In this third post about companies that changed the internet economy by challenging existing business models we will reflect on the lessons that we can extract from them.
Remember that common for all these cases is that they just needed to change one single element of the Osterwalder Business Model canvas to destroy their competition. In part 1 we studied how four companies – Apple, Facebook, Finn.no and Netflix – built entire new industries from the customer side. In part 2 we revealed how three other companies did the same from the partner side. One case, Nokia, revealed how important it is to excel in execution in order not to disappoint your partners. Such a mistake may reveal your game to a new and powerful rival that may succeed where the first mover failed. (Hello App Store)
What can we learn from all these cases then?
- First of all, a new business model doesn’t need to be neither very complicated nor extensive. Just changing one element of the canvas can destroy your competitors and secure a lasting leadership position.
- To develop and to rightly communicate a compelling value proposition is essential in the developing of any new product or service. Without it, the result will always be a «me too product», pressing the company one step further into declining revenues and eventually unbearably slim margins. The success of the iPod made it very clear.
- Focus on what you have from before in order to build a new business model. Do you have great relationships with your partners or customers? Do you excel at R&D? AWS, Finn.no and Opera changed the internet economy focusing on what they could do best or had an unparalleled quality at.
- Alternatively you may look into what your competitors rely heavily on in order to execute their business model. Is there a general and pervasive business model in the industry that could be challenged? Which part of the dominant business model would make virtually all competitors cripple if it could be changed? Netflix understood this possibility first and achieved the leading position within video streaming while simultaneously annihilating its old competitors, the video renting stores.
- Start with a niche or concrete segment you really know in depth – target customer, technology, application, product… then roll out into new segments as the concept becomes proven and the organization tuned. Two reasons for this: First, the less you have to analyze and/ or guess about a new business model possibility, the more resources you can dedicate to execute it and proof the concept. Second, virtually no company has resources to attack all segments simultaneously without risking fatal failures or putting the company in serious financial danger.
- Never, ever, let your partners down and remember to execute your promises. Otherwise you may be inviting a new powerful competitor that may win their loyalty and shatter your dreams of a first mover advantage. You may think that your company is too important. You may repeat a self-delusional mantra to yourself. You may even consider yourself too big to be ignored. You are not. Ask IBM. Ask Nokia. Ask any cable TV operator.
It is not impossible to develop a new industry or to command a leading position in an existing market. However, it demands laser-sharp focus from top management, hard analytical job in order to find an unique positioning, a will to execute, a realistic approach to resource allocation, and a respectful and fair game towards partners. The reward can be a long lasting competitive advantage and a voluntarily captive market that keep pouring profits into the pockets of your shareholders for many years.
A serious exercise around the Osterwalder Business Model canvas at top management level is in this sense an excellent point to start with. Good luck!
Read part I and II of this series on business models here.
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