Archive for the ‘business model’ Category

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Mar 28, 2010

Business Model Innovation and Cultural Heritage

Harry

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>

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Posted in Europe, JAM, Netherlands, business design, business model, business model design, business model innovation, business model innovation obstacles, business models, business models beyond profit, chris anderson, design thinking, long tail, open business models, strategy, visual business models, visual strategy, visual thinking, visualization | 8 Comments »

Feb 1, 2010

Ambition: Building Business Models that Matter

Alexander Osterwalder

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

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Posted in Uncategorized, business model | 12 Comments »

Apr 4, 2009

Obstacles to Business Model Innovation

Alexander Osterwalder

At each of my workshops we usually discuss what the obstacles to business model innovation are in companies. I thought it could be interesting to open up this discussion to the Web through my blog. Please share your experience rather than just an opinion.

Some of the most frequent points mentioned were:

  • current success – it prevents companies from asking themselves how their business model could be replaced
  • risk avoidance – people are often unwilling to take risks on a personal level, but also as an organization. It is easier to stick with the status quo.
  • organizational structures – because they are not designed for new business models to emerge. They sustain the status quo.
  • lack of customer understanding – of course organizations understand their customers, but not good enough to design new business models that address their emerging needs.
  • required size of innovations – in big companies a potential new business model must immediately demonstrate an opporunity of millions of additional revenue.

These were just some few points to kick-off the discussion. Please share your EXPERIENCE!

You may also want to share your experience from a start-up perspective. What is preventing start-ups from more business model innovation (though many innovative BMs come from that universe…).

Posted in business model, business model innovation, business model innovation obstacles, obstacles | 20 Comments »

Mar 28, 2009

There is No Lack of Business Model Innovation Ideas

Alexander Osterwalder

Currently I am working our upcoming book “Business Model Generation” on a section about ideation: the art of generating innovative business model ideas.

While working on this section I realized that ideas were not necessarily the problem. They exist in abundance within a company or an industry. I’ve experienced this with multiple organizations. The issue is selecting the right ideas, turning them into something implementable and then actually DOING them.

Regarding the first issue, selection, the biggest problem is that today’s organizational and management structures don’t allow good business model ideas to become visible. Interesting business model ideas can come from anywhere in a company. Operations, client services, finance… Yet, they have to be selected by management in order to maybe become real options. More often than not they stay invisible. I’m pretty sure that there were many smart folks in record companies that had good busines model innvation ideas. However, the management of these companies preferred to stick to the status quo… and ultimately become disrupted by illegal downloads and challenged by iTunes.

A solution to this is to put a multi-disciplinary business model innovation task force together. One that has the sponsorship of top management and the board. The task force should be composed of people from various levels of hierarchy, from different age groups, with diverse levels of experience, from different business units and with mixed expertise. The diversity will help ideas to emerge, to be discussed, improved and then selected for implementation.


The implementation issue is more challenging. It requires the willingness of top management and the board to experiment and allow for bottom-up ideas to emerge. Unfortunately, it also requires taking some risks to play with new ideas in the field. But if you look at the major record companies today, the risk of inaction is even bigger. I would argue for maintaining a portfolio of business models of which some may even cannibalize the existing main business model.

A great example of a business model portfolio can be found within Nestlé’s coffee business. While the Swiss multinational became big in coffee with Nescafé it’s current growth engine is now Nespresso. Nespresso sells espresso machines and pods to the high-end of the market. What is impressive is that Nestlé is internally challenging its new multi-billion espresso-pod money-making machine. They expanded their business model portfolio in coffee with Dolce Gusto, a Nescafé sub-brand targeting the lower end of the market. Dolce Gusto’s business model is quite similar to that of Nespresso with some tweaks. Nespresso sells to the higher end of the market, while Dolce Gusto sells to the lower end. Nespresso doesn’t sell pods through third party retail, while Dolce Gusto does. Though they are both targeting different customer segments, Dolcé Gusto is still cannibalizing Nespresso to a certain extent. Respect for Nestlé that they allow for this internal competition!

Posted in alex osterwalder, alexander osterwalder, business model, business model innovation, business model portfolio, business model task force, dolce gusto, ideation, nespresso | 5 Comments »

Mar 17, 2009

The Power of Immersion and Visual Thinking

Alexander Osterwalder

I am currently keeping my blogposts to a minimum, because I am focusing on book writing and delivering a small number of keynotes and workshops. However, I haven’t stopped experimenting. During the last workshop in The Netherlands I changed the structure of the workshop and I had the opportunity to work together with JAM, a Dutch company focusing on visual strategy facilitation. It was a big success.


