Barry Horwitz shares a post to help you define and improve your business model.
According to Mark Johnson, co-founder of Innosight, a business model is simply this: “The way a business creates and delivers value for a customer while also capturing value for itself in a repeatable way.” It’s a straightforward concept, but important enough that academics and consultants alike talk about it frequently.
For example, in my work with entrepreneurs — both established and “would-be” (i.e., students at the Questrom School of Business at Boston University) — I often leverage something called the “Business Model Canvas,” created by training firm Strategyzer. This framework is useful in ensuring that all the relevant elements and their interconnections are considered before going to market.
The interconnections are particularly critical, since changes in one can wreak havoc on the rest.
Consider digital music. Apple’s iTunes disrupted the music industry by enabling downloads of individual songs at only 99c each, upending a once fabulously profitable record industry and forever changing how music was purchased. But it wasn’t long after that when the next tech innovation arrived — cellular broadband — which allowed for music streaming (via Spotify and others), changing the game once again, as music ownership was eclipsed by an unlimited library and a monthly subscription.
Note that renting rather than owning is not, in itself, new; people have had the choice of leasing cars instead of buying them for decades, as one example. But the application of the “rent rather than own” business model to music, was… enough to disrupt an entire industry.
Key points include:
- Customer segmentation
- Pricing and cost
- Changing the business model
Read the full article, What’s Your Business Model, on HorwitzandCo.com.
Robbie Kellman Baxter shares a tale from the trenches of subscription-based business success stories. In this episode, how a subscription business can become successful by focusing on subscriber outcomes.
Robbie Baxter: How did you come to run Instant Ink? Looking back, would you say it was inevitable? Or are you surprised at where you’ve ended up?
Anthony Napolitano: Well, I’m thrilled to where I ended up. I can’t say it was fully planned and chartered for sure. I think each of us have sometimes at our career we make a specific choice and sometimes luck just kind of falls upon you and you look back at are grateful that it happened. I think most of my career I’ve spent in what we call startup businesses inside of HP. So these are new businesses that we’re trying to grow and create. And it just so happened to be that before I joined Instant Ink, I was in another startup business inside of HP, which is quite a unique experience, is that I was there from day one until we actually shut down the business. So I was in that business for 12 years. And while it didn’t succeed in kind of a commercial sense, I learned a lot from that business. But because I had that experience, Instant Ink at the time was really only a few hundred thousand customers. And so I had this reputation of being able to grow new businesses inside of HP and I was given the opportunity to come into Instant Ink. Now we have over seven million customers worldwide.
Robbie Baxter: How many customers was that?
Anthony Napolitano: Seven million.
Robbie Baxter: Three hundred thousand to seven million.
Anthony Napolitano: That’s right. In the last five plus years.
Robbie Baxter: Wow. Now, it’s interesting to me that you’re you’re really an entrepreneur, and yet you’ve spent most of your career inside a big established company. What has that been like for you?
Key points covered include:
- Leading trend transformations
- Being the disruptor
- Cohort analysis
Read the full article or listen to the podcast, Reinventing the Razor & Razorblades Model by Focusing on Subscriber Outcomes with Anthony Napolitano of HP’s Instant Ink, on LinkedIn.
Robbie Kellman Baxter shares her latest article with expert insights on the subscription-based business model. This week, she discusses the disruption to the manufacturing industry and three mindset shifts leaders will need to make during the coming year.
Whether you’re a B2B manufacturer or a supplier to the industry, it’s time to rethink your entire relationship with your customers.
Companies like Dollar Shave Club and Birch Box let consumers enjoy cost savings, convenience and the fun discovery. And Peloton offers video subscriptions so purchasers of their indoor cycling bikes can get more out of their fitness regimen.
Now, B2B manufacturing and the companies who supply the manufacturers are starting to get on the act. The implications are huge. Think of the potential if manufacturers were ‘members’ who could subscribe to a factory line instead of owning it outright. I’m talking about the makers of heavy equipment like jet engines, cranes, combines and, of course, automobiles, but also entrepreneurs designing new electronics products.
Of course, subscription isn’t a totally new concept for the heavy equipment world. Many businesses already prefer to “subscribe” to cranes or trucks rather than bearing the burdens and responsibilities of a major capital expense. But what if you’re a supplier to a manufacturer, or a manufacturer whose primary “customer” is the distributor, not the end-user? If you want to see what the future holds, just look at the “Software as Service” (SaaS) revolution.
Key points include:
- Starting with the service, not the machine
- Customer focused strategies
- How to build a Forever Transaction
Read the full article, The Subscription Model is Set to Disrupt Manufacturing. Here are 3 Mindset Shifts Leaders Will Need to Make, on LinkedIn.
Using the company Hoowaki as an example, David Summa shares an article that illustrates how business model innovations can drive new revenue streams.
