We have learned that innovations are often variations of something that has existed in other places, in other industries, in other markets in other context. Some authors such as Gassman say that it is not necessary to reinvent the wheel with each project and with each innovative initiative and it’s that reinventing the wheel sometimes leads to dead ends instead of improving things as it neglects everyone else’s learning. On the other hand, Gassman says this learning can be inspired on what already exists, you can be inspired with what already exists. The research they have developed has demonstrated that approximately ninety percent of all successful innovations of business models what they really do is to recombine elements of existing business models. Innovation lies exactly on that comprehension of the recombination and how you translate and transfer it to successful patterns and put them in your own industry, you adapt them to your business model. Now, this is not that easy, it’s not that easy as though it were a simple copycat but what it allows you is to learn from the others and thus it may allow you to reinvent your own industry. Which are the strategies suggested by the St.Gallen School to make your business model? According to the book Business Model Navigator there are three basic useful strategies to create a new business model. The first one is transference. An existing model is transferred to a new Industry, what you see as success in an industry, you take the business model and you can transfer it to a different industry. The main advantage is that the blueprint, that is the blueprint already exists. The second one is combining, transferring and combining two business models. Especially innovative and big companies can have several business models, you can no longer keep one only you have to find variations and transfer several business models combine them ,and the third one is called Leverage, and a successful business model is used to produce another range of products and new business models as a platform. The most important thing of the new business models to be competitive is that the company must open to the outside world and be ready to learn from other industries the message is clear one can learn from other industries. It is important to mention that copycats won’t do the trick, that is they will not be successful, only creative copycats with the capacity to learn and transfer these lessons can really revolutionize their own industry according to what Gassman says in his Business Model Navigator. We will talk about the best known or more popular business models nowadays. They are not in alphabetical order but you can use them and look at the patterns in order to develop your own business model. I hope you enjoy these examples. The first example of a business model that is already baptized and is known since a long time ago is called Razor & blade, in this Razor & Blade model the basic product is sold at a bargain price, even below its cost and is even given out for free. The additional products that customers need to use this basic product have now a high price and some make themselves accountable, these additional products are held accountable for generating income. The main idea of the Razor & Blade pattern is to generate loyalty by reducing the barriers to purchase the basic product. Money starts flowing in once the customer buys the complementary products. The most famous case is that of Gillette. In 1906 Mister Gillette creates the razor and its blades and what is worth more, the most expensive are the blades. The other example we have here is that of Hewlett-Packard of the printers and cartridges. Oddly enough, the most expensive is not the printer but the cartridge. I hope you liked this business model called Razor & Blade. Now I’m going to talk about a very modern second business model called Long Tail. Even when Long Tail offers more stretch margins and less volume of sales of individual products, profits are significant in the vast array sold in the long term. The Long Tail pattern, or Long Tail ignores the classic rule that we know as the eighty/twenty rule, according to which a company generally makes eighty percent of their profits with only twenty percent of the sales of their products. With this model, massive and specialized products can even generate a bigger part of the income and that is why in order to be successful a company must be able to, in the Long Tail model, to handle the distribution costs efficiently as you are not selling large quantities of a product. The most notorious Long Tail cases, quintessentially, are which? Yes, you are right, they’re Amazon, Ebay,Itunes, Youtube. I hope that this business model helps you to create your own business model. The third business model that we are going to discuss, and which you must have surely heard about is called Crowdsourcing. Crowdsourcing is the technique to outsource specific tasks to external actors, which generally learn about the tasks through an open call, that is they participate through an open call and that is Crowdsourcing. The objective of Crowdsourcing is to extend innovation and knowledge sources of the company and open possibilities to develop cheaper and more effective solutions outside the company. Crowdsourcing has gained enormous strength in the last years through the possibility of connecting with several actors in different ways. These actors complement your needs at a much more accessible price and thanks to the Internet we can do Crowdsourcing all over the world in services which companies traditionally did inwards. The most relevant crowdsourcing companies for 2020 according to our research are companies that specialize on design, marketing, advertisement, publicity, etcetera such as