Tuesday, March 16, 2010

Business models...

Not long ago I came across this very smart cookie, a young lad in his early thirties, from Lausanne Switzerland. I haven't ever actually met him in person, but I initially read some of his work (mainly presentations in SlideShare) incl. a preview of his book "Business Model Generation" offered at his website. His approach seemed so compelling that I went out to order his bible in a heartbeat. His name: Alexander Osterwalder.

He studied computer science at the EPFL in Lausanne, Switzerland, one of the top two Engineering Polytechniques in the country, and he PhD'ed at the same school about Business Model Ontologies. You can find summaries of his thesis real easy on the net. The young graduate probably had an epiphany and discovered that most businesses out there (actually all of them) like to talk a lot about their biz models and biz modeling but only a wee tiny percent knows how to do the job right. Kinda like teenager sex...

Anyways, I was also one of those millions sitting at the margin of business modeling, sad to admit, feeling confident that I could tell a business model if it hit me in the face, but not much more beyond that. After reading his work though, I received the same epiphany like he had and I became an instant believer. His book is highly recommended and you can get it thru Amazon in the US. That's where I bought my copy. Last time I checked, no other Amazon out of the US carried the item. Maybe they do now, who knows. Needless to say, as a sequel to my conversion, Osterwalder's modeling approach became part of my college lecturing overnight, with his permission, of course.

But, why am I making the point right this moment? Quite simple. I have been just reading this article about Google's Nexus One that seems to have only sold 135K units in the same number of days right after market launch, where Apple's iPhone sold a million items during exactly the same number of days following its own launch. This is 74 days, in fact. If you come to think that Google even copied most iPhone functions and some of its surrounding ecosystem, and then see what they've been able to sell... just pathetic! They can sing along Palm and it's recent disaster with Pre. The question then rises: Is Google indeed as incompetent as the rest of them?

Apparently so. Certainly when they launch products that emerged from a copycat strategy. The article points to a number of Google's wrongdoings, like selling the phones via their web alone, having zero human contact assistance available, and much more like that, as we have been reading in the press the last couple months... Including software inefficiencies and such. If you read Osterwalder's work though and applied his recommended framework, the reasons behind the Google mess suddenly seem so simple to grasp, that even someone with the brains of a five year old could do a far better launch job.

Here's the thing. The vast majority of market players (incl. many with successful past track record) mostly fail not because they launch the wrong products (copycat or not) but because they are simply too ignorant to apply a descent business model at all. It's not the product itself that is the problem, stupid, it's the bring-to-market business model that makes the difference. The iPhone's success is the result of its business model in the first place. Like the iPod's and very soon now the new iPad's (to be). In pre-orders alone the iPad is currently being reported to have sold multiples of what Nexus One sold in the last 74 days... Go figure!

There are nine critical components (building blocks) vitally interrelated in any proper business model per the Osterwalder framework. These components need to operate in sync like neuron cells synapting among themselves to create something that stands and works. One single neuron is totally useless; get a few thousand stuck together to exchange signals and you got an... emotion! Google may have got the hardware and a few other details right (actually most goodness came from HTC) but I doubt they got any of the remaining components in their place, like customer relationships, and channels and value propositions, not to forget customer segments above all... "Me too" strategies are hard to make succeed. Especially when you are only driven by what the one-you-are-after does, in every step of the way. Instead of adding new value, that is. You end up with a biz model entangled like spaghetti Bolognese. Like Palm's Pre, the Nexus showed some fancy GUI and multitasking and Google all of a sudden thought the war is over! Those entrepreneurs who still think that most consumers have plain double digit IQs, and will buy any BS you can sell them, should time-travel and stay there to operate in my granny's times. Makes you wonder what they eat for breakfast these folks at Google and Palm.

Largey should better pick up the phone and call Alex for this matter. He might learn something about doing business like seasoned grown-ups do. You see, not all business is like Google Search. Mark my words...

3 comments:

nabil said...

Vassily

I learned this lesson 20 years ago at P&G. I can cite 100's of examples that support this premise. I even lectured on it many times outside P&G.

VJK said...

Nabil, we'll be glad to have you contribute some of your knowledge in the production of caselets, like the one sample you may find here:

http://www.businessmodelhub.com/forum/topics/business-model-innovation-quiz

Feel free to register and then contribute... and spread the word in the US too.

香蕉哥哥 said...

how do u do?