Business Model Design and Innovation

The Challenges of an Innovation Journey (an Author's Perspective)

2009-09-03T10:39:00.012+02:00

Our upcoming book Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (25% pre-purchase discount) is literally on the way to the printing press – time to summarize the experience.

The past 14 months have been an exciting, but also very exhausting innovation journey. From all my experiences with innovation (I have helped build two and sell one organization) this has been by far the most challenging one. It is only thanks to a great team that this project has produced a powerful book (Yves Pigneur: Co-Author, Alan Smith: Design, Tim Clark: Editing, Patrick van der Pijl: Production). So how did the journey look like:

Starting Point

Goal:

Produce a book on the topic of business model innovation that stands out in a market where countless strategy and management books are published every year

Assets:

a “willing” and enthusiastic co-author with the best analytical and structuring skills I can imagine: My former PhD supervisor Prof Yves Pigneur

a reasonably well frequented blog on business models with a global audience

a business model innovation approach increasingly practiced around the world, notably in companies such as 3M, Ericsson, Deloitte, and Telenor (based on my PhD dissertation and blog)

a variable income stream from keynote talks and workshops that almost covers the living costs for my little family (invitations for gigs solely through my blog) and allows for writing

Handicaps:

“Competing” in a field of big name gurus from Harvard, Insead, Wharton & Co., while I am mainly known through my blog

Initial Ideas:

Publish the book based on an innovative business model to underline the importance of the concept

Finance the book through corporate sponsors who would have their logo on the cover

Bypass publishers

Sell mainly through Amazon.com

Of course things turned out differently than I initially imagined. It was actually much more exciting, though I hadn’t foreseen most of the obstacles. But let’s first look at the end result of the journey.

Outcome:

a highly visual, full color, beautifully designed, and practical book with 280 pages on business model innovation

strong differentiation from traditional strategy & management books

470 co-authors who have contributed to making this a better product and who have partially financed the endeavor through their access fees to the Business Model Hub where the co-creation has take place

Pre-sales through our own website www.businessmodelgeneration.com that have contributed to financing the first print run

Successfully bypassed publishers (I even got an invitation by the German publishing industry to show how we’ve done it)

What I realized during the project was that Business Model Generation is spearheading an entirely new generation of management books: designed, visual, co-created, approachable and applicable. We had to create entirely new systems and processes to actually produce such a book.

During the work with our creative director and designer, Alan Smith from The Movement, I realized how powerful design is to create a good management book. It’s not “just” about the content, but also about the form. Management concepts are inherently visual, because they deal with simplifying the complexity of today’s business environment in order to make it manageable. Not using visuals to convey these concepts seems silly.

Good design can make management books much clearer and more functional – and as a side effect also more beautiful. As a result of our project I have become intolerant for old-style text-heavy management and strategy books.

So what are the key lessons learned that I could share with writers of future management books?

Lessons learned:

Pros:

Co-creating the book in a completely transparent way on an Internet platform has been a wonderful experience. We regularly shared content chunks in a very raw and unedited format with 470 co-authors. In addition we gave insights into our challenges and the design process. The feedback and comments led to a greater product - though responding to every one of the 1’300+ comments and integrating them into the book was extremely time consuming. The positive aspect was to see how enthusiastic the crowd was and how some people started to feel ownership of the product. Rightly so, since they contributed and will have their names printed in the book.

Designing the book under the creative direction of Alan Smith has been an eye-opening experience. I couldn’t imagine writing a text-only business book anymore. Impossible. It just wouldn’t make sense. Design and visualization is – in my opinion - indispensable to convey business concepts. More importantly even, discussing the design of content with Alan helped crystallize key concepts of the book. Thus, design thinking has become core to producing content rather than just an afterthought to make the book look good.

Differentiation has been “easier” than expected. What we have done in terms of co-creation and book design is truly unique and has attracted many, many curious people. I think it was the only possible path for us “underdogs” in this field of mostly North American gurus (sometimes with Indian roots ;-). Sales will tell.

Cons:

Playing underdog is tough. The players who we hoped could sponsor the book project didn’t see the potential and didn’t understand. Now that it’s done they are showing up. Too late – we covered the risk of the project ourselves and succeeded. The premium to join now is high!

