This week I participated in a high-level panel on strategic and operational private banking models in the 21st century in Zurich Switzerland. I talked about business model innovation in private banking (not meaning the innovative financial products that provoked the current financial turmoil, of course).
Enjoy the video:
You can check out the videos of the other panelists on www.privatebankinginnovation.com.
I’ll be giving a full day workshop on business model innovation at the ULURU innovation theatre in Amsterdam, Netherlands, on 3. April 2008.
The invitation (image left) shows that ULURU is a company that does things differently. They have a strong network among Dutch multinationals (including Heineken, TomTom, ING , KPN and many others).
Workshop Take Away: After this workshop you will know and understand innovative business models from various industries and be able to apply the business modelling methodology to your own company. You will also be able to use a pragmatic framework to innovate within your own business model.
Content: Help (senior) management foster business model innovation at large; Give (senior) managers a broad overview of innovatieve (disruptive) business models in various industries; We will show examples from various industries (including in wealth management, private banking, telecom (Skype)); The participants will learn how to apply a simple and pragmatic approach to achieve and implement business model innovation.
If you’re interested in participating click on the invitation image and contact them directly. Of the 25 available seats, only 10 are left after 4 days of workshop announcement. I’m sure it will be a great experience.
See you in Amsterdam!
Today I came across this quite interesting video interview with Roger Martin (hat tip to Ralf Beuker), dean of the Rotman School of Management. What you must know (if you don’t already) is that the Rotman School is very design oriented and aims at bringing design to business.
Enjoy the video where Roger talks about the design & business overlap:
I very much apply what Roger says in my consulting work and I also taught it in my last workshops in Mexico.
Today I had the pleasure to chat with Jean-Pierre Lehmann, professor at IMD and founder of the Evian Group. Jean-Pierre is a person who I very much admire for his deep knowledge, broad global vision and tireless action to promote global prosperity through an open trade regime.
In this short “interview” I asked him about how he sees the role of European corporations in the global market economy and what challenges lie ahead of them.
At the end of the “interview” I didn’t fail to ask Jean-Pierre for two book recommendations for today’s global leader, since I know nobody else with such a large global literary knowledge (fiction & non-fiction).
The last few days I have been thinking of the value of visual tools in strategy quite intensly. When I was standing in front of our business strategy library I realized how few of these books use visual techniques to make things clearer. Often there is not much more than charts and quite a number of strategy books are text only. The topic of visual techniques and communication has been on my mind because we are currently in close contact with XPLANE, a company whose tagline is “the visual thinking company”. They help businesses communicate complex business issues with simple images. One thing I realized was how XPLANE and Arvetica each create value through visual techniques in different areas with different tools.
Arvetica: Our main strength is to synthesise the essence of business issues, such as strategies and business models in simple diagrams. These are based on concepts (e.g. strategy maps) and are mainly composed of boxes and arrows. The value lies in creating a rapid understanding and the highlighting of how issues are related to each other. Images communicate relationships between objects than text documents. How can you quickly and clearly describe an interdependant multi-channel market approach with words?
XPLANE: Their main strength is their ability to illustrate complex business issues (e.g. change management) with drawn scenarios. They create a quick understanding with their comic-like pictures, because humans easily relate to stories. In many cases it is not sufficient to illustrate business issues through boxes and arrows only. Human scenarios that describe business issues in an illustrative manner help people relate to a the topic much easier. For example, the above image illustrates how to deal with difficult clients.
I’m quite exited that I will be able to learn more about visual techniques in business from XPLANE. I firmly believe that this will be one of the hot topics in strategic management in the coming years. In business strategy we still poorly communicate when it comes to visuals…
Check out this webcast/interview I’ve done for arvetica (the company I work for) on how (traditional) companies can learn about innovation from the computer & video game industry.
Nicolas highlights three major practices/processes which are common in the game industry and lead to innovation:
Check out the webcast/video on arvetica’s blog!
Update: Business Model Innovation Book. We are currently writing a groundbreaking book on business model innovation (publication: June 2009). You can get special privileges and participate in the innovative business model of our book project on our book chunk platformUpdate: Based on the overwhelming interest this post got, I updated the version from 2005
A business model is nothing else than a representation of how an organization makes (or intends to make) money. This can be nicely described through the 9 building blocks illustrated in the graphic below, which we call “business model canvas”.
