business model innovation (more again on what the heck is that thingamy?)

Enterprise software promises good ROIs. Good, good. But ask yourself, what is easy to measure?

Efficiency. 15% less time spent, 7% less electricity used, six percentage points better use of capacity - all easy to translate to the bottom line. Easy is the word.

Difficult is the word when you want to measure business model innovation. Perhaps even not doable.

Amazon was never a brick and mortar bookstore, eBay was never a village mart, Dell never sold through resellers - so what change of "what" could you measure here? Anybody venture a method to calculate the ROI on those business model innovations?

And, for the established firm, does that mean that Business Model Innovation requires a complete restart? Totally new business, unrecognisable even? Not an inviting thought indeed...

A quick revisit to what a Business Model is: "How do you use your resources to deliver value and keep some of that for yourself".

Ford did some Business Model Innovation in 1913, changed the way he used his resources and went from 70 hours per car in the spring to 7 hours per car in the fall. A factor of ten, that is what Business Model Innovation could attain, no mere 7 or 12 percent efficiency gain.

That is what the thingamy is about - business model building - create, run, play and recreate. Thus a tool for innovation.

That's our goal - make it easy to innovate that business model, heck, even spur that innovation if you ask me. :)

Comments

[Hamish]

You laugh, but the number of business cases that actually show positive ROI in some ERP installation types is nearly zero. I think that there are two reasons, one of which that only measuring quantifiable benefits brings you into MBA measurement hell, where only time and money matter, even though you can SEE the customers getting pissed off and going elsewhere. (Related to another of my favourite subjects, the post-autistic economics movement.)

Measurement activities like accounting and risk management are very hard to justify in a time and motion sense. After all, risk management only pays back because NOTHING BAD HAPPENS. Price disaster avoidance.

I heard a great explanation from one of my old colleagues about a new CFO who joined a large international bank, and immediately launched a general ledger replacement project.

My colleague asked what was wrong with the current one, to which the reply was "nothing."

"So, why the project?"

"Well, I get to completely change the operational structure, put the people I want to keep on the project team, and side-line the others. Then I get to review all of the hidden bullshit that my predecessor was hiding during the data conversion process. And I get to put my stamp on the organisation, and claim that this is an indication of my dynamism and successful business change skills. Questions?"

Right. That`s a justificiation, and the project happened, but it`s not about the business picture.

[sig]

Hamish, excellent one! Another one for a Sunday Dilbert strip ;)

And I'll brashly take your description of reality as support of the my view on management theory progress: 2000 years ago the Roman army found that one boss per ten subordinates (decurion, centurion) was the way to go, now after 100 years with MBA courses and a gazillion management books the consensus is that it should be one boss per eight subordinates... who's to argue... :D