One of the main changes I made to the workshop structure was a new focus for the break-out sessions. I gave the immersion into client issues much more space. The workshop had two “client immersion sessions” before actually thinking of drafting an innovative business model around the clients. The ultimate task was to re-invent the consulting business model. Instead of getting them to start with business model innovation immediately I made them think about how consulting clients really feel and start innovating from there. This worked out really well, notably because JAM made the outcomes more tangible through images.

In the first break-out session I asked the groups to make a simple client profile (based on a method from XPLANE, which they call “empathy map”). The goal of this exercise is to think of the client more holistically.



The next break-out session consisted of sketching out the most important client issues. Wouter (1st image below) and Jan (2nd image) from JAM did a wonderful job of making these client issues more tangible through visualizations.



The groups then had a chance to walk around and look at the other groups’ work. In addition I asked them to put stickers on the client issues which they found most interesting. This “silent feedback” gave the groups a direction for the following break-out sessions.


After the client immersion sessions I asked the groups to outline the building blocks of their business models with the business model canvas.

At the end of the busy day each group presented their work and we voted for the best new consulting business model.



By the way, the workshop was kindly hosted by seats2meet.com, a company led by Ronald van den Hoff. He is disrupting the meeting space and event venue business with an innovative business model. Workshop participants had a chance to learn about his “lessons learned” when I interviewed him on business model innovation issues during the workshop.


All the other photos of the event can be found on my Flickr page. Big thanks to my business partner Patrick van der Pijl who took the pictures, but more importantly, set-up and managed the event.

Posted in "business model workshop", JAM, alexander osterwalder, business model, business model innovation, seats2meet.com, visual thinking, workshop, workshops | 5 Comments »

Feb 20, 2009

Publishers, Update your Business Model!

Alexander Osterwalder

Book publishers, I think your business model is expiring! If you don’t update it now, you will suffer the same fate as the music industry: “cluelessness” of what to do to fight steeply declining revenues!

I am by no means an expert of the book publishing industry. My only qualification is being a huge buyer of books and being an aspiring author with a business model innovation book I am working on. The innovation behind the book: I am not alone in writing this book, but my co-author and I are working with another 250+ 470+ co-authors who paid to be part of the book writing. Oh, I almost forgot, we not working with a publisher… I never even submitted a manuscript to a publisher…

Here four substantial trends off the top of my head that will rock the book publishing industry and their business models (trends which you probably know, but are not taking seriously):

Distribution is a commodity and attention is scarce

Publishers and retailers used to controlled distribution. That gave them the power to promote authors and their books. With Amazon.com, self-publishing sites such as Lulu.com and the rise of e-books that power is gone because anybody can (print and) distribute a book. The name of the game is now capturing attention in a world of abundance and the absence of distribution scarcity. The publisher’s role of the gatekeeper is soon gone. We are entering the ultimate meritocracy. Books will be successful without a major publisher if they can capture the attention of potential readers through the mastery of the tools of the attention economy: blogs, communities, search engine optimization (SEO) and viral marketing. Readers will catapult a book to success if their attention can be captured. We have already seen this happen sporadically in the music industry.

New business and revenue models will dominate the landscape

Traditional revenue streams from selling books are prone to die. Learn from the music industry: Apple is now the dominant force in digital music and has replaced the incumbent players with a completely different business and revenue model. They sell music online, but they earn most from selling their iPod hardware. Or look towards the artist that give away their music and earn their revenues from increased concert sales or special edition albums. They use “free” as a way to capture attention and earn from new revenue streams.

Authors want to be liberated from the handcuffs of publishers

Very few authors get lucrative royalties or a substantial advance from their publishers. Royalties usually run around 5-10% of the book price. You have to sell VERY many books to live from it decently. In addition publishers don’t allow you to do most of the interesting stuff: experiment with new formats, revenue models and online communities. Hence, new authors have little interest to work with publishers and many of the most lucrative successful authors will run as soon as they have the courage: Paulo Coelho is famous for his stance against the publishing industry and their traditional methods.