The business model topic is very popular among business people today because in various industries we can see a proliferation of new and innovative business models (i.e. new ways of making money). In several industries new business models are threatening or even replacing established companies and conventional ways of doing business. Just have a look at the music or airline industry.
Hence, the interest in business models comes from two opposing sides:
Within this context the business model concept is a particularly helpful unit of strategic analysis tailored to today’s competitive business environment. It helps executives as well as entrepreneurs increase their capacity to manage continuous change and constantly adapt to rapidly changing business environments by injecting new ideas into their business model.
But what actually is a business model?
In management meetings the question of what a business model is (even what “our” business model is) often remains relatively vague. The main reason for this is because business people have an intuitive understanding of business models. Normal, since the business model is about how an organization makes money, which is a manger’s job after all. However, there is often a lack of a more precise and shared understanding of what a business model is. Yet, such a common understanding is required if we want to have high quality discussions of one’s business model and make important business model decisions.
Therefore we have come up with the 9 building block approach to describing business models. It has the characteristics of any other type of model (e.g. in architecture or engineering).
Like other models it is a simplified description and representation of a complex real world object. It describes the original in a way that we understand its essence without having to deal with all its characteristics and complexities. In the same line of thought we can define a business model as a simplified description of how a company does business and makes money without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.
Based on an extensive literature research and real-world experience we define a business model as consisting of 9 building blocks that constitute the business model canvas (readers of this blog will realize that this is an updated and slightly adapted version of the model):
Origins of the term business model
The term business model became popular only in the late 90s, which, personally I think is related to the rapid erosion of prices in the IT and telecom industry. The roots of my assumption lie in Transaction Cost Economics (TCE). Because it became so cheap to process, store and share information across business units and other companies all the way to the customer, many new ways of doing business became possible: Value chains were broken up and reconfigured; Innovative information-rich or -enriched products and services appeared; New distribution channels emerged; More customers were reached.
Ultimately this lead to globalization and increased competition, but, as described above, it also led to new ways of doing business. In other words, today there is a larger variety of how companies can make money: this means new in terms of what they do, how they do it and for whom they do it…
For managers and executives this means that they have a whole new range of possibilities to design their businesses. This results in innovative and competing business models in the same industries. Before, it used to be sufficient to say in what industry you where in, for somebody to understand what your company was doing. All players had more or less the same business model. Today it is not sufficient to choose a lucrative industry, but you must also design a competitive business model. In addition, increased competition and rapid copying of successful business models forces all players to continuously innovate and adapt their business model to gain and/or sustain a competitive edge.
Companies that thoroughly understand their business model and know how the building blocks relate to each other will be able to constantly rethink and redesign these blocks and their relationship to innovate before their business model is copied.
Business Models & Innovation
The term business model is also closely related to innovation. As I mentioned, the business model concept is related to a whole new range of business design opportunities. There are examples of business model innovations in each of the 9 building blocks described. The most obvious is innovating in the value proposition. When mobile phones appeared in the market they offered a different value proposition than fixed line phones. In the early days of the Internet popular indexes like Yahoo! helped people find information on the Web. Regarding target customer segments, low-cost airlines like EasyJet have brought flying to the masses. Dell became really successful by exploring the web as a distribution channel. Gillette has made a fortune by establishing a continuous relationship with customers based on its disposable razors. Apple resurged based on its core capacity of bringing
design to computers and electronic gadgets. Cisco became famous for its capacity of configuring activities in new and innovative supply chains. Intel thrived for its capacity to get partners to build on its processing platform. Google tapped in an innovative revenue streams by linking highly specific search results and content with text ads. Wal-Mart became dominant by its ability to slash cost throughout its business model.
For conference or workshop engagements on the topic of business models, please contact me at alex@businessmodeldesign.com and ask for a speaker’s profile
Skype is a company offering free Voice over IP (VoIP) on the Internet and they are enjoying a phenominal success. Since I’ve intervied them in March this year they grew their number of employees from about 100 to 170. Now that is what I call lightspeed growth.
However, what is of particular interest is how their business model design is different from the one of a traditional telco. With a group of collaborators from the University of Lausanne we tried to identify Skype’s disruptive potential by analyzing its business model and comparing it to a traditional telco. I uploaded that study and the detailed PowerPoint presentation I recently made in Bangkok to my consulting website.
Read the paper on Skype’s disruptive business model design.
Look at the detailed PowerPoint presentation about the business model comparison.
