Business Modeling is a process and requires experience

Business Modeling is a process

Business Modeling is a processEverybody talks about business models and business modeling, but not many have been exposed to different types of scenarios and organizations when applying it. I learned today after having talked to a person that had used Business Model Canvas in the past and felt that the use was a bit messy.  I am not surprised about this experience at all. Using Business Model Canvas takes time to master and reading a $22 book does not make you a master. You have to go out there and test it out, make mistakes, learn to pros and cons and most importantly, learn that it is not about the tool/framework, it is about the people applying it and whenever there are people, there is a chance for confusion and disagreement.

I still remember vividly the day when I used Business Model Canvas the first time. I decided to try out Business Model Canvas on a company that wanted me to help with their product/solution business modeling. I must admit that I was a bit nervous as I did not know whether the Business Model Canvas would help me out to run the workshop.  I was also nervous to get too many questions of use cases in the Canvas use… I did not really have any… I did not even know if it would work…

I learned really quickly that the Business Model Canvas is just a tool and the entire business modeling excersise is based on human interaction and how to be able to extract and guide people to think about their business, how to get them to agree on things and how create an effective action plan. Business modeling is just the start of a journey that an organization has to commit to and also understand that there might be a need to pivot the business model every now and then when the market or other circumstances change. We are living in the era of agility and business models need to be agile as well.

Today, when I run workshops using Business Model Canvas, I put emphasis to the group chemistry to ensure that everybody in the group/teams are contributing the goals of the workshop. Specifically in smaller companies it is very common to have one or two very strong individuals that “take over” the discussion and this is why I usually want to divide the group into two or more teams to get more discussions among the participants.  It takes time to learn how a business modeling session process and to learn to read the group/teams when they get stuck or become frustrated.  If there are more than 6 people in the group, I typically want to divide the group into two teams of 3 people. The teams should be assembled in a way that people that interact less during regular work are put in the same group.

In some cases I have people in the group/teams that want to argue how to use the Business Model Canvas framework and the discussion becomes more academic. My recommendation is not to put too much time in learning in-an-outs of the framework, as each person has his/her subjective way to view it. It is enough if the entire group/teams agree a common set of rules.  A good example is the discussion if a key partner should be listed as channel or the other way around. It is enough as long as everybody agrees how it is defined. A key partner to me is an organization that you work with either long term or an organization that you need to deliver your solution to a given market segment.

In summary, a Business Model Canvas is just a framework that enables you to view your business, but the key is the process how you end up with your business model. It is also important that your facilitator knows how to deal with different types of situations when you have business owners and/or senior level executives defining the future of the company. It is very easy to get lost in the process and the day could lead to a situation where you loose face with your group/teams and the Business Model framework becomes something that nobody wants to hear about anymore.

 

Nokia and Microsoft from a partner-to-partner (p-2-p) perspective to achieve a vibrant ecosystem: recommendations for Microsoft and Nokia partners

Disclosure: I am a former global Chairman for International Association of Microsoft Channel Partners (http://www.iamcp.org) that according to IDC 2009 study had $10,1 billion in partner-to-partner business. My views might be biased due to two factors: I am a Finn living in the US and earn 100% of my revenue from the Microsoft ecosystem. This blog entry is about the possibilities for Microsoft and Nokia, and not about the past mistakes that might have been made.

The much speculated announcement from Nokia and Microsoft is now reality. Nokia and Microsoft have announced a new strategic partnership to build a new global mobile ecosystem. This news item has been dwelled in the cyberspace such as PCMag.com, blogs such as Mary-Jo Foley All about Microsoft and some newspapers such as Financial Times questioning whether Elop is the right person to lead Nokia. The rumbling of Nokia’s strategy accelerated to full force after Stephen Elop’s internal memo was leaked to the public. This memo included strong words about Symbian and how it was burning and it was time to jump ship. I have commented on Nokia in some of my previous blog entries but today and going forward, I am going to focus on future possibilities and not dwell on the past as this does not bring anybody any good.

