Talking about business models examples I believe Nespresso is one of the most popular case studies. But why do we always use Nespresso as an example? Nespresso is sexy. Nespresso is hot. Nespresso is easy to
understand. And people love to talk about it.
I often use Nespresso in our training courses and client strategy workshops. But what is so special about the Nespresso model? I think that people do not realize that it took Nespresso 30 years to get where it is now. Their patent was registered in 1976 and it was launched internationally in 1991. George Cloony – very strong connected to the brand – was hired in 2006. For me there are on a high level 2 elements of the business model that are remarkable.
1. Nespresso uses different channels to distribute to their clients. Except for the easiest channel: the supermarket. Where nowadays we see supermarkets are becoming more powerful than the production companies such as Unilever and Proctor & Gamble, Nespresso is able to pass the supermarket channel.
2. Nespresso knows everything about his clients. Amazing. They connect you through their Nespresso club and they make it work. An example I experienced myself. I got a second hand machine from one of my clients and I tried to order cups. A callcenter called me and registered all my information. “What is your machine ID?” they asked. “Mmm… that is not your machine isn’t it? It is from 72dpi! Wow! Last month I bought my own machine as the other broke down finally. Their service in the shop was excellent. I took home a huge pack of all kind of coffee flavors. Yesterday I got a phone call from Nespresso club. “How are you, do you like our product?”. Yes I said but at the moment I try to drink the less favorite blends. “No problem” she said. “Just serve it to your guests!” “And… can I help you with ordering the new blends then?” Fantastic. This is service in optima forma. I love it. That’s why I love to use this example. A lot to learn from Nespresso.
Do you want to read more about this case study? On page 236 of Business Model Generation you can read all details and their next business model!
The visualization was made by Xplane.
Although strategy consultant Ouke Arts had seen many businessess and business models before – he had a hard time figuring out how the model of Sellaband exactly works. How does their model differentiate from the established music industry players? Who are the clients of Sellaband? What are their activities? How do they sell their services? What are their core assets and how do they make money in the end?
Ouke could not imagine he was the only one trying to put the pieces of the puzzle together. Would it be an idea to visualize the business model? Ouke contacted Sellaband owner Johan Vosmeijer to arrange a meeting to explore their business model. I (Patrick) joined Ouke and together with Johan we put the post-it notes in the Business Model Canvas. Interesting. We understood the business model is a Multi Sided Platform. This means that Sellaband brings together two or more distinct but interdependent groups of customers. Such platforms are only of value if the other group of customers is also present (source: Business Model Generation book by Alex Osterwalder and Yves Pigneur). In this case the Believers, Artists and Music Buyers. Johan got excited about the results of the session and said: “I would love to put the visualized model in my room so I do not need to explain it all the time.”
Together with Wouter Boog (JAM) we worked on the visualisation of the model. We translated the Business Model Canvas with post-it notes to visuals. According to the visual design process JAM developed, we first understand what the several elements are. Then we try to understand their relationship. The Canvas helps as the 9 building blocks are put in the right order. By means of several discussions and feedback Wouter drew the first version.
Ouke and I went back to meet Sellaband with a big poster drawn by Wouter. Now we had a meeting with Sellabands’ General Manager Dagmar Heijmans. We put the poster on the table and started a discussion. Can you explain us your business model? Are there things missing? We had a very interesting discussion how Sellaband is working on his business model from the start, creating various prototypes, learning by doing. But what is the advantage of this visual? “Let’s bring the other colleagues to the table” Ouke said. Dagmar invited his colleagues and the discussion started again. “Wow!”, one of the new colleagues said. “Now I know exactly how Sellaband is making their money.” “Very powerful tool!” We concluded that Sellaband now has a common language when it comes to their business model.
We concluded ourselves that the model of Sellaband is a very good example of how a complex business model at first sight can be easily explained through visualization with the canvas. The Sellaband model now serves as a case study in the Business Model Generation book that will be released in September 2009. You can read all about it in the book.
Today in the Dutch newspaper “De Telegraaf” an article was posted about the fall of revenue of Notaries/Solicitors of 30 to 40%. “A big war” is going on between Notary offices who lower their rates in order to keep up with the competition. Or in other words… in order to survive. “200 notaries united to fight the battle because the market enforced the prices going down!” “The New Stamp” will put an end to lower prices. Anyone who charges lower prices will be friendly asked not to do so. AMAZING. Mmm… do Notaries wear sunglasses? Are they too blind to see what their clients really want?
But where have we seen strong decrease in revenue before? CD-sales? In the music industry? Where established firms like e.g Warner was outperformed by newcomers with new business models like Sellaband? In the car industry? In the airline industry where Ryanair and Easyjet rule the market nowadays?