New experimental formats will emerge

Books will be written by communities, they will come in versions (like software: cf. the unbook movement by my friend Dave Gray), they will have innovative intellectual copyrights (e.g. creative commons) and novels will have multiple endings. They will take advantage of multimedia by integrating online content and they will be delivered to digital readers like the Kindle. There are absolutely no limits to imagination of how the “books of the future” will look like. Sadly, publishers (with notable exceptions) lack the required imagination to exploit the new opportunity space.

UPDATE: Richard Baraniuk’s talk at TED on textbooks: Goodbye, textbooks; hello, open-source learning:
http://www.ted.com/index.php/talks/richard_baraniuk_on_open_source_learning.html

Posted in alex osterwalder, book project, book publishing, business model, business model book, business model innovation, paulo coelho, publishing | 12 Comments »

Jan 28, 2009

Financial Crisis – an Opportunity for Business Model Innovation?

Alexander Osterwalder

Innovating during an economic downturn might seem counter intuitive at first sight. However, it is precisely the right moment to do so, as long as you already prepared your company for survival during this extremely severe crisis.

This Monday European and US companies announced a brutal 76′000 job cuts in one single day (cf FT article Gloom deepens as 76,000 jobs go in a day). To focus on business model innovation when you just fired a part of your workforce to bring your company through the crisis might seem very strange. Yet, it is the right moment to do so for a number of reasons.

Business model innovation is difficult to achieve because it affects so many parts of an organization and because it needs the buy-in of so many different people. In addition, it requires the right organizational structures and a sense of urgency to make it happen. All these conditions are, unfortunately, easier to achieve during an economic downturn.

In an economic crisis complacency is gone and everybody feels a sense of urgency to act. People resist change much less when the survival of their company and ultimately their jobs are at stake. We all know how fiercely most people resist change in good times. So when the most urgent issues, such as cash management, are taken care of, a company’s management should turn to innovation. This is the best opportunity they will get to position their company for the future of business model innovation.

So what is to be done? A good place to start with is building the right organizational structures that allow for business model innovation. With this I don’t simply mean a “traditional” restructuring and shifting of people, but deep structural change. An organization that systematically wants to address business model innovation has the following characteristics:

  • its board explicitly gives the management the mandate to continuously examine business model innovation;

  • it extensively works with multidisciplinary teams across “departments” and across hierarchies;

  • it has mechanisms that allow innovative business model ideas to be evaluated by peers during a first phase, rather than “just by managers”;

  • it involves the customer in the process of business model innovation

  • it maintains a portfolio of innovative business models that may even cannibalize the existing business model.

  • it has the right physical space in place to allow multidisciplinary business model project teams to flourish. In other words, it has project/war rooms dedicated to a project during it’s entire duration and with lots of whiteboards and walls to post visuals.

Voilà, some “unbaked” thoughts on using the economic downturn as an opportunity to position an organization for the future of business model innovation.

If you have any thoughts to add, please don’t hesitate. The forum is yours…

Posted in business model, business model innovation, economic crisis, economic downturn, opportunity, organization, organizational structures | 8 Comments »

Jan 2, 2009

Wikipedia Needs a Business Model not Donations – plead-for-business model

Alexander Osterwalder

Wikipedia founder, Jimmy Wales, recently made a plead-for-donations for his extremely successful website (hat tip to Victor Lombardi).

Dear Jimmy Wales, this looks really desperate and I think it’s the wrong route you are going down! A great website, such as yours, should not have to rely on the mercy of donors. I would suggest you try to find a better business model, because donations are just not sustainable… Look at the lessons of long standing not-for-profit organizations: They are relying less and less on donations.

With your foundation you are hoping to raise $6 million through your annual campaign. With such a valuable and successful website, I think you would better focus on your core competencies rather than fund raising. You have the assets to build a successful business model and still fulfill your vision. 8 years of track record, 275 million monthly visits to your website, 11 million articles in 265 languages and your 150′000 volunteers merit more than the mercy of donors.

Please learn lessons from companies like Google. Based on advertising they have contributed just as much to trying to make knowledge universally accessible than Wikipedia. Ok, you don’t want to use advertising, because your volunteers think that could compromise the content. Well, I think you have a much larger range of possible business models to explore than just one built on advertising based revenue streams. I think you should launch a plead-for-business-models rather than a plead-for-donations.

