In one of my recent class at ID, the professor asked
"What are the coolest product innovations in the last 10 years?"
In a few minutes, the class came up with this list....Google, Social Networks, Smartphones, Dyson Vacs, Single Cup Coffee, Oxo Good grips, Web Services and Tablets
"What are the coolest business model innovations in the last 10 years?"
In about half the time, the class came up with twice as many names....Amazon, Zipcars, Netflix, Dell, iTunes, Outsource, Crowdsource, Freemium, eBay, Redbox, Craigslist, Jetblue, Microlending, Cloud computing, Adsense and Peapod
Couple of observations...
- Business model innovations seems to be where the action is (I know, its obvious)
- A number of product innovations often are part of business model innovations (Google)
- All the business model innovations listed appear to be enabled by the internet (Shaun's awesome observation)
"So why is it that more innovation is happening in business models instead of products?"
- Commoditized product features - iPhone / Android / Blackberry - similar capabilities
- Limited product differentiation with technology, branding, design, pricing = Limited competitive advantage
- Blurred customer segments - 60 year olds buying Scions - Products alone offers uncertain marketing plan
- Product copycats - Means product innovation is not enough
On the contrary, the business model innovation offers...
- More levers to pull...pricing, delivery, entire user experience and of course product innovation
- Sustainable competitive advantage - Netflix or Redbox (actually better yet, ask Blockbuster or Hollywood Videos ;-) )
- Network and platform effect (Think iPod without iTunes)
- Services that were seemingly impossible in the past (Thanks DARPA for the internet)
Every day, we encounter some problem and think 'there has to be a better way', but often a lot of our thoughts gravitate to building a better mousetrap. To me at least, it was a profound realization that businesses strategies are not balanced adequately if they do not address a business model design.
Real world example...What if a Windows/Nokia phone handset (whenever it debuts) was not offered as a mobile device for purchase but rented instead .i.e. instead of buying a $150 - 200 handset (Android / iPhone), what if Microsoft/Nokia offered a comparable handset for an additional $10/month with free upgrade to a new device every 12 months.
So, who's got game - product designers or business strategists / back office / ops guys...Maybe a combination of both.