The term “business model” has gained in relevance during the first decade of this century mainly in response to the newly created dotcom businesses. Whereas there doesn’t seem to be a common understanding of neither the term itself nor its components yet it has developed into a widely used business expression.
Here’s what I identify to be the common denominator in terms of (a) components and (b) differences compared with the even more widely spread term “strategy”:
A business model has to include at least a description of what kind of customer value to create (1), how to do that (value chain architecture – 2) and how to earn a living (revenue model – 3) (compare e.g. Timmers, 1998 ; Magretta, 2002 or Osterwalder, 2004). Many other definitions include several other components as well, some of them even the business’s strategy. When we think of common definitions of strategy, one can find at least two major differences between a strategy and a business model – assuming that there really is a difference between the two and we don’t want to delve into academic terminology debates: A strategy has a dedicated focus on the future (compare e.g. Johnson et al., 2014 “the longterm direction of an organisation”) whereas a business model is a statement of current activities – similar to the distinction of vision and mission statements (I). A strategy explicitly includes the dimension of competition (compare e.g. Grant, 2015 “strategy is about winning”) (II). That’s why two competitors can have the same business model but won’t be able to co-exist with the same strategy in the long run.
The description of a strategy might be more detailed than of a business model but it could be the other way around, too – depending on what we actually define as “the strategy”.
When thinking about “business model innovation” it is hard to define the pivotal point that delineates a business model innovation, i.e. what level of modification of the before mentioned components (customer value, value chain architecture, revenue model) is necessary? One possibility could be to link the definition to the number of components that face innovation (according to BCG (2009) at least two of the six components included in their business model definition need to be changed). Another solution would be to define how big the change of the single components is – admittedly something rather difficult to measure. A simple and manageable approach could be that at least two of the before mentioned components of a business model need to be changed considerably.
When looking at different industries and markets one soon recognises that some are easier to turn around whilst others appear to have fallen asleep waiting in myopia for their final entry into the decline stage. Publishing seems to be such a case. Whereas Amazon and Google have already revolutionised our ways of consuming literature and information – there are only few successful examples of radical change on the production site.
During the recent “Frankfurter Buchmesse“, one of Germany’s most famous bloggers, Sascha Lobo, presented one of his latest projects: Sobooks. The business shall change how we all read books and whilst I was rather sceptical in February – see below – Lobo’s latest cooperation initiative turns the questionable approach into something worth trying: Together with the German airline, Lufthansa, Lobo developed an e-Book platform
with an integration to Lufthansa’s FlyNet which might become the ultimate way for booklovers to enjoy their flight.
I got to know Sobooks whilst visiting the “work in progress” conference in Hamburg last February. There I stumbled upon some promising examples of business model “revolution” whilst joining a panel discussion on “Digital ist anders – der Wandel der Kreativwirtschaft mit der Digitalisierung (Presse und Literatur)” (in English: “digital is different – creative industries facing digitalisation (press and literature)”). On my
way back home to Wiesbaden I realised that each of the speakers had presented a new idea that changes at least one of the elements of the traditional business models in publishing.
1. First to present was Susann Hoffmann founder of EDITION F an online magazine aiming at solving each business women’s conflict which magazine to purchase for reading on a business trip (Cosmopolitan or brandeins). Their online platform (last year in the last days of their crowdfunding round) not only combines the information on latest fashion and business trends but also includes job offers as well as an online shop.
A new customer value for the upcoming generation of self-conscious business women.
2. The same applies to Sobooks (s.a.), a new way of reading books online, presented by Co-Founder Christoph Kappes – internet pioneer, strategist and jack of all trades.
3. Tea Herovic, Business Development Managerin at Friedrich Oetinger in Hamburg, currently responsible for Oetinger34, a crowdsourcing platform for collaborative content creation in turn explained a new value chain architecture for publishing houses. The idea is to let the crowd choose which author(s) and illustrator(s) should join forces to create the next reading experience (apparently a new customer value as well).
4. Wencke Karla Tzanakakis, Managing Director for crossmedia (the collaboration of print and online) for the German magazine Stern, explained how a struggling print media might compensate for the ubiquitous reduction in loyalty (abonnements) and spontaneity (Kiosk purchases) in times of commodity-like news consumption. On the one hand their crossmedia interaction generates new customer value – on the other hand (a sufficient amount of “impression- and click-willing” customers taken for granted) it also offers new sources of revenue (advertising and maybe also big data).
In addition to the before mentioned ideas, the Financial Times recently surprised me with a pretty clever revenue model for their content. I was asked to answer three questions (aiming at measuring customer satisfaction) in order to get two days free access to articles on the FT.com’s website.
Whether or not the above mentioned ideas really do represent business model innovations will partly depend on their success in the market: if customers are either not convinced of the new value created and in turn won’t be willing to pay for it these creative approaches are likely to fail and disappear. But trying, learning and adapting these (let’s name them) new business models should definitely be the superior solution to the widely spread myopia – so: Good luck!
This article has also been published here: https://issuu.com/wirtschaft.fh-mainz/docs/update22_gesamt_final
BCG: Lindgardt, Z. et al. (2009): Business Model
Grant (2015): Contemporary Strategy Analysis.
Johnson, G. et al. (2014): Fundamentals of Strategy.
Magretta, J. (2002): Why Business Models Matter.
Osterwalder, A. (2004): The Business Model Ontology.
Timmers, P. (1998): Business Models for Electronic