Innovation Value is in Business Models, Not Products

18 09 2008

BusinessWeek has some data in this week’s issue on revenue and profit growth for companies named to its Most Innovative Companies list, with some clear dominance from companies seen as innovating business models (in yellow below) – as opposed to customer experiences (green), business processes (purple), or products (blue).


Source: BusinessWeek

This is in line with research from innovation consultancy Doblin, which finds a bit of an 80-20 rule about innovation: ~80% of innovation is in products that account 20% of the value growth, while ~20% of innovation is in business models and other more lucrative areas that generate 80% of the growth.  Doblin’s reasoning: product innovation is often needed just to keep up, while business models can revolutionize value creation.

Business model innovation has led to a host of recent developments, including software-as-a-service (SaaS), fractional ownership, pay per use/rental/subscription services in music and movies, and even advertising (witness Microsoft’s cashback Search).


Growth Leaders | Jeanne Liedtka on

14 07 2008

I studied with Jeanne Liedtka in Darden’s full-time MBA program while we successfully proposed a new design-oriented Strategy Lab and executed a “blue ocean” consulting engagement with a major international architecture firm. Here, Jeanne discusses some of the bigger points from a forthcoming study on “growth leaders,” the individuals who consistently lead innovating organizations to better serve customer needs and deliver market-leading performance.

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Jeanne and her co-authors, including Sean Carr, director of corporate innovation programs at Darden’s Batten Institute, recently produced an article in the Sloan Management Review detailing some of their findings on growth leaders as well.  Follow the link for the article:

In Search of Growth Leaders

Transforming business with open source models | Why Nokia Bought Symbian

9 07 2008

A couple weeks ago, Nokia surprised the world when it announced it would buy out the other partners in mobile operating system company Symbian for $410 million, repackage the software, then release it to the world under a business-friendly Eclipse Public License.  Why would this leading handset maker turn loose the market-leading mobile operating system, installed on roughly two-thirds of the world’s handsets?  And what does it mean for the LiMo Foundation and Open Handset Alliance, both of which are developing open source operating systems for mobile devices as well?

Scott Anthony, the President of Innosight and a Discussion Leader at Harvard Business Publishing, has offered one of the best analyses of Nokia’s business case for turning Symbian open.

Why Nokia Bought Symbian, Then Gave It Away – Scott Anthony

Essentially, the folks at Innosight reckon that consumers don’t purchase cell phones for the operating system – they purchase for the looks and, increasingly, the capabilities.  With new SDKs for the iPhone and the buzz around other open development platforms for mobile devices, Nokia could see its handset business threatened should a “killer application” be developed for a different platform.  Now Nokia is opening up the largest mobile development platform in the world, seeking to attract the best developers to Symbian so that Nokia’s handsets will be the most capable devices in the world.

I wonder if Nokia is also stepping down a path similar to IBM’s transformation into a services organization.  Could Nokia become a consultant and deployer of services when the platform is open?  Might Nokia become the preferred enterprise partner for mobile applications, given its expertise in handsets and operating systems?

What Nokia lacks is an integrated service tier, like that of Google’s mobile services, to make a concerted effort at becoming a leading mobile services organization.  Google, which is leading the charge on Android, has the potential to be the leader in mobile ad services for advertisers and publishers targeting Android devices as well as extend its reach of ad-supported services like GMail and Blogger to a world of mobile devices.

Google Mobile servicesGoogle Mobile Services

Google competes on the basis of choice every day, so it’s not likely to require use of its services in an Android deployment, but it is particularly well situated to benefit from wider mobile access to its web and ad services.

Strategy processes and decision making

16 04 2008

A repeated theme from my business school strategy courses has been to ask the right questions. The seeds of this learning were planted by Clayton Christenson and Michael Raynor who taught me:

  • To decipher contingent circumstances of a theory, ask “When doesn’t this work?”
  • To unmask a correlation impersonating a causal theory, ask “What is the causal mechanism?”

Ask the right questions

Some recent readings expanded my field of application to broader management and strategy development. Bazerman and Chugh’s notion of a devil’s inquisitor”[1] seems like an immensely practical and powerful practice for managers and strategy consultants (whose ranks I will join shortly). A devil’s inquisitor could ask “When doesn’t this work?” to objects far more diverse than a management theory; the inquisitor could challenge hidden assumptions embedded in sales presentations, marketing plans, hiring decisions, and financial forecasts. Read the rest of this entry »

The Cost Of Cutting Emissions | BusinessWeek

19 03 2008

Have you ever wished the whole world would just buy hybrid cars and be done with this global warming thing? It turns out that the price premium for hybrids also includes an enormous opportunity cost in regards to cutting emissions – far more effective alternatives exist that would also provide a much more enticing financial case as well.

Cost of Cutting Emissions

Charts by Laurel Daunis-Allen

The March 10, 2008 edition of BusinessWeek included this clever graph depicting the range of emissions-cutting activities spanning the financial range from money-saving initiatives like updating residential lighting systems to money-chugging activities like hybridizing automobiles. While the magnitude of the bars indicates the net cost (or savings) of each initiative, the width suggests the relative quantity of greenhouse gases each activity could conserve.

This relative analysis points out, among other things, that improving automobile fuel economy standards is a much more cost-effective and emissions-effective means of reducing greenhouse gases than car hybridization. This data should be an essential reference for any company’s corporate social responsibility plan, and person’s own reference for greener living, and any government’s pursuit of effective business and environmental policy.

Read the rest of this entry »

BusinessWeek | Rapid prototyping on the web: Kluster at TED

27 02 2008

Gore, Geldof, Venter…And This Guy on

Look out for Ben Kauffman – the man driving a new force in rapid prototyping and crowd-sourced innovation. He’s hoping to turn this year’s TED crowd into an innovation machine as they bid their Watts on product ideas using his Kluster web service.

What I want to know is will Kluster lend itself to rapid protoyping of brands, of delivery channels, of business models? Product development is by all means a necessary activity for companies to remain competitive, but it’s not the deepest source of value creation. Revolutionary business models, new services and experiences, and innovative branding ideas hold the keys to unlocking competitive advantage in value creation.

TED | Talks | Isabel Allende: Tales of passion (video)

31 01 2008

I recently read “Eva Luna” by Isabel Allende – a book that has become infinitely more moving after seeing Isabel in this live presentation. She illuminates the great power of storytelling for social change and inspiration. Interestingly, someone pointed out how devoid current political debates or the State of the Union address have been in good storytelling.

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