Resources were extremely limited. It is only thanks to the “sacrifices” of the entire core book team that we could bring this project to fruition. More money would have made the process much easier, yet it probably wouldn’t have led to a better end product.

Lacking the infrastructure to do what we wanted to do was a challenge. There is no off-the-shelf platform on the Web where an author can co-create with readers and ask them for a participation fee. We tinkered with Ning and Paypal and my blog to put something workable together.

Amazon.com is a must-have distribution channel. However, to sell on Amazon we must give them 55% of our sales price. This leaves us with 45% to cover production costs and shipping to their warehouses. We will probably have to charge a much higher price than we want to simply to cover our costs. However, solely selling at a reasonable price through our own website www.businessmodelgeneration.com based on a Dutch fulfillment center is not an option. Amazon has a de-facto monopoly…

Those were some initial thoughts… There is certainly more and I will write more when we have started to deliver books end of September.

Have a look at the “making of” pages coming directly from Business Model Generation to learn more about what we’ve done.

Making of...

Business Models Beyond Profit - Social Entrepreneurship Lecture

2009-08-27T08:52:00.005+02:00

Last Monday I gave a three hour lecture on Business Models Beyond Profit at Jacobs University, Bremen, Germany. It was in the context of impACT, a pan-European student competition in social entrepreneurship. Find the slides of my presentation below.

It's a really exciting topic and I am a firm believer in the combination of "doing good" and "doing well". In my opinion the traditional frontiers between nonprofits focusing on social and environmental impact, and corporations solely focusing on profits will disappear - because of new and innovative business models. So many young professionals want to make a difference, but are not willing to forgo decent salaries. Personally, I think that's not a contradiction. The challenge is to come up with the business models that combine both impact & profit.

Michael Shuman, author of Going Local, nicely summarizes why I think nonprofits must be replaced with different business models (and I'm speaking with the experience of somebody who worked in the HIV/AIDS and malaria field):

There’s a very good argument that many of the attributes of typical nonprofits – heavy reporting requirements, self-reappointing boards, poor access to capital, awful labor standards (in the name of the public interest) – make them lousy vehicles for social change…I think we need to rethink the structure of do-good enterprises.

In my presentation I mainly focused on showing how the Business Model Canvas can be used to describe and design "new" models like Grameenphone, MyC4, Grameen Bank, Kiva and more. Have a look and tell me what you think:

Business Models Beyond Profit - Social Entrepreneurship Lecture

View more documents from Alexander Osterwalder.

By the way, we are looking for funding to write a social entrepreneurship version of our book Business Model Generation: A Handbook for Visionaries, Game Changers and Challengers. We know that this would be of immense value and that it would have a huge audience. Organizations like the Skoll Foundation, Ashoka and others are likely to be interested, but we don't have the contacts there...

SellaBand.com Uses Canvas to Visualize, Challenge and Communicate Business Model

2009-08-13T13:28:00.008+02:00

I always love seeing young and interesting companies adopt the Business Model Canvas. So I was very happy when renowned Dutch music upstart SellaBand used the Canvas to visualize their Business Model. They're a typical example of the business model generation. They use the image below to explain their innovative model to investors and employees. The image is one of the many illustrations in the "Business Model Generation" book by the way.

Sellaband provides an alternative to the traditional music industry. It is a platform that empowers artists to record their next album, funded by their fans.

Read more about the SellaBand business model example and how it came to live in Patrick van der Pijl's blogpost. Patrick worked with strategy consultant Ouke Arts, strategy visualizers JAM, and Sellaband co-founder Johan Vosmeijer on the case.

If you're interested in the link between business models and visualization: JAM has done a lot of the visual thinking in "Business Model Generation"!

How Business Models Help Generate Business Plans

2009-08-06T11:19:00.004+02:00

In this blogpost I explore the close relationship between business model and business plan. A business plan’s main role is to plan, outline and communicate a business (or not-for-profit) project and its implementation internally or externally. The motivation for the business plan may be to “sell” a project to potential investors or internally to top management and also serves as a planning document.

In fact, when you have designed and thought through your business model you have the perfect basis for writing a good business plan. Structure your business plan into five main sections: The team, the business model, financial analysis, external environment, implementation roadmap, and risk analysis.