This announcement from Microsoft and Nokia is not just a major and dramatic shift for Nokia, but also for the entire Finnish business ecosystem. Based on the Finnish news sources, this is the biggest change that Finland has seen in the technology landscape since the changes that took place in traditional industry such as forest, metal and shipbuilding. I feel sorry for the thousands of Nokia employees and hundreds or even thousands of companies that have earned their living from Nokia and its ecosystem. I have in fact been Chairman of the Board for one company and Nokia was a very important source of living for the company. However, each and every one of us has to admit that this did not happen overnight, the writing was on the wall and Stephen Elop just happened to be the one that had to make this change.

I have been tracking the discussions in the cyberspace and this announcement has caused emotions, both negative as well as positive. I believe that Nokia to Finland is like Volvo for Swedes and  it has to do with national identify and when that gets threatened, people react in different ways, some probably without really thinking about the consequences of what they say, and some more realistic and with the future in mind.

I have had a chance to track the evolution of Nokia story from a US perspective during the past 13 years and I have to say it has been depressing to see Nokia and the Nokia brand sink among US consumers and businesses. Already a few years ago it was almost impossible to find a nice Nokia phone in local AT&T store and this should have been a sign already then that something was wrong. One could argue that the current Chairman of the Board Jorma Ollila should have seen the signs on the wall when he was the CEO or at the very latest during Olli-Pekka Kallasvuo’s tenure. He did not, or if he did, the board and the management team did not take the risk of changing the course.

The current Nokia CEO Stephen Elop was the one that was forced to stop the bleeding of Nokia’s market share in the smartphone space and he is now the one that is taking the heat from the press and industry analysts. I do not think it is fair to put this on his shoulders as Nokia has had ample chances to change the course during the past few years or at the very latest when the first iPhone was released in in 2007.

When I saw the Meego leader Ari Jaaksi leave Nokia a few months ago to lead HP Palm software to become senior vice president of WebOS, I smelled problems in the future of Meego. This is obviously bad news for the companies that have invested in Meego development and future, but that is unfortunately nothing new in the technology field. During my career, my company had to invest in APPC communication protocol development that nobody remembers today. Nobody asked me how I felt when APPC was replaced with TCP/IP.

Once the companies and Nokia employees that have put their lives into Symbian and application development around Symbian have spent some time to reflect what they want to do going forward, I would like to encourage them to view Microsoft as an opportunity for them to change direction and get really to become a part of Microsoft huge 600k plus partner ecosystem. That is what we entrepreneurs do all the time. We have to review our business model, its robustness and change it when needed. We will never let outside forces let to drive our future; we need to be in charge of it. If your current revenue model is 100% from Symbian, you are the one responsible for it and you can’t blame Nokia or Microsoft for it. Running a business on one horse is both stupid and risky and not good for shareholders. In some cases it can reward you, but in some other cases it can also take you down. You have to be on watch what happens around you and the day when you start ignoring the outside world, things start falling apart and this is exactly what happened to Nokia.

I have seen some misrepresentation in some blog entries that Microsoft would not be partner friendly which is a misrepresentation of huge measures. Microsoft partner network generates more than 90% of Microsoft annual revenue. Bring me another company that would do that with its partners. Microsoft has of course individuals that might in some cases have hurt some partners, but overall Microsoft has a strategy to work with its partners, not against its partners.

When I look at the Microsoft ecosystem and what is happening today from a technological perspective the cloud and the mobility are the two current topics that everybody seems to be talking about. Look at what is happening with our youth. They assume to be able to consume services from the cloud and they are born with smartphones and know how to utilize them effectively by using messenger and SMS. What does this mean for Microsoft and Nokia? Microsoft has more than 30.000 Windows Azure clients and an ecosystem building cloud solutions. These cloud solutions need mobility applications and this is where I see the thousands of current Symbian developers to have a huge opportunity if they so want to see it. It is going to be a change that they have to take and any change will hurt and be difficult but without change and pain, there is no gain. There are thousands of Microsoft partners that are more than willing to partner with mobility professionals and once the mourning is over, it is time to jump on the bandwagon of cloud and mobility and start building new innovative solutions.

I would encourage all current Symbian developers and vendors focusing on Symbian to look at what Microsoft brings to the table and the opportunities that it brings to these companies. We know that Symbian is not the nicest development environment to work with and based on developer experiences, Microsoft development tools and environment will be better and more productive. Yet again, there are many different opinions on this as well, but I am basing my opinion on the tens and hundreds of developers and people that I have talked and worked with.

