In the beginning...
Innovative and disruptive new businesses have been emerging since time began. From the 1950’s information and communication technologies made it possible to create and build very large businesses based on the new technology. In the 1990’s the Internet arrived and we saw the dotcom boom. Many of the companies started in this phase proved to be founded on thin air and they disappeared very quickly during the bust of 1999/2000.
After the Dotcom Bubble burst, new ICT companies were out of fashion for a while although many were still founded. Fashion began to shift and it was given a huge new burst of momentum by the launch of the iPhone in 2007. Apple simultaneously made tech cool again and created a whole new platform for ideas. This was quickly followed by the financial crisis which drove many talented people and some money into starting new businesses.
The Start Up movement
The iPhone, the financial crisis and a tremendous amount of passion, energy and talent have fuelled today’s wave of innovation - start ups. Start ups have attracted increasing amounts of funding. This together with attention and support from Governments has turned today’s wave of innovation into a global movement.
The survivors of each wave of innovation are today’s established technology giants - HP, IBM, Microsoft, Apple, Oracle, SAP, Google and so on. Each wave has also left behind a legacy of fears and concerns. Learning the lessons of previous busts has been a driving force in business and management thinking.
Business model thing and innovation
Business thinking has become one of the major sources of innovation and disruption in the start up movement today. The first landmark is the Lean Startup by Eric Ries. If you haven’t read this, go get it. It is a very well thought out description of the process by which innovation happens and the business mechanism which drives growth and scale.
If the Lean Startup described the how of creating a great start up, Business Model Generation by Alex Osterwalder (@alexosterwalder) and Yves Pigneur (@ypigneur) mapped out the structure and components of a successful business. Although the title says business model, this is really a modern and well developed view of the elements and process of business strategy. It is comprehensive and influential. Perhaps the most influential factor is the tool that underpins the book, the Business Model Canvas.
The combination of lead concepts and the canvas inspired another founding text of start up theory, Running Lean by Ash Maurya (@ashmaurya). Ash is an entrepreneur not an academic and this makes his book and the materials which of with it more practice and less theory. As a result, his tool, the Lean Canvas, has become even more widely used than the Business Model Canvas.
An important strand of start up business thinking has focused on customer development and growth. Here the founding text is Steve Blank’s (@sgblank) 4 Steps to the Epiphany.
Taking the next step
Taken together these ideas have transformed the way start up pitches and investment analysis are presented. The language of lean, customers and growth and the canvases permeates the whole ecosystem. Incubators and accelerators teach these concepts to budding entrepreneurs enthusiastically. The web and social media offer hundreds of variations to anyone who is interested.
More importantly there are some great ideas and founders have a much better chance of building a successful business as a result. Many start ups are growing using these ideas and as a result some proven routes to success are emerging. I believe this practical experience provides the foundation for the next step.
We now have enough knowledge and experience to create a set of practical tools that can be used to design and build business activities and interactions based on the 6 most common business models - SaaS, Usage, eCommerce, Marketplace, Advertising and Licence.
A business model toolkit based on these principles will put start up entrepreneurs, investors and analysts on the same page by linking business operations with numbers and value.
This is my last post of 2014. I wish everyone a great Christmas and a Guid New Year. If you have a few minutes, I would love to hear your ideas for successful business models in the mobile and digital world.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.