business model innovation

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Several companies asked us if they could make use of our 10 building block model to visualise their business concept. Companies like Beebole as well as students used the mapping tool already to communicate their ideas. We are working on a basic online app to sketch business models yourself, but in the meantime you can make use of this free template (download ppt). Just create a new slide, use all the elements to draw any business model you’ve found. Feel free to share it on slideshare or flickr (tag: BCONCEPT) or mail your mapping to info@boardofinnovation.com for extra feedback!

business model innovation

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All our business model examples start from a simple set of 10 building blocks. To give more insight in the way this works, we give a brief overview of the different components. Of course this is a simplified version of what happens in reality, but these examples can form a great inspiration tool when looking for new business concepts and revenue models.

Part 1: The players

A. The company

The first big entity is a company. In most models this will be the actor that offers the product. The company whose business model is designed, will be coloured blue in differentiation with other players and stakeholders.

B. The consumer

The one that receives the product and gives something in return, is the consumer. In B2B models, the client is a company and will therefore be illustrated with the previous company icon. The general company-client relation is the same in both business systems.

Part 2: The flow from company to client

Product

The first, most straightforward offer to clients is an actual product, ranging from basic commodities up to finished goods. A BMW car is one example, but today also digital products can be included.

Service

A first way to upgrade your business model is to offer a service next to the product. BMW in this case will not only sell you a car, but will include maintenance and other services around the product. Of course, a lot of companies offer only services without product.

Experience

The two concepts of product and service are commonly applied throughout our economy. In the last years, several companies have moved a step further by offering an experience to customers. BMW does not sell a car with a service in this case, but a driving experience.

Reputation

Today, the next upgrade to reputation can only be found in a few sectors. In these cases, ‘reputation’ selling can be described as the most essential brand experience. If you take the example of BMW, then you could say that some people don’t see their BMW as a driving experience but as the core values and reputation of the brand as such. Hereby, customers are able to shape their own identity with that of the company. Typically reputation will be placed in the top of Maslow’s hierarchy of needs, which makes this type of transaction extremely valuable to companies.

Part 3: The flow from client to company

Money

The typical currency that clients pay with, is money – which is critical to company’s revenue models. This is in contrast to exchange. The building blocks make a differentiation between two types of money. This first icon represents the normal value of a good, including profit.

Less Money

This second icon represents money as well, but less than the normal amount covering cost and profit of what is offered. Usually this transaction implies that other revenue streams are added to the traditional business model.

Attention

Attention has become an important new currency that clients can pay with. Free business models are often based upon this principle: clients get a product or service for free, but pay with their attention (to 3th party advertisers).

Exposure

Active exposure is the next step in the evolution of currency. People are not only offering their own attention, but also that of their peers in their social environment. For some businesses the spreading of their ideas and brand values becomes more important than the immediate return in money. Of course, companies can’t just rely on active exposure,  so their business model should include more players and other transactions. Many start-ups and even big web 2.0 companies are still struggling with this. There is a lot of exposure and value offered to clients, but there is no sustainable business model to capture that value in revenues and profit.

Conclusion

These 10 building blocks offer a new way of designing and innovating business models. Although a lot of details can’t be covered with this set, it is the power of  using generic building blocks that enables you to visually map models, compare different businesses, and identify underlying trends. When you have questions like ‘how to apply the eBay business model in my industry’ or ‘how to innovate’, you can start very practically by taking successful new business models and transfer their general principles into your industry. Specific cases will illustrate what the innovation is in the business model of new start-ups, how you can make the transfer from one model to another, and which key success factors should be taken into account.

business model innovation

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One of the first business models that we will add to our business model catalog will be that related to the ‘free economy’. The concept of ‘free’ has already disrupted a number of industries, and no doubt other industries will follow soon. The book industry will probably be one of those, as youngsters are already used to read texts on small screens. In addition, we see the uprise of many E-readers like Kindl. The mixture of both trends, backed by large organisations like Amazon, will create momentum and disrupt the traditional publisher based model.