I would also encourage both existing Microsoft partners and Nokia development partners to get together and IAMCP.org is an example of an organization that can facilitate partner-to-partner collaboration. IAMCP has chapters and chapter meetings every day in some part of the world and this gives a tremendous opportunity to get a view of what it is to be partnered with Microsoft. I would also encourage to ignore the ones that are resistant to the change as the change has already happened and the ones that will prevail are the ones that takes this moment as an opportunity to grow and build a new sustainable business.

I rest my case and welcome all Nokia developers to learn what it is to be part of the Microsoft ecosystem.

What types of influencers are increasing your web-site or blog traffic?

The Internet has really changed how we can be heard without really being physically seen. My company has done a bunch of influencer intelligence ecosystem research studies in the competitive intelligence domain and I get constantly questions from my clients how and what they should do to be heard in the cyberspace. If you are a software vendor and want to play in the cloud area, you’d better create a strong strategy how to be heard.

Let’s first analyze what you can do and what type of people you should try to attract to your web-site or blog. I recently run into an interesting blog entry by SEOMOZ that lists the main types of influencers that you should be interested in. They are as follows and SEOMOZ calls these for Linkerati:

  • Bloggers – this is the main group of influencers that you want to attract. Bloggers not only drive traffic, but they also influencer others.
  • Forum posters – people that comment in forums but according to SEOMOZ, these entries does not necessarily drive traffic from search engine perspective like bloggers would. This group is still very important target group for you to attract.
  • Web News Writers – these are the writers that people follow on different topics such as Mary-Jo Foley from ZDNet “All about Microsoft” blog. Mary Ann tracks Microsoft and what happens inside Microsoft.
  • Content Creators – people that maintain web-sites and seek valuable resources to link to. This is extremely useful as many people link their own sites to these sites and search engines like this kind of link building.
  • Resource Editors – people at government institutions, non-profit organizations and educational establishments that add content to web-sites.
  • Social Taggers – people that add links using Digg, Del.icio.us, Reddit and other similar services.
  • Viral Connectors – influencers that e-mail, use Twitter to send links and posts of different topics.
  • Journalists – Online or offline content creators and if you get linked to Wall Street Journal, New York Times or other similar sites, the traffic to your site will skyrocket.

I am still running to executives in companies that do not realize that they have to be present in the cyberspace whether they want it or not. The new generation of workers expects the management to have at least some type of clue what social behavior in the Internet means and the tools including software has to reflect this as well. If you are working in the software area and still ignorant of Twitter, Facebook, blogging and other similar services means that you are ignoring the marketing potential that the Internet brings to the table.

If you do not have a strategy in place how you want to appear in the social media world and if you social footprint is zero, do not expect that to change overnight. As with everything in life, to achieve something, you have to change your behavior and if you do not actively engage yourself in the cyberspace, you will not be heard nor do you maintain your status in services such as Technorati.com and similar services that ranks your social influence. If you want to learn more about Web Monitoring, I recommend the book by Alistair Cross and Sean Power Complete Web Monitoring: Watching Your Visitors, Performance, Communities, and Competitors. The blog entry from SEOMOZ did not address the “community” concept, which is a key area for software organizations in their efforts to build an ecosystem. This was also evident in the recent Nokia and Microsoft announcement for a broad strategic partnership between the two companies. Nokia is betting on having a third-party ecosystem building key applications around the Windows Mobile phone and bring the competitiveness back to Nokia against Apple and Android ecosystems.

Building social connections in the cyberspace takes time and will take a tremendous effort. Social connections are earned on trust and that is something that people tend to forget. If you want to learn more about influencer intelligence, there is quite a few books about it such as Robert B. Cialdini’s book Influence: Science and Practice (5th Edition) or Duncan Brown and Nick Hayes book Influencer Marketing: Who Really Influences Your Customers.

Summary:                                                                                                                                                                    

For you to be successful in increasing web-site traffic or digital footprint, you have to proactively change you behavior and identify the influencers that you want to propagate your message in cyberspace and you will eventually increase the awareness of you, your solution or product or whatever you happen to represent. It takes time and you have to be patient and consistent. It is like with everything in life. Without persistency, you won’t achieve anything.

