Scott Anthony on Disruptive Innovation

An interesting interview with Scott Anthony, president of Innosight, on disruptive innovation.

"Disruptive innovation is a particular type of innovation that occurs when an innovator brings to a market an innovation that is simple, convenient, accessible, and affordable; changing the game"

"Disruptive innovation will result in major changes but they don't often rely on technical innovation, in fact many times the technology is quite trivial, it's the business model, the way a company organizes and acts that drives disruption"

Questions to identify opportunities for disruptive innovation:

1. "Look for markets where there is some kind of constrains that inhibits consumptions, where is there something that makes it difficult for people to solve problems in their life. Sometimes they don't have skills, money, access to the solution and sometimes it just takes too long."
2. "Try to identify where people have important unsatisfied jobs to be done, where there is a problem that the customer can’t adequately solve today. If you can find that frustrated customer and ease their pain, you often times have the ticket to disruptive innovation."

"After you have looked for constraints consumptions and you have targeted that job to be done, think about how you can play the innovation game differently. Remember is not about doing it better, it’s about making it simpler, cheaper, more accessible, and more affordable, that's what disruption is all about"

"Think about the markets that you are going to analyze, looking not necessarily at the most demanding customer today, but thinking about people who are relatively undemanding, or people who are not consuming anything at all"

"Focus groups can be a simple way to begin a conversation with customers. Customer observation can be really powerful, because sometimes the customer simple can't tell you what you want. Sometimes you got to give customers something, a very early prototype and let them co-develop the product or service with you. Sometimes you got to do more detailed quantitative research to really pinpoint what are the points of frustration in the market and where are opportunities to do things differently"

"Take a simple first step. Invest a little, learn a lot. Don't spend huge money upfront because the only thing you can be sure of is that your first strategy is wrong, so if you invest too much too soon, you are looking into a path that is fatally flawed"

More videos on disruptive innovation:

Clayton Christensen on jobs needing to get done

Value network analysis and positioning

There is an increasing need for companies to gain insights into what is actually happening around them and where value can be created and captured. Linear value chains have in many cases been replaced by complex, interdependent and dynamic relationships between multiple sets of actors in different industries, different parts of the world, using different business and revenue models.

The increased turbulence creates threats and opportunities for organizations to respond to and quickly reconfigure its business models and with that its different roles in relation to external actors. To capture opportunities more quickly than rivals do, organizations must have agile business models and constantly analyze where value can be created and captured.

An intricate network of roles and relationships

The value network surrounding an organization comprises of different stakeholders and organizations (nodes) that have an effect on the outcome of the organization's activities. Between the nodes are different forms of formal and in-formal relationships connecting the nodes, forming the network. In contrast to linear value chains and One-Sided Business Models, such as buying ingredients to sell lemonade on the driveway, the number of different actors having multiple roles creates an intricate network of roles and relationships.

Nodes with multiple roles

One actor in the value network can simultaneously be a value provider (e.g. out-licensing important technology, co-educating customers, partner in working towards establishing a standard, co-developing new technology, supplier of services, providing user data), a value recipient (e.g. in-licensing technology, buying products and services, having access to process knowledge and technical know-how, benefiting from complementary products and services), a value neutral (e.g. competing with similar products and services, providing substitute technology, products or services, non-connected experts, authorities and regulators, standardization bodies). Additional to the complexity of nodes having multiple roles is that roles, relationships and business models are constantly changing.

Different business and revenue models

Each of the actors in the value network has its own business and revenue models and actors outside the industry may at any time enter with business models disrupting the whole industry, such as Apple entering the music industry or Google entering the navigation technology industry. Organizations need to constantly monitor actors in the value network, at the edges of the industry and potential outside actors that could for example provide something at a much lower cost or even for free. A good question to ask is what an industry outsider would do to take advantage of the weaknesses in existing value network and business models? Some examples of potentially disruptive business models:

• Give away or subsidize hardware to sell software or services
• Give away or subsidize software to sell hardware or services
• Give away or subsidize services to sell hardware or software
• Give away one version of the hardware, software and/or service to sell another
• Give away or subsidize hardware, software and/or services, supported by advertising
• Give away or subsidize hardware, software and/or services, sell access to 3rd party

For more examples: 50 Business Models built on Free

Mapping the value network

To understand the value network, an organization should for every value proposition map out each and every actor that could have an effect on the outcome. This should initially be done as broadly as possible generating a very long list of actors. Different approaches can be used to identify actors such as:

• Roles in relation to one’s own organization "all suppliers, partners, competitors, customers, substitutes…"
• Type of organizations "all incumbents, SMEs, start-ups, research institutes, university research groups, governmental organizations…"
• Different forms of activities or expertise "content idea, content creation, publishing, distribution, content aggregation…"

The next step is to categorize each actor in the list to make it more manageable. This can be done in the style of a mind-map or in Excel lists that are perhaps more easy to sort and filter. The way to categorize and group actors is very situational specific and the approaches above can be used as a starting point.

