Let’s look at one example. Last year we saw how the incredible rise of Netflix suddenly halted. In two years time Netflix managed to boost its stock price value with almost 400%. An amazing figure in economic turbulent times! But then, in July of last year, Netlfix announced a new pricing strategy for its business model. The bundled package of DVD-by-mail and streaming service would be split up in 2 brands (Qwikster & Netflix). This resulted in a price increase of +60% for many of the Netflix subscribers. The backlash that followed the months afterwards lead to a loss of almost 1,000,000 customers and a drop in stock price of 200 dollar. By the end of the year, the operation to redesign their revenue model was canceled (sort of) but the damage had been done. Let’s hope Netflix doesn’t go down the MySpace route.Amazon, Redbox and Apple are not the smallest player to compete with!

Did we miss any relevant cases? I guess Groupon could be added to the list. Kodak as well? Thanks for sharing your ideas!

Imagine a way to centrally manage the way you get and accept quotes from suppliers. Imagine a way for businesses to come to you, rather than you going out individually to each of them. That’s what PickAQuote.com.au tries to address with its online service offering.

I’ve sat down with Marcus Lim, the co-founder of PickAQuote.com.au, based in Sydney Australia. The guys at PickAQuote are building a central on-line marketplace to streamline the supplier quotation process. Their business model is relatively simple:

1. Consumers post their requests on-line for free
2. Competitive quotes come in
3. The consumer picks the best quote available

Revenues come from quotation fees (when a business responds to a job with a formal quote) as well as success fees (when the business is accepted for a job). Customers may also receive some ‘kick-back’ revenue ($10) for each successful referral made, as well as $5 for every job completed.

There is certainly great potential for this organisation to be a successful – the real questions to address are how to achieve critical mass (for both supply and demand), how to leverage economies of scale, as well as how to market an on-line product to a typically off-line activity.

PickAQuote has been actively marketing on national radio channels, and have been mentioned on prominent newspapers in Australia. Given such media coverage, the direction this business is heading is one of many examples of an innovative Aussie start-up aiming to disrupt the status quo. Expect to see more innovative Asia Pacific start-up / business model examples on this blog in the future.

Comparing both donation platforms I’ve got the feeling that Causes.com is leaving money on the table, which is sad of course. Just looking at Kickstarter.com you can see that people get a bigger reward depending on the amount they donate. A very important motivator to jack up the donations! Most projects on Causes.com don’t give anything extra when they donate more.

What could Causes.com do to improve their business model?

Make it personal

Based on our own experience with Kiva I would strongly advice to make a personal connection with the project you’re supporting. To give one example: Kiva.com reported that our loan to Jocelyn in the Philippines helped her in setting up her wine vending and coffee shop. These personal stories make your donation very tangible! But Causes.com can do better than this!

What about game mechanics?

Yesterday Empire Avenue launched EAvCares. Empire Avenue is an experiment on its own. Basically this website is a stock market simulation social network game that allows users to buy and sell shares of people and websites. Ok, that’s a full mouth of buzzwords, sorry about that. (e.g. My stock overview) With EAvCares user can now gain extra points and badges in this game when donating to real world charity projects. An interesting twist to mix both online and offline worlds!

A few months ago Zynga (company behind Farmville et al.) used their gaming platform to encourage players to make in-game donations. All they had to do was make virtual items, sell them in the game and donate this income to the Japan Earthquake Relief campaign. $2.5 million was raised this way. Very smart!

A third and last example in this field is the Walkathon iPhone app. When linked with a pedometer this app can track how many step you take during the day. When you achieve certain goals (e.g. x amount of steps) companies will donate a given amount to a charity event of your choice. You can imagine people will just walk that extra mile to activate an extra donation.

I hope Causes.com can borrow some of the ideas presented in these business models so initiatives like that of Craig can have bigger impact in the end.

picture by Chasing Butterflies

Lesson 1: Always start with the mindset!

There’s no point in starting with business modelling, if people haven’t changed their mindset. A lot of organizations are still very much focused on innovating their product, with the business model being largely unchanged over the last 20-40 years. Don’t end up in a TomTom situation where you kept improving your product, but all of a sudden your product has become obsolete. Start with listing all the assumptions you have about your current business model, and then challenge each one of them.

Lesson 2: Copy/paste from successful business models.