Law #8 of Bessemer’s Top 10 Cloud Computing Laws and the Business Model Canvas –Leverage and monetize the data asset

I am now in the eight law in Bessemer’s Top 10 Computing Laws with an emphasis how to be able to monetize and utilize the data asset that the SaaS vendor is accumulating by users that are generating a wealth of information and all of this information is accessible for the SaaS vendor if the contractual agreement allows the use of this data. 

When reading about this law my memories from my youth crept to my mind when studying in the Swedish School of Economics in Helsinki (Hanken) where each student in the accounting/management accounting class had to analyze public financial statements from Finnish companies as part of the advanced classes. This analysis was then used to compare different companies in the same vertical and to create some base-line standards for analyzing and comparing companies. This analysis gave me a perspective on accounting and how it really works. This learning has helped me throughout my life and especially now as an entrepreneur. The power of cash-flow statements can’t be underestimated which has been a reality for many software vendors the last couple of years.

However, during that time (1984-1989), the data was stored in Lotus Symphony spreadsheets, so most of the analysis and data entry was manual and very labor intensive. Companies at that time were still using green screen terminals and only a few companies started deploying personal desktops, but laptops were still not on the market as far as I remember. The first real PC with MS-DOS that I used was Italian Olivetti with two floppy stations. I can’t believe how far we have come since then.

This law (#8) is a reminder to me of the changes in business models and how cloud can provide new business model opportunities for organizations. Ten years ago, the notion of “data asset use” was very rare and if you had the possibility to accrue information from companies in the same vertical, you had a tremendous asset in your hands. I know a company owner in the US that sold his company for a few millions by having collected financial data for financial institutions over time and then sold the assets to a larger company as part of an exit. Let’s view how this law impacts software businesses and business model canvas overall.

Law #8: Leverage and monetize the data asset

Imagine having access to a massive amount of data that your clients are generating in your cloud application. Image to have access to performance metrics for a given vertical market segment such as banks at large and their performance. Wouldn’t it be valuable for somebody to be able to compare banks with each other from different perspectives and maybe even sell this data to external parties? Imagine being able to service this through Microsoft Dallas service that enables developers and information workers to easily discover, purchase, and manage premium data subscriptions in the Windows Azure platform.  Maybe this collective information serves as benchmark information for other companies in the same vertical and enables these companies to compare how well the perform in their respective business?  The Bessemer blog entry gives examples of this kind of benchmarking by referencing the leading expense management software company Concur where companies in the same peer group can compare for example expense costs such as travel with other companies.

Another successful example is the company Mint.com that used to compete with Intuit Quicken by providing a free SaaS solution for consumers to track expenses automatically. The Mint story is very interesting; it was started by Aaron Patzer, Matt Snider and Poornima Vijayashanker in Mr. Patzer’s apartment. Two years later the company was acquired by Intuit for $170 million. The story is simple and amazing at the same time. The founders felt that it was too difficult to track personal finances online and that people had to spend far too much time in setups and entering data. The founders felt that once the Mint.com is linked to the credit card statements and bank accounts, most of the daily stuff should happen automatically. I found out about this service as part of my own research and decided to test it out. It is as easy as Mint.com claims and today I get updates from the system on regular basis. The business model that Mint had initially was to use the consumer data to propose better credit card deals etc. to generate leads for credit card companies etc. It is obvious that Mint.com became a threat to Intuit so they decided to acquire them. Mint.com success has led Intuit to replace Quicken Online product in favor of Mint.com. Let’s analyze how this law can be viewed from Business Model Canvas perspective.

Summary of our findings in respect to Business Model Canvas

This law (#8 of Bessemer’s Top 10 Computing Laws) can be linked to any of the nine Business Model Canvas building blocks. The success of any SaaS company utilizing data assets effectively will be based on:

  1. How well the company can define its Value Proposition (VP),
  2.  How well the information assets can be linked to a specific Customer Segment (CS)
  3. How the company can generate revenue (Revenue Streams-RS) from these information assets.

