Business Model Alchemist

I have two public workshops coming up, besides my work for companies and conferences. It would be a pleasure to meet you there! There is an attractive “early bird rate” until December 19.

Public workshops:

• 21. January ‘09: Zurich “Crafting Innovative Business Models” in German (info & sign-up here)
• 22. January ‘09: Geneva “Crafting Innovative Business Models” in English (info & sign-up here)

Public Talks:

• 15. December ‘08: VizThink Madrid – short keynote on business models and visual thinking together with XPLANE

Also, in April I will do another North America tour. Toronto and New York are sure stops. Others will be defined in the coming weeks.

If you want to be successful at innovation in companies today you have to involve everybody!

That is one of the strongest quotes that I take away from Sir Ken Robinson’s keynote that I attended in Toronto today. Michael Dila of Torch Partnership invited me to this event and I’m glad I accepted.

Sir Ken is an authority in the field of creativity and innovation. In his talks he shows how we are taught to become uncreative throughout our educational systems. We have practically lost our ability to be creative by the time we arrive as so-called “knowledge workers” in companies … In essence, this means that we don’t have a creativity crisis in companies, but a structural crisis. Our educational system and our companies lack the structures it takes to make creativity flourish throughout our organizations.

“saying that not all people can be creative is like saying that not all people can be literate”

I could not agree more. That is also one of the reasons I think we have such difficulties to achieve business model innovation. We believe only the “creatives” can come up with new and maybe disruptive ideas. However, inventing innovative business models requires co-creation and diverse teams from all hierarchical levels, divisions, age and gender groups. Everybody’s creativity within an organization should contribute to strengthening and renewing the business model!

Taste a sample of Sir Ken’s amazing ability to entertain while addressing a highly important issue:

Sorry if this post does not seem fully cooked and ready to serve. I have several hours of travel behind me, but absolutely wanted to write about this inspiring event I attended…

This blogpost is a question to you: would you like to see a business model innovation platform emerge for a community of practitioners around the topic? A place to share experience, tools, examples and insights…

Context: I’m just done with a series of 3 workshops in a row at Toronto’s Rotman school, the MaRS “incubator” and an event in New York. It was GREAT! The topic is hot, people are hungry to innovate business models and my business model canvas is spreading. Multiple groups and companies are applying the canvas in their own setting and extending its use (e.g. IBM is experimenting with software-supported business model design). One person in Toronto has even told me that the canvas has opened up a whole new career for him. Yet, there is no one place to go to share experience around the topic…

This all led me back to an idea I had a while ago: the creation of a Business Model Innovation Platform. It would be a place where people could share their ideas around the topic, share their experience with business model innovation and show how they applied the business model canvas. A vibrant community of practitioners where all the necessary tools are available for download (some would have to be paid, though). Tools could be templates, training videos, industry specific business model reports, etc. The MySpace of business model innovation…

A couple of questions to you:

• Are you interested? Is this a worthwhile idea?
• What functionalists would you want from such a platform for a community of business model innovation practitioners?
• What business model innovation tools would be useful?
• What name do you recommend for this platform

Another series of questions to the “techies” on my blog:

• Are there open source platforms out there that could be easily used for such a platform (non-branded, so the platform could have its own brand…)?
• Where can I get my platform developed through crowd-sourcing?
• Where can I get a good and cheap design crowd-sourced?

I’m hopeful you can spare a moment to share on this topic because such a platfrom could have a nice impact on how we do business. We could create more value through new business models, we could have more fun doing strategy and business models through design thinking and we could find new and innovative ways to make money…

By the way, there is one particular reason why I am so supercharged: 4 years ago I used to sit at the Wawee Coffee Shop in Chiang Mai, Thailand. That is where I relaunched my blog on business model innovation. Since then I have never looked back. Many people know my blog and use my canvas. I am now invited for keynotes and workshops around the world.

4 years later I am sitting in a coffee shop in Brooklyn, New York, surrounded by entrepreneurs and students working on their Mac. I feel like this is the next stage for my work after those days in Chiang Mai. It’s the launch of another stage: Together with Professor Yves Pigneur we want to lauch a new type of business book in 2009 on business model innovation. In addition to that I would love to connect the business model innovation community on a platform. There is just so much exciting innovation around business models going on at the moment… We need to bring that experience together!

The title of this blogpost is probably a bit cocky and it would certainly be completely off the mark if it were just about another management book…

What will be different about this book that Professor Yves Pigneur and I are writing in collaboration with ULURU is the business model. We are launching this book based on an innovative business model, which is quite different from any other management book published to date.

However, before revealing any ideas that we have come up with during our brainstorming sessions, I would like to get some inputs from you. Please help us design a great book by telling us what you would expect from a book by us on the topic of business model innovation. What will make you buy it?

