Business Model Alchemist

I’m writing this blogpost following another inspiring discussion with Steve Blank. One of the topics we chatted about was how his Customer Development process and the Business Model Canvas fit together. I wrote these ideas down while visiting Steve’s K&S ranch – inspired by its beauty, surroundings and amazing view on the Californian coast. I’ll illustrate the ideas with an example from the field of social entrepreneurship.

In a nutshell, this post shall help entrepreneurs and intrapreneurs develop better business models by designing and exploring multiple alternatives, closely listening to customers and continuously adapting their early models until they find the right business model to scale. I believe a start-up or new venture’s quest for the right business model should consist of three rough phases:

• Designing a starting model
• Iteratively adapting your starting model in response to market feedback
• Scaling it when you nailed it

All three phases can be supported by the tools and concepts outlined in Steve’s book on Customer Development and our book on Designing Business Models. We provide you the tools to map, design and discuss a business model. Steve provides you the mindset and tools to continuously “test” your model and your assumptions with customers until you find the right business model to scale.

The Case Study

Let me outline the three phases above with a case I often use in my business model innovation workshops. It is an example of a Swedish organization that developed a single-use toilet bag, the Peepoo bag for the so-called Bottom-of-the-Pyramid market of over 2 billion people who lack access to proper sanitation.

Peepoople, the company behind the Peepoo bag, is a particularly interesting case because it combines a journey for the right business model with a quest for meaningful impact. No easy task. At this very moment Peepoople is on its search for the right business model: one that is financially viable, and scalable in terms of growth and impact.

Now let us look at the three phases outlined above through the lens of the Peepoople case.

Designing a starting model

Many entrepreneurs and intrapreneurs underestimate that a great new technology, product or service can be insufficient to build a successful and sustainable business. Because of their trust in a technology’s, product’s or service’s superiority they fail to spend enough time exploring alternative business models. They often go with the first model they come up with. Yet, entrepreneurial history is littered with great technologies, products and services that bombed.

Entrepreneurs and intrapreneurs could greatly improve their success chances by spending more time with searching and finding an empowering business model. Every technology, product or service can be brought to market by several alternative business models. The challenge is to find the best and most scalable one.

Peepoople, for example, has a proven product/technology that works and was tested – the Peepoo bag. However, the company acknowledges that this is only a starting point. The management team knows that it has to think through several possible business models in order to find one that is sustainable AND has a substantial impact.

So let us use the product (Peepoo bag), its characteristics, and the context as the starting point to develop alternative business models:

• A single use toilet bag: it is designed to be conveniently used with any type of recipient and it effectively prevents odors;
• Self sanitizing; it inactivates organisms that produce diseases and are found in faeces;
• Biodegradable: it is made of a high performance degradable bioplastic
• Turns into fertilizer: the treated faeces constitute a high value fertilizer with a considerable market value
• Low production cost (numbers confidential);
• Aimed at substantially reducing the sanitation problem in the world;
• In many developing markets people already pay for (limited) access to sanitation (e.g. public latrines in slums)

Based on the above we can map out several different alternative business models for Peepoople’s product. Here the emphasis is on “mapping”, which means putting a Business Model Canvas poster on the wall to quickly develop conceptual prototypes. Let me just mention a few possible ones:

• Not-for-Profit Model: Traditionally, an organization like Peepoople would seek donors to fund the distribution of Peepoo bags to beneficiaries. Like myself, the management team of Peepoople doesn’t see this as a sustainable business model nor as one that will achieve the most impact.

  

• Cross-Subsidy Model: Peepoople could sell the bags to a premium segment (e.g. to hikers in the Swiss Alps, or as military supplies) in order to fund the free distribution of the bags to beneficiaries. Financially this model already looks more robust than the first.
• Sales/Retail Model: Why not try to sell through traditional retail among the mini-shampoo bottles sold to the BoP market. Sanitation is a basic need and there is already a market for public latrines.
• Micro-Finance/Micro-Entrepreneurship Model: Another powerful way to bring the bag to the market could be an alliance with a micro-finance institution which would finance micro-entrepreneurs to buy bags. The entrepreneurs would then resell the bags.

