In this article I will try to answer the question “What is a business model?”. I will use a formal definition from Alexander Osterwalder and dive into tools and concepts that might be of use when you start playing around with innovating your (company’s) business model.
What is Open Innovation? Professor Henry Chesbrough shook up the business world with his book Open Innovation: The New Imperative for Creating and Profiting from Technology back in 2003.
In 2006 professor Chesbrough released another book Open Business Models: How to Thrive in the New Innovation Landscape and in 2011 Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era.
This illustrates that the open innovation field has innovated itself, and therefore I would like to focus a on the (research) question “What is open innovation?”.
Open Innovation Definition
Let’s start with a definition from the University of California, Berkeley – Haas School of Business website:
“Open Innovation is the use of purpose inflows and outflows of knowledge to accelerate innovation. With knowledge now widely distributed, companies cannot rely entirely on their own research, but should acquire inventions or intellectual property from other companies when it advances the business model.”
Open Innovation is not only about getting knowledge and ideas into the company boundaries, but also about outflows of knowledge and technology to various markets.
During the fifth European Masterclass on Corporate Entrepeneurship & Open Innovation with Henry Chesbrough & Kenneth Morse, professor Chesbrough emphasized the importance of the business model.
Definition Business Model
“A business model describes the rational of how an organization creates, delivers and captures value.“
Advancing the business model sounds like business model innovation as defined by Osterwalder et al. (2009).Osterwalder et al. (2009) provide a tool, the business model canvas, to help advance or innovate the business model !
Open Innovation Funnel
The open innovation funnel could be seen as the visual model of the open innovation definition above.
- You see both the blue internal technology base as well as the red external technology base;
- You see the various inflows and outflows of knowledge, including in-sourcing, licensing, spinning out, divest and venture handling;
- Finally you see the various combinations of market(s) from a company’s current market, a new market or another firms market.
The open innovation funnel will help me position open innovation research articles, but helps furthermore in the process of developing new business models.
Service focused innovation
Finally I would like to invite you to watch the following interview with professor Chesbrough, in which he briefly explains the change from product focused innovation to service focused innovation. 🙂
“Henry Chesbrough, executive director of the Haas Center for Open Innovation, rethinks the concept of open innovation to tackle a new economy. In his new book, Open Services Innovation (2011), Chesbrough offers the tools to apply service-focused innovation to avoid what he calls ‘the commodity trap.'”
Enjoy innovation !
I was fortunate being invited to attend the highly succesful first edition of the Android Experience, an event that adresses the Android ecosystem from different perspectives.
In this article I will briefly summarize some of the highlights of Android Experience 2010 @ the Amsterdam Convention Factory.
On the MobilityMinded website I have written an extensive event report, inline with the following structure:
- The importance of openness for innovation – Vincent Everts, trendwatcher;
- The mobile future is bright and open, the impact of Android – Ed Achterberg, founder, CEO and senior research analyst at Telecompaper;
- The power of Android: User experience is key – Mark Moons, Regional Director Benelux HTC;
- Developing Apps: Doing business making money – Raimo van der Klein, Chief Exectutive Officer of Layar;
- Banking with apps – David-Jan Janse, Manager of Rabo Mobile, Rabobank Netherlands;
The highlights of Android Experience 2010, in my personal opinion, are marked in itallic in the list structure above.
The mobile future is bright and open, the impact of Android – Ed Achterberg, founder, CEO and senior research analyst at Telecompaper;
I really liked the objective scientific approach of Ed Achterberg, founder, CEO and senior research analyst at Telecompaper. While some very interesting facts about the competitive mobile landscape were presented, Ed Achterberg also made some points that really make you think.
The misuse of the term personal computer for a desktop computer at home, while you take your smartphone with you all the time. A smartphone, which has taken over a lot of computer capabilities, is probably the most personal electronic device. Also the impact of other devices, like the netbook, e-book readers and devices like the Apple iPad will change the landscape;
Ed Achterberg presented a graph with the indexed results of the simplicity of device configuration at first use. Honestly I didn’t expect this measurements. However with the average age of the Dutch society rising, fast and easy configuration for the Joe Average end-user becomes critical, with increase of complexity among mobile electronic devices;
- The Android operating system has got a very explosive growth curve with rapid development cycles. From the launch of the HTC Dream, which was the first Android device several versions of the Android OS have been released, 1.5 , 1.6 , 2.0 , 2.1 and a variety of handset manufacturer customizations. The open source nature has driven the growth of the platform, but it also fragments to Android OS at a fast rate. An interesting question is if Google should step up and close the open source model a little. Ed Achterberg suggests that a more uniform quality and user exprience could help the Android OS.
