Archive for the ‘business model innovation’ Category

« Older Entries
Newer Entries »
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 »

Feb 10, 2009

The Silly Business Model Innovation Cow Exercise

Alexander Osterwalder

A couple of posts back I wrote about a simple, fun, but silly exercise to think out of the box when it comes to business model innovation: the silly cow exercise. I asked people to submit their own sketches of business models using a cow..

The echo was very weak (no creativity out there, or fear of sketching?). Hence, in addition to the set of sketches I got from Fréderic Sidler, I photographed some of the sketches coming out of a workshop I did last week in Belfast. The silly cow exercise is a always a success, probably because it looks at business model innovation from a very light angle. It even works with very senior and serious business people. My favorite business model came from a participant in Belfast. However, she didn’t have the courage to present her sketch during the workshop: “The Condom Tester”…

Here some of the sketches. You can find the full set on Flickr. I will certainly add more over time…

Posted in business model exercise, business model innovation, cow exercise, exercise, innovation, out-of-the-box thinking | 3 Comments »

Feb 6, 2009

Disrupting the Music Industry: Trent Reznor

Alexander Osterwalder

Many of you have seen my presentation “business models matter“, which shows how the music industry has been slow to react to a changing industry landscape.

Here a video explanation by Mike Masnick from Techdirt of how an artist, Trent Raznor, is re-inventing business models for the music industry. Most interestingly: he shows how FREE can be the basis for earning substantial revenues…

What can other industries learn from this? I have a pretty clear idea: Business Model Innovation is possible!

Posted in business model innovation, music industry, trent raznor, video | 8 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 18, 2009

Business Model Designer From Sticky Note To Screen Interaction

Alexander Osterwalder

Last Friday I was part of the committee for a Masters Thesis defense on business model design at the HEC Business School in Lausanne, Switzerland. Boris Fritscher, whom I previously mentioned on this blog, defended his thesis “Business Model Designer From Sticky Note To Screen Interaction”. For his dissertation Boris developed a web-based business model design tool under the guidance of Professor Yves Pigneur, my co-author for an upcoming book on business model innovation.

Boris did an outstanding job combining business relevance with software development. You can check out his presentation and thesis below or on his website. You can also look into a non-interactive demo of his business model design tool. It allows capturing, storing and designing business models (read about it in the dissertation). Boris is not yet opening up the tool to the public, though many readers of my blog have already asked me for access. If we show him how much we want/need this tool he will hopefully change his mind and allow some testers access to an alpha/beta version. Isn’t it, Boris ;-) So post a comment to this blog if you think this is relevant!

Have a look at Boris’ thesis. It is really interesting and I believe it points us to the future of business model innovation: one where paper based brainstorming is combined and complemented with the advantages of computer aided business model design.

And here the slides Boris presented during his thesis defense:

Posted in CAD, boris fritscher, business design, business model design, business model innovation, computer aided business model design, computer aided design, redesigning business models, yves pigneur | 12 Comments »

Jan 13, 2009

Business Model Innovation Exercise Series: nr.1 – ideation

Alexander Osterwalder

The cow exercise is something I regularly do at my keynote speeches and workshops to trigger business model innovation thinking. It so far away from the audience’s daily business concerns that it easily stimulates creativity.

Have a look at the slides and make sure you send me your own sketches:

Have fun, send me your sketches and give me feedback…

Posted in business model innovation, cow, creativity, exercise, innovation | No Comments »

Jan 9, 2009

The Future of Management Books

Alexander Osterwalder

There are a lot of good management books out there and I’m looking up to many of the leading authors. I particularly admire thinkers like C.K. Prahalad (Bottom of the Pyramid), Gary Hamel (Future of Management) or Tom Kelley (Ten Faces of Innovation), to mention just some. Yet, even those outstanding personalities have not really changed the genre of management books. It’s high noon to do so.

The management book as it looks today is mainly due to past restrictions regarding printing and media. It is usually written by a limited group of persons or a single thought leader and it is published with a lot of black & white text and few images. This is the norm, though there are obviously great exception (John Kotter’s “Our Iceberg is Melting” or Tom Peters’ “Design Essentials“).

Here is my take on how a management book should be crafted and how the result should look like. I try to apply this in my own management book that I am writing together with Professor Yves Pigneur on business model innovation.

The 4 design essentials that the NEW management book should follow:

Visual Thinking & Design: The majority of management books as we now them today only rely on few visuals. This is mainly due to past restrictions in the printing industry. Authors of management books should use images much more because the visual sense trumps all authors as John Media outlines in his excellent book on brain rules (see rule #10). Images allow the simplification of concepts and they make it possible to convey emotion (e.g. change, urgency, competition). Personally, I believe it is not enough to have some graphs and 2×2 matrixes. We need a compelling visual design to make useful management books. For that purpose our book writing team includes a designer and the participation of XPLANE, the leading company in visualizing business strategy and management.

Co-creation: Management books should be co-created together with the end-user. Though authors usually have a pretty clear idea of what they want to convey in their book, I believe they should still integrate the reader as part of the book creation process. Yves and I are doing this through an online platform (called the Hub) where we share chunks of the book as we write them and then allow people to give feedback on each piece. We are doing this to integrate the valuable experience of our readers, to test ideas and start building a community of practitioners around the topic. In a month over 160 people have paid 24.- $US to be part of this process!

Prototyping: The method we use to co-create is prototyping. We see the book chunks that we share on the Hub as prototypes that we test with the members of the platform. This includes testing the content as well as the form, since in our book both play an essential role. Conveying a message through a more visual presentation must be tested by the end-user, the reader. Does it really work? Do people “get it”? The amount and quality of feedback that we got from our 160+ Hub members on our first book chunk was wonderful. It’s amazing how people get involved.

Applicability: Ultimately, a management book should help a person better manage his work, team or organization. Hence, the easier a management book makes it for the reader to apply the concepts conveyed in the book, the better it is… I think this is still a relatively weak point in the majority of management books – even in those with some of the most powerful concepts. Let me be clear, applicability is about limiting the effort the reader needs to make to translate the concepts conveyed in the book into applying them to his own work setting. In our own book on business model innovation we are aiming at making all we write applicable. As a consequence our book will look more like a manual for business model innovation. It shall include workshop scenarios, use cases and exercises to practices business model thinking.

Well great, now I’ve raised the expectations for our book once again… Join our book chunk project if you want to judge our ability to achieve the above design essentials. For 24.- $US you get some great privileges and the opportunity to participate in the future of management books ;-)

Posted in book project, book recommendation, business model book, business model innovation, business model innovation manual, business model manual, hamel, management book, prahalad | 1 Comment »

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 | 17 Comments »

Dec 19, 2008

Apple iPod – Business Model Example Series: Issue 2

Alexander Osterwalder

This week I was in Madrid to work together with XPLANE, the leading company when it comes to visual thinking in strategy & business. XPLANE will help me with the visuals for some examples and processes in my upcoming book on business model innovation.

Together with Pablo Ramirez of XPLANE we worked on several things, including the business model of the Apple iPod. Here is a first sketch – open for your input & feedback…

Don’t hesitate with comments & feedback. This is most certainly one of the examples we will use in the book. At every workshop & event I do, the Apple iPod comes up because of its influence on the music industry.

Posted in XPLANE, alex osterwalder, apple ipod, business model innovation, music industry, slides, slideshare | 6 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 »

« Older Entries
Newer Entries »