  

• Licensing/Franchising Model: Peepoople could go down a completely different path and simply license its technology to different institutions. Alternatively, it could build a franchise model to quickly scale its growth.
• Resource Model (Fertilizer): Fertilizer is a very valuable good in BoP markets. Why not give the bags away and even pay people to bring them back full. Revenues would then be come from selling the fertilizer to farmers.

These are just some of the potential business models for the Peepoo bag. Others could include white labeling the technology, building brand alliances (e.g. distribution with mobile phone prepaid cards), advertising on the bags, and many, many more. What is important is to spend some time with quickly mapping out alternative business models before defining the criteria to select the one to go with. Selection criteria can be growth potential, risk, impact, etc.

An essential part of this first design phase is to carefully observe and understand (potential) customers. The business model alternatives you come up with should be informed by deep customer knowledge. Steve Blank nicely describes this as Customer Discovery, the first of four steps in his Customer Development Process

you need to leave guesswork behind and get “outside the building” in order to learn what the high-value customer problems are, what it is about your product that solves these problems, and who specifically are your customer and user.

Iteratively adapting your starting model to customer/market feedback

When companies have spent substantial time, effort, and money searching for a business model (e.g. for a new product or service) they are often under the illusion that they nailed it. Yet, a “starting business model” is just that: a starting point – based on a number of assumptions and hypothesis. Even with the most elaborate design phase, the smartest people, and the largest budget, it is pretty rare that entrepreneurs or intrapreneurs immediately get the business model completely right.

The Customer Development process assumes that many of the initial assumptions about your business model are probably wrong, which you will find out in the second step of the process, Customer Validation. It is only when you start testing a business model or aspects of it with customers that you will find if your hypothesis were right or wrong. Hence, the Customer Development Process builds in an iteration loop to fix the shortcomings of your business model. Eric Ries, who built on Steve’s work, coined this business model iteration loop the Pivot.

The Business Model Canvas powerfully supports this iteration and pivoting process through visualization and structuring. Steve nicely described this as keeping score of your pivots.

Peepoople is just now entering the iterative phase where they are testing business models in Kibera, a slum in Nairobi, Kenya. The challenge will be to continuously search for the most powerful business model and only settle when they found a scalable one.

Scaling it when you nailed it

It is probably only after several iterations and pivots of your business model that you will really “nail it” and find the right one. That is when it is time to scale. In the terminology of Customer Development this is called Customer Creation, when you start “creating end-user demand and drive that demand into the company’s sales channel”. Only at the very end should you focus on Company Building “where the company transitions from its informal, learning and discovery oriented Customer Development team into formal departments with VPs of Sales, Marketing and Business Development”.

Unfortunately, I’ve seen too many companies get caught up in this last (operational) step when they haven’t even “nailed” the business model.

As to Peepoople, I’m pretty curious to see how the company will manage business model iterations and pivots. It does have a great technology to start with, but only a scalable business model will allow it to have an impact. However, I have great confidence in Karin Ruiz, its CEO. She combines private sector experience, a passion for impact, and the knowledge that only the right business model will allow Peepoople to make a difference in the world.

Last week I met with Steve Blank and Ann Miura-Ko at the University Coffee in Palo Alto to chat about Business Model Generation and our upcoming Business Model app for the iPad. It was a real treat. One of the questions Steve and Ann brought up was how to differentiate between users and customers in the Business Model Canvas.

