simple diagrams. These are based on concepts (e.g. strategy maps) and are mainly composed of boxes and arrows. The value lies in creating a rapid understanding and the highlighting of how issues are related to each other. Images communicate relationships between objects than text documents. How can you quickly and clearly describe an interdependant multi-channel market approach with words?

XPLANE: Their main strength is their ability to illustrate complex business issues (e.g. change management) with drawn scenarios. They create a quick understanding with their comic-like pictures, because humans easily relate to stories. In many cases it is not sufficient to illustrate business issues through boxes and arrows only. Human scenarios that describe business issues in an illustrative manner help people relate to a the topic much easier. For example, the above image illustrates how to deal with difficult clients.

I'm quite exited that I will be able to learn more about visual techniques in business from XPLANE. I firmly believe that this will be one of the hot topics in strategic management in the coming years. In business strategy we still poorly communicate when it comes to visuals...

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Nicolas Nova: Lessons on Innovation from the Video Game Industry

Check out this webcast/interview I've done for arvetica (the company I work for) on how (traditional) companies can learn about innovation from the computer & video game industry.

Nicolas highlights three major practices/processes which are common in the game industry and lead to innovation:

  • user centered design approach
  • expand beyond traditional (industry) boundaries
  • user generated content

Check out the webcast/video on arvetica's blog!

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What is a business model?

Update: Business Model Innovation Book. We are currently writing a groundbreaking book on business model innovation (publication: June 2009). You can get special privileges and participate in the innovative business model of our book project on our book chunk platform

Update: Based on the overwhelming interest this post got, I updated the version from 2005

A business model is nothing else than a representation of how an organization makes (or intends to make) money. This can be nicely described through the 9 building blocks illustrated in the graphic below, which we call "business model canvas".

Insight: In addition to this post check out the business model design template

The business model topic is very popular among business people today because in various industries we can see a proliferation of new and innovative business models (i.e. new ways of making money). In several industries new business models are threatening or even replacing established companies and conventional ways of doing business. Just have a look at the music or airline industry.

Hence, the interest in business models comes from two opposing sides:

  • Established companies have to find new and innovative business models to compete against growing competition and to fend off insurgents
  • Entrepreneurs want to find new and innovative business models to carve out their space in the marketplace

Within this context the business model concept is a particularly helpful unit of strategic analysis tailored to today's competitive business environment. It helps executives as well as entrepreneurs increase their capacity to manage continuous change and constantly adapt to rapidly changing business environments by injecting new ideas into their business model.

But what actually is a business model?

In management meetings the question of what a business model is (even what “our” business model is) often remains relatively vague. The main reason for this is because business people have an intuitive understanding of business models. Normal, since the business model is about how an organization makes money, which is a manger’s job after all. However, there is often a lack of a more precise and shared understanding of what a business model is. Yet, such a common understanding is required if we want to have high quality discussions of one’s business model and make important business model decisions.

Therefore we have come up with the 9 building block approach to describing business models. It has the characteristics of any other type of model (e.g. in architecture or engineering).

Like other models it is a simplified description and representation of a complex real world object. It describes the original in a way that we understand its essence without having to deal with all its characteristics and complexities. In the same line of thought we can define a business model as a simplified description of how a company does business and makes money without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.

Based on an extensive literature research and real-world experience we define a business model as consisting of 9 building blocks that constitute the business model canvas (readers of this blog will realize that this is an updated and slightly adapted version of the model):

  1. The value proposition of what is offered to the market;
  2. The segment(s) of clients that are addressed by the value proposition;
  3. The communication and distribution channels to reach clients and offer them the value proposition;
  4. The relationships established with clients;
  5. The key resources needed to make the business model possible;
  6. The key activities necessary to implement the business model;
  7. The key partners and their motivations to participate in the business model;
  8. The revenue streams generated by the business model (constituting the revenue model);
  9. The cost structure resulting from the business model.

Origins of the term business model

The term business model became popular only in the late 90s, which, personally I think is related to the rapid erosion of prices in the IT and telecom industry. The roots of my assumption lie in Transaction Cost Economics (TCE). Because it became so cheap to process, store and share information across business units and other companies all the way to the customer, many new ways of doing business became possible: Value chains were broken up and reconfigured; Innovative information-rich or -enriched products and services appeared; New distribution channels emerged; More customers were reached.

Ultimately this lead to globalization and increased competition, but, as described above, it also led to new ways of doing business. In other words, today there is a larger variety of how companies can make money: this means new in terms of what they do, how they do it and for whom they do it...

For managers and executives this means that they have a whole new range of possibilities to design their businesses. This results in innovative and competing business models in the same industries. Before, it used to be sufficient to say in what industry you where in, for somebody to understand what your company was doing. All players had more or less the same business model. Today it is not sufficient to choose a lucrative industry, but you must also design a competitive business model. In addition, increased competition and rapid copying of successful business models forces all players to continuously innovate and adapt their business model to gain and/or sustain a competitive edge.

Companies that thoroughly understand their business model and know how the building blocks relate to each other will be able to constantly rethink and redesign these blocks and their relationship to innovate before their business model is copied.

Business Models & Innovation

The term business model is also closely related to innovation. As I mentioned, the business model concept is related to a whole new range of business design opportunities. There are examples of business model innovations in each of the 9 building blocks described. The most obvious is innovating in the value proposition. When mobile phones appeared in the market they offered a different value proposition than fixed line phones. In the early days of the Internet popular indexes like Yahoo! helped people find information on the Web. Regarding target customer segments, low-cost airlines like EasyJet have brought flying to the masses. Dell became really successful by exploring the web as a distribution channel. Gillette has made a fortune by establishing a continuous relationship with customers based on its disposable razors. Apple resurged based on its core capacity of bringingdesign to computers and electronic gadgets. Cisco became famous for its capacity of configuring activities in new and innovative supply chains. Intel thrived for its capacity to get partners to build on its processing platform. Google tapped in an innovative revenue streams by linking highly specific search results and content with text ads. Wal-Mart became dominant by its ability to slash cost throughout its business model.

For conference or workshop engagements on the topic of business models, please contact me at alex@businessmodeldesign.com and ask for a speaker's profile

Skype's business model and its disruptive potential for the telecom sector

Skype is a company offering free Voice over IP (VoIP) on the Internet and they are enjoying a phenominal success. Since I've intervied them in March this year they grew their number of employees from about 100 to 170. Now that is what I call lightspeed growth.

However, what is of particular interest is how their business model design is different from the one of a traditional telco. With a group of collaborators from the University of Lausanne we tried to identify Skype's disruptive potential by analyzing its business model and comparing it to a traditional telco. I uploaded that study and the detailed PowerPoint presentation I recently made in Bangkok to my consulting website.

Read the paper on Skype's disruptive business model design.
Look at the detailed PowerPoint presentation about the business model comparison.