In my last post, I wrote about business model innovations and how it can drive new revenue streams, especially in times of changing economic and cultural landscapes or declining performance. To help illustrate this point, I’d like to talk about a recent success with Hoowaki.
Hoowaki is a materials science company in South Carolina that for years has specialized in manipulating surface friction. They create novel surfaces that fall anywhere on the spectrum of slippery to grippy. Their business model generated revenue through paid R&D, followed by a promise of royalties once a product containing their technology reached market. However, many of their inventions, though remarkably better than what currently existed in the market, were not incorporated into a customer’s product. Only later did Hoowaki learn that they needed to help customers stand-up a supply chain in order to make their product, which may seem obvious today, but at the time wasn’t expected, nor did customers communicate this. As such, only half of the Hoowaki business model proved profitable.
In 2019, BMI began working with Ralph Hulseman and Hoowaki to upgrade its business model. We mined past work and identified application categories, mapped them on a value per square meter of material (high to low) and square meters per year (high to low). What emerged was an excellent roadmap for scaleup.
Key points in this article include:
- Incorporating inventions into a customer product
- Upgrading Hoowaki’s business model
- The success of flipping the business model
Read the full article, The Swab Opportunity: An Example of Business Model Innovation, on LinkedIn.
Supriya Prakash Sen shares an article on the issue of consumerism and waste generation within the current capitalist-driven economy; the article also outlines steps that can be taken to improve sustainability.
Looking at the stock market’s valuation of some of the world’s top brands- (see the below graphic from visualcapitalist.com) already, there is a distinct valuation difference between those brands that are promoting dematerialized (virtual) products and services vis a vis those with physical products. Even for the latter category we believe (and hope) that there will ultimately be a premium for those who curb their propensity for populating the planet with overmuch packaging and waste generation. Those brands that know the true meaning of sustainability and are able to add true value at a price that the consumer can afford, while still accurately reflecting the price of their production (and waste generation), will be the winners of tomorrow. As the world wakes up to the true cost of the industrial model- knowing that you can throw away but there is no ‘away’.
Key points in this article include:
Read the full article, A New Model for Consumerism, on LinkedIn.
With COVID-19 still plaguing the globe and the threat of a second wave looming, Kaihan Krippendorff has customized a strategy to address, prepare for, and build a strategy for the future.
We are dealing with unprecedented change invoked by the COVID-19 pandemic. What we need more than ever is a sense of hope. So, we’ve taken The Outthinker Process – a strategic process that helps business leaders step outside of conventional thinking to redesign their business models and strategies – and reformed it specifically for what we’re going through right now.
We distilled insights and advice from personal interviews with some of today’s foremost strategic thought leaders – Renee Mauborgne, Rita McGrath, Efosa Ojomo, Bharat Anand, Alex Osterwalder, and Scott Anthony – into a succinct set of steps you can follow to make sense of the future then design a strategy to help your business thrive through the crisis.
We have found that by following four steps, you can quickly apply emerging strategic concepts to your business strategy, rethink your business model, and redesign your business to be fit for the future. We have customized these specifically for the COVID-19 crisis. The entire process should take 3.5 hours to complete. You can do it in one sitting or spread over several thinking sessions.
The strategic steps identified in this article are:
- Imagine: Think through potential future scenarios.
- Dissect: Break down your business model to assess which parts you may want to change.
- Expand: Expand your strategic options by ideating potential strategies.
- Analyze: Assess and prioritize your options.
Read the full article, Four Steps to Outthink COVID, on Kaihan.net.
Paul Millerd’s latest newsletter explores four questions surrounding the state of work, schools, and creativity and shares unexpected thoughts on the future of work.
The US has lost 38 million jobs. Some of those may come back. Many will not. Going into 2021, the US will likely have the highest unemployment rate in the last 100 years.
I’ve written quite a bit about the fragile labor economy and believe the gaps I’ve written about have become more visible than ever.
Here are the questions I’m thinking about for the next year.
#1. What happens when work doesn’t seem a necessary part of our lives?
In Max Weber’s famous treatise on Capitalism published in the 1800’s, he argued that a central element that enabled capitalism to emerge and succeed starting in the 1500s was the fact that so many people eventually developed a “spirit” for capitalism.
Many people incorrectly equate this spirit as greed, but as Weber points out, greed is timeless and universal not a product of capitalism. It has been seen at all times in history and in all types of economic systems. Instead Weber suggests that capitalism might have become so effective because of its ability to restrain greed:
‘Capitalism may even be identical with the restraint, or at least a rational tempering, of this irrational impulse.’
By channeling this natural human urge into work, it can theoretically benefit not only the greedy person, but society at large.
What then motivates work?
Included in this article:
- How does unstable work relate to how people think about the future?
- How will the cross-generation disconnect be resolved?
- What is the role of making stuff and our relationship to optimism and the future?
