WiFi connection bars rarely represent the quality of the connection, they only indicate distance from it. How can we get a better idea of the health of a network and its integrity?
Business model innovation
When companies talk about innovation, the status quo says it's an iterative development that happens at product or service level with improvements as catalysts for change.
But what if this way of thinking about it has run its course?
What if the greatest single factor for leap frog innovation is the business model itself: exploring and expanding the ways in which we make money, seeing what catches fire and pursuing the potential from there?
In a recent talk, Zoe Scaman provided some examples of what moving innovation to the business model looks like by tapping into what companies are doing in China:
- Books: from transactions and subscriptions as the only options to unlock the ending, pay per chapter, tips, and reading credits, which has a gaming component.
- Podcasts: from advertising and donations to tips, pay per episode, membership, listening credits, and subscriptions.
- Music: from subscriptions, transactions, and advertising to adding ticket sales and live streaming, limited time access, listening credits with access to merchandise, and personalization.
This takes care of digital distribution. But what about physical places? Eventually, we will rejoin the land of in person space. Barnes & Noble is trying to write the next chapter of its existence:
Instead of stockpiling books that people need but don’t want (like history textbooks), [James] Daunt is shifting B&N’s focus to curating books with local, thematic value.
Daunt is also the CEO of Waterstones, a 280+ branch bookstore in the UK where his focus turned the company into a profit machine.
Impressively, Waterstones’ return rate (the number of unsold books retailers return to publishers) is 3.5%. Now, Daunt is trying to slim down B&N’s marginally higher rate of 25-50%.
Daunt's playbook looks remarkably similar to the shift from transactions to subscriptions in the meaning Morrissey ascribes to it: focus on content, i.e. have full control on book selection and store design locally.
Thinking around corners is a good way to describe the expansion to business models, plural, and innovating with distribution. Jen Van Der Meer of Reason Street wrote about the pay-as-you-go business model. When you innovate the business model, you can open different income streams and create stability in the business.
Product takes center stage
Remember Jack Butcher of Visualize Value? I talked about him in the issue about creators as critical links in the value chain. He was working around the clock as a freelancer, then as the owner of an agency. He decided to give the business model innovation a stab.
He’s built up an audience of 300k across social channels. 18 months ago, Jack launched his first digital product. Now, he’s making $1m/year. His motto is "build once, sell twice." And takes advantage of the costs and potential scale of online products.
The first thing Jack did, actually, was to build attention. Then he tried a bunch of ideas to see what stuck, gave people the option to learn what he was doing… as he was doing it. One mere step ahead of them. Of course, you've got to have skills in at least one domain to pull this off. In his case, visualizing value was an idea whose time has come.
You're likely not going to quit your day job today, if you have one. Which is wise. But maybe you'd like to learn to see a bit around corners at work.
In the status quo world you have:
- Transactions that are all about the sale—hence much of the focus ends up going to promotion to get new customers and innovation ends up being unstable.
- Subscriptions that are all about retention—to get to predictable numbers you manage attrition while you work on innovating just enough to keep numbers steady.
- Advertising that is all about attention—media companies have been spinning all kinds of ways to increase time and engagement… social media did bring some innovation, but kept the value.
But these are not the only possible business models. Jack is playing with different business models, each with its own strategy and products. This is how you scale.
Morrissey again with some recent media examples:
This is why Jason Kilar is risking Hollywood’s wrath by moving Warner’s movie slate onto HBO Max. This is why Quibi failed. This is why Nicholas Thompson, a journalist with product chops, is a fitting choice to be The Atlantic’s new CEO. This is why The New York Times has lapped the field in the news business to the point where it is a threat to all news publishers by poaching top talent and taking disproportionate market share. On the B2B side, Industry Dive’s Sean Griffey has pointed out how screwed big events companies are because they mostly got rid of their publishing assets. And yes, it is why we are seeing star creators continue to leave legacy publications.
A time of great opportunity
It sounds like part-detective, part-creator, overall curious coach and champion: someone willing to try things, with a sense of humor and high in self-awareness.