Analyzing the value network

It is important to understand how value is converted from one form to another across the value network. Ideally each actor and relationship should be analyzed and a starting point is to analyze each group of actors and each identified key actor:

• How do value move through the network?
• Where are the bottlenecks?
• Who are benefiting from whom?
• What values are provided from each actor?
• Who are the main value creators?
• What are their objectives and strategies?
• Where are the unique assets and capabilities?
• How well are assets being used?
• How well are the values being realized?
• Who are the main value recipients?
• What do the value recipients need to compromise?
• What social value or cost is generated by each actor?
• Where are the main costs and risks of each actor?

With an understanding of the value network the next step for an organization is to analyze its own position in the value network.

Analyzing one’s own position

Based on the value network analysis the organization can start evaluating its own situation and different alternatives for adjusting its position in the value network:

• What roles and relationships is it dependent upon?
• What are the value propositions (including benefits) it provides to other actors?
• How are different external offerings affecting own value propositions?
• What are the financial and non-financial transactions in these relationships?
• How will success increase other actors' success and vice-versa?
• How will the organization enable other actors to win versus their competition?
• How can it change the game to its own and others advantage?
• How will its position evolve over time?

Positioning through strategic moves

Based on the existing and sought for position, the organization can then use strategic moves to affect identified actors, formulate alliances and partnerships and change its business models, to manage the value network:

• Who to collaborate with, for what purpose, in what form?
• Who to form strategic alliances with?
• What to bring to the table and what to expect from the collaboration?
• What actions to take to affect other organizations or relationships?
• How to adjust value propositions and business models?

Turning turbulence into an advantage

To understand the current and future capability for value creation, it is essential for every organization to understand the surrounding value network and how value is converted from one form to another across the network, and adjust its business models accordingly.

Opportunities arise from strategic moves and from pure luck. The challenge is for organizations to have agile business models to be able to act on these opportunities. I believe that organizations that really understand their different roles and surrounding value networks can turn the turbulence into an advantage.

Clayton Christensen on jobs needing to get done

Some great and entertaining thoughts by Clayton Christensen in short sound bites presented at TechPoint's Innovation Summit on September 29, 2009.

"Very often why companies found that they have lost their ability to innovate, isn't that there aren't good ideas coming in, but it's the shaping process confirms everything to what the company is good at doing, instead of what fits the market needs"

"The idea that we should focus on understanding the customer and give the customer what she needs actually contributes to the failure of new innovations. The unit of analysis in coming up with great ideas are the jobs that are sitting out there needing to get done for which our products or services might get hired"

"I wonder what job people hire a milkshake to do for them..." "...it turns out that the competitor is not Burger King milkshakes but bananas, donuts, bagels, snickers bars and boredom"

Related videos:

• Mark Johnson on Business Model Innovation and his new book Seizing the White Space
• Scott Anthony on Disruptive Innovation

Emmanuel Faber, Co-Chief Operating Officer, DANONE on the profit that you accept NOT to do

An interesting presentation from HEC Social Business Conference, by Emmanuel Faber, Co-Chief Operating Officer, DANONE, on “How to manage business objectives and social objectives?” - a question that Emmanuel rephrases into "How can you achieve business objectives without also perusing social goals?"

"The goal of a company is to serve society through the people that it serves in its interaction with those people. Whether they are consumers, customers, employees, shareholders, suppliers, they are people and these people are the ones who ultimately judge whether the company is efficient or not efficient, each of them having their own stakes."

"The real value of the company is not what derives from the valuation of its profits, or the actualization of its profits on the long term, what really makes a company valuable is the profit that it accepts not to do. What really makes a company a solid company is the profit you accept not to do, the profit that you accept to share with the stakeholders of the company."

