Personal Blog
A link to the Flare Innovation Impact Matrix was shared by fellow friend Fenno Verdaasdonk. In this article I will describe the Flare Innovation Impact Matrix and try to look at connections with business model generation and corporate effectuation.
What or who is Flare Innovation? Flare Innovation is a “collective of experienced innovators and specialists operating in the wider field of innovation and new product development”.
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?”.
Stress, the University of Twente’s largest study association, organized an awesome guest-lecture with Steve van Wyk, CIO @ ING Bank. The theme of the lecture is “Challenges @ ING” and one of the topics is the merger of the Postbank and ING, the challenges that came with it and how they were overcome.
In this article I will provide some of the interesting topics from the lecture, and for those who haven’t attended this lecture you really missed a great opportunity to have a detailed look at the technology-side of ING.
A few days ago my attention was caught by a message communicated via the verified Google Twitter account, that introduces the role of Google as an engine of economic growth:
“We’re not just a search engine, we’re an engine of economic growth. Our U.S. economic impact in 2009 was $54 billion”
On the official Google Blog you can read a related article, posted by Claire Hughes Johnson, Vice President, Global Online Sales @ Google.
“This week is National Small Business Week, and Ross will be with me on Capitol Hill in Washington today to share his story and help unveil something that means a tremendous amount to me: a new report detailing, for the first time ever, Google’s economic impact in all 50 states.”
Let me be clear that the financial number of $54 billion is pretty impressive, but still I find the first time ever part remarkable. I’m pretty sure that the quantification on a state level is the first time ever in a public available document. Google is a public traded company, so you should be able to find estimates of the economic impact in the annual reports.
But what does the financial number of $54 billion, represent? If you download the Google’s Economic Impact – United States, 2009 – report, you can read that:
“In the pages that follow, we describe Google’s economic impact across the U.S. This impact is reflected by the number of advertisers and website publishers in every state, the non–profits we provide with free advertising, and the real–life stories of small businesses that have benefited from using Google.” (Google’s Economic Impact, 2009, p.3)
What I really like about the report, is that start-ups, entrepreneurs and small business are included in this report. I recall the statement of Professor Pieper on the title slide of the opening speech presentation of the vision on the future symposium: “Value creation, nothing else matters.”
Google is well known for its search engine activities, but with regard to the economic impact let’s have a look at the business side where the money flows! In the the Google’s Economic Impact – United States, 2009 – report, you can read that:
“Aside from being a well-known search engine, Google is also a successful advertising company. We make most of our revenue from the ads shown next to our search results, on our other websites and on the websites of our partners. Through these ad programs, we help many others make a living too. This booklet presents a conservative estimate of Google’s economic impact on businesses across the U.S. based on three core parts of our business: Google Search and AdWords, AdSense and Google Grants.” (Google’s Economic Impact, 2009, p.4)
As you can see all three advertising related core parts of the Google business-side are closely tied to Google Search, which is the key resource (control point) in the Google Business Model.
The first advertising pillar the generates Google revenue is Google Adwords, that shows ads next to the search results based on the keywords that you have entered in the search field. In other words these are more or less “targeted” advertisements.
The second advertising pillar that contributes to Googles Economic Impact is Google AdSense. On the Google AdSense product page you can read the following description:
“Google AdSense is a free program that enables website publishers of all sizes to display relevant Google ads and earn.”
Almost everyone I know in online publishing is using Google AdSense to some extent, since Google AdSense can place advertisements in: (1) content, (2) mobile, (3) search, and (4) feeds. In fact it is a mutual relationship, since Google needs websites and online publishers to sell advertisements, while online publishers can use Google AdSense at no costs, and start earning money.
The most interesting part of Google AdSense is the multiple channel characteristic, each with different financial business (model) parameters.