Read the full article, Four Work Questions, Alternative Path Stories, Facebook’s Deeper Game & Creativity, on the Boundless website.
Shane Heywood takes a look at how the Direct to Consumer business model could have meaningful implications for social enterprises.
My earliest shaving experience was around the age of 13. After 10 minutes, reeling from irritation everywhere, and minimal hair in the sink, I also felt slightly cheated by how much I had spent on the razor.
Apparently, that feeling has helped to lead to a $1 Bn USD deal.
Across some consumer-facing industries, from shaving cream to mattresses to prescription glasses, a direct to consumer – plus (DTC+) model is leaving an indelible imprint in the Consumer Goods industry, delighting consumers and disappointing long-standing players with equal effect.
The Dollar Shaving Club, which provides members with razors and other personal care products, is one of the more prominent firms showing the DTC model; however Casper and Eve mattresses are other examples, and Warby Parker, providing glasses.
Points covered in this article include:
- The Direct to Consumer (DTC) business model
- DTC and Social impact
Read the full article, Dollar Shaving Club and Social Enterprises: Can one learn from the other?, on Shane’s website.
Mike Cox answers a question that is close to the heart of every business owner and entrepreneur who may be considering bringing new people into the business, “How much equity should I give a new hire.”
This question greys the hair of every business owner and entrepreneur. After all owners bear the burden of risk regardless of how they answer that question and the more that they choose to let go of equity, the less they feel like an owner and the more they feel like any other executive -except that they incurred a risk others didn’t.
While holding equity is fundamental to being a business owner, the distribution of equity from owners to employees is not fundamental and happens for a wide variety of reasons – some justified and others misguided. And while few employees would ever shun being given equity, their rationale for and level of interest in equity varies for many reasons.
Points covered in this article include:
- Equity distribution, the tool of last resort
- The appeal of equity to employees
- Alignment of agendas
Read the full article, Don’t Give Equity away too Freely, on the Cox Innovations website.
Luca Ottinetti’s company blog shares case studies that reveal how Intel and SpaceX successfully launched new products, and what went wrong with Nokia and Swissair’s business model innovations.
Entering a new market with new products that target new customers requires a new business model. It is a powerful strategic initiative that changes the rules of competition. It also represents a challenge with odds of success at roughly 30%, but ultimately – when done right – it rewards winners with huge returns.
Managers need to know what they’re in for if they decide to pursue this path of business growth. The challenge in entering a new market through a successful business model innovation (BMI) consists of getting two elements right:
(1) the pursuit of attractive market opportunities, and
(2) ownership of the strategic control points in the industry to protect profit streams.
We look at cases of success and failure by companies that have entered new markets with new business model designs to illustrate the determinants of success.
Included in this article:
- Two case studies on successful business model innovation
- Two case studies on failed business model innovation
Read the full article, Market Entry through New Business Model Design, on the Great Prairie Group website.
Subscription businesses were a big deal in 2019, so what’s the forecast for 2020? Robbie Kellman Baxter shares her expertise on what lies ahead.
I’m no fortune teller, but something about the beginning of a new year and a new decade makes me want to start spouting predictions. Actually, this isn’t the first time I have taken a crack at predictions. The final chapter of my new book THE FOREVER TRANSACTION is all about the future of subscription and membership models too.
Here’s what I think will happen.
In this post, topics covered include:
- There will be a right-sizing of the “Subscription Box” industry.
- Subscription “Managers” Will be Everywhere.
- Subscription CMOs will swing back toward strategy and away from “growth hacking”.
- Consumers will start subscribing to the thing itself, not just services and boxes.
- Big Companies will try to buy their way into the Membership Economy through Acquisition.
- Healthcare will become increasingly consumer-centric, which will lead to more forever transactions.
Read the full article, Crystal Ball: The World of Subscriptions in 2020, on LinkedIn.
Robbie Baxter explains why companies need to prioritize their mission over their products to take advantage of new technologies and services and build a new kind of relationship with today’s–and tomorrow’s–members.
As association leaders, many of you are Membership Pioneers. Membership is something you probably have been thinking about for years. But in the last 10 years, membership has reinvented nearly every industry. Companies like LinkedIn, Amazon and Salesforce have created forever transactions of their own with their customers by using many of the tactics that are core to the deep relationships trade groups, professional societies and other not-for-profit associations have been building for decades.
But they’re using new tactics–streaming content, frictionless checkout, recommendation engines, artificial intelligence–to create dramatically improved experiences. As a result, consumer expectations about what membership means have changed. And the drivers of this new perception are not coming from other associations, they’re coming from Silicon Valley tech.
Maybe this is a good thing though. In times of great change, there are big winners, and big losers.
So what can your organization do to be one of the winners?
Points covered include:
-Product market fit
-Taking advantage of new technologies and services
-Prioritizing your mission over your products
Read the full article, Memberships Are Changing and What it Means for Your Association, on LinkedIn.