"There is a possibility that in the next 2-3 years the stock market valuation will have to take into account more than just how the profit evolve whether they go up or down, what is the PEG to growth ratio etc. I think that there is a likelihood that the market will be requiring a better understanding of what fundamentally these companies are about. Are they based on sound business models that make sense from the community in which it engages."

How to motivate employees to take social issues into account

How to help this blog

Thank you for reading this blog!

One year from the creation of TBMDB, I am still surprised and humbled about the large number of weekly returning visitors, the time spent per visitor and the wide geographical distribution!

I have invested serious time and effort in creating and updating the blog in parallel with 60-80h work weeks, to keep myself and others updated in the subject, find and present interesting concepts, presentations and videos, and answer related questions by email. I have a limited time for the blog and have prioritized content before marketing.

If you like this blog and you're willing to chip in a few minutes of your time, you could help improving the content of this blog and help it reach more people.

Please consider doing any of the following:

To improve the content of this blog:

• Comment the content on the blog, to @sundelin or to anders (@) tbmdb.com
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These little things can make a huge difference. It gives me moral support to continue to provide resources for your personal development and business model innovation.

Thanks for your help and support.

Anders

Business Model Generation (2009)

The book, written by Alexander Osterwalder and Yves Pigneur, co-created by 470 practioners, is a fascinating book for several reasons and I highly recommend people interested in learning about business models to buy it. It is a compilation of 10 years of work on a simple idea; on how to capture the essence of how an organization creates and captures value. It is a book that I believe many will read and keep handy for reference.

The book in three bullet points:

• It presents a business model framework, based on nine building blocks, that is widely used by practioners today and it summarizes many popular management theories using the same framework.
• It uses visual thinking and design in a way that is novel in business literature, and provides several workshop ideas for companies that want to get their hands dirty applying the tools presented
• It provides many interesting examples of companies that have successfully innovated their business model

The business model canvas

At the core of the book is the business model canvas, developed by Alex during his PhD work, and it's included in one form or another, on almost every page of the book. It is a graphical representation of the 9 business model components that Alex argues describe the rationale of how an organization creates, delivers, and captures value. It has created a shared language for describing, visualizing, assessing, and changing business models, and is widely used by business model innovation practioners.

The structure of the book

The book is divided into five main sections that can be read on their own:

1. The business model canvas including definition and the nine building blocks: Customer Segments, Value Propositions, Channels, Customers Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships and Cost Structure.
2. Popular business model patterns including concepts from popular management literature such as Unbundling Business Models, The Long Tail, Multi-Sided Platforms, FREE as a Business Model and Open Business Models.
3. Business model design, using concepts such as customer insights, ideation, visual thinking, prototyping, storytelling and scenarios.
4. Strategy, including the business model environment, evaluating business models, business model perspective on blue ocean strategy and managing multiple business models.
5. Business model design process, including a 5 step process: mobilize, understand, design, implement and manage.

One book to rule them all

Alex and Yves covers a lot of management concepts in the book and use the business model canvas to illustrate key ideas from publications such as Unbundling the Corporation by John Hagel and Marc Singer (1999), The Long Tail by Chris Anderson (2006), Free: The Future of a Radical Price by Chris Anderson (2008), Co-Opetition by Adam Brandenburger and Barry Nalebuff (1996), Blue Ocean Strategy by Cahn Kim and Mauborgne, and Open Business Models by Henry Chesbrough (2006). The focus is very much to make complex things simple and understandable which is great for most readers!

Visual thinking

Another strong focus of the book is the visual thinking, the analogies to architecture and design, using concepts such as ideation, prototyping and storytelling. The best way, according to the writers, is to print out the canvas on a large surface, put it on a wall and let people jointly sketch or use post-it notes to discuss and analyze business models. Alex has for several years worked together with designers and the design of the book is very different from traditional management literature and share more similarities with books such as The Back of the Napkin: Solving Problems and Selling Ideas with Pictures by Dan Roam. Alan Smith of The Movement, has really done a wonderful job designing the book.

Many interesting examples

The book contains many interesting examples from companies such as Lulu.com Lego, Google, Nintendo Wii, Apple, Metro, Flickr, Red Hat, Skype, Rega, Gillette, Procter & Gamble, GSK and Innocentive. It uses the business model canvas to explain the rationale of each company's business model and sometimes including the differences with traditional companies within the same industry.

