Business model innovation vs new business models: - organizational implications

"New ventures within established organizations are best created as separate units. In fact, they should be built as though they are startups coming together from scratch. "

Chris Trimble is making this conclusion when discussing the newspaper industry with regard to the print and online operations. He declares two reasons for his conclusion:

"First, new ventures face much greater uncertainty, and, as a result, everything that established companies think they know about planning and assessing business performance gets turned upside down. Second, major business model change simply does not happen without sharp organizational change."

I believe Chris is both right and wrong. Yes, new ventures face a higher risk. That is an obvious statement. A new venture is...new. It does not have a track record. No customers. No nothing. It's just an idea that we are trying to commercialize. Priorities are different in infancy compared to maturity, but a new venture is still a business and should be run like one.

I agree with Chris's second reason but I would state my conclusion slightly differently:

• New ventures within established organizations are best created as separate units, if the venture is based on a new business model.
• New ventures within established organizations should not be created as separate units, if the venture is based on business model innovation.

Why? Because when the company offers a new value proposition they need a new business model. A new business model equals new knowledge, new operations, new customers or new customer segments, new supply chain etc. Hence it makes perfect sense to set up the venture as a new unit or as a start-up company.

When the company "simply" make changes in the existing business model it's called business model innovation. The value proposition does not change, though different parts of the business model change. Creating a new organization for the business model innovation makes no business sense as it creates confusion for all parties involved, from employees to customers.

And here is the key, in my opinion, to understanding why the newspaper business is consolidating their print and online operations. They did not understand the principles discussed above. Instead of viewing the online operations as a new business model, they should have viewed it as a business model innovation, and have incorporated the new operations in their existing organizations. This way they would have saved tons of money by not having to re-organize their companies two times, first by starting up new venture organizations and later by consolidating these ventures into their regular operations.

Tags: business models, innovation, business model, business model innovation, new ventures, newspapers, organization

The recession as an opportunity to create a better world

Recessions are part of a cyclical change. But we seem to forget that. Peter Schiff's early warnings about overconsumption, debt, low savings and underproduction was ridiculed and laughed at. We can now see that Schiff was right. Good for his career. Bad for us. Or is it?

Umair Haque writes about the same overconsumption as Schiff. Haque goes a step further by stating that "We're addicted to consumption". This addiction is driven by the push marketing/sales culture in our present business paradigm, the industrial paradigm. A paradigm that is based on what Riane Eisler calls "dominator systems".

The industrial age represented the mechanical universe and the organizations were patterned after the dominator model:

• fear-based
• characterized by rigid hierarchies of domination
• an ethos of conquest (including the “conquest of nature”)
• a high degree of institutionalized or built-in violence
• male domination
• and contempt for “soft” or stereotypically feminine values

The industrial organization was made for another era, when control, efficiency, order and predictions were the foundations for success. Here is the paradox. The world we live in is completely different from the industrial age. Still, we rely on the same principles for organization today as we did 100 years ago.

The recession does not have to be the worst thing since "New Coke". Crisis also breeds opportunity (Business Week). Andrew Carnegie started building his empire 1873, in the beginning of a depression. Hewlett and Packard started their operations during the Great Depression. What is needed in order to capture the opportunities are courage and innovation.

I believe the world has an urgent need for two kinds of innovations;

• organizational innovations that release us from the decaying industrial paradigm, and
• business model innovations that focus on real value creation

I believe these two breeds of innovation are closely linked. Organizational innovation may not be a prerequisite for business model innovation, but it can certainly pave the way for radically new business models.

In order for this to happen we need courageous leaders. Leaders that are brave enough to pioneer the emerging paradigm, while their peers will ridicule and laugh at them. Just like Peter Schiff's "peers" did a year ago. But look who's laughing now.

My hope is that the recession will not just be misery, bailouts to preserve the old power structures and economic waste but that we will see pioneering leaders emerging, leading the way to a better future for mankind and our planet.

Tags: Peter Schiff, recession, Umair Haque, consumption, industrial paradigm, opportunity, courage, change, innovation