Until this chat the question hasn’t really preoccupied me, because it has been less of an issue for most of the companies I work with (mainly large multinationals). However, I do see the relevance of the question (particularly in a start-up context in the software and Web space, but also in other spaces). And how couldn’t I have an open ear for a point made by one of my entrepreneurial role models and a rising VC star…

Steve and Ann suggest separating customers and users into two separate building blocks when describing a business model. I prefer keeping one single building block that captures users and customers. At the end of the day I think we all have to use the representation that we are most comfortable with. However, I do fully agree with Ann and Steve that it is interesting to look into the user vs. customer question (and a matter of survival if you are a start-up with users, but no customers…).

After the chat I couldn’t let go of the question, so I sketched out some business model examples on my iPad on a flight from beautiful Vancouver back to San Francisco, our family’s temporary HQ. This helped me get a clearer picture of the question. The models I sketched out were Skype, Google, Youtube, Flickr, and Sony Playstation. Each business model has a different user vs. customer configuration.

I basically see all groups for which a company creates value through a product or a service as users. Customers are simply users who pay for the value that is created for them in the form of a revenue stream for the company. In some cases users and customers are pretty similar, except that one group generates revenues by paying for additional features of functionalities (e.g. Skype, Flickr). In other cases users and customers are distinct groups, where one subsidizes the other (e.g. Google, Youtube, Sony Playstation, government services). Let’s have a look at some different business models and their dynamics.

Skype

Skype is company that allows making calls over the Internet based on its proprietary software. It has over 500 million users. Of that only a tiny fraction are paying customers. However, in this case it is difficult to distinguish between users and customers, because they might be the very same people. For example, I use free software-based Skype-to-Skype calling all the time, but occasionally also buy so-called SkypeOut credits to make calls from my computer to international landline and mobile phone numbers. I am a (free) user and (paying) customer at the same time.

Regarding the “free user vs. paying customer question” Skype provides some even more interesting material. Skype’s free users are crucial to its success. One might think that the reason is to assure a decent revenue even with a small conversion rate from free to paying users. In fact, that is not the only reason.

Skype needs a large user base to assure good calling quality. Every call is routed through the Internet, from one user to another, based on so-called peer-to-peer technology. The more users Skype has, the better the calling quality. In fact, in that regard users are a key resource of its business model. And since Skype manages no network (because of the Internet-based peer-to-peer technology) it costs the company practically nothing to add on free users.

Flickr

Flickr is a website that allows hosting images and videos. Like Skype it has a large number of free users and only a fraction of paying user/customers who pay for advanced features like increased storage space or unlimited uploads. Like Skype this is a so-called freemium business model with a set of free services and paid premium services.

However, different from Skype, people using Flickr usually fall either into the category of free users or paying customers. Another difference with Skype is that Flickr’s free users generate costs that the company has to recuperate with its paying user/customers. The free users do, however, add value by contributing to the content on the website. Flickr now has over 4 billion images on its site.

Google

Google’s core business – search – is another story. In this case (free) users and (paying) users/customers are two totally distinct groups. The free users are the people using the search engine. The paying users/customers are the people buying keywords for search advertising. Both groups of users are offered two totally different services and value propositions. The first service (search) is free and subsidized by the latter (adverting). And the more (free) users Google can attract, the more interesting it is for advertisers.

Youtube

Youtube, the leading video-sharing website which was aquired by Google in 2006, provides another interesting element to the user vs customer discussion. Free users can be split into two subgroups: a smaller group of users who upload content (often their own user-generated content), and a larger group of users who simply view/consume content. The former provide an important resource to the business model – content – to attract the latter.

Sony Playstation

A fifth interesting case regarding the user vs. customer question is the business model of Sony’s game console, the Playstation. The users of the Playstation buy their console and in that sense they are customers. However, traditionally Playstation consoles are subsidized in order to make their price more affordable and attract as many users as possible to their game console platform.

Sony does this – and accepts losses on selling consoles – because their most lucrative user/customer segment lies elsewhere. It’s the game developers, who make the games for the Sony Playstation and who pay Sony a license fee for every single game sold. Hence, the more users/gamers Sony has, the more attractive it is to developers, the more games are made and sold, and the more license fees Sony pockets. In this sense, the user-base is a key resource to Sony and is its value proposition to game developers.