Hands-on tools

Besides the business model canvas the book comprises several hands-on tools such as The Empathy Map developed by XPLANE, "What If" questions, The Silly Cow Exercise, Techniques to develop stories, and questions to perform a detailed SWOT analysis of each business model component. It has a very practical focus and it is easy for companies to pick up the book and do some workshops on their own.

In relation to other books

The Business Model Generation gives a fresh perspective on business models and it provides an introduction to many concepts, of which the reader can dig further into in other books. A quick comparison with some other popular books on business models:

• Getting to Plan B: Breaking Through to a Better Business Model by John Mullins and Randy Komisar, focus more on entrepreneurship and start-ups and on learning from experimentation and adjusting the business model, also with more focus on financials. A good complementary book to Business Model Generation. See my review/summary here

• The Design of Business: Why Design Thinking is the Next Competitive Advantage by Roger Martin, explores design thinking, and advocates using intuition combined with analytical thinking to innovate business models. It is a great complementary to Business Model Generation. See my review/summary here
  

• The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book. See my review here

• The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read and perhaps complementary to The Business Model Generation that focus less on profitability. See my review here

• Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

All in all, The Business Model Generation is a great book and everyone interested in the subject should have a copy of it. Download the preview and buy it.

Full disclosure: I was one of the 470 practitioners contributing to the book.

If you find this book review helpful, please go to the Amazon book review page and rate my identical review "Helpful". Thanks!

Business Model Examples

There are many examples of inspiring business models and business model innovators described and referenced on this blog and elsewhere. To provide a quick read with popular examples, a list of business model innovators is presented below. Please feel free to comment or contact me on great business model examples that you find missing.

Amazon - Leveraging assets

Launched in 1994 as an online book seller, Amazon has constantly altered its business model leveraging its assets and capabilities to generate new business… Read more

Apple - Providing convenient solutions

Apple has revolutionized the computer industry, the music industry and now the mobile phone industry, and the classic example is iPod and iTunes… Read more

Better Place - Using per-distance fees

Better Place aims to use the margin between electricity and gas to subsidize the cost of new electric cars, even providing electric cars for free... Read more

Etsy - Mass customization of arts

Aggregating the long tail in an online marketplace for handmade goods with the goal to enable people around the world to make a living making things… Read more

Gillette - Razor and blades

Gillette's success with its razors and blades is a story about superior technology, design and the use of control mechanisms, foremost patents… Read more

Lego - Turning users into developers

Lego has turned its most loyal users into designers and co-creators of their own products. More than 30000 kits have been shared so far… Read more

Tata Motors - Modular distribution

Tata Nano is not only cheap to buy it is constructed of modules that can be built and shipped separately to be assembled in a variety of locations.… Read more

Threadless - Dressing the long tail

Threadless was one of the first firms to systematically mine a community for designs, a trend that today can be seen in various industries… Read more

Xerox - Business Innovation in 1959

The company decided to lease the equipment, instead of selling it, at a relatively low cost and then charge a per copy fee for copies in excess of 2000 copies per month… Read more

Zara - a devastating business model

Zara has managed to substantially shorten the time to develop a new product and get it to stores, and in doing so it can react quickly to changing market trends… Read more

More inspiring examples will come, send me your suggestions!

Further reading:

Using the crowd as a part of the business model

10 Initiatives using the crowd to generate new ideas

Business model example: Zara - A devastating business model

Zara, owned by Inditex, has been described by Daniel Piette, fashion director LVMH, as "possibly the most innovative and devastating retailer in the world" and is a vertically integrated retailer controlling the design, manufacturing and distribution of clothing itself. This is very different from most clothing retailers that outsource much of their manufacturing to developing countries. Zara has managed to substantially shorten the time to develop a new product and get it to stores, and in doing so it can react quickly to changing market trends. From design to finished goods can be made in four to five weeks, and modification of existing items can be made in as little as two weeks. It produces about 11,000 distinct items annually compared with 2,000 to 4,000 items for its key competitors, constantly updating its range of clothes. Zara shop managers report back every day to designers on what has and has not sold, information that is used to decide which product lines and colors to keep or alter, and whether new lines should be created. Reducing the time to get the clothes into the shelves and the batches of clothing in small quantities also keeps the costs down by keeping stocks low, and if a design doesn't sell well within a week, it is withdrawn from shops, and further orders are canceled. Where most retailers have different "seasons" Zara keeps no design on the shop floor for more than four weeks, encouraging customers to make repeat visits. Popular items appear and disappear within a week creating an image of scarcity. Some customers know exactly when new deliveries arrive at their local shop and turn up before opening time to pick up the latest fashion. Zara uses no advertising or promotion, and 50% of the products are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian and African countries and the rest of the world.

