Wednesday, February 29, 2012

Live from FEI EMEA: Business Models that Separate Leading Companies from Followers

Alexander Osterwalder, Author, Expert in Business Model Innovation, asked himself the question in the past: Could there be a any shared language in order to create business models?

Everybody uses the same term business model, but once you dig deeper you realize that everybody uses a different definition. This has been demonstrated by interacting with the audience.

Therefore Alexander Osterwalder developed the Business Model Canvas as visual answer, which consists of 9 Key Building blocks, namely: Key Partners, Key Activities, Key Resources, Value Propositions, Customer Relationships, Channels, Customer Segments, Cost Structure, Revenue Streams.
Nespresso is an example, who sell coffee machines via retailers, which can only be used with their specific coffee pads later on and which they have protected with their own patents. Afterwards you can buy the pads via their own sales channels. Today they transfer their strategy to baby products and tea. While Nespresso is a very a successful company nowadays, they have almost failed in 1987 due to a wrong business model with the same product.
The elements of the business model fits all on one page, a copy has been distributed to every participant of the conference. Within 8 minutes the participants had the chance to give it a try reflecting their own situation. Two rules were given before: Write elements on post-its, never use the template directly template; don’t make listings on each post-it.
Regarding the Strategy there can be found different levels-
Level 0 – a strategy like a parcel, you don’t know what’s inside.
Level 1 - Beginners, who treat a strategy like a checklist
Level 2 - The Masters of Business Model Innovation, e.g. Nespresso, Nintendo; all elements fit together.
Level 3 - The Invincibles, e.g. Amazon, allowing also competitors  to sell books, now selling infrastructure ; Apple, who disrupted themselves to create entirely new business models.

Existing vs. new business models- you can do incremental innovation to improve the business models while at the same time still earning money. Or you can come up with a new business model- what you really need to do is experimentation instead of writing business plans and planning budgets. In the web people are asked about products that don’t even exist and they provide as potential customers immediate feedback. But in big companies usually the space doesn’t exit to do both, incremental and disruptive change
About the Author:

Frauke Lohr is running her own consulting business named Comsciencia, targeting customers from industry, academia as well as politics with special focus on innovation topics. She is currently attending the 6th annual Front End of Innovation EMEA in Z├╝rich, Switzerland on February 27-29, 2012, and covering the event live via the FEI Blog and Twitter.

No comments:

Clicky Web Analytics