80% of our creative ideas comes from analogy thinking. That’s why it is important to look outside of your industry boundaries, and learn from new business concepts. We looked for example at how Aux Raus has transferred the McDonalds franchise model into the music industry (an old business model in a new context), and how you could copy the mobile phone model to electric cars.

Lesson 3: Innovation projects should be fun and serious at the same time.

If you’re innovation process looks like Gantt charts, idea boxes, and dull meetings, it’s time to shake things up! We spoke about motivating a team when entering a business model innovation project, and using the metaphor of making a movie together. You can read more about it in the top presentation about our innovation process.

Lesson 4: Experiment with business models!

On the Creativity World Forum, Jamie Anderson gave an energetic speech about the pace of new developments in the music sector. Where Madonna changed here looks once every 2 years (the lifecycle of new albums), new star Lady Gaga changes her looks every 2 months (the lifecycle of digital songs). This change in pace is taking place in every sector. That’s why you shouldn’t get stuck in a 2y cycle of traditional business planning, but experiment with a portfolio of business model prototypes. I was impressed by the ecosystem Turkcell has set up with all-kinds of startups in related fields, from mobile gaming to mobile payments, with different business models. That’s the way to go!

I certainly have to thank WeDecide (the new kid in town of innovation management platforms) and Özyeğin Üniversity (Istanbul’s leading university on innovation & entrepreneurship) for hosting us. Btw, on Saturday I met with Erhan Sabay, our new ambassador in Turkey. Keep an eye on him via this blog, as he’ll keep us updated on the latest innovations popping up over there.

With the former palace of Brussels as an inspiring location, we talked about Ponzi-schemes, human traffic, drug carriers, pirates, … and how they set up their business model. Insights into criminal models, it even triggered some journalists. We made it into several newspapers, and Nick was invited to talk about the subject on national television on De Laatste Show (late evening talk show).

Still curious about the examples? Let me give you 3 tactics to talk about with your colleagues over lunch!

• Put time pressure on clients to act
  What’s making Groupon and penny auctions so popular? The fact that people have a certain time to act, otherwise they miss a great deal, is what gives these companies crucial benefits! Think about it, what are ways to increase time limitations? See it as a gamification technique and people will love it!

• Fear or hope as an emotional payment
  Ever heard about chicken pox parties? Parties where mothers bring their kids to in order to get infected by other kids (so that this happens in holidays instead of during school periods). Or chicken pox lolly’s: for sale for only $50. A lot of industries are actually offering their products on the basis of fear or hope, often in an unethical way. Is this happening in your industry as well? It can also be done in a legal way. Do you have fear that your new the glass back of your new iPhone might break? Apple has an insurance product that they bundle with the iPhone sales!

• Better stuff or better service?
  The people of Xalisco Network are not regular heroin dealers, they bring door-to-door delivery, have their own over phone customer service and reward their clients with free heroin if they bring in new addicts. Obviously we don’t agree with this at all, but even there you see business strategies being implemented. Ask yourself: does your company focus on better stuff or a better service?

Interested in more criminal tactics? Let’s have a Black Business Models workshop, get in touch!

Story 1. Black Business Models: Why there are 200M fire weapons in the US.

In the state of Arizona you can carry a gun in public, not hidden, without a permit. Everyone can. This is obviously big business for the whole firearms industry. So where is this coming from? - there are probably different explanations but I was told the following in the corridors of the conference - It originates from the oppression of people before US’ independence, when government rule was imposed on them. The logic following from that: a government could only oppress a whole population if they can enforce it with firepower. That’s why there are currently about 200M firearms in the US, only 2-3M owned by law enforcement forces, all the rest by citizens! Of course the world has changed since then, but the fear of government dictatorship has been translated into a big weapons business, embedded in the constitution. In preparation of our upcoming Black Business Models masterclass, we’ve spoken before about how creating a feeling of fear (Somali Pirates) can drive big business (private security and insurance firms). You see this in a number of industries. Take a critical look at your industry or at services you are buying yourself as a customer, how many are actually based on a (false) feeling of fear, freedom, happiness…? Mexican flue vaccines, anyone? BBM, Black Business Models, Big Business Models?!

Story 2. Try on a fat suit if you sell diet products!