Further reading:

• List of business model examples
• Threadless - Dressing the long tail in user design

Business model example: Xerox - Business Model Innovation in 1959

The business model around Xerox Model 914, introduced to the public in 1959, has become a classical example of how a new technology sometimes needs a new business model to become successful. The Xerography technology, to produce images using electricity that avoids the use of wet chemicals, was superior to other available methods, but also very expensive. When Haloid (later renamed Haloid Xerox and then Xerox Corporation) tried to find marketing partners for its Model 914 the company was constantly turned down by the likes of GE, IBM and Kodak. Haloid decided to lease the equipment, instead of selling it, at a relatively low cost and then charge a per copy fee for copies in excess of 2000 copies per day. The company provided all the required supplies, service and support and the customer could cancel the lease on only fifteen day's notice. This was a bold move given that the average business copier at that time produced an average of 15-20 copies per day. Haloid took a large risk as customers were only committed to the monthly lease payment and paid no more unless the performance of the Model 914 led them to make more than 2000 copies. The Model 914 became a huge success, with customers averaging two thousand copies per day (instead of month) and the company sustained a compound annual growth rate of 41% over a 12 year period. Also, the company became highly incentivized to develop faster machines that could handle high volumes with maximum machine uptime and availability.

Further reading:

• List of business model examples

Business model example: Threadless - Dressing the long tail in user design

Challenges in the apparel industry are to find designers that can create hit products on a continuous basis, to predict the demand down to the style, color and size. Threadless started as a hobby inviting anyone to submit artworks for t-shirts to an online platform, a community to rate and the best t-shirts to be printed. Today, the company is the biggest community-based t-shirt store on the web, selling more than 100 000 t-shirts per month. It is one of the most famous examples of "crowdsourcing" inviting everyone to design and assess new t-shirts. Members, some 900 000, download a template and upload a design, around 150 submissions per day, and a small percentage are selected by the visitors and members of the community to be printed and sold through the online store. Creators of the winning designs receive $2000 in cash, a $500 gift certificate and a membership to a monthly subscription-based line of t-shirts. Threadless t-shirts are run in limited batches with 9 new designs a week, and when sold out reprinting only occurs when there is enough demand for a new batch. Producing a predetermined demand keeps costs low and margins high, and because community members tell the company which t-shirts to produce Threadless never produces t-shirts that are not sold. In addition to being designers, voters, and buyers, community members get t-shirt credits by sending in digital pictures of themselves wearing purchased t-shirts if featured, and for recommending t-shirts to people in their social networks when purchased through a referral link. Threadless was one of the first firms to systematically mine a community for designs, a trend that today can be seen in various industries.

Further reading:

• List of business model examples
• Zara - A devastating business model

Business model example: Tata Motors - Inexpensive cars for modular distribution

Tata Motors is India's largest automobile company, the world's fourth largest truck manufacturer, the second largest bus manufacturer and the developer and manufacturer of Tata Nano, listed in the Guinness Book of World Records as the world's cheapest car. The Tata Nano, that has received media attention due to its low price, started to be delivered to customers after July 17 2009, with a starting price of Rs 100,000, which is approximately equal to UK£ 1,360 or US$ 2,171 as of October 2009. When competing in the Indian market the Tata Nano is not primarily competing with other cars but with motorcycles used to transport entire families. Making a car affordable for families with low incomes the launch of Tata Nano is believed to expand the Indian car market by 65%. Boston Consulting Group predicts that by 2015, 100 million households in the developing world will be able to afford cars priced between the Nano and the more expensive Renault Logan ($6000). So how could Tata create such a low cost car? Tata refined the manufacturing process breaking down every component of the car into its smallest pieces eliminating everything that is absolutely necessary and predominantly outsourcing its manufacturing to a limited number of suppliers. The number of parts have been reduced with changes such as one windscreen wiper instead of two, no power steering, three lug nuts on the wheel instead of four, no tubes in the tires, only one side mirror and the basic version has no air conditioning, no power windows, no fabric seats, radio or central locking and the seats are fixed except for the driver's which is adjustable. What is really fascinating is how the Nano is constructed of modules that can be built and shipped separately to be assembled in a variety of locations. It can be sold in kits that are distributed, assembled and serviced by local entrepreneurs in rural areas, adjusting the car for local needs adding value to the product or receiving replacement modules for broken cars. To ease assembly, body panels are glued instead of welded. Still, the car meets all Indian emission, pollution, and safety standards. Tata is also developing electrical versions of the Tata Nano that will probably become the world's cheapest electric car when launched.

