How business model innovation changes the game

Are your customers buying your stuff the regular way, by the hour or by volume? If your offering has a limited added value that might be a good way of charging based on cost. Charging based on value is of course a much better model for everyone, both you and your customers. This is sometimes called business model innovation when you switch from charging based on cost to charging on value. In a recent IBM CEO study more than 80% said business model innovation was a top priority during 2009.

As you can imagine its easier said than done. Not many companies changes their business model until they're forced by competition or customers. Look at the music industry and torrents ...

Today a small company in Gothenburg, Sweden, won the second place in Venture Cup 2009 called AdFreight. Their idea is simple yet changes the game for internet shopping. They basically sells the space on the parcels to advertizers. When you receive the parcel there is custom ads printed automatically on it. Now freight can be free simplifying both internet shoping and enabling efficient advertising. Not just by getting customer cycles, but more the goodwill you get when paying for the freight. A completely new experience where you as a customer gets something of real value when getting exposed to advertisements.

So what is new in this you might ask? Well, it is a combination of a new advertising model where a third party picks up the tab and for internet based businesses to sell the freight space. For advertisers it enables them to get undisturbed time with the customer where he or she is devoted to your message while opening the expected package.

A true win-win building goodwill for advertisers and enabling internet shoping to truly differenciate itself by adding an additional value that in-store shoping will have trouble copying.

Släpp innovationen loss, det är vår! – Hur SOA möjliggör lättrörligt införande av innovationer

I dessa tider av aktiekurser som smälter som snö och företag som drar i handbromsen finns det en sak som är viktigare än någonsin tidigare, innovation. I havet av snöslask och lera reser sig de envisaste snödropparna som trotsar kyla, väder och vind och likt glänsande renaste pärlemor sträcker sig mot solen. Likt dessa kylans trotsare ger innovation organisationen bränsle att ta sig vidare och möta kundernas behov. Det är dags för oss alla att stå upp och transformera våra team, nätverk och organisationer. Det våras för innovationen! Låt innovation bli din heliga graal och vägvisare mot ljusare tider.

Genom globaliseringen har tillgången på kunskap, resurser och en vertikalisering av värdekedjor drastiskt sänkt tröskeln för att gå in på en marknad sedan början av 90-talet. I och med den pågående lågkonjunkturen finns det ett stort överskott på tillverknings- och transportkapacitet i världen. Hur skall då en organisation särskilja sig från mängden och samtidigt erbjuda ett högre värde till marknaden?

I en studie som IBM (www.ibm.com/enterpriseofthefuture) genomförde med VD:ar sade sig två tredjedelar fokusera på affärsmodellsinnovation för att ta sig upp i värdekedjan. Ökat värde för alla parter nås genom att erbjuda en kombination av affärsmodell och nya tjänster och produkter. Kännetecknen för innovativa organisationer är att de låter affärsmodellen driva förändringen, har strategiska samarbeten utefter hela värdekedjan, använder teknologi för att skapa förändring, integrerar IT i hela organisationen och involverar kunden genom innovationsprocessen. Utmaningarna för en organisation som satsar på affärsmodellsinnovation är inte främst att komma på nya sätt att göra affärer utan hur man skall integrera modellen med sina existerande affärer, processer och samarbeten med partners, leverantörer och kunder.

Det finns som tur är metoder att arbeta med för att fokusera på det stöd som ger störst affärsvärde och som ger en strategisk lättrörlighet. Detta för att kunna möta och omfamna nya möjligheter som affärsmodellsinnovation ger. På så sätt underlättas integration med existerande processer och affärer internt och samarbeten med partners, leverantörer och kunder.

Verksamhetsarkitektur eller Enterprise Architecture, EA, är metoden som möjliggör för en organisation att identifiera, prioritera och, kanske viktigast av allt, att kommunicera de digitala processer som bäst stödjer affärsvisionen. EA skapar en plattform för exekvering som öppnar upp och prioriterar de investeringar i IT stöd som ger störst strategisk värde. Genom att titta på var organisationen befinner sig idag, det IT stöd som finns tillgängligt och vart man är på väg skapas ett beslutsunderlag för hur man tar sig till önskat läge med störst affärsvärde. Strategic agility handlar om att lyssna till behoven, genomföra strategiska förändringar i tid och att fokusera på de IT investeringar som ger värde. I Strategic agility ingår förmågan att samtidigt hantera:
• Resource Fluidity – Förmågan att snabbt sätta in resurser där behovet finns
• Leadership Unity – Förmågan att fatta kollektiva beslut på kort tid
• Strategic Acuity – Förmågan att se och rama in möjligheter på ett nytänkande sätt