Discussions on the free business model

How the publishing sector will cope with the upcoming change is difficult to tell, but we can look at other successful examples seen in the last years. The Free! Summit with Chris Anderson will be held in a few weeks, and will go deeper into this topic. Some of the following key questions have already started the discussion:

• How is free changing consumer expectations, and vice versa?
• How can free be part of a sustainble business model?
• When the price is zero, what else do customers value?
• Is free a threat, or a boon, to intellectual property?
• Are there other ways free pays off?
• What about the social benefits?
• Where is free headed to?

Harold from Stuff Channel made the following statement:

Free is the most misleading business concept in the world, because it is predicated on giving something the appearance of value by actively devaluing everything else around it.

Problems? Now many bands give away free music so that people will attend their (still profitable) music events. What happens when some bands start playing free concerts just to sell T-shirts? Will they devalue the concert experience enough to lower the value for everyone? What happens when a band gives away T-shirts and concerts just for a share of the concession stands? It doesn’t end because the concepts of “free” continue to encourage end users to think of things as having no true value.

Free is never free, but it expects a whole bunch of people to work for nothing. Web2.0 is already leaving the building, hopefully free will go with it.

The ongoing discussion on Techdirt as a response to Harold gives an indication of how this business innovation will continue to shake several industries. Whether the outcome will be positive or negative, is something only the future will tell.

business model innovation

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“There is a growing focus on jobs in innovation and on service, away from manufacturing”, says economist Dr. Mike Walden. While his statement underpins the overall shift from products to services (and experiences), it also refers to the growing number of jobs dedicated to innovation, usually but not always with “innovation” in the new job titles.

Most companies still allocate their innovation responsibilities to people in existing functions within the Marketing, Engineering or R&D department. Without a true innovative mindset or appropriate metrics in place, it will often stay a ‘nice-to-have’ next to short term deadlines and targets. Leading organisations value that innovation transcends functional boundaries, and have created new roles from Junior Innovation Managers up to Chief Innovation Officers. Especially when you consider business model innovation, innovation is much more than developing new products or services. It is about changing the entire way of thinking and operating as an organisation, as in from analog to digital photography, or from paid to free press. It has proven very difficult to drive these radical changes from within existing functional boundaries, which further strengthes the need for Chief Innovation Officers, Vice Presidents of Innovation, Chief Strategy Officers… or innovation councils.

With a growing number of jobs in innovation, we had the idea of setting up an Innovation Job Board. The job board filters and features jobs with clear innovation responsibilities, and gives employers the opportunity to post their job openings to a highly qualified audience of innovation professionals. We hope you enjoy it and welcome your comments!

business model innovation

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Since Jeff Howe coined the term “Crowdsourcing” in 2006, there has been a lot of buzz about the subject and its promising potential. Despite many examples of crowdsourcing projects – some more successful than others – I have found it very difficult though to apply the concept in my day to day business development activities.

The concept as such is rather straight forward: When you crowdsource a task, you take a job traditionally performed by an employee or contractor, and outsource it to an undefined, generally large group of people in the form of an open call. Leading initiatives have applied crowdsourcing to tasks as solving technology problems, designing new logos, developing (software) products, contributing videos, finding gold, and even predicting the future.

With all these success stories, of course you want to apply crowdsourcing yourself or at least consider it. To start with, I have found it important to understand the difference between:

1. Start-ups using crowdsourcing as their core business model: f.e. YouTube, Threadless…
2. Existing organisations applying crowdsourcing to a specific job: f.e. P&G posting R&D challenges on Innocentive or Goldcorp crowdsourcing the search for gold resources.

So the first step is to define the context. Do you want to use crowdsourcing as a business model for a start-up or new business unit? Or do you want to review specific tasks within an existing organisation (marketing, distribution, R&D challenges…), and redefine the optimal way of performing the task: inhouse, partnership, outsourced, or by crowdsourcing?