Further reading:

• List of business model examples
• Better Place - Introducing per-distance fees

Business model example: Lego - Turning users into product developers

Lego has turned its most loyal users into designers and co-creators of their own products. The toy manufacturer providing a building system based on interlocking bricks patented in 1958 begun to run into difficulties in the late 1990s. Lego's product development had become increasingly complex with many product ranges and at one stage Lego had 11000 contractors -more suppliers than Boeing used to build its airplanes. At the same time a change in customer behavior from building models to computer games together with low cost competition made the company increasingly losing money and market share. With a new CEO and the injection of turnaround funding, the company rationalized its supply chain and factory location, reduced the number of unique pieces, in-licensed the rights to use characters from blockbuster movies and developed new ways of working with users as designers as part of the new product development process. The latter is what has made Lego famous in business model innovation (even though the in-licensing has proven to be the main revenue generator). An early product involving users, launched in 2000, was Lego Mosaic, which allowed users to upload photographs to Lego's website. The company would digitize the picture and calculate the bricks required to build the mosaic. In 2005 Lego launched Lego Factory where users can design, share and purchase custom models. The user downloads a virtual building program to design 3-D models with virtual bricks and elements and depending on the creation, a price is dictated by the size and elements used. A community of builders shares their virtual creations, more than 30000 kits uploaded so far, and download the building instructions to build from their existing Lego collection or purchase someone else's model for themselves. In parallel to the sharing platforms Lego launched its MIndstorms Robotic Invention System (RIS) product, aimed at competing with computer games. MIndstorms is a sophisticated kit with a programmable brick, various sensors and actuators to build models that can carry out various movements. One of the key limitations of the original Mindstorms was the complexity of the programming language and Lego discovered that users were hacking the software and developing applications and extension to the original code. Within weeks of the original Mindstorms’ debut, a user had reverse engineered the system and posted all of his findings including information on the underlying firmware, online. Lego concluded that limiting creativity was contrary to its mission or encouraging exploration and ingenuity, and rather than sending out cease and desist letters, Lego decided to write a "right to hack" into the software license. More than 40 guidebooks providing step-by-step strategies were developed by external users and hardware developers designed sensors far more sophisticated than the included ones. When Lego later developed the next generation Mindstorms (NXT), key developers driven by interest and involvement were recruited into a Mindstorms user panel in exchange for Lego sets and NXT prototypes.

Further reading:

• List of business model examples

Business model example: Gillette - The razor and blade business model

The name Razor and Blade business model refers to Gillette's use of razor handles, sometimes given away for free, and high margin disposable blades. Gillette has used the razor-and-blade business model since the first model with disposable blades was launched in 1902, with granted patents in 1904. Since then several different generations of razors have been developed, patented and released and razors has become one of the most heavily patented consumer products with more than 1000 granted patents. Gillette's success with its razors and blades is a story about superior technology, design and the use of control mechanisms, foremost patents, to ensure market dominance. Gillette who spends huge amounts on R&D and patenting, has fine tuned its business model and patenting activities, and never releases a new razor until the next generation is already in development. It has continuously developed and heavily patented its products, replacing old models just when patents have started to expire. As patents per definition becomes publicly available, and is used for competitive intelligence, Gillette, instead of filing own patents when inventions are discovered, awaits the right time to file large batches of patents to be published in perfect timing for the launching of new products. In 1998, after more than $750 million of research and testing, Gillette introduced Mach3, with innovations such as the triple blade, the single-point cartridge docking, the indicator lubricating strip to signal when to replace cartridge and the diamond-like carbon-coated DLC blade edge (three times stronger than stainless steel, made with chip-making technology). The company made sure to patent every design and engineering feature resulting in a wall of more than 50 patents surrounding the product. Seven years later the Gillette Fusion was launched with new inventions protected by more than 70 patents.