Service Oriented Architecture, SOA, är nyckeln till att realisera en verksamhetsarkitektur för att tillvarata nya affärsmodeller genom ett fokusera på arkitektur och struktur framför teknik. SOA möjliggör inte bara affärsmodellsinnovation genom att flexibelt och med hög grad av återanvändning integrera de nya affärsmodellerna och processerna i den existerande verksamheten. SOA öppnar också upp organisationens interna processer och informationskällor som möjliggör fördjupat samarbete med partners, leverantörer och kunder. En SOA baserad arkitektur tillhandahåller ett väldefinierat gränssnitt som ger en sammanhängande informations- och säkerhetsarkitektur, spårbarhet och kontroll.

Med fokus på Enterprise Architecture och SOA skapar vi en plattform för flexibla affärer och processer genom att prioritera de värdefullaste IT investeringarna. Vi kan i det nuvarande kyliga klimatet blomma ut som pärlemorglänsande snödroppar och ta nästa steg mot affärsmodellsinnovation, samarbete och ökat värde för oss, våra partners och inte minst våra kunder.

När skall du ge dig ut på sökandet efter just din innovations-graal?

LinkedIn - good that went better and could go through the roof

I have to admit that I'm a LinkedIn junkie. I use it throughout the day, reading about what people are doing, thinking and most important of all, who they connect to. Whenever I meet a person or hear about someone I check them out on LinkedIn. If needed I ask someone in my network that knows this person to put in a word or two for me before I make contact.

The latest tool I started to use was the TripIt application that lets me see who is close in a city I'm visiting and announcing to my network where I'm heading in the future to simplify contact.

Here's my humble suggestions for improvements to the great LinkedIn team:

• My greatest pain right now is how to keep my CV updated in the corporate repository and the various sites on the web.
• Why don't LinkedIn offer a closed private space for employees to store their profiles? 
• One could select which data would be private and which would be available through the public LinkedIn profile.
• Searches returns hits in the public LinkedIn network plus internal resources
• Staffing Managers and recruiters could search on Linked public + private and find resources inside and outside of the company. To connect with people outside the company they just have to contact the person knowing the searched for person
• Integration with corporate HR and recuitment systems would have to be done through a Web services API or similar.
• Thus I only have to maintain my CV at one place, what a world that would be.
• Based on a subscription fee LinkedIn would get more revenue and users.
• For companies this would lower their system costs (close down one system), utilize already existing networks of their employees, simplify access to brain power and use true cloud services.

How can Capgemini's Technivision support Innovation and Competetivness

In this post I will discuss two HBR articles from an Enterprise Architecture point-of-view and possible usages of Capgemini's Technovision from the conclusions made in the articles.

“Teaming Up to Crack Innovation and Enterprise Integration” – James Cash, Michael Earl and Robert Morison, HBR November 2008.

Innovation and Integration are two compelling sources for growth within organizations. Innovation is the process of creating new products and services that delivers a measurable value for customers including new generations of products and more importantly conceiving new business processes and methods. Integration is making disparate parts of the organization work better together and identifying opportunities for cross-functional improvements and collaboration that are only visible when you look across functions.

The article discusses how large corporations can move from a situation where IT is just a catalyst of business innovation and cross-functional integration to systematically leveraging technology. In a study of 24 US and European businesses it was revealed a method for systematically approaching innovation and integration efforts coordinating theses two critical processes. Through a distributed innovation group (DIG) that combines internal efforts with the best of external technology creating new business variations working across boundaries and organizations. An enterprise integration group (EIG) folds yesterdays new variations into the operating model of the enterprise aligning with and extending the platform for execution in use. The two groups works together enabling better identification, coordination and prioritization of the most promising projects as well as spreading technology, tools and best practices across the enterprise.

Through the article I learned a method where one can combine innovation and technology nicely to spur new innovations and at the same time plan, structure and integrate those new variations into the existing platform for execution possibly extending it if necessary. In Capgemini our Technovision serves as a great example in how technology can be used to inspire and drive innovation at ourselves and our customers. Through the article you will also gain new methods and approaches how to integrate that innovation in a systematic way driving cost-optimized execution platforms while fostering and driving innovation which in some organizations can be viewed as opposing ideas. Innovation injects novelty and variety; Integration battles against fragmentation. A company pursuing growth must excel at both.

