To change the game, change the business model

nothing is quite what it seemsYesterday, I was a judge for a showcase of projects from marketing students of a local university. Most of the projects that were pitched are apps that exist elsewhere in some form; nothing game-changing. There were many common innovation myths that were present in many of the pitches, such as “our competitive advantage is being the first ones in Mexico”, “our competitive advantage is there isn’t something like this anywhere”, “our competitive advantage is we have no competition”.

First of all, being first doesn’t matter; being right does.

Whenever situations like these come up, I tell people that they should remember about what approach to innovating they are taking. As a rule of thumb, there are three ways to come up with a game-changing innovation:

  1. If you are taking on an existing product or service in head-to-head competition, you need a 10X performance improvement;
  2. If you are a small business taking on a big one, you need to change the rules of the game with business model innovation;
  3. The third way to develop a game-changing innovation is to re-imagine.

As most of the pitches were new businesses seeking funding, it was the second strategy that was most relevant. Take the example of an app that aims to create a directory of great places to go for drinks in your city, their reasoning for why the business concept would work was “there isn’t one so we must be onto something”. Another reason was that their revenue model would be…wait for it…advertising!

Nowadays, it’s hard to find a mobile app that doesn’t try to make money off advertising. To me, this is the perfect opportunity to try to change the game!

How? Change the interaction and you’ll find a different business model.

Seen from a traditional business perspective, businesses are just business models competing against each other; it’s why we have all this sameness out in the world. But what if you shift your perspective, look at things differently and change the components of the business model?

Let’s take the same app drink directory as an example. Imagine that instead of having people search through a bunch of places to go have a drink, you apply the following perspectives:

  • Recommendation. The app recommends a new place everyday or every weekend;
  • Serendipity. You apply the stumbleupon lens and let the app take you somewhere you’ve never been before;
  • Money saver. You tell the app how much money you want to spend, the type of drink you’d like to have, ambience, etc., and local places around you bid for your business;
  • Niche. The app is very specific in the content it has, so that makes it very narrow and focused.

There are many other ways we could look at it, but the point is that each of the above perspectives changes the business model and interaction from passive to active participation.

Business model innovation is not easy. But if executed well, and the timing is right, it’s a great source of sustainable competitive advantage that could unleash value for your customers and business.

Bottom line: To change the game, change the business model.

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