Further reading:

• List of business model examples
• Razor and blade business model

Business model example: Etsy - Mass customization of arts and crafts

Customization has traditionally been costly with plenty of long-tail producers and customers spread out over the world, too small to set up shop on the average city street without expensive pricing. Etsy aggregates the long tail in an online marketplace for handmade goods with the goal to enable people around the world to make a living making things. The company provides a platform for users to buy and sell items listed under broad categories and user-defined tags. Where Ebay attracts brand-name bargain-hunters, people go to Etsy looking for something handmade, something unique, and find more than 250 000 sellers from around 100 different countries. The company collects a 20 cents listing fee and a 3.5% commission on each item sold, and sells slots in a showcase (internal advertising program for sellers to show off) of featured items for $7 a day. Etsy offers workshops to help entrepreneurs sell their stuff on its platform and market their products using social media such as Twitter and Facebook.

Further reading:

• List of business model examples

Business model example: Better Place - Introducing per-distance fees

For many years the car manufacturers have struggled with that electric cars are too expensive to sell in comparison to current cars, due to the very expensive battery. At the same time car manufacturers have been aware of the margin between what electricity costs and what is paid today per km gas. The performance of the battery has also been limited, reducing the range for which the car can be used between charging and the time it takes to charge the battery has been considered too long. While car manufacturers are waiting for battery companies to develop the technology for future cars, Better Place has developed a business model for electric cars and infrastructure that is being tested in Israel, Denmark and Hawaii - small geographical markets with special tax policies for zero-emission cars. Better Place is not focusing solely on the cars but on the system including charge spots, battery-switching stations, and grid-management software. Redefining the electric car, where customers are not allowed to purchase battery packs, the company is able to use a business model similar to how mobile phones are sold. The company then uses the margin between electricity and gas to subsidize the cost of new electric cars, providing electric cars for free, for customers signing up to costs similar to the costs they have for gas today. The costs, or per-distance fees, cover battery pack leasing, charging and battery switching infrastructure.

Further reading:

• List of business model examples
• Tata Motors - Inexpensive cars for modular distribution

Video:

• Shai Agassi on the business model of Better Place

Business model example: Apple - Providing convenient solutions

Apple has a history of design-driven product innovation and has introduced a number of high-end products such as personal computers, media devices, accessories, peripherals as well as media and software to support their products including operating systems, applications for areas such as music and video. Apple has revolutionized the computer industry, the music industry and now the mobile phone industry. The classical example of business model innovation is related to Apple's iPod and later the iPhone. Launched in 2001, the iPod was a standalone product, but when Apple launched the iTunes Music Store in 2003, it provided cheap music for buyers of their physical products, turning Apple into the world's largest online music retailer. The same strategy was applied to provide a convenient solution for applications to its iPhone when the App Store for iPhone was launched in 2008, establishing Apple as a broker of application, collecting a 30% royalty on each application sold.

Further reading:

• List of business model examples

Business model example: Amazon - Leveraging assets

Amazon was launched in 1994 and established itself as an online book seller providing books but also an online community for customers to share information and opinions about books with one another. The company soon realized the potential in leveraging the platform and infrastructure to offer new categories of products, turning into an online department store. Amazon also supplies e-commerce services and features to power other companies' web sites. Another way of leveraging its software is the supply of e-commerce services to syndicated stores that sell Amazons products on other companies' web sites resulting in distributed distribution channels. To provide the largest catalog possible on its platform, other companies including competitors are allowed to utilize the platform establishing Amazon as a broker of transactions and leaser of web space to other retailers. By bringing buyer and seller together, collecting the buyer's funds when the order is placed, and maintaining advantageous payment terms with suppliers, Amazon has done with online retailing what Dell did with computers. Further leveraging its assets and capabilities Amazon started to offer a number of services such as storage services, the lease of computing power, together with an end-to-end product sales and logistics platform, handling orders, payments and shipments.

Further reading:

• List of business model examples

Muhammad Yunus - Creating a World Without Poverty

An inspirational presentation by Muhammad Yunus, the Bangladeshi banker and economist, developer of the microcredit concept, founder of Grameen Bank awarded with the Nobel Peace Price, for "creating economic and social development from below".

"We reverse what the traditional bank does. The basic principle of banking is the more you have the more you can get. The less you have the less interest you get. We reversed that basic principle to the less you have the more attractive you are, if you have nothing you get the highest priority"

Full length video at FORA.tv

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