The Team

One of the elements that particularly venture capitalists look at first is the management team of a project. Is the team experienced, knowledgeable and connected enough to pull-off what they propose? Highlight why your team is the right one to successfully build the business model you propose in the document.

The Business Model

In this section you showcase the attractiveness of your business model. Use the Business Model Canvas to give an immediate overview of your model. Ideally you sketch it out with drawings. Then describe the value proposition, outline why you believe potential customers need it and explain how you are going to reach the market. Use stories. Then highlight the attractiveness of your target markets to get the reader of the business plan interested. Finally, outline what key resources and activities are required to build and operate the business model.

Financial Analysis

This is traditionally an important part of the business plan that will attract a lot of attention. It contains the financial information that you can calculate based on your organization’s Business Model Canvas and a set of hypothesis of how many customers you can reach in a specific time period. This includes elements such as break-even analysis, sales scenarios and operating costs. The Canvas also helps you calculate capital spending and more generally how much it will cost you to implement the business model. Based on all these calculations you outline your funding requirements.

External Environment

In this section of the business plan you outline how your business model is positioned regarding the external environment. Outline market forces, industry forces, key trends, and macroeconomic situation. Summarizing, you need to stress what the competitive advantages of your business model are in this landscape.

Implementation Roadmap

This section gives the reader an idea of what it takes to implement your business model and how you will do it. It includes a summery of all projects and the overall milestones. A project roadmap, including Gantt charts, then outlines the implementation agenda. The projects can be directly derived from your organization’s Canvas.

Risk Analysis

At the end of the document you describe limiting factors and obstacles, as well as critical success factors. These can be easily derived from a SWOT analysis of your Business Model Canvas.

This is a brief excerpt of the "outlook part" of my Business Model Generation book.

Scanning Your Business Model’s Environment

2009-07-26T23:02:00.004+02:00

Business models are designed and operated in a specific environment. Developing a good understanding of this environment helps you conceive better, more informed and likely more competitive business models.

Scan your environment by mapping out four main areas. These are a) market forces, b) industry forces, c) driving trends, and c) macro-economic forces. Each can be divided into sub-areas that allow you to draw a picture of your business model's environment (see image below).

Continuously scanning your business model’s environment is important because the economic landscape is driven by growing complexity (e.g. networked business models), increasing uncertainty (e.g. technology innovations) and market disruptions (e.g. new disruptive value propositions). Understanding the changes happening in this environment help you more rapidly adapt your model to shifting external forces.

You should apprehend this environment as a sort of design space. It is a context in which you conceive or adapt your business model by taking into account a number of design drivers (e.g. new customer needs, new technologies, etc.) and design constraints (e.g. regulatory trends, dominant competitors, etc.). This environment should in no way limit your creativity or define your business model upfront. However, it should influence your design choices and help you make more informed decisions.

Friends of Business Model Innovation

2009-07-03T12:28:00.002+02:00

Business Model Innovation is a hot topic these days. I thought I'd post a note about some of my fellow bloggers who focus on the topic and who are friends or colleagues...

Anders Sundelin who launched the Business Model Database Blog
Patrick Stähler the sharp brain behind fluidminds
Peter Froberg who focuses on the freemium business model
Saul Kaplan of the amazing Business Innovation Factory

For all others who have a special focus on business model innovation, who read this blog and who blog about it themselves: don't hesitate to post your URL as a comment...

Beta Version Available! Computer Aided Business Model Design

2009-06-29T10:05:00.005+02:00

Together with my former PhD supervisor Professor Yves Pigneur (and now my co-author), I have long advocated the utility of some kind of computer aided business model design tool (see here) – in fact my PhD dissertation aimed at building the foundations for that. Now this vision is starting to become reality. One of Yves’ new PhD students has built such a tool on the basis of Yves’ and my conceptual groundwork.

Boris Fritscher, a brilliant student who has just started working on his PhD, has conceived a Web-based tool to sketch and edit business models. Now this Business Model Editor called BM|DESIGN|ER is open to the public in the form of a beta version (I talked about Boris' work previously here and here). The more you test it and play around with it the better it will get. All you need to give in return is substantive feedback! I hope to see the tool on TechCrunch soon - I think it is a substantial basic tool for start-ups to play around with their business model.