Flickr, Creative Common, RedesignMe, uTest, Chaordix, Namethis, Pledgemusic and Spitch. This also has to do with names registration etcetera all the topic of creativity can now be associated through Crowdsourcing. The next business model is Crowdfunding, you must surely have heard about it. This is a business model that consists of outsourcing or opening the funding of a project to the public in general. Its intention is basically that investments in a project are democratized. It starts with ads designed to disclose projects that seek potential sponsors. Most of the people who will be funding are crowds, they are private or collective individuals who freely choose how much they want to invest on a project in exchange for endorsement and oddly enough because in exchange for endorsing the project the investors, this public, receive a reward, but oddly enough this reward may not necessarily lie on an interest rate but it may be a finished product or maybe a different economic value. Usually, funding is an all-or-nothing proposal which means that a project can only be done when the minimum funding objective has been reached this is very important because looking at crowdfunding platforms if you really do not meet the limit set forth the funding is not completed. It is important to mention that the crowdfunding spirit is favoring entrepreneurships or projects in early stages, therefore profitability is important but more than that there is an investor spirit in favoring the entrepreneur then it is very important that you understand that these are platforms which are democraticized for the public in general and they are not professional investors but the public invest their money. Famous platforms of this on the Crowdfunding part are: Kickstarter, Indiegogo, Kueski, Fondeadora, etc. The other business model that we are going to discuss is E-commerce, electronic commerce, includes different activities among them are purchasing, sales, supplying and distribution of services or products through digital platforms and websites on the Internet. Through the virtual network customers have access to several catalogues of services and products at all times, anywhere. Remember we are talking about E-commerce. The relevance of this type of commerce of electronic commerce is such that businesses take it as part of sales strategies today thanks to their efficiency. Shops already have a website and they create profiles on social networks to reach a wider audience, a larger public range . It basically deals with the processes of sales of products and services through electronic channels, specially the web and the Internet, apps and social networks are used, they are considered as part of electronic commerce. Nowadays there is a myriad of electronic commerce platforms but which is the most famous? Well, it is Amazon, but also in Latin America Mercado Libre has had a great impact, nowadays a very famous one is Wix, Zappos, Shopify, etcetera, are flooding the market. In Latin America, Brazil has got the most important electronic commerce market followed by Mexico. Another fun business model, though it’s very old, is that of Barter. The term Barter describes a business model where products or services are exchanged among people or organizations for products or services in kind, careful, there is no money transaction, no cash is involved, it is an exchange and the exchange or barter is based solely on goods or services without the participation of money as I said before. Although this business model is one of the oldest in the world going back to the times of the old Roman empire, nowadays with technology and information flux, a new society who is using this business model is starting to resurface. Nowadays where I am an advisor in the hotel sector, bartering is very important making exchanges between marketing agencies, communication media, and for example hotel brands, where hotel rooms are exchanged by pattern. What do you think about this Barter business model? I will tell you about one more that is in vogue and that is not as old as Barter, which is Freemium, you must surely have heard about Freemium. The term Freemium is a combination of the word free plus premium and as the word suggests, the business model implies offering a basic version of the product or service for free while the premium version is available but with an additional payment. The free version is designed, for what? To enable the company to establish a large initial number of customers that is everything states yes it is free I sign up you already have a database in such way that it is expected that enough customers wish to dive into the premium version later on. I am an example with Spotify I have to accept that. Examples of Freemium are also many in the market as are the most famous, the one I mentioned: Spotify but you have also heard about Dropbox, you must surely use it. We transfer among many others, offer you a Freemium but if you want something else you must pay for it. I hope you had fun with these business models, look at the Business Model Navigator which has more than sixty business models but it is very important that you check the different sources which we have shared so that you can see which business model you have now and how with the combination of different business models you find your own business models. There are several sources which I am recommending throughout this course Adam J. Bock has different business models in his platform which he uses, Accenture and precisely with the Business Model Navigator you will benefit from this and make the combinations which are so important not only to establish your business model but to compete towards the future developing these new business models. I hope you had fun with these patterns.
