Thursday 22.9 I published the first part of these posts about Business models that changed the internet. I used the Osterwalder Business Model Canvas as the tool to disclose how four companies (Apple, Finn.no, Netflix and Facebook) destroyed the competition by changing just one element of the canvas.
In this post I will go on to describe how three other companies changed the internet economy by, again, changing just one element of the canvas. Instead of doing it from the customer side, these players did it from the partner side. We will also see how poor execution can make a powerful company lose its first mover advantage and its throne to a second but better player.
These companies are: Opera, Amazon Web Services and Nokia
Nokia: A partnership and execution tragedy
You guessed right, the powerful company that gave up its throne to a newcomer by poorly executing a brilliant idea was Nokia. By all accounts, Nokia was a smashing company in the late 2000s. At its peak, in 2007, out of hundred mobile phones sold globally, 49 had the Nokia brand on it. European mobile carriers were terrified by the power a single brand had on their subscribers. It wasn’t enough. Still ambitious, the Finnish giant developed a weapon to control all content users would consume on the mobile phone. The weapon was named OVI (door in Finnish). It was an application hub for the masses, with content that could be paid, consumed and updated directly form the Nokia mobile phone, without the need for a PC. Focus was on music and entertainment. OVI was the last piece Nokia needed to achieve world domination and sweep the remaining competition away.
But that was on paper. In reality, OVI was a usability nightmare. It was cumbersome, and the content took ages to download… when it did. For the most part, the only thing I remember from OVI is a big fat “X” on the screen without any further understandable explanation. I still loved my Nokia N95, but OVI remained a forgotten icon on the screen. The promise of massive and easy content distribution made to partners was broken.
Then, in 2007, the iPhone came. In 2008, the Appstore came along. It worked wonderfully. In addition, the partnership with developers had clear and accepted rules for both sides. Android/ Google too came with its own Android Market shortly after. Five years later, the market share of Nokia was an irrelevant 2,8 percent. However, it was the original idea of Nokia OVI the one that changed the concept of internet economy. Apple, as in may other occasions, just made it work. Execution became the key to success.
Opera: R&D – the capability that brought telcos to the table
The Norwegian Opera also changed the internet economy, this time by focusing on their internal activities in connection with their partners, the telecom operators. The company created a new browser based on internal know-how and rapidly enjoyed commanding market shares, specially in developing countries. The differentiating factor was the capability the Opera browser had to compress the published content on the web with proprietary software.This saved bandwidth, which not only was beneficial for the subscriber, but also for mobile operators. This internal R&D product, a key activity at Opera, allowed the browser to be distributed for free to end users, but at the same time operators payed Opera for the benefit of including the technology in their networks.
Amazon Web Services: Probably the most notable example of diversification ever
Amazon Web Services – AWS – invented the cloud for all practical matters. It is now the leading cloud services provider and enjoys over 30% market share. However, the most remarkable fact about AWS is that its immediate competitors, Google, Microsoft and IBM, only have 22% market share combined. It is an amazing leading position. How did an e-commerce company did it?
The fact is that Amazon took a page from the business development strategy book and executed it wonderfully. Amazon took the key resource that made its gigantic operations possible – its vast installed base of servers – and opened it to anyone else. Until then, companies had to buy and operate their own servers and application. Alternatively, they outsourced the whole mess to IT partners, but the sources of dissatisfaction were still there. Before AWS, legacy IT plattforms made operations rigid and technical debt had become an accepted nightmare for CFOs. AWS solved those matters. Remarkably, Amazon executed in a smart way too. First it focused on startups, who needed to use AWS based on its ability to scale fast on demand, than anyone else came along. The possibility of exchanging CAPEX with OPEX became too seductive to be resisted. Although the valuation of Amazon is still doubtful, the business as such has changed the economies of the internet forever.
Next Thursday, I will review these posts and extract conclusions for top managers and decision makers interested in breaking away from the traditional business models
Read part I and part III of this series on business models her.
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By all accounts, Nokia was a smashing company in the late 2000s. Nope, doesn’t look like it
Yepp, I have read similar articles myself. However, in terms of market power, revenues, margins and brand, at that time Nokia looked invincible. Of course, such a complicated company culture will sooner or later become a problem, but before the iPhone, it didn’t seem to matter.