Check it out the BM|DESIGN|ER here:
http://bmdesigner.com/

Personally, I believe we can make a lot of progress in the field of computer supported business design. While I am a great fan of working on whiteboards and/or with post-it™ notes, I also think computer-aided systems have an essential complementary role to play (and one day we will be able to conveniently brainstorm with virtual post-it notes).

Some of the main advantages of computer aided business model design over paper are:

Highlighting of linkages between business model building blocks throughout a model – e.g. what resources, activities and partners do we need to serve a specific customer segment.
Navigating between layers of a business model – e.g. this allows us to look at the different interlinked parts/layers of Amazon.com’s business model, which has expanded from online retailing towards providing Web infrastructure to other companies.
Automatically generating financial spreadsheets based on visually conceived business model prototypes.
Advanced manipulation of business models, such as storing, merging, comparing, versioning and sharing models.

Of course this all sounds a bit futuristic and it remains to be seen how business people pick up on this. But look at the history of information systems in business and you might be able to trace a trajectory: We started out with modeling accounting information and now have sophisticated software-based accounting systems. Then we started modeling order and warehouse management. That brought us sophisticated enterprise resource planning systems. We moved on and started modeling and redesigning processes. Now we have quite advanced Business Process Management Systems. So what is the next bastion? Business Models: New ways of creating value ;-)

Boris, bravo for providing a first advance in this direction! Let’s have fun playing around with and advancing the BMeditor!!! Boris put all the examples of our upcoming book, Business Model Generation, into the system. That will give you something to start with…

Business Model Knowledge Fair & Book Launch

2009-06-22T13:31:00.027+02:00

No, the book is not finished yet, but we launched a 200-print unfinished limited edition for the Business Model Knowledge Fair in Amsterdam last Friday. The limited edition, which was messed up by the print-house (page order wrong), is now truly a collector's item and can be purchased for $250.-

The "real" book will be out in September and can be pre-ordered at a special 25% discount on www.businessmodelgeneration.com. The reason it takes a little bit longer than planned is because we are co-creating the book. Integrating 400+ people in the process is time-consuming, but makes for a better book!

A number of those co-creators from our business model book writing Hub also took place in the Business Model Knowledge Fair last Friday. It was extraordinary to see them face to face. They came from many different places: US, Spain, Canada, Slovenia, Germany, and more (12 countries in total - on the Hub participants are from 40+ countries).

As to the event: The day was perfectly run by Patrick van der Pijl from Business Models Inc, who moderated the presentations and workshop sessions. The event took place at the “Hotel De Goudfazant” - an innovator's venue.

I kicked off the day with a presentation on... Business Models. Check out the slides:

Business Model Knowledge Fair, Amsterdam

View more Microsoft Word documents from Alexander Osterwalder.

After my Intro Patrick interviewed the entire core book team, including my co-author Yves Pigneur, designer Alan Smith and editor Tim Clark (Patrick is himself involved managing production and distribution). To give the audience a feel for the book project FISH-EYE media produced a short video trailer of the book writing. Enjoy it:

Business Model Generation from FISH EYE media on Vimeo.

Then, after his short video intermezzo, four business model innovation practitioners presented their work. Bas van Oosterhout of Capgemini presented his work at DSM, Marielle Sijgers presented Seats2meet.com and Harry Verwayen of Kennisland presented his work at the National Archive. Really impressive what these people are achieving!

In the afternoon we continued with something that I find core to systematically approaching business model innovation: Visual Thinking. The visual strategists of JAM, who are substantially contributing to the book, ran a dare2draw session. They got all 60 participants to draw their business model. Look at the photo proof (or check out all the photos here):

After the drawing session Tim Clark and Alan Smith took over. Tim presented his exciting and relevant research on the relationship between cultural context and business models, particularly related to Japan. Alan gave us a great insight into design methods and design thinking. Absolutely crucial when it comes to business model innovation.

The end of the day was devoted to the business model Hub where we co-created the book. First, Martijn Pater of Fronteer Strategy - a co-creation specialist - outlined the guiding principles of co-creation. Then the participants jointly brainstormed on a couple of questions to continue this business model innovation community: What are the lessons learned? What business model questions remain unanswered. What do we really need to focus on as a community of practitioners. Let's hope this effort will go much beyond the book!