This law extends the use of information that the SaaS vendor can utilize and gives a business opportunity for the SaaS vendor. This model has not been possible in the past as the data has typically been secured by the end user client organizations and their data centers.  Companies such as Concur, Mint.com and many others have identified the opportunity to sell information/service instead of selling software and I think this will be the key differentiator in many of the future SaaS innovations.  The time of having lots of features and functions in a software package might be over and people appreciate solutions that are easy to use and do not require lots of training to maneuver.

The SaaS vendor needs to have an understanding of the analytics behind the data in selected Customer Segment (CS) and this relates back to the need to have the right Key Resources (KR) and Key Activities (KA) that are well aligned with the SaaS vendor objectives.

Law #5 of Bessemer’s Top 10 Cloud Computing Laws and the Business Model Canvas –Build Employee Software

I am now in the fifth law in Bessemer’s Top 10 Computing Laws and this has to with  how the SaaS company DNA needs to look at its employees as users of the solution and not just as “developers” developing for somebody else. I have so far addressed in my blog entry that a SaaS vendor needs to really live the life of a SaaS company, be part of the SaaS DNA, I have looked into the financials of a SaaS company, and sales operations/sales curve for a SaaS vendor and how SaaS and software channels work in SaaS ecosystems.

Law #5: Build Employee Software.

Many of us have been in the software world for a long time, and many of us still remember vividly the times when we built solutions to end users that we felt that “just did not get it”. If you have been around a while, there is no reason for you to not admit that. Some of our clients have been the victims of complexity, horrendous user interfaces and clunky functionality but we still thought the solution was technically the best in the world; it was the users that did not get it.  Let’s think about this for a while. Would you accept clunky software today? Would you spend your valuable time trying to figure out what the SaaS solution that you are trying to utilize was all about? No, I don’t think so. Consumers and businesses have so many options today that it is not worth while spending time on solutions that are obviously not going to cut it.

Let me give you an example of a solution that has really made my life a joy when it comes to my research and book-keeping of my books, both eBooks for my Kindle and physical books that I own. I used to have a desktops solution Collectorz for Books where I cataloged by books whenever I bought them. I loved the solution, but every time I had to change laptop/desktop, it was a pain to move files and keep things updated. Also, I was not able to access my book catalog from other places than this one specific laptop and this would not cut for me in the long run.

Then, by chance, I run to a new SaaS solution recommended by my friend in Chicago and she said she had started using it and loved it. It was Librarything.com and I decided to jump onboard by first trying the Freemium version for 200 books, but as I have thousands, after a trial period, I jumped into lifetime version which is $25. Today, you can find my profile DrSalonen and all of the books that I have bought/listed in the SaaS application. It is not just the application; it is also about social networking with the Librarything.com application. I can see how many other people own the book, I can join different interest groups and I can become friends with likeminded people that read and enjoy similar books. This is an example of an application that is really nice to use and you get passionate of it.

How does this relate back to the Bessemer Cloud Law #5? It is about emphasizing that SaaS employees have to really eat their own dog food, and to make sure that they would be using the solution every day with passion and dedication as otherwise the solution will never be deployed in large scale. Also, SaaS vendors need to create the buying process as easy as possible, by using a credit card as this is the only way to get masses of users testing out your solution. If you wait for the IT department to push for your solution, you might have to wait for a long time. It is the users that rule the world in today’s SaaS world, we have seen it, been part of it, and this trend will become stronger and stronger each day. According to Bessemer, some SaaS companies have had success in selling administrative dashboards for CIOs in companies as many of them have not been able to control the use of SaaS solutions due to low monthly costs and the ability to use a credit card to pay.

Summary of our findings in respect to Business Model Canvas

Like in my previous blog entries, the objective of this series of Bessemer Laws was to relate the Laws to the Business Model Canvas from Dr. Alexander Osterwalder et al. This Bessemer #5 Law has to do with many Business Model Canvas building blocks. The reason I am saying this is that it starts from the Value Proposition (VA) and the usability of the solution to Revenue Streams (RS) as if the solution is not acceptable, customer will not renew the contract after a year of use and it will impact the Customer Relationship (CR) as the bad experiences of the solution will sour the relationship with the SaaS vendor itself.