The third advertising pillar from that contributes to the Google revenue is Google Grants. For me personally this was a pillar I don’t know that well, however if you look at the description on the Google Grants website, it is nothing more than Google AdWords for non-profit organizations:
“Google Grants is a unique in-kind donation program awarding free AdWords advertising to select charitable organizations. We support organizations sharing our philosophy of community service to help the world in areas such as science and technology, education, global public health, the environment, youth advocacy, and the arts.”
In addition the financial number of $54 billion as the total of Google’s US Economic Impact in 2009, it is interesting to have a look at the underlying calculations.
You can find a pretty detailed description of the calculations in the Google’s Economic Impact – United States, 2009 – report, as shown in the picture above. (Google’s Economic Impact, 2009, p.6-7) Furthermore you can find a video of Claire Hughes Johnson, Vice President, Global Online Sales @ Google and Google Chief Economist, Hal Varian, who provides additional background information on the underlying calculations:
httpv://www.youtube.com/watch?v=hiGn8HPGrMM
When I first watched the video, I heard the word estimates a few times, which raised some skepticism. Of course I do understand that it is hard to make the calculations with a mathematical accuracy on two digits behind the comma, that are 110% reflecting the real world situation. However in the Google’s Economic Impact – United States, 2009 – report (p. 7) you can read:
“This is a first attempt to estimate the economic impact of Google’s core search and advertising business. In search and advertising, we’ve derived a conservative estimate of the impact of our tools on businesses, website publishers and non–profits, but we’ve left out such estimates as the cost savings for consumers now able to find the information they need more easily than before. We also have not estimated the economic impact our employees provide, or that of other major products like Google Maps and YouTube. So while we’re reasonably confident in our estimates, consider them a lower bound on Google’s true economic impact.”
As you can read in the “what is not included” section (Google’s Economic Impact, 2009, p.7) there are some limitations and constraints. For example the is purely focussed on the core search and advertising businesses. YouTube is excluded despite it has become the second largest search engine online, is another example.
“For more information about our methodology and to download the two cited studies, please visit: http://www.google.com/economicimpact/methodology.html”
At first I think the Google’s Economic Impact – United States, 2009 – report is a highly interesting one, especially since there are some real-life examples included from each of the 50 states. I think both this report and the total economic impact, represent quite an amount of entrepreneurship.The report furthermore shows some core aspects of the Google business (model) side, where the search technology is an enabler for the advertising revenue model.
However there are certainly also constraints and limitations in this report about Google’s Economic Impact. You could also phrase it differently: the report has a clear focus on search and advertising, and it is a first attempt with recommendations for further research. 🙂 It would be interesting to do some math and compare the numbers from the Google’s Economic Impact 2009 report, with the Google Annual Report 2009.
Last year I was fortunate to visit Microsoft TechNet_Live, an event for IT Professionals and Technical Decision Makers, that started with a keynote “Join the New Efficiency” from Microsoft CEO Steve Ballmer. If you have a look at section 1. and the included picture, you can see that Steve Ballmer is performing a similar exercise with the slide “IT More Critical Than Ever”:
“Steve Ballmer describes the impact of the Microsoft Ecosystem in the Netherlands in terms of hard numbers: for example jobs, revenues, new business opportunities and even as percentage of the GDP.”
It is not only Google, Microsoft or Apple who have a significant economic impact, but I think you can extend this reasoning and generalize that every (major) company has strategically build ecosystem that directly or indirectly includes other “surrounding” companies in the ecosystem.
Do you remember the article on the Official Google Blog, in which Google closed the acquisition of AdMob. Mobile Advertising has become a central part of the Google Advertising business with the AdMob acquisition.
Combined with the growing global market-share of the open source Google Android mobile operating system, I’m really curious to find out what percentage of next year’s Google’s Economic Impact is generated from Mobile and Mobile advertising. …. and with these last thoughts I would like to finalize this article !
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 highlights of Android Experience 2010, in my personal opinion, are marked in itallic in the list structure above.
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.
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) ?
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
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)
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.
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
