On my Tech blog in June 2013 I wrote about new Apple product announcements and the need for updates for previously released Apple products. Colin Donnell just wrote a blog post on this same topic with the title “The products Apple doesn’t have time to improve.” Colin’s point was to highlight the dilemma that much of the appeal of Apple’s well designed products is their focus but that it is also disappointing when it results in lack of follow-through as their focus changes. His first example is Safari extensions and the web sites promoting them. A better example of a product justifying more focus and priority, which he mentions in passing at the end, is iPhoto especially on the Mac. The recent development of offering iLife and iWork for free could be cause for continued concern if this becomes a rationale for even less focus on these more important personal and business products. It seems to me like Apple is neglecting ongoing evolution of software products as a critical success factor.
A point I made in my June post is that this dilemma is also associated with Apple’s culture with regards to secrecy and partnerships. One possible solution is to subcontract work to third party developers on products that have recently been determined to be noncore (i.e. not of a high enough priority to receive consistent attention and updates). Rather than let the products stagnate they could continue to evolve and be supported under Apple’s guidance or independently. This could involve business model innovation with regards to information sharing and providing a rewarding incentive for partners to support the platform.
One of the great things about being in business for yourself is creating the opportunity to do business your way. Common Craft is a creative explanation business that has decided that their business philosophy is Erring on the side of Happiness.
This is a counterpoint to the view that you don’t really have a business at all if you aren’t building and growing it to operate (or sell) independent of your involvement. Both views have their merits but the important thing is to make the choices that are right for you.
A documented company purpose, beyond making money, can help provide guidance when making these decisions.
Most consumers don’t know and don’t care about the business models underlying the products they buy because, let’s face it, life is complicated enough and bottom line what really matters to most people is just the availability, quality, and price of the product they buy. People should care about business models, however, because they affect the profitability of different enterprises in the supply chain and their ability to provide value or even exist. This eventually does impact availability, quality, and price if the enterprises affected were providing value.
Charlie Stross provides a book publishing business model supply chain explanation on his blog. It explains what is behind the fight between Amazon and MacMillan that casts a light on who are the good guys and bad guys in this dispute. Without being informed, consumers might tend to side with Amazon who positions the fight as Amazon standing up for consumers to bring a consistent low price for products. Once there is an understanding the business model and supply chain a different perspective can emerge that the battle is really about roles, control, and who gets what portion of the profit. It also exposes what is at stake in the ability for market forces to operate vs. an enterprise exercising monopoly like control. Consumers might actually have an opinion over which enterprises can provide best value in a role and would like choice with free competition. Even if an enterprise professes to be a benevolent dictator (e.g. do no evil) my vote is for the distributed power of letting the market decide availability, quality, and price by consumers voting democratically with their dollars. There may be a temptation for just going for the lowest offered price but without understanding the business model implications there is a real danger of creating unforeseen consequences by putting portions of the value chain out of business.
In Canada, another example of a business model battle that has gone public, is the TV distributors vs. the local TV content providers. The content providers business model has changed and they can no longer remain profitable with advertising so they want payments for their content from TV distributors. The TV distributors (e.g. Bell ExpressVu and Rogers cable) pay for other content from the US but don’t want to pay for local content. They are positioning these proposed local content payments as a tax that has to be passed through to consumers. A public relations battle is taking place to see if and how the business model will be changed.
Business models are also important for workers who are increasingly concerned about the viability of their jobs. It may be tempting to think that viability of a company’s business model can be left to the CEO or marketing department but ultimately workers need to make informed decisions about where they work and the industry where they earn their livelihood. This needs to be based on an “eyes wide open” view of where their employer and industry fits into the supply chain, what value they provide, and is the business model structured to reward that value. The world is getting more complicated by the emergence of innovative and complex business models but this is the reality of the brave new world of opportunities and risks.
Steve Blank has done an excellent presentation for the Cleantech Accelerator conference on the difference between business plans and business models and how they can complement each other. He provides very clear examples, templates, and a structure on how diagrams can be used to clarify your business hypotheses and plans. Business clarity and simplicity have a crazy way of providing focus which can save a lot of time and money.
This applies to all types of business (and personal) endeavors especially for those in new businesses and the public sector. Some good candidates for business model diagrams are where major change is planned, there is a complex web of alternatives, and end objectives haven’t yet been completely defined.
Chris Anderson, senior editor at Wired, has written a number of interesting articles about business models and marketing.
His book “The Long Tail: Why the future of business is selling less of more” is a classic that explains how the Pareto principle (80-20 rule) can be applied to selling products. Conventional wisdom is to focus on the 20% of products that sell in high volume but his book explained that under the right circumstances there is money to be made in the 80% of products that sell in low volume. This is something Amazon has taken full advantage of. For a quick overview of the Long Tail concept check out the wikipedia article.
Chris was releasing his newest book “Free” in June 2009 but now it is delayed until July 7. Note that the book will cost $23.09 at Chapters. It is based on this fascinating online Wired article on how items are being provided for free to promote other items in innovative business models. Everyone has heard about Gillette giving away razors to sell razor blades. Google is a primary example of offering many free services that directly or indirectly promote their ad revenues.
Important note is that not everything can be provided for free since even as different types of costs for some items are radically reduced with new technologies they are still non-zero and can be substantial when they occur in large enough volumes. This leads to the joke highlighting how this phenomena can be misunderstood. A company has a business model that isn’t profitable but they plan to make it up in volume.