How to Innovate the Macro Business Model

Up to now I focused my writings on innovation of Business Models of companies and their role in the Value Chain. The credit crunch and its effect on the real economy asked for a reflection on how to innovate the current Macro Business Models and the possibility to create a so called ideal Super Business Model on macro level.

The Russian Economist Nikolai Dmitrievitsj Kondratieff discovered in the early nineteen hundreds a economical cycle of fifty years in four different stages (seasons): Spring (starting up), Summer (consolidation), Autumn (stabilization) and Winter (liquidation). Eric Mecking (Universiteit Amsterdam, Deflatie in aantocht) recognized strong similarity between the situation of 1920-1929 and 1980-2000. These periods are also recognized as typical Autumn Seasons.
We are just at the beginning of the Winter Season and for the first time in the whole world at the same time. It will be much worse than today and it will be not over in just one or two years! On the contrary, based on the counter measures of National Administration (based on the old Business Model of one-faced value measuring and often extreme unequally value sharing) I expect they even enlarge the problem.

So it is time to Innovate the Macro Business Model (MBM) !!!

What are the key elements to change in the current MBM:

1. From extreme unequally value sharing towards a more balanced sharing. President from Brazil showed a nice example with his Bolsa Familia how he managed to implement the first steps to balance the value sharing. Its seems to work for Brazil.
2. From individual value measuring towards collective and sustainable value measuring. Noreena Hertz wrote about the change from Gucci-Capitalism to Coöp-Capitalism. The core values are based on cooperation and collective interests.
3. From absence of Government or overregulated Government towards a balanced and facilitating Government. In the VS the Administration is not endorsing basic human needs. President Obama showed that every 30 seconds a family is forced to lose their house because than can’t pay the medical bills. China bounds every economic model to operate freely. The EU suffocates entrepreneurship, innovation and risk taking with ridicule law and legislation. Administrations needs to develop new formats based on the balance between freedom and safety. It should be flexible, adaptive and therefore based on the courage of new generation of world leaders.
4. From one-side technology based innovation criteria towards holistic measurement instruments of Innovation. In many countries we measure innovation based on R&D spending, the amount of new IP and the volume of engineers. Successful innovations should be measured as I described in our Point of View on Business Model Innovation.

I strongly believe that all pieces of the puzzle are there but not in place. We need to co-create on a global level to reach out to a new Macro Business Model working for everyone and in any place. We need to step forward and show new leadership and entrepreneurship!

Business Model Innovation Archetypes

In the engagements with our client we face that business model innovation is a complex issue. Many aspects are involved and these are also intertwined. As I wrote in articles earlier we use a Business Model Innovation Framework based on Oosterwalder. We use this framework to facilitate the in depth discussion with our clients according to the systematic approach to create more business value. In these discussion sometimes we end up into an academic dilemma if we can speak about a new business model or just an improvement of the current business model. In concrete terms: how many of the building blocks of the framework have to change in order to speak of a real new business model. Personally I think that it is not a key discussion but I looked for some interesting peer views on the web. I found an interesting paper of MIT Sloan: Do some business models perform better than others? The authors defined a Basic Business Model Archetypes. They use two key criteria:
1. What rights are being sold?
2. What type of asset is involved?

In the first criteria they defined different rights: ownership, use, matching. In the situation of ownership they distinguish an ownership of asset with significant or limited transformation.
The second criteria they came also with four different types: Financial, Physical, Intangible and Human assets. If you combine these two sets of criteria you get theoretical 16 possible archetypes. The good news is that in the study of the largest 1000 US companies they discovered only seven types in practice. As I work a lot with high tech companies and manufacturers I am interested in the physical assets with gives three archetypes:
1.Manufacturer: creates and sells physical assets. Buys raw materials or components from suppliers and then transform or assembles the asset to create a product sold to buyers. (example: General Motors)
2.Wholesaler/Retailer: buys and sells physical assets. Buys a product and resells essential the same product to someone else an may provide additional value by transport, repackaging and customer service. (example: Wall marts)
3.Physical Landlord: sells the right to use a physical asset. The asset may be a location or equipment or even complete production plants (example: Marriot, Hertz).

We see that a lot of our Business to Business Clients are willing to move from one to type two or event to type three. We start to analyze the different archetypes in terms of differentiation of the Business Model Innovation Framework. As expected we see some logical differences in dominancy of the buildings blocks within the framework.
We use the outcome in two parallel ways. The first way (insight out) is we analyze the impact on the current business model of a running innovation project and see if it will lead to a new Business Model archetype and what kind of transformation is needed. In the second way (outside in) we use the Business Model Archetypes to challenge the current Innovation Portfolio in order to change the projects to boost the value creation.

The conclusion is that Business Model Archetypes can indeed help clients to improve the discussion of the current Innovation Portfolio and how to boost there business value. But only if the archetypes are in detailed analyzed by the Business Model Innovation Framework value can be captured.