Other Models

There are other interesting models that I haven’t visualized. In government services their is also difference between users and customers. We could see beneficiaries of services as users (e.g. regarding grants and contributions) and governments or tax payers as customers (since they foot the bill).

A final model I have briefly looked into from the user vs. customer angle is the insurance model. One could argue that in an insurance scheme a large number of customers are paying for a policy in order to be insured against a hypothetical incident. Yet, only a small group of these customers turn into users because they incur the incident and want to benefit from the insurance policy… In this sense a large number of paying customers (who are not “users”) are required to “subsidies” a small group of customers who become users based on an incident.

Finally, … don’t ask me about Twitter

During the last few weeks we worked on an iPad app that allows you to sketch out business models and simulate it’s viability with ballpark figures. Though the app is still very basic I have no doubt it’s going to become a game changer. Now you have the opportunity to be among the first to test and influence the app by joining our Alpha version testing team.

Last week we created a new company – The Business Model Foundry – to design, develop, and market a whole new range of software-supported tools that shall help you think through, prototype, test, implement, and manage new business models. The first tool we are working on is an app for the iPad, which will allow you to quickly sketch and simulate business models (as I outlined in my last blogpost). Since this is a totally new tool on a totally new device we decided to test it at a very early development stage already.

This sits well with two concepts I recently became a fan of: The Minimal Viable Product by Eric Ries and Customer Development by Steve Blank (who runs one of my favorite blogs). Both stress the importance of testing (software) products and business models with customers at an early stage and developing them in an iterative fashion.

However, we thought it would be a bit boring to just give potential customers access to the early-stage software. Hence, we opted for a more innovative approach: For 150.- USD you can join the exclusive circle of the Alpha Testing Team, which will be involved in the development of the BMGEN iPad App. What will you get?

• Exclusive access to Alpha test versions of the BMGEN iPad App (starting end of this week/early next week – June 11/14
• Free lifetime upgrade to all subsequent versions
• Mention of your participation in the software project
• Ability to give feedback and influence the development of features and functions

If this sounds exciting, please consider joining. Our ambition is not only to create a simple iPad App, but to revolutionize the way innovative business models are conceived and managed. In fact, we are aiming to change the way entrepreneurs and managers work on new business model projects. If you have an iPad, get access to the Alpha test version.







CAVEAT:

Please take note of the following important points before buying access:

• You need an iPad to be able to install the Alpha test versions
• The early Alpha versions will be extremely raw with limited functionality
• We will slowly, but steadily build this app into a game changer
• The first Alpha test App will be available at the end of this week/early next week (June 11/14, 2010)
• Read the Alpha Testing License Agreement (pdf)
• First basic App in the iTunes Store to appear somewhere in July/early August for about 29.99 USD (without lifetime upgrade of course)

And now come and join us in the club of game changers. This promises to be an exciting journey and even more influential than the Business Model Generation Book (which will be in retail outlets across the US in July!!)… Get access to the very first iPad Business Model App Alpha version now.









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Some of you know that we are working on an iPad app to help entrepreneurs and intra-preneurs develop innovative business models. We decided to do this as transparently as we have for the book. Please join us on our journey and give us your feedback!

In the slides below we outlined the specs for a minimal viable (app) product (MVP). It is the “heart” of the app we are developing and it will obviously evolve into something more sophisticated over time. But we want to test the MVP with (potential) buyers first…

We have a couple of questions to you:

• What kind of future functionality would you like to see in the app?
• What kind of usage scenarios could you imagine for the app and yourself?
• What do you think of our price of $29.99 – including free updates for some of the early features beyond the MVP?

As you know we really love and value your feedback! Tell us what you think!

