Fractal Business Models and Analytics
2009/11/21 1 Comment
Successful Business Model Innovation
You may be tempted to re-think how you view successful business models after reading here that the Philips and Samsung business models are idolized while Sony’s business model is shunned because of a perceived high value knowledge innovation strategy.
Sony appears to have subsequently added a high knowledge value strategy to create product differentiation. In other words Sony competitors must spend as much as Sony on R&D and sell the same product volumes or they won’t be able to compete. In my view Sony, Philips and Samsung employ a similar business model and there may be a better way.
The Fractal Way
Apple and Cisco compete by aligning energy and value created in their value chains with innovation on-ramps and controlled entry points to encourage and reward partners that add value. This approach is fractal in that it mimics the way the firms innovate internally and scales externally across entire value chains or value streams. This is a short explanation of fractals as applied to topography and weather though the simple patterns and perspectives are easily applied to business models and business analytics.
One of the natural limits to business model innovation is the ability to provide value across an entire value stream to buyers, sellers and other market participants. This imperative is especially acute for companies that mimic the Apple and Cisco business models by competing with their entire value chain as it is a fractal approach. While there is tremendous upside with the Apple and Cisco business models, there is also significant downside potential unless value can be quickly distributed to all value stream partners. Innovative creation and speedy distribution of value is a new way of doing business. We call it the fractal imperative.
Successful innovation requires the ability to measure and respond to markets which perform the critical function of distributing ideas and physical products. Companies that understand their markets have a tangbile opportunity to employ fractal analytics to identify opportunities faster, innovate and align their business models accordingly. Fractal analytics is a way to measure from multiple simultaneous perspectives to help identify opportunities to adjust business models, objectives, products or how customers are served.
What are fractals?
Arthur C. Clarke Explains Fractals
1 of 6 http://www.youtube.com/watch?v=qB8m85p7GsU
2 of 6 http://www.youtube.com/watch?v=3gKOB6spCb8
3 of 6 http://www.youtube.com/watch?v=iZsVrHCPOio
4 of 6 http://www.youtube.com/watch?v=eXngUyOS-XM
5 of 6 http://www.youtube.com/watch?v=AjdogjBxfco
6 of 6 http://www.youtube.com/watch?v=l8Y6xpeQK-w
Apple Brokers Success
Apple helps partners deliver high quality applications and customers create valuable content while simultaneously providing a vibrant and engaging market space for their creations.
Cisco Defines Standards
Cisco buys Tandberg to own the global video conferencing standard.
Indeed both Apple and Cisco have the ability to broker ideas to the market so fast that they have transformed value chains to parallel value streams and knowledge flows. While Apple focuses on design because of the nature of its customers, Cisco’s focus is on setting techical standards to achieve ambitious corporate objectives.
Ideas vs Speed-to-Market
Like other forward thinking companies Mitsui, Sony and T-Gaia hold idea competitions to help identify current market needs. This approach takes more time to manifest value than the Apple and Cisco business models and illustrates the philosophical value given to the generation of unique ideas or intellectual property compared to an emphasis on commercialization speed. On the other hand speed to market is a relative measure and Mitui, Sony and T-Gaia only have to be a little faster than their competitors and associated value stream partners.
Mitsui Ventures, the venture investment arm of Mitsui & Co., and T-Gaia Corporation are to hold the 2nd i*deal Competition (i*deal Competition 2010) with the support and cooperation of Sony Corporation and Mitsui & Co., Ltd. The competition calls on contestants to submit their plans for new business models and services, software applications and mobile technologies to operate under the next-generation, high-speed, mobile communications environment (3.9G-4G). This year the invitation is also being extended to entrants from the USA. i*deal Competition 2010 Official Website
Look Both Ways to Succeed
The Apple/Cisco Way, as a combined business model, is a tremendous exemplar as it bridges idea brokering and accelerates the innovation of technical, design or marketing standards. Apple’s iPod platform is the industry standard and it acts an on-ramp for new partner ideas and innovation. Likewise Cisco is a fierce innovator but devotes proportionately more energy to standards to mobilize value stream partners.
Paradoxically the Apple/Cisco Way faces both ways–backwards (standards) and forwards (broker).
Standards face backwards as they wait for partners to innovate according to their direction and assume that the markets and customers will consume products that are created within the standard. On the other hand brokerage business models take their cues simultaneously from customers and value stream partners. While it is possible to have a standard based business model or a brokerage based business model without a fractal perspective, the Apple/Cisco Way is fractal as a change in one part of the value stream impacts the entire value stream very quickly. This occurs whether the impact is related to the delivery of new expertise delivered via training or the almost instant employment of new technical standards across the entire value stream. As a contrast typically Sony, Samsung and Philips spit out innovative products and lack the ability to mobilize partners or set standards as effectively as Cisco and Apple which currently dominate their markets.
Understanding the impact of measures is critical to going to market successfully and we have employed fractal analytics concepts to support business model innovation and speed up new product introductions for companies engaged in mergers and acquisitions.
Viewing business models through a fractal lens seems unusual initially but provides a clear focus on innovation and alignment opportunities that scale quickly for a positive impact on customers and partners, large or small, across the value stream. Fractal analytics shifts our attention from solution points to wholistic opportunity perspectives.
Innovation in business models and metrics demands multiple perspectives of business performance. A fractal perspective combined with flexible analytics helps analysts navigate data and relationships to find and promote combinations of products and customers whether transactions are small or large. This is the fractal value concept.
Once we identify a successful pattern we look for its ‘fractal’ or where it repeats at larger or smaller scale. Looking for this repeating pattern permits us to re-define success regardless of scale, marke, product or customer. We achieve maximum leverage of resources by offering similar but slightly different value propositions saving time and money.
The fractal business model is supported by fractal measures.
To understand how the power of fractal patterns are applied in a customers context consider how we employ a ‘mask’ or ‘persona’ to approximate a customer ‘fractal’ to represent a small number of behaviours that we profitable serve. We call this customer mask a Neuropersona that represents behaviours of a focused set of customers and likewise behaviours of groups of customers or behaviours of parts of an entire market. Carefully selected behaviour sets are fractal and changes in those behaviours allow us to accomodate one customer, groups of customers or parts of an entire market if we can shift and align our value proposition accordingly.
Fractal business models and analytics applied to business model innovation are next practices and intangibles represent the most significant and quickest fractual value creation opportunity for any company.
We welcome you to explore the fractal imperative with us.