I don’t want to give you any recommendations – you and your board are smart enough. However, if I were to find money to fulfill Wikipedia’s vision I would look into other business models that are complementary to your overall not-for-profit goal. Examples:

  • Licensing Wikipedia’s technology to for-profit-companies
  • Hosting other Wiki’s (similar to what WordPress does for blogs)
  • Membership fees like Amnesty International has

Here Jimmy Wales’ plead-for-donations:

Personally, I don’t really believe in donations. Some of the organizations that I find most astonishing and have achieved a huge social and economic impact are not at all donation-based (some take donations, but it’s not at their core). Here I’m thinking of Grameen Bank, Grameen Phone, Kiva or WISE.

Any other suggestions for Wikipedia business models?

Posted in business model, business model innovation, donations, jimmy wales, wikipedia, wikipedia business model, wikipedia donation, wikipedia founder | 16 Comments »

Dec 12, 2008

Web-based Business Model Innovation Software and Working on the Wall

Alexander Osterwalder

Boris Fritscher, a brilliant masters student of HEC business school in Lausanne, Switzerland, has picked up on using software to sketch out business models under the guidance of my co-author, Professor Yves Pigneur.

Yesterday he showcased the tool to me and Patrick van der Pijl, producer of my business model book. Boris built a web-based tool that allows the design and description of business models. But Boris didn’t keep it there. He extended the tool to allow designing business models live on a projected image on the wall (see picture where Boris works on a business model). How cool is that?

The tool, which is a research project, is still in private beta. We are currently exploring how it can most easily be used to build a database of interesting and innovative business models on the book chunk platform.

I think there is quite some potential in software-based business modeling. Two IBMers, Norbert Herman and Sergey Trikhachev are also working on a tool based on my method. They built a Visio-based tool and are extending it to include business model simulation capacities

Previously I called this Computer Aided Business Model Design (CABMoD), referring to Computer Aided Design (CAD) in Engineering and Architecture. I believe it has similar potential in business…

Posted in business design, business model, business model innovation, computer aided business model design | 3 Comments »

Dec 2, 2008

Business Model Innovation Book – buy early access to raw content now!

Alexander Osterwalder

In MaySeptember 2009 Yves Pigneur and I will bring a new management book to the market, which will be a beautiful manual for entrepreneurs and executives about business model innovation.

The interest we are getting for the book is staggering, because our business model innovation methods are already in use in companies such as 3M, IBM, Deloitte, Telenor, Logica and more. Our aim is to write a book that is visual & simple, applicable, relevant and full of exciting examples.

If you are interested in the topic you now have the exclusive possibility to get early access to the book content and a community of business model innovators. It is a unique opportunity to participate in the makings of a management book that has the potential to become a global bestseller. Working title: “Crafting Innovative Business Models” “Business Model Generation”.

We will float and discuss the book content as it emerges on www.businessmodelhub.comThe content is already done, but you can get your name into the book until August 14th. Access will only cost you $US 24.- $US 36.- $US 54.- $US 81.- $US 121.50 $US 243.- (the price increased because we exceeded 100 200 300 400 450+ subscribers and are now near publishing)

SUBSCRIPTION IS NOW CLOSED UNTIL WE PUBLISH THE BOOK IN SEPTEMBER

By joining you will have the following privileges:

  • first & exclusive access to raw book content as we write it on www.businessmodelhub.com
  • FREE digital version of the full book when it is published
  • opportunity to influence authors and join content discussionsthe book is done by now
  • personal mention of your participation (names of participants’ in print version in order of sign-up… so you better hurry this is your last chance ;-)
  • about 8 19 installments of book chunks (in a non-linear order as they emerge)
  • 50% discount off the FREE final book
  • access to templates and exclusive PowerPoint slideshows
  • being part of the business model innovation community

When you buy access for $US 243.- we will invite you to the book chunk platform www.businessmodelhub.com within 48 hours. There you will be able to access everything that is going on. The first “book chunk” is due mid-December and is currently in the making. Already now there is a discussion on the book platform about examples, book format etc. 13 All book chunks are online now. This is the last opportunity to participate and get your name into the final print version book of this amazing breakthrough project.

Don’t miss out on being part of a potential management book bestseller. You will even be able to prove it because your name will be mentioned in the print version!

On Monday January 19. 2009 at 17:00 (CET, Zurich/Geneva) we will hold a free webinar to explain how the book chunk project works.

Posted in book, book project, business model, business model book, business model canvas | 29 Comments »

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