Look how one of the early, early software prototypes looks:

There are also some videos of our earlier thinking on the app:

scenario: adding an activity with a cost

scenario: for adding a revenue stream

scenario: for opening a financial report

From time to time I invite guestbloggers to write about their expert knowledge. Today I have the pleasure to introduce you to Harry Verwayen from Europeana.eu, which aims to make European heritage openly available.

Harry has tirelessly advanced business model thinking in the (digital) cultural heritage sector. On this blog he is presenting the results of a new report. Harry, the floor is yours:

When large, forward thinking companies such Google are prepared to face huge lawsuits over the digitization of old books, that is a sure-tell sign that you find yourself in a sweet spot for business model innovation.

Not surprisingly, libraries and museums are pondering over ways to capture some of that value that comes with reaching a whole new audience. Over the past decade, museums, archives and other cultural heritage institutions have started digitizing important cultural heritage collections on an unprecedented scale. Literally millions of artifacts such as books, film, audio and even clay tablets have been digitized in order to bridge the divide between our analogue pasts and the digital futures.  Based on this material these institutions-  that were originally designed to safeguard our heritage-  have started experimenting with new digital services, aiming to bring this material closer to a group of people that would otherwise never visit these temples of wisdom.

However, there is an increasing recognition that these digital services are not yet perfectly suited to the needs of today’s users, who expect to be able to request, retrieve and adapt cultural heritage content- any content for that matter-  through popular interactive sites like YouTube, Flickr, Facebook and Wikipedia. This is a step that requires true business model innovation. A research team from thinktank Knowledgeland and the DEN Foundation in the Netherlands used the canvas to create a common language as the start of our investigations.

Old model

We found that the old, analogue model looked something like this: the value proposition was primarily based on ‘managing’ and safeguarding heritage for the (distant) future. In this model the clients are the government and professionals such as historians that are catered to through a building and professional curators. Cost and revenue streams are transparent and stable, practically all key activities could be carried out as part of the core business of the institutions, no partners needed.

New Model

With digitization the model changes, radically. The institutions still need to perform their management tasks, but completely new value propositions are suddenly within reach: The core mission of most of these institutions is to make  our heritage available as broadly as possible. With the variable costs of distribution falling close to zero this means that in theory all this material could be made accessible through a licensing system such as Creative Commons to the general public. Granted, there may not be a huge uptake on some of this ephemeral material, but if you still believe in the Long Tail you could imagine that at least some of this material will find a new audience.

Both the institutions themselves and policymakers consider the broad accessibility of cultural heritage materials to be an important contribution to our common social capital. But, when innovating the model, various barriers are encountered: while more than 26% of our heritage in Europe is currently digitized only a very small percentage (less than 1% by my estimates) is available where the value creation would be greatest, in the networked environment. After several rounds of iteration we came to the conclusion that there are four main problem areas that we needed to delve deeper into: Organization, ICT infrastructure, Copyright and Revenue Models.

We quickly found out that the traditional instrumentarium (bring together expert groups, read and write thick reports) alone would not do the trick. The subjects were simply too large and too complex. We then asked the people from JAM visual thinking to help us out. Tother with them we shaped our expert meetings into creative sessions supported by strong visuals that were constantly adapted to our latest thinking.

Revenue Models

We figured out that from a legal perspective there are four distinctive ways to make heritage available, represented by the four rings in the picture. In the inner rings the material is presented within the walls of the institutions. In the two outer rings the material is presented in the online environment. The further you get out, the more the material is shared in the networked environment with explicit re-use rights. We argue that the value for the users becomes greater when the material is cut loose from institutional boundaries and have tried to categorize ways to generate revenues in all four rings.

Although we are still far from reaching our goal of creating the ubiquitous, open, virtual library that is necessary to support the knowledge economy, we feel that we have at least been able to map out the issues and some paths towards solutions. This has resulted in a publication that I would like to bring to your attention, which can be downloaded here. Your comments are more than welcome, and I appreciate you spreading this in your network!