Especially about this last bullet I had some discussion about, among mobile friends and on Twitter with for example JeanPaul Horn (Planet Android / iPhoneclub) and Arnoud Wokke (Tweakers). I’m also curious if and how Google tries to manage the Android Marketplace with an explosive growth of developed applications (indexing and categorizing applications vs. sending in new applications) ?
The power of Android: User experience is key – Mark Moons, Regional Director Benelux HTC;
Mark Moons, Regional Director Benelux HTC, builds further on the market figures from the previous session of Ed Achterberg by sharing the HTC marketshares and the position of the Android OS in the Dutch mobile market.
A significant part of the session is about the Android ecosystem. Mark Moons explains the necessity of a healthy ecosystem in which the different players challenge each other and drive true innocation. In this light both open- and closed ecosystem are addressed, as well as the opportunity to educate end-users and create a competitive advantage for retailers.
The main conclusion is that an operating system with a healty ecosystem and an excellent user experience will be sustainable on the long term. According to Mark Moons, “Android will become the second operating system in the Netherlands within two years“.
Picture used with permission of Daphne Channa Horn, Independent Photographer
Developing Apps: Doing business making money – Raimo van der Klein, Chief Exectutive Officer of Layar;
Raimo van der Klein, Chief Exectutive Officer of Layar, is the fourth speaker on the Android Experience, and shares the challenges, opportunities and reconfigurations of business model and strategy in time of Layar.
Layar now aimes at becoming a platform (in contrast with the initial content focus) on top of which other developers can build their services, and in which Layar more or less takes care of a stable platform/environment, the distribution, the installed userbase and pre-installation on Android smartphones, for example the Samsung Galaxy S.
Raimo van der Klein explains the different business models and some specific business details in an interview with Vincent Everts (in Dutch and remark that Android World = Android Experience, Ed Achterberg is from Telecompaper not from Telecomworld)
Layar had 3-5 business models from the start about a year ago and now;
Layar was one of five concepts the Layar team planned to do, however now there is fulltime focus on Layar only;
32 people are working on Layar;
Layar is funded (with venture capital) for E2.5 milion euro;
2700 Layar developers worldwide;
450 Layars published already and 1700 Layars in development;
THE BUSINESS MODELS
Content Layars, payment for hosting;
Opening the platform, payment when content is published, for example with a monthly fee;
Analytics, premium payments for advanced analytics;
Currently Layar focusses on building and expanding the brand, distribution and things like the pre-installation deal with Samsung;
Games and tourists guides will become available in Layar in the near future (remark business model 2 in the list above);
Currently Layar has more end-users on Android devices than on the Apple iPhone devices;
The release of every Android device caused some change in the Layar code. Upcoming year about 90 handsets, and 2 people working fulltime on a stable Layar experience on all these devices;
Looking at a collaboration with Nokia (Symbian, Meamo). Nokia is stil the largest handset manufacturer that ships 400 milion handset per year;
Nokia plays the retail game very strong and pushing the distribution among stores;
Raimo van der Klein illustrates the Layar platform startegy with a new venture: TAB worldmedia, who connect augmented reality with outdoor advertising. I was fortunate to talk with Remco Vroom and Johannes la Poutre in the late afternoon, which was highly interesting.
At first I’m glad that Raimo van der Klein is willing to share these details on a business model level. It is very interesting, and these facts simply illustrate that business model innovation and the constant search for new strategic opportunities and exapnding competitive advantage are a necessity for every entrepreneur.
I’m curious if the Layar team used a business model design tool, like the business model canvas proposed by business model expert Alexander Osterwalder.
Final thoughts and wrap-up
I would like to compliment everyone who has been involved with the organization of the first edition of the Android Experience. The great industrial atmosphere of the Amsterdam Convention Factory was excellent for a technology event like this.
In addition to the excellent presentations above, Android Experience was also about meeting old friends (developers, press, bloggers, handset manufacturers, distributors) and meeting new friends. During and after the Planet Android App Challenge 2010, I had a few drinks with Patrick de Laive of the Next Web. A great guy with an exceptional entrepreneurial drive.
Other examples of this creativity and entrepreneurship are my discussion with the guys from TAB Worldmedia, or the described presentation of Raimo van der Klein, Chief Exectutive Officer of Layar, and Koen Krijns of Hardware.info with the barcode scanning application for Android.
The conclusion is simple, first edition of the Android Experience was a huge success !!
Dynamic Content Gallery Picture used with permission of Daphne Channa Horn, Independent Photographer