Based on my personal experiences running a software company, the key to success is hardly ever technology, but the people that you work with. The developers that are talented will create solutions that are compelling and usable. The very famous statement that one good developer can replace 10 bad ones is according to my experiences pretty much what I have experienced. You do not need to have a huge team to create something that is compelling. If this is the case, the most important in the Business Model Canvas is the Key Resources building block that includes your best people and talent that will not only create your solution, but will also sell and market it to customers.

As you can see, it is very difficult to pinpoint any specific building block in the Business Model Canvas as they all relate to each other and this is also the point in business modeling/planning. You iterate continuously until you find a good balance between the building blocks and eventually you might find a balance. What is also important to realize that each change might cause a new “instance” of the business model, as a change in Customer Segment (CS) could create a new Revenue Stream (RS), new Channel (C) etc. I am sure you get the point and just envision multiple layers of business models on top of each other.

I have now concluded five of Bessemer’s Top 10 Cloud Laws and 5 more to go. Stay tuned for more!

Update on my second book: Boldly into the World – Succeed in Business Life and as an Individual

I have submitted my second book to my editor at Talentum and waiting for the next iteration round. I am very excited to be in this stage of the project as I can see the light in the tunnel. I know this from past experiences. My editor is great and I have all the trust in her doing the right types of decisions.

Like with everything in life, nothing comes easy.  I still remember vividly my first book project How to Succeed in the Big World and the ups and downs that I had during my writing process. My second book, Boldly Into the World – Succeed in Business Life and as an Individual has been much easier of two reasons. First of all, I have been able to define my own process of writing so I knew what it is and how to go about it. Secondly, I think the topic was very close to my own interests probably due to my own experience and also due to the fact that my interviews of more than 40 people confirmed some of the things that I had been thinking of. I also realized during the second book project that all of the data collection to the first book project helped me in formulating my second book. That is kind of exciting to find out that five years of my life has not been wasted in research and something has stuck into my head.

I really love books and I love to read and consolidate information and thinking from lots of smart people. That has always been my passion and my objective is to try to take all of that information to the next stage. I have to thank my former Professor Markku Sääksjärvi for teaching me how to read, how to think and how to analyze. He was a great mentor for me and I do miss the times working with him almost on a weekly basis.

Stay tuned for more information about the progress on my second book.

Social media and its impact on people living abroad

Today, I was writing a section about the impact that social media has on our lives. Think about Facebook for example. That has changed completely the way we see the world. Today, I can follow my family and friends in Finland, what they are up to and also about their daily life. Some of you might think that this is silly, but it isn’t. In the same way I can follow and communicate with my friends around the world and see what they are up to and this is very, very inspiring. Last week I learned that my good friend from Mexico City has read a few very good books and by referencing these, he is now sharing his joy with the rest of the world.

There are people that do not want to share anything of their lives. That is fine as well, but the ones that want to live and share, Facebooks, Twitters, and other communities give the possibility to communicate, and spread the joy of life.

Chirag Vedullapalli:Young talent is showcased

It is fascinating how today’s Internet can bring forward talented and gifted kids. Check out Chirag Vedullapalli’s work from http://meylah.com/blog where people can post comments and admiration of the work that this young artist is bringing to the world. In my youth, this was not possible, but now we can get the world to us using the Internet. In my new upcoming book, I give examples of how a person from a remote destination can get his/her skills demonstrated and when the delivery is digital, nothing stops a person to do business on global basis. I can se Chirag and platforms such as Meylah to be such places for artists. The world keeps amazing me and I am currently enjoying my weekend by working on this new upcoming book. Life is good!

Are you vertical or horizontal in you career?

Looking back at our careers, most of us have had to make a decision to either focus on a specific skill-set or become part of a management role where there is a real threat that one becomes a “paper pusher”. I remember vividly when I had discussions with my bosses in the past when I was asked whether I want to focus (vertical) or become a generalist (horizontal) in my career. We make these choices and sometimes we are being hurt by them specifically when we age and there is a threat that we are being laid off. My suggestion to all young people that are in their early careers is to ensure that they have a skill-set that is marketable regardless of age. That will keep them employed no matter what. This might seem a simple conclusion, but unfortunately I have seen too many to loose their jobs and struggling to get rehired.