New Business Models

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There are lots of little ways to tweak your business and how you market it using the many online channels. The problem gets increasingly more complex when the channel changes the way your business operates. For many traditional businesses, they think it’s about how they market online and not about how their business model works in this new channel. That’s when the tragedy usually strikes.

We keep seeing the same thing over and over again. The big mobile carriers were worried about voice and not data. When other companies came in and focused on data (like RIM with the BlackBerry), the carriers started fighting for what they felt like they were entitled to. The music industry did not want to stop selling CDs and they really didn’t want to go back to the single song format, then iTunes came out with songs for $0.99 by download and changed everything. Or maybe people didn’t want to download the song at all, but simply wanted to use it as a ringtone.

Don Tapscott (author of Wikinomics and Grown Up Digital) says this about the music industry: "how sad that the same industry that gave us The Beatles is now suing their consumers because they can’t figure out a new business model." Just this past week, Seth Godin was interviewed over on the HarperStudio Blog, The 26th Story, in this post: Tribes Author Seth Godin Discusses Free Content and the Publishing Industry:

"First, the market and the internet don’t care if you make money. That’s important to say. You have no right to make money from every development in media, and the humility that comes from approaching the market that way matters. It’s not ‘how can the market make me money’ it’s ‘how can I do things for this market.’ Because generally, when you do something for an audience, they repay you. The Grateful Dead made plenty of money. Tom Peters makes many millions of dollars a year giving speeches, while books are a tiny fraction of that. Barack Obama used ideas to get elected, book royalties are just a nice side effect. There are doctors and consultants who profit from spreading ideas. Novelists and musicians can make money with bespoke work and appearances and interactions. And you know what? It’s entirely likely that many people in the chain WON’T make any money. That’s okay. That’s the way change works."

Does Threadless sell t-shirts or do they sell design and celebrating the creative spirit of the individual (with a passionate community)? Lulu does not publish one book to ten million people, Lulu sells ten million books to ten million people.

New business models…

Look weird.

Act weird.

Are weird.

… because they are new. New business models cause disruption (especially when it involves technology and communication).

The reason most companies are stuck is because they keep thinking: "that’s the way it has always been." What would happen if you sat down with your business and thought about how it all got started? Odds are, you’ll quickly realize that the founder of your business (which might be you) saw a new way of doing things. It could have been better, cheaper, more efficient, cooler, whatever… it was a new business model.

We live in the time of very unique and new business models. They come along quick and change everything we thought we knew about an industry. What if all classified ads were free (except for the one related to employment, real estate and "adult services")? Maybe it will change your current newspaper advertising model or, just maybe, it’s the next Craigslist.

It also doesn’t have to be complex. Look at what Google did to advertising. AdWords has nothing to do with images, video or audio. It has nothing to do with high-end directors and special effects. It has to do with a fistful of words and the right targeting at the right time. Oh, it also has to do with charging on a performance basis instead of perceived value or estimated audience size. 

How do you feel about new business models? Business killers, inventors or disrupters?


  1. Very interesting look at things Mitch. So many start-ups focus on a new technology, on a new product, on a new market or a combination of 2 or 3 of those possibilities. Sadly, those who focus on a new business model are the exception. Sometimes it’s the VC’s that want a business model that they can grasp (they need some kind of handle on the project). There are so many Web2.0 business that fall into that category; copycats. I’m pretty sure that the payoff comes cheaper, faster and simpler from a new business model than from a disruptive technology.

  2. I think that, above all else, they’re fun. May not be the most intelligent answer, but let’s face it: old school business models, marketing, etc. are a bit rote. Whereas with the advent and rise of advertising, open-source media, etc., everything is a bit more unpredictable (yet more track-able – what a paradox), more organic, even. It’s a fun time to be involved in business.

  3. White space might be the best example right now and CBC’s Search Engine had a neat piece on it.
    One thing many business models miss is participation. Music is an excellent example as there are many ways to participate musically, outside of the “music as a commodity” frame. Sales of instruments are up, Guitar Hero and Rock Band have paved the way, playful musicking is making a comeback.

  4. established businesses are too busy trying to prop up old models and fear change than actually change themselves…
    in fact, many people are simply afraid of change itself

  5. Mitch – if there is a silver lining in this recessionary cloud, it’s that many businesses will be forced into exploring innovative business models as a survival tactic.
    You know the old saying about change: it happens only when the pain of remaining the same is greater than the pain of the change. And the pain of remaining the same is getting harder and harder to bear these days.
    I think we are only scratching the surface of what web 2.0 (and soon to be 3.0) is going to bring to the business world. It’s an exciting time to be alive and “in the thick of it”.

  6. The idea that young companies can now change the market for large ones is fast becoming a reality owing to the nature of commuications methods that are available to all. Web 2.0 is bringing challenges to these companies and will allow end buyers of companies services to gain neutral opinion without the hype. Nice post.

  7. very good post mitch. why did you say “except for real estate, employment and adult services” when you talked about classifieds? why not for them too?

  8. The music industry is one of the most visual and discussed examples of unwillingness to evolve new business models. I see this particular example from two angles.
    The music industry is like a parent who has given birth to a child, guided and developed them through the toddler years, flourished as the child grows up to become a teenager. Only now this child, who they have spent so much time nurturing, suddenly decides to go its own way, the teenager gets some tattoos, moves out of home to live with their friends and do things their own way. This was not the vision