What should Notaries do nowadays… ? I think they should understand that they can not change the market but rather themselves should adjust to the changes. Why? Clients do not see the added value of their services as contracts are available on the Internet. Their services are not transparent. Why paying € 1.400 for setting up a company? Or € 1.200 for wedding papers? Can Notaries do something about it? YES they CAN! Take off their sunglasses and do BUSINESS MODEL INNOVATION!
Take a look at the practices in the other regions, Estonia for example. Looking at Estonia would not be your first thought. However, we can learn a lot from them. The idea is to facilitate the entrepreneur in boosting the economy (not the Notaries bank account). For setting up a business you have 2 options: 1) through the Internet (if no notary is required) and option 2: at Notary office. And do you know what the second option costs you? Depending on the number of parties involved and the transaction volume you pay for a BV (Dutch Limited Company) only € 70!
Being served by an Estonian Notary feels like flying Easyjet. A different model. No over the top offices, no staff overload, no Notary with Mont Blanc pencils but just a beautiful designed office where you can shop for a Notary signature in only 20 minutes. By the way in the public computer corner you can pay your bill online. Pick up and delivery of papers on the next day. Wow Dutch Notaries… what about that?
Have you ever experienced the wonderful feeling of driving an electric scooter bike? Today I did. WOW! During the lunch break of our Business Modeling session with the Dutch based company QWIC run by Taco Anema and Michiel Hartman I had the opportunity. Sailing on your bike with no sound at all through the busy streets of Amsterdam-Zuid. Wonderful. I’d love to have one! See how Jan Selen (JAM) visualized my moves in this picture here…
During our session together with Twenty Twenty – Minnemijn Smit en Foris Croon – we explored different models. Strange. People are still afraid that they are not able to reload their accu. But how many fuel stations do we have near our home? Do we have the opportunity to get fuel at home? No! So? Afraid to do something environmental friendly? And what about the models? Freemium? Charge for accu’s only? A subscription or lease?
Anyway, I don’t care. My next car is a QWIC!
On May 6th I was running a workshop together with Ouke Arts of PricewaterhouseCoopers on Open Business Model Innovation. LEF Open Innovation (@ Media Plaza Utrecht) had put an interesting program together to discuss the topic “What is open innovation?” Open Innovation is a term promoted by Henry Chesbrough (Prof. University of Berkeley). The idea behind open innovation is that companies work with other companies on innovation. They either source it in, or source it out (eg. patents they do not use).
Just at the time I needed to do prepare the workshop Alex Osterwalder and Yves Pigneur released their book chunk on Open Business Models on the Hub. Alex describes here the difference between the outside in and inside out approach. Very visual presentation on how these business models work. Examples of Glaxo and Proctor & Gamble included.
But how does open innovation work for the participants of the workshop? During our workshop they audience had difficulties in coming up with a definition. Is it that you work close together on the innovation process with other companies? But what if a company recently invented an idea or concept and you start working with them rightaway? Is that inside out open business models? Or is it just smart sourcing? Anyhow, we had great discussions, people helped each other with describing business models and we concluded: Invent your business model! Inside, outside and upside down! (you can take a look at our slide pack here).
Today is a Free day! Alex Osterwalder posted his book chunk about Free as a Business Model on the Hub. What is actually a free business model? As Alex describes it is a “business model where at least one customer segment is able to continuously benefit from a free offer. It usually financed by another part of the business model or another customer segment.” The chunk describes great examples on Advertising (Metro), Freemium (Flickr, Skype, Insurance!) and the Bait and Hook model. You can find out more on our Business Model Hub. At the moment we are working with more than 350 members from 44 countries and we have 10 more chunks to go…
Peter Froberg – one of our members on the Hub – from Denmark introduced a great example on a Free Business Model: Freemium on his blog: Flat World Knowledge. Actually a model that looks interesting. Something we would have loved when we were students. Look at the movie of Flat World Knowledge. (sorry, I could not plug it in here).
But what is free actually? Free does not represent any value, does it? Nothing is for free… In the end someone has to pay… Either the client (a segment) or the advertiser or the government.
Striking is that Tata introduced a new car… The Tata Nano. It was first introduced on the Auto Expo (Jan 2008). A cheap, basic designed and environmental friendly car (very economical) . The car will be on sales on July 2009. But is this business model innovation? What do you think? Yes, making cars available for everyone… Same as India did with the public transport 😉
Yes, I think they use cheap labor, they produce for the local market (India) and… the distribute through Internet. You can buy your Tata Nano Online here. Online? Yes, as the options are limited (color of the car only), Internet suits as a distribution channel here.
See here a video on this topic.. thx to Innovation Management.