Special thanks to Alex and the team for continuously supporting this initiative and inspiring us to continue approaching these issues as designers.

Best,
Harry Verwayen <hverwayen@ziggo.nl>

I’m posting a brief schedule of my upcoming workshops and talks during the first semester, because I got a lot of questions about them lately. I try not to post too much self-advertising on my blog, but I need to from time to time so I can support the free content on this site

My public events are relatively infrequent, since most of my talks and workshops take place inside companies.

• Keynote Talk, Düsseldorf, Germany (19. March) Creative Summit Nordrhein Westfalen (NRW): Neues Wachstum Durch Neue Business Modelle / in German
  (website)
• Workshop (full day), Amsterdam, The Netherlands (23. March): Business Model Innovation – Masterclass
  (registration)
• Workshop (half-day), Toronto, Canada (14. April): Exploring Business Model Generation with Alex Osterwalder: A Master Class in Business Model Design
  (early-bird registration fee)
• Talk, Toronto, Canada (15. April), Business Model Generation – how to co-create a bestseller guerrilla fashion
• Workshop (half-day), Gothenburg, Sweden (22. April): Nya grepp om kreativa affärsmodeller / in English
  (registration)
• Software Presentation, Geneva, Switzerland (28. April) iPhone Dev Days: Business Model Software for the iPad
  (website)
• Special Workshop (full day), London, UK (29. April): London School of Economics: Business Model Design
  (website)(registration)
• Workshop (2h) Geneva, Switzerland (5. May) LIFT’10: Business Model Innovation for Start-ups, Corporations and Social Entrepreneurs
  (website)
• Workshop (full day), Lausanne, Switzerland (18. May) at the Swiss Gratuduate School of Public Administration (IDHEAP): Reconcevoir vos modèles d’action publique – découverte et application d’une méthode novatrice et pratique / in French
  (registration)
• Workshop (full day), Lausanne, Switzerland (19. May) at the Swiss Gratuduate School of Public Administration (IDHEAP): Reconcevoir le management des organisations sportives / in French
• Keynote, London, UK (14. June) Shine 2010 – Unconference for Social Entrepreneurs
  (website)

Hope to see you at one of the events!

By the way, on March 17. I’m giving an online interview for the “coaches rising” website (register for free)

Energy will be, no doubt, one of the dominating issues of the decade and beyond. That’s why I was really excited to discover how Jigar Shah, a 34 year old entrepreneur, disrupted the field of solar energy – he achieved that not through technology innovation, as one might expect, but based on an innovative business model.

Last week, my sister Nathalie, a senior environmental lawyer at the International Institute for Sustainable Development (IISD), pointed me to an article in the OnEarth magazine about an organization that has changed the face of the solar energy sector. She had just come from a dinner meeting with Jigar Shah, the founder of SunEdison, which has developed into the largest provider of solar power in the United States.

I sketched out SunEdison’s business model, which will definitely figure in our new project BusinessModelsBeyondProfit.com. Check out the slides:

The closing paragraph in the OnEarth article was particularly interesting. He stresses that the driver is NOT technology – it’s the business model. Jigar Shah says:

“The big area for me has always been to come up with business solutions to address global warming,” Shah says. “The thing that people have had a hard time understanding about solar is that it’s part of the energy business. While new energy technologies come up all the time, technology is not the driver of the energy industry. The driver is the business model: how you get it financed and how you apply traditional risk-management methods to solar and wind and biomass. That to me is the key to solving global warming.”

If you are interested in the state of the solar energy industry (in the US) you should watch Jigar Shah in the keynote below. It’s the first part of a total of 6 videos, which you can find on youtube:

A lot has been written on the value of social media for businesses (Blogs, Wikis, Twitter, Facebook, etc.) – some of it relevant, some of it hype. I will limit myself to mapping out three business model areas where social media can have an impact.

