Many of you probably know about the Osterwalder Business Model Canvas. It is a powerful tool to describe how a present or a new company should interact with its environment in order to generate value and benefits. The purpose of this post is to highlight 7 companies that achieved dominant positions in the internat marketplace, sometimes creating totally new markets, just by changing one element of the canvas. Some of them destroyed their competition in the process. These companies are:
On the market side: Apple, Finn.no, Netflix and Facebook
On the partner side: Opera, Amazon Web Services and Nokia (yes, Nokia)
This post will focus on the companies on the market side. The second part exploring the partner side can be found here. Later, I will also extract some conclusions and recommendations for decision makers with accountability on innovation and business development.
You can find the book explaining the business model canvas, «Business Model Generation» in the section: «Anbefalte bøker» of this blog.
Apple: «A thousand songs in your pocket»
There are few better examples of destroying the competition by excelling at value proposition than the Apple iPod. At the time it was launched, there were a lot of competitors with a portfolio of portable music devices in mp3 format. No other than Sony, the creator of the walkman, had its own products already on the market.
However, Apple worked hard on developing a product that could compete and win based on providing better value to the customers. It was a bold move, Apple was still in a bad financial shape, and not everyone was convinced it was a good idea. You can find the video of the iPod launch on YouTube here
Some people still say that Apple doesn’t rely on market research to develop their devices. The reality is very different. When you watch the video, you realize that Apple did a lot of research on competition in order to find the common vulnerabilities of all of them. The company attacked all of them, focused on the limited capacity of the devices available at the time. As a result, it condensed the promise of the iPod in just that one line: A thousand songs in your pocket. The rest is history.
Finn.no: Exploiting relationships
Finn.no, owned by the Schibsted media conglomerate, was launched in the form we know today in year 2000, even if it had existed in other forms before. Finn.no had competition from before. It was not the first player to enter the web-based classifieds market. However, after few years, it destroyed the early competitors. Today, Finn.no has a position that resembles a de facto monopoly for classifieds on the internet in Norway. How was it possible?
Finn.no exploited the one overwhelming strength the parent company Schibsted had vs. competitors – the established relationship with the companies interested in posting classifieds. Those relationships were indeed already very strong with the newspapers Schibsted owned, taking Aftenposten as a main example. In addition, Finn.no focused first on the verticals that were most profitable: Real estate, automobiles and jobs. The result has been a virtual monopoly so strong and powerful, that real estate agents are now trying to break it by establishing their own common competitive platform. They will have a hard time.
Netflix: Channels and timing
Netflix was launched in 1997 as a distributor of DVDs by mail order with focus on remote locations in suburban USA. In many ways, it was indeed a niche player. Today, Netflix and YouTube together account for over 55% of all data traffic in the lands these services are deployed.
The big change happened when Netflix CEO, Reed Hastings, became aware of the major inconveniences that the rental of physical DVDs meant for the users. From driving to the store, to browsing catalogues and physical covers to the interaction with assistants at the stores, it was all hassle. Netflix changed all that by distributing through a channel that bypassed all those inconveniences: Broadband internet.
However, Netflix was not the first one to try that new channel in order to distribute movies. Many others, telecom operators and cable TV companies included, had tried it too, and some were having a relative success in doing that. The clue to Netflix success was a combination of two factors: Scale and timing on macroeconomic conditions. Netflix achieved scale by selling its service to all broadband subscribers, not only the subscribers to a specific telecom or cable TV player, like the latter where doing. That gave the company an immediate potential to grow fast beyond infrastructure constrictions and eventually reach a global audience. This is something other established broadband players at the time couldn’t do, because their current businesses were intimately attached to the cables and servers that defined their very communications infrastructure. At the same rime, the «all you can eat» subscription revenue model at ultra low price points was (and is) a low margin business. This is something operators and cable TV operators just couldn’t afford.
Timing had thus a lot to do with Netflix success. The ultra low interest rates and quantitative easing from the FED in the aftermath of the financial crisis in 2008 flooded capital markets with hot money desperately searching for growth stories to invest in. Without this phenomenon, the Netflix «growth at any price» strategy and Unicorn culture would have been much harder to execute.
Facebook: From niche to niche to world domination
Facebook wasn’t always a tale about global presence. Like the previous major players on this list, also Facebook had competitors. Specially one of them, MySpace, was a powerful force at the time. A face-off battle for the users had been borderline suicidal for Facebook.
Facebook approached the market in the most intelligent way. Instead of trying to attack the whole potential customer base at the same time, the future social giant started humble in the very limited and closed circle of the Harvard University students. By testing and learning there, it rapidly moved to other Universities and even high schools. It was after users had been well studied and the service well proven and tested that the company went global. Backed by massive funding from financial giants like Accel Partners and Goldman Sachs, it grew exponentially.
These four companies changed the internet economy by changing and mastering primarily just one element of the business model on the customer side. Which box could your business change to destroy your competition?
Read part II of these series about business models here.
Read part III her.
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