Here some final photos - The book team (Tim's missing - see him in the next photo)

Tim Clark (with the blue shirt) and others - drawing business models

Participants enjoying the day

Presentation of a visual business model

I'm presenting the "broken" b&w limited edition

If you are interested in buying one of the remaining "broken" & unfinished limited editions of Business Model Generation, of which only 200 examples will ever be printed, you can do that here. The book is printed in black & white, contains about 70% of the final content, of which 50% is fully designed. This limited edition was part of the package of the Business Model Knowledge Fair. What makes it a collector's item is that the print house got the printing wrong. The page order was misaligned, which completely messed up the design and made the book almost unreadable.

Buy the "broken" limited edition of Business Model Generation now for $250.- and you will get the final full color print in addition for free this September.

Caveat: This is a collector's item of which only 200 examples will be printed. The book is not finished, not fully designed and has a print error.

Thoughts on Design Thinking by Alan Smith - Designer of "Business Model Generation"

2009-05-06T10:12:00.010+02:00

As many of you know, I am a big fan of design thinking applied to business. I believe there is a lot we can learn from designers and their tools to improve the way we innovate and manage in companies. Hence, it's straightforward to have a guest post by a designer.

I invited Alan Smith from The Movement, designer of our upcoming "Business Model Generation" book, to write about his take on design thinking. I've learned enormously about design from Alan while working on the book - it reinforced my love story with design thinking... (more about this topic in "Business Model Generation" ;-) But now, Alan, the stage is yours:

No Parking Policy:

The best class I had in design school was a class called "Design Thinking" with a fabulous professor named Mary Ann Maruska. The best comment I ever got in that class was on a project redesigning a "tow-away zone" sign.

As soon as we got the brief - that instant -I had this bloody brilliant idea of bending the sign-pole at its base and putting a hook through the circle in the "no parking" sign literally towing the sign away.

Brilliant no? What you don't get it? That's ok, most people didn't. I was in love with this idea though!!!! It was so sweet!!! I've done X Y and Z right from a theoretical perspective and damn that's hot!!! I shared it with fellow students. 8/10 times: "ummm". I thought: "pfff. Another dimwit. I'm brilliant. That's ok that they don't get it. Everyone with a brain will."

The course required that you create 10 alternatives, so I half-heartedly went through the process. I made them because I had to. Teacher says so. Jokes on her though, these crap solutions would enforce my Eureka sign and everyone would get it then!

As a young foolish student, my post project-reflection read: "I think my first idea is generally the best for any project. "

Mary Ann's Response : "Really? This must be your first idea on ideas." Went right over my head. But I think I get it now.

Creating alternatives is not just about verifying an idea you like, its about finding one that's better, more appropriate, more interesting, or that leads to something better. Most of all, its about letting go.

This ability to let go dies hard, and with each new field / exercise you enter it comes back without you noticing.

Moving into business model design, I see myself making the same mistakes I made entering graphic design, and afterwards as a systems designer, furniture, motion graphics, web-architecture, management, entrepreneurship, etc...

Like a boxer, you can trust the process like you'd trust a coach. Run the drills knowing that they'll give you value your weaknesses would not allow you to create. Better yet, you'll also train those weaknesses out over time.

When you're new to something, follow medium specific exercises and processes like you follow street-signs. You'll end up arriving at incredible results you never could have found otherwise.

Or, you could just park one idea and hope it doesn't get towed away by the first person who see's through it.

Video Interview with NIN About Business Model Innovation in Music

2009-04-21T22:06:00.008+02:00

Interesting interview with Trent Reznor of Nine Inch Nails about the music industry, notably about business model innovation (hat tip to Peter Froberg of Freemium.eu). They've done business model innovation and have the legitimacy to talk about it ;-) What an amazing industry to innovate in these days!

Business Model Knowledge Fair, Book Launch and other Upcoming Events

2009-04-09T10:02:00.012+02:00

I'm excited to announce the Business Model Knowledge Fair and Book Launch Party on June 19 2009 in Amsterdam (register now for early-bird rate). Though we still have some path to go to finish the business model book, I'm really looking forward to the event. It will be a special day where we have working sessions around the book content and share knowledge and experience with business model practitioners! It will be a unique and particular event and you will get a limited special launch edition of the book.