“Investing in the IT That Makes a Competitive Difference” – Andrew MacAfee and Erik Brynjolfsson, HBR July-August 2008.

The authors have studied all publicly traded US companies in today’s economy from the 1960’s through 2005. They looked at relevant performance indicators and found some striking patterns. The competitive dynamics have changed dramatically from the mid 90’s about at the same time as IT investments sharply increased and the use of internet grew. This change is visible in the number of new companies that grow and the speed with which they grow. The difference between leaders and laggards have also increased showing the importance of being market leader in an industry. This has previously been mostly visible in markets for digitized products like music or software. Now IT is accelerating this change in the traditional industries as well. Why? It is not because more products are becoming digitized, but because more processes are. Through digitized processes an innovator with a better way of doing things can scale things up with unprecedented speed and dominating an industry.

In the article you will get a more thorough background to the change and how technology is linked to the increased levels of competition. You will get the tools and rationale on how to realize digitized business processes. Deploying a platform for execution, utilize the IT-enabled opportunities for innovation (see previous article on the relationship between Innovation and Integration) and finally propagate the innovation through the entire organization – top down or bottom up using collaboration and Web 2.0 tools. Capgemini Technovision with focus both on collaboration and interaction as well as digitized processes based on SOA principles enables automated and configurable business processes through BPM tools. It’s not easy – success is not guaranteed – but if you do you can expect outsize rewards – at least until someone else comes along and propagates business innovation that’s even better.

The Customer Journey in the Land of Free

Have you ever been thinking of how you also can twist your offerings into a free lunch where the wardrobe funds the meal and profits comes from the additional shoe shining service provided during dessert? In this post I will discuss the Customer Journey in the land of the Free. Where the drinks are on the house and the peanuts are on the guy in the bar, make sure you are ready to transform your own business models. Let's start!




There has been a lot of talk about things going free. Numerous attempts over the last couple of years have been trying to find ways of bringing out free products or services. For example Ryan Air have a clear goal of offering free flight service within a near future. Other examples are when operators are offering triple play services where one of the components comes for free if you sign up for all or for an extended contract time. Apple's iPod and iPhone provides an example where an integrated solution consisting of hardware, software and service makes a complete non-separable unit where the low-margin music service is sponsored by the high margin iPod and iPhone. Here Apple is actually doing the opposite - it acts as the ticket and entrance to the party with a hefty price opening the scene giving access to a dream of always available music and video for a favorable price. The value being a working playground of cheap music always available packaged in a must-have design. With iPhone you get always connected where you can interact with the world and install any application of your choice.


 

The idea of giving something away for free is of course not to out-compete Santa Claus, rather to sell more of something else, like periodic recurring subscriptions, shaving foam, hotel night, what-have-you. The organization offering the free service is trying to switch from something that is viewed as expensive in the eyes of the customer to something that is perceived as cheaper and that has a higher margin. Another reason could be to offer something for free that is needed in order to do the for-pay activity where you get the money back. A flight ticket for free increases the need for hotels, airport transportation, etc. A free mobile phone drives traffic and monthly fees.

 

Anyway, what I planned to discuss in this post is the value of a customer and how that can affect the entire customer journey. Inspiration is taken from many sources, one being Detective Marketing and the other an article in November's issue of Harvard Business Review titled "What Is a Free Customer Worth?". In the examples above organizations are giving things away for free in the hope of making up the loss later in the customer journey. In some cases they have full control of the customer like Ryan Air where they can see during the ordering process how much additional services they are buying. In other cases the business case is built upon statistics on customer behavior and how much they usually spend during the entire journey. In some cases a free customer is made good from how much other customers spend, in this case it is totally unknown from moment of attraction how much this customer is worth.

 

How will you then spend on attracting this customer? You have to consider direct and indirect network effects on the behavior of your others customers, the ones actually paying for your free customer. When designing  such a model there are several areas to relate to and address. These are:

1. When and how much for attracting free customers?
2. How much is such an enterprise worth consisting of free customers?
3. How should the organization be set-up to facilitate attraction of free customers?

 

Through-out the customer journey you have to see the effects the free customer have on your entire base of both other free customers and paying customers. How many other free customers will one more free customer attract? And more importantly, how many new paying customers will it attract? This is crucial to get right, since getting this wrong might jeopardize the entire business.