Take this survey to tell us what you would like to see in this book

An important element of this book project will be that you can buy the book in advance, during the writing process to benefit from special features & services (e.g. video-interviews, web seminars, draft book chapters). If you are among the advance buyers you can influence the book content and will be mentioned as contributor.

Interested? Stay posted to find out what the innovative business model for the book is about…

Two people who are at the forefront of thinking on the intersection between business and design will be speaking in Europe this November. Though this is not 100% related to business model design, I believe they promote the kind of tools & techniques that are necessary to come up with sound business models. I very much value their contributions of bringing design thinking to business.

Victor and Jess will be first speaking at the IA Konferenz 2007 in Stuttgart, Germany (9./10. November).

Jess will also speak at the Italian IA Summit 2007 in Trento, Italy (16./17. November).

I’ve scaled down on reading blogs recently, but I still follow some blogs and people in the blogosphere… Here a selection of the ones I like most:

• Laurent Haug: Laurent is a frequent guest at arvetica (the consulting boutique I work for). He’s the founder of the top-notch social technology conference LIFT and the best connected man in Suisse Romande. A great source on new web tools – speak Web n.0.
• Nicolas Nova: Nicolas just passed by at our offices today to chat and to work on the final touces of his PhD dissertation. He’s the best input you can imagine on the value of the latest technologies – particularly in the field of group collaboration. Nicolas is also part of the founding team of LIFT.
• Irving Wladawsky-Berger: Vice President, Technical Strategy and Innovation at IBM Corporation. Though he probably doesn’t know me, I know his blog It’s a great source to understand where IBM is heading – interesting material. I’d love to have a chat with him.
• Pascal Rossini: Pascal is one of the top Web (2.0) entrepreneurs of Switzerland and I had the great pleasure to do some consulting work for him. His newest coup is ADS-click, Sky-click and Skippi. Follow his ventures.
• Ralf Beuker: Ralf is at the forefront of design management. When we met last December we had some great discussions on design thinking. A true source of inspiration.
• John Hagel: John is a well known management guru. I don’t know him personally, but I felt honored that he referenced one of my blogposts last year. His blogposts highlight his out-of-the-box strategic thinking. I hope he stops by in Geneva some time…

It’s quite funny that I tried to convince a number of other friends to start blogging last year (‘06)… Actually the motivation was a bit egoistic: It’s the most convenient way for me to follow their latest innovative thinking. Some have actually followed my advice, like Gerry Schnyder who is currently in London working on his PhD about comparative corporate governance.

At arvetica we also set-up a new blog (which is actually our company website!!) and I’ll be writing there more and more in the future…

(disclosure: I don’t know the real source of the above image which represents the blogosphere… Sorry if it’s breach to anyone’s Intellectual Property Rights (IPRs))

Yesterday freelance writer Clint Witchalls interviewed me on business models. The chat was quite fun and Clint asked some good questions. Among many other things we came across the following topics:

1. Product/service innovation vs. business model innovation: While the former is – no doubt – important, I believe the latter is much more powerful. Take (once again) Apple’s iPod as an example. The reason why that thing is so competitive is because it’s not just built on a product. It is also grounded in a powerful business model (at least to date), which includes their iTunes software & shop. Some of Apple’s competitors are lining up terribly impressive products and are still staying miles behind…
2. Why has the business model concept and business model innovation become so important: I believe business executives have much more choice than 10-15 years ago in designing their business model. Each business model building block allows for a wide range of choices. An executive can design various distribution channel strategies, he can opt for many different types of customer relationships, he can build many diverse revenue streams, he can enrich physical products with information services and, and, and. Much of this was more limited just some years ago.
3. Wich people should join the group leading a firm’s effort on business model innovation: In my opinion the selection should be as a large as possible. The people should definitely come from different areas of a company. The business model concept is an overarching construction and can help overcome the still dominant silo-thinking that has many companies in its grip. In order for innovative business model building blocks to become reinforcing people must work together from various company backgrounds.
4. The different evolution of technological disruption and business model disruptions: I pointed Clint to an article from Constantinos Markides which compares the former to the latter (ref: Disruptive Innovation: In Need of Better Theory). While I don’t think the article is very good, it does make one particularly interesting observation: Disruptive technologies tend to replace incumbent technologies, whereas disruptive business models tend to co-exist with incumbent business models. Examples are numerous: airline industry, computer sales, etc. This leads to another interesting point: Various economic areas are increasingly characterised by multiple (innovative) business models.

A last thing I believe is terribly important to understand, but which we haven’t discussed in the interview, is the difficulty to classify certain business models among an industry sector. In which industry would you say does Apple’s iPod/iTunes initiative operate? Should we classify Apple’s business model in the hardware industry, software industry, music industry or even design industry?

