#48/111: Seizing the White Space

What is it about?

What have Amazon, Hilti and Hindustan Unilever in common? Each company revolutionized its business model. Mark W. Johnson studied these and more companies and found a process for business model innovation.

What can I learn?

What’s the job-to-be-done? Don’t ask your customer what he wants your product/service to be. Find out what tasks he have to do. This allows you to use your expertise to build a better solution. This will be your starting point.

How can you satisfy it? Now it’s time to build a company around your product. What are your key resources, your key processes and how can you make money out of it?

Let’s take the first business model of Amazon for example. The job-to-be-done was offering a wide range of books. You can only make profit, if enough books will be sold. Also the warehouse costs have to be reduced. Furthermore, people want to read their books as soon as possible.

To ensure that you are going to sell enough books, you have to build a platform. So the key resources and processes are the technology for warehousing, IT infrastructure for the website (channel) and a partner for shipping.

Change is hard: Often there’s a discrepancy between your company and your new business model. If possible, take the easy way and build a new company. It will save your lots of time, discussions and compromises.

Conclusion

I really like Seizing the White Space. It is more practical than Business Model Generation which focuses more on building a meta solution. There are lots of interesting case studies with uncommon companies. Furthermore, I like Johnson’s approach of Customer Development, i.e. searching a solution for the job-to-be-done and then building the rest of the company around it. Great recommendation for everyone who wants to start a company and solve a job-to-be-done.

#46/111: Startup

What is it about?

If you want to start a business, you need an idea and a business model and money. Elizabeth Edwards focuses about the latter. She shows you how to cut your personal expenses, how to calculate your financial numbers and why venture capital isn’t always the best option.

What can I learn?

Is your business profitable? Before starting your business, you should check if your business model can generate enough profit. How high is your initial investment and how much does it cost you monthly to operate your business? The next step is to calculate your profit on this basis. How long does it take you to break even, i.e. you aren’t losing money anymore? You should reject your idea if it will take longer than two years.

Capital can be expensive: Before you are going to look for venture capitalists, you should think about your need of outside capital. If you can do it alone, go for it. If you can’t do it without outside money, she recommends you to thoughtfully calculate your costs. Don’t forget to include your opportunity costs for searching investors.

Know your metrics: A business runs on numbers. You should monitor your industry key metrics (e.g. page impressions for social sites) and of cause your ordinary indicators like sales, costs and profit. Even if you aren’t a numbers person, learn how to read your key numbers.

Conclusion

This book is an accumulation of tips but lacks the explanation of why you should do they. This is a bit of a downer. The good parts of Startup were clearly the financial and legal knowledge. If you start your business in the US this information is possible pretty valuable. Lastly, besides of the financial and legal advice most advice is out of other books like Made to Stick or Business Model Generation. I would recommend reading those, if you want to deepen your knowledge.

#45/111: Business Model Generation

What is it about?

In the last twenty years business model innovation became an important term. Some examples are Amazon, which decided to sell a larger variety of books than usual or Google, which improved PPC advertising. Alexander Osterwalder and Yves Pigneur wrote about these and more companies in Business Model Generation and explain how to come up with a new business model.

What can I learn?

The Business Model Canvas: Here you can see the Business Model Canvas which is quite self-explanatory. You can download a larger version (with explanations) directly from their site. This is the basis for the whole book and method. You can see that the right side focuses on the customer (Customer Relationship, Channels, Revenue Stream, Customer Segment, Value Proposition) and the left side focuses on your internal work (Key Partners, Key Activities, Key Resources, Cost Structure, Value Proposition).

Let your mind wander: One great thing of the Canvas is that you can start collecting individual ideas for every panel. Try different combinations and be crazy. That is a great way to explore business models you never thought of. After your brainstorming session it’s time to reduce the model to a few realistic ones.

Use your waste: If you look on the left side, you got your internal background for offering the right side. Amazon, e.g. needs a sophisticated IT infrastructure for lots of items online. They used their waste to build Amazon Web Services which offers cloud computing and storage for everybody. What’s the waste in your industry and how can you use it?

Conclusion

Actually, I wasn’t really overwhelmed after reading this book. I thought that It’s a nice canvas but not overwhelming. Then I used the Business Model Canvas and it was pretty good. I saw people modifying it for their industry and this was impressive. In conclusion, I think it is sufficient if you download the Business Model Canvas, study on some existing Canvases of Facebook, Zynga or Kiva and then go straight creating your own.