Drop Your Training Wheels: Competing on Business Models

The Business Model Canvas is continuing to spread across the business world. However, some people and organizations use it in more sophisticated ways than others. So I came up with four levels of strategic mastery as to competing on business models.

At the lowest level of mastery, level 0 strategies, people focus on products, technologies, and value propositions mainly. They aren't even aware that it is often the business model that makes the difference between success and failure. At the highest level of mastery, level 3 strategies, companies disrupt themselves with new and innovative business models, while their existing business models are still successful and make money. I played around with a new video tool, educrations, to outline my thoughts. Check out why focusing on products and technology alone is like competing with training wheels, while you could be riding a Ducati Monster:

In the video I describe four levels of mastery:

  • Level 0 Strategy - The Oblivious: Focus on products/value propositions alone rather than the value proposition AND the business model.
  • Level 1 Strategy - The Beginners: Use the Business Model Canvas as a checklist.
  • Level 2 Strategy - The Masters: Outcompete others with a superior business model where every one of the business model building blocks reinforce each other (e.g. Nintendo Wii, Nespresso, Dell).
  • Level 3 Strategy - The Invincible: Continuously disrupt themselves while their business models are still successful (e.g. Apple, Amazon.com).

Business models that outperform others do so in various ways, for example by...

  • disrupting the existing market (e.g. Dell).
  • creating a hard-to-copy competitive advantage (e.g. Apple appstore ecosystem).
  • establishing game-changing cost and/or profitability structures (e.g. Nintendo Wii)
  • creating entirely new markets (e.g. Nespresso).

As a complement to this post you might also want to have a look at my post on the characteristics of a good business model, 7 Questions to Assess Your Business Model Design .
If you carefully watched the video you probably noticed that I messed up the Gary Kasparov quote, which should have been: "Success is the enemy of future success". Good that I can blame the jet lag from my trip to New Orleans ;-)

Business Model Generation on Amazon.com Now

The first print-run of Business Model Generation was sold out after a few weeks only. We couldn't keep up with demand and were out of stock for a while. Now the book is available again. You can get it directly on Amazon.com in a deluxe or portable version.

Business Model Generation has been selling phenomenally well - and that without a publisher and 0 marketing budget. Last week it even ranked #2 in sales of management books on Amazon.com. For this second print-run we decided to produce two slightly different versions: a deluxe version for your office and a portable version for the road. Deluxe Version

The particularity of the deluxe version is its beautiful cardboard cover and special binding, which allows you to lay it flat open on a table. Yet, it's not only attractive, but also offers you the perfect working experience that you would expect from a hands-on and practical book. However, be careful: deluxe versions are objects of envy - it's not unheard of that copies get stolen when you leave them unsupervised on your desk.

buy now

Portable Version

We introduced the portable version in order to offer you a lighter and more portable copy at a lower price. The content is the same, but its format (perfect bound and softcover) is designed for taking it on the road. Business Model warriors will likely own both versions. One to show off at their office and one to take with them anywhere they go.

buy now

Caveat

Unfortunately, Amazon.com currently restricts us from offering a top-notch service to some customer segments. Readers outside the US cannot benefit from expedited shipping. Also, Amazon.com does not ship the book to Canada, due to internal restrictions. Hopefully, we can find a way around those limitations in the future.

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.