What is disturbing is not so much the fact that we can’t classify their business model, but that analysts and consultants still largely use methods referring to “industry”, while the concept is becoming outdated… Michael Porter’s five forces model is such an example. I predict that in the future we will see more and more business models that will be impossible to be classified in specific industries. This means that methods of industry analysis will be of less and less value.

Today’s FT ran an interesting article about Alfa Romeo, the Italian carmaker. The story makes a nice showcase for outlining how important it is to align the different building blocks of one’s business model.

Alfa’s cars have a very distinctive style and are known for their high-quality workmanship. However, as the FT article points out, Alfa has a tarnished reputation for distribution and customer care. The former, car perception, is high-end while the latter, car and distribution, has been handled carelessly. Both are completely unaligned. It is as if Alfa Romeo thought it’s sufficient to through a nice car model on to the market and success will follow by its own. However, JDPower, a consumer ratings group, has helped Alfa understand that their existing and potential customers had a huge problem with customer care and the way the cars were sold. For example, some dealers

sold the luxury cars alongside cheaper brands, with vehicles crowded into small spaces

and

Potential customers’ expectation of the brand was that it was like Audi or BMW, but it was being sold alongside volume brands

This is clearly a case of unaligned business model building blocks… In my language of describing business models this means that “distribution channel” and “customer relation” are not aligned with the “value proposition” and the “target customers” (as outlined in the slides below). The open question is if Alfa’s managers were unable to understand this or if they were simply sluggish in the execution.

However, today the company is serious about its strategy execution. As the FT outlines, this reorientation is part of a broader turnaround at Fiat, the Italian industrial group that owns Alfa. The initiative has been led by Sergio Marchionne, Fiat’s CEO since ‘04 (by the way, Marchionne is very well known to Swiss business as a turn-around manager…).

Alfa is now taking care about its distribution channel design and is, for instance, reviewing all its UK car dealers to assure a high-end distribution style. They’ve hired SGS, a Swiss auditing company (formerly turned-around by Marchionne) to improve compliance with the required quality and in case necessary replace existing car dealers with new ones.

An example of this new channel design is Alfa’s collaboration with HR Owen, an upscale chain, whose other brands include Bentley, Rolls-Royce and Ferrari…

While moving homes has dark sides it also has bright sides: In a huge pile of unread and half-read magazines (who doesn’t know that phenomena I stumbled across the September issue of Wired. The cover story was about the “rebirth of music” and triggered a lot of ideas in my mind.

First of all, I realized at what point the music industry is currently a huge business model design laboratory. It’s not new that old and new business models are clashing in this domain, but the richness of all these new business models is astonishing. I believe it might be the industry with the most different types of business models competing against each other these days.

Sedondly, while reading I understood that other industries MUST follow the evolution of business models in the music industry if they want to be prepared for business model innovation in their own industry. I’m not only talking about intellectual property rights (IPRs), peer-to-peer (P2P) music sharing platforms and lessons for the film industry. I’m talking about genuine insights into business model innovation.

Finally, The music industry transformation is giving us lessons about business model innovation in many different building blocks, such as distribution channels (mobile phones, P2P, USB-sticks, TV series, MySpace, game consoles, …), service & product innovation (free remixing platforms, ringtones, communities of interest, recommendation engines & music DNA…), revenue streams (various forms of advertising, live-streamed concerts, …) and so on.

One of my favorite business model innovations picked from the several Wired stories is the one where movie theaters offer live streaming of sold-out concerts on their big screens (Big-Screen Bands).

With help from National CineMedia, your local cineplex can show live footage from a sold-out concert in New York City. Sure, you may not get away with smoking a joint and sipping a flask, but for $15, you’ll get comfy stadium seating and a view of every wrinkle on the aging rocker’s face.

WOW – this simple innovation involves new value added services, new distribution channels, reducing fixed costs, partnerships and new revenue streams. My advice: go out and learn about the business model innovations taking place in the laboratory of the music industry today – then apply the lessons to your own field.

Merry Christmas, Alex

I found reading this short interview on business model innovation with Clayton Christensen, the renowned Harvard professor and author, quite worthwhile. He offers some trenchant advice on business model innovation. Even more important: It shows how hot the topic currently is. I saw Christensen speak at a conference a few years ago and he certainly isn’t a person who jumps on a topic just because of the buzz.

The most interesting part is Christensen’s answer to the question if the creation of new business models are substantially different from the innovation of new products or services. His answer:

Yes. Most new products and technologies can be sold through the existing business models. In fact, the corporation will reject process or resource allocations that don’t fit its business model.

A powerful reason why companies aren’t good at business-model innovation is because the kind of products that are required to be the seed of a new model can’t get through the resource allocation process.

This is food for thought, particularly for successfull companies…