Social media refers to a category of online media or platforms that facilitate discussions, participation, and sharing of various forms of content in a very convenient way. Technologies in this area include blogs, wikis, social networking platforms, micro-blogs, and other platforms that facilitate sharing user generated content. Players – and service providers – in this arena range from Facebook (social network) and Twitter (microblogging), to Youtube (user generated content), LinkedIn, Wikipedia, Flickr, and many, many more.

In this blogpost I’m less interested in the technological possibilities of social media, but ask myself how these tools can be instrumental to your business model. I singled out three areas visualized in the Business Model Canvas image below: co-creation, marketing as conversations, and open innovation. As a modern organization, we have, of course, integrated all three of these areas into the production and sales or our bestselling book Business Model Generation (more at the end of this post)





A Co-Creation

Understanding and satisfying customer needs is the basis of any enterprise. So what could be better than integrating the customer into the product or service development process. The question to ask is…

How can social media enable your customers to contribute to value creation?

On the extreme end this means user generated content. Threadless, for example, is a community-based t-shirt company that allows people to submit new t-shirt designs that can be discussed and voted upon on the website. Less extreme example are Amazon.com which allows buyers to review and discuss products, or eBay, which allows the community to evaluate sellers. All this contributes to better value propositions based on customer contributions.

B Marketing as Conversations

Don’t you find it annoying when somebody desperately tries to sell you something (remember that last phone marketing call that ripped you out of your deepest concentration..)? Well, hard selling is dead – or at least it’s a dying species. The question to ask is…

How can social media enable your customers to become your best advocates/sales people?

Social media is transforming the way companies can market their products and services. The authors of the cluetrain manifesto nicely put this when they state that “markets are conversations”.

In a nutshell this means that your most valuable sales force is your existing customer base. You will probably argue that this has always been the case. However, what has changed is that we increasingly rely on our friends and peers to make buying decisions – not company marketing. Hence, you must focus on existing customers as channels to reach their friends and peers… And this is where it ties back into the above point: customers that have participated to co-create value are more likely to become your best advocates.

C Open Innovation

Increasingly organizational boundaries are becoming fuzzy. Companies understand that they need to open up to outside ideas, talent, and patents to leverage their own resources and activities. The question to ask is

How can social media enable your organization to integrate ideas and knowledge from outside its boundaries?

Open innovation is a concept that my friend Henry Chesbrough has eloquently discussed in his books Open Innovation and Open Business Models. Social media has given open innovation another boost. It allows engineers to easily reach beyond company boundaries and it allows R&D departments to effectively collaborate with outside scientists across the world.

An example that I particularly appreciate is the software company Red Hat. The organization’s core product, Red Hat Enterprise Linux, is deeply engrained in the freely available open source operating system Linux. A software which could have never reached its current levels of success without the Internet and social media.

Business Model Generation

The book is actually the reason why I wrote this post. Last week I asked my 2′800+ followers on Twitter to retweet (i.e. pass on the message) that we needed help in promoting Business Model Generation in order to improve our Amazon sales rank. This would help us in our negotiations to sell our self-published book to leading publishing houses. In the minutes and hours that followed 16 influential Twitterers helped us regain a decent sales rank in the bestselling management books on Amazon.com.

A special thank you goes to the following Twitterers

@ajenkins @emenel @essen2punt0 @joemmanuelponce @leanbot @LeilaOliva @lylebclarke @michaelscher @NohaMahmoud @petdekoning @robdebob @skfreidel @StefanHagen @stuntspeaker @StUpPal @ThinkWay

The reason why people were willing to help us promote the book among their friends and peers is simple. We had 470 people participate as part of the book project – they helped us co-create the book on the Business Model Hub and got their name in the book as a reward. These participants are the best advocates one can imagine. A warm thank you to all of them.

Many of the above Twitterers stem from that group, others have joined the conversation as fans later on…

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.

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