How to understand your customers, really. While everyone is talking about the job-to-be-done, customer insights, the voice of the customer… how many do really understand the people that are buying their products? You don’t really feel that from customer statistics or summaries of ethnographic interviews; those only make you aware of facts or insights. Steven Fahrenholtz, Strategy and Innovation Director at General Mills, brought a good story about how he tries to understand people, taking his innovation team with him in that. When developing new diet products, he went on a diet himself. Quite straightforward, but how many people do it? He would also get his team in a ‘fat suit’ doubling people’s weight, and get them to McDonalds ordering a super-sized meal, talking to people… Some people just broke. That’s something you don’t get out of market studies. In our ideation projects, we use a similar approach: we give the idea team (i.e. The Cast) different characters over a period of 2-3 weeks, including different customer profiles. From that point of view they have to generate new business ideas (see slide 19 of our structured way to create Innovation Blockbusters). Steven’s approach is actually taking that a step further, very inspiring! So, try on your fat suit, sports suit, whatever suit and get out there!

Story 3. Fail Forward, the only way to create an innovative culture.

There’s a lot of talk about failing fast, both in corporates and start-ups, but how many people or organizations are really applying this on the ground. It was inspiring to hear how Tata has a Dare to Try award category. Awarding ideas and projects that fail to encourage people to be bold and innovative, that’s putting it in to practice. Are you failing forward? Do you award OR burn bold ideas that fail?

The conference was very strong on sharing best practices between corporate innovation leaders. I wouldn’t mind some more inspiration next time though. Overall, PDMA’s Annual Conference was good! And the Grand Canyon flight wasn’t bad either. Looking forward to seeing you all at next year’s edition in Orlando, Florida.

Yesterday, we had a great day in the Business Model Innovation Lab. Great organization by Chris Dolan and Matt Benson. There were many insights, but I certainly liked Josh Suskewicz‘s summary of the 3 main traps for business model innovation. Why is Business Model Innovation so hard?

1. Trap 1: Failure to allocate resources. Many organizations see that business model innovation is important for them, but fail at allocating substantial resources to really work on this for a longer period. In this perspective, we agreed that it’s better to allocate 2 people full-time instead of 10 people for 20% of their time. Less people, more dedicated.
2. Trap 2: Business Model Cramming. When the first trap is overcome, many fall into the next one: trying to squeeze everything into new business models, using the the same metrics and logic than the current business. Kodak actually developed the first digital imaging technology, already in 1975. When they launched their first digital camera, they crammed everything in there because it had to match their current business model of high quality camera. This resulted in a 30,000$ device launched in 1990. No surprise they got nowhere with this. New business model projects have to follow their own business logic and metrics.
3. Trap 3: Impatience for growth. If you are impatient for rapid growth, you will not take the time to really develop and learn how a new business model and new markets will work for you. The advice: You have to be patient for growth, impatient for profit.

Board of Innovation ended the lab with an interactive business model session in which innovation directors from Hallmark, Microsoft, Coca-Cola and many more teamed up to come up with new revenue models for a start-up, and pitch them to each other. Great teams and great ideas! I really enjoyed it.

A couple of take-ways from today: I liked Ravi Arora’s talk about innovation at Tata. They have a “Dare to Try”-category within Tata to reward ambitious innovation projects that failed. Brilliant! Another of Ravi’s advices: If you are hit by the WORK (Weekly Overload Recreational Killer) virus, immediately go to the nearest BAR (Biological Antitode Remedy). In the section “buzzword of the conference”, the job-to-be-done seems to winning at this moment for me.

Looking forward to the second half of the conference! ps: follow everything on twitter (#PIM11)

If you are attending the conference, you can of course meet us for our “Designing Business Models that Rock!” session on Monday (1:30-4:30PM) in the Business Model Innovation Lab.

Istanbul, Vienna, Belfast, Brussels or Creativity World Forum?
If Phoenix doesn’t work out for you, we could meet up at one of the following occasions:

• Mission-e-motion workshop: Vienna, Austria, November 13-14
• Creativity World Forum: Hasselt, Belgium, November 16-17
• Istanbul Innovates 2: Istanbul, Turkey, November 20-22
• Black Business Models: Brussels, Belgium, November 24
• Startups Incubation Programme: Belfast, UK, Dec 8-9/Dec 19-20 (tbc)

Looking forward to some interesting conversations in the next month!

Are you looking for amazing new concepts? A structured and inspiring way to do this? Get in touch: philippe@boardofinnovation.com