 

Setting up a compensation model that takes both free and paying customers into account and ensuring that the different departments that handle the different types of customers work well together avoiding sub-optimizing is an important first step.

Then setting up a good pricing strategy fostering a good balance between initial customer attraction and early revenue and the positive network effects of attracting many paying customers. Skimming strategy with high early price to milk the early adopters, Constant strategy with a constant price over time and Penetration strategy with initial low prices to attract many customers and then raising price to increase revenue.

Focus on the value for the free customers you try to attract. Why should they become a customer of yours? Even if they don't transform into a paying customer, what is their goal and value of continuing being a non-paying customer?

How will the entire portfolio of free and paying customers be valued by the market? By making the actual network of customers and their stages in the customer journey clear and well defined it is much easier making the case for Wall-street on what the company is actually worth. Knowing where you are and where you are going simplifies communication internally and externally.

 

To summarize the above: Free customers can provide a lot of value whether they are supposed to pay later in the journey themselves or attracting other paying customers. The key is to get the model right including direct and indirect customer networks and the compensation and organizational issues serving paying and free customers. By having a clear view on where you are and what you want to achieve it is much easier getting the right pricing strategy and valuation model in place. Good luck with your customer strategy and attraction model. 

Reflections on 2009 and Beyond

I’m writing these lines from a winter cold Lund, Sweden, where the snow and frost is holding its grip on everything from beautiful trees shaped in diamond-like dresses to frosty car-windows forcing me to freeze my hands-off while getting ready for a ride. Sipping on a cup of warm relaxing green tea while watching the fire magically turn oak and spruce into black carbonized remainings is soothing for once soul.

It is at moments like this you start to summarize the past year and plan the coming year’s opportunities. 

What will 2009 bring to us all? Based on my conversations with my customers I have the following focus:

• RFID and Near Field Communication
  

o   Supply chain and logistics within all kinds of industries are seeing an ever increased pressure to cut costs, stream-line inventories and improve visibility. Using RFID technologies will increasingly achieve all of this and more. Now it is ready for more general prime-time shows where focus is on the actual value created and not the technology as such.

o   On the longer horizon we’re seeing telecom operators looking into using RFID or NFC for large scale payments and ticketing solutions. 2009 is the year for trials and 2010 there might be deployments.

• Telecom Service Convergence
  

o   Telecom operators are finally embracing Service Convergence where services are independent of the underlying network. This includes WebService and JEE/.Net services that can be delivered on any network, TDM or IP. Also part of this is the roll-out of NGOSS based OSS systems that will enable seamless deployment and provisioning of subscribers on these services. The trend has been ongoing for some time and now we're beginning to see more widespread deployments. Both Convergin and Apptrigger got additional funding during the year and this points towards further market development.

• Cloud Computing
  

o   Hype yes, but is it mature enough? Yes, I believe so since both Google and Amazon have had their stuff out there for at least two years by now. The global down turn will force companies into the Cloud for the sake of saving money. However the most interesting opportunity with the cloud are the possibilities for innovation and interactions made available. Without any upfront investment a startup, a project or a large organization can get access to information and computing power never before imaginable. Customers are looking at the cloud as a way of saving some serious dollars where another customer sees the potential for increasing collaboration and information sharing within the projects. It is definitely here to stay and 2009 will be the year it takes off.

These areas could be summarized into 2 general conclusions:

·         Innovation

o   IT and support systems serves two purposes; first to automate and streamline processes and secondly to enable innovation and process flexibility. These two purposes are somewhat contrary yet indispensable for every organization that wants to grow and flourish. The key is to focus your IT investments in the areas that makes a competitive difference balancing innovation, process automation, process flexibility and streamlined operations. This is not easy, however the three areas outlined above all enables innovation and process flexibility while cutting costs.

·         Interaction

o   IT should enable a dialogue and collaboration within an organization and with customers and partners. Too much of today’s IT is focused on handling transactions where the real value and the real innovation is created in the interaction between people and the organizations they belong to. Thus 2009 and the down turn should laser-focus everyone on the importance of interactions and investing in IT that enables and strengthens a two-way communication between people. The solutions are different depending on the actual case and the three areas outlined above all enables interaction and collaboration knitting the ties closer between supplier, customers and partners.

May Your 2009 be a transformational experience where Innovation and Interaction marks a centerpiece of your achievements.