As a reader of my blog you get a special discount off the entry price. The first 10 people get a crazy 35% discount (discount registration code: "bizmodelblog35"). When those are sold out you get still get a nice 10% (discount registration code: "bizmodelblog10").

Business Model Knowledge Fair & Book Launch

View more presentations from Alexander Osterwalder.

I will also be speaking at a couple of other public events this Spring:

April 16. Oslo (Norway): Keynote at BEKK Business Model Seminar (sign-up)
May 7. Tampa (US): Keynote at Innovate Tampa Bay Summit (sign-up)
May 15. Waterford (Ireland): Keynote at Innovate to Compete

See you around!

Obstacles to Business Model Innovation

2009-04-04T18:42:00.005+02:00

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...).

There is No Lack of Business Model Innovation Ideas

2009-03-28T20:43:00.010+01:00

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!

The Power of Immersion and Visual Thinking

2009-03-17T07:43:00.011+01:00

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.

Publishers, Update your Business Model!

2009-02-20T17:33:00.010+01:00

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

The Silly Business Model Innovation Cow Exercise

2009-02-10T08:28:00.006+01:00

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...

Disrupting the Music Industry: Trent Raznor

2009-02-06T18:15:00.004+01:00

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!

Financial Crisis - an Opportunity for Business Model Innovation?

2009-01-28T11:55:00.008+01:00

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...

Business Model Designer From Sticky Note To Screen Interaction

2009-01-17T23:55:00.014+01:00

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.

Business Model Designer From Sticky Note To Screen Interaction

And here the slides Boris presented during his thesis defense:

Business Model Designer From Sticky Note To Screen Interaction Presentation

Business Model Innovation Exercise Series: nr.1 - ideation

2009-01-13T13:51:00.004+01:00

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:

Business Model Exercise Series : nr.1 - ideation

View SlideShare presentation or Upload your own. (tags: management strategy)

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

The Future of Management Books

2009-01-09T09:54:00.019+01:00

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 2x2 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 ;-)

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

2009-01-02T08:48:00.009+01:00

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?

Apple iPod - Business Model Example Series: Issue 2

2008-12-19T12:57:00.007+01:00

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...

Business Model Example Series : Issue 2 / iPod

View SlideShare presentation or Upload your own. (tags: business model)

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.

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

2008-12-12T12:48:00.005+01:00

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...

The Necessity of Management Innovation

2008-12-08T21:16:00.014+01:00

Innovation regarding the way we run and manage our companies will be a key requirement to foster business model innovation. Financial Times management writer, Stefan Stern, and Peter Marsh wrote an excellent article on innovative management structures in the FT.

They portrait Terri Kelly, CEO of WL Gore, a $2.5bn turnover company, which is characterized by a totally flat organizational structure.

"Leaders emerge through a democratic process rather than being appointed from the top, and peer appraisal is crucial to both salary levels and career advancement."

Ms Kelly makes a clear case for this type of "democratic management" that would probably steal most traditional managers' sleep. She argues that decisions reached together are pursued much more energetically:

"I think that what you find in a lot of companies is that if there isn’t true support for the decision, it gets undermined along the way. In fact, it may never come to fruition. So on the one hand you’ve made a very quick decision – ‘We’re going to go to China’ – but then you’ve got all kinds of resistance.”

Same goes for business model innovation. The lateral and multi-disciplinary nature of business model innovation projects require the motivation and true buy-in from all parties involved. Top-level support, while necessary, wont be sufficient to succeed.

A must read as to management innovation is Gary Hamel's book "The Future of Management". WL Gore is one of the examples which he explains in-depth. Others are Google, Whole Foods Market and Semco. Good Stuff. Gary Hamel has the merit of being the first "management guru" to raise awareness of this topic at the board level (read the NY Times book review).

Impressively, Gary Hamel, one of the most influentual management thinkers today, didn't just leave it with writing a book. In June this year he gathered 30 leaders in management development, education, consulting, and the CEOs of Whole Foods, Gore, Ideo, Google, and HCL to discuss "the future of management". He mobilized the crème de la crème of management thinking, such as Henry Mintzberg, C.K. Prahalad, Tim Brown, Peter Senge, ... (too many gurus to mention them all). His gathering question was “why can’t we bring as much innovation, adaptation, and engagement to our organizations as we do to our development of products and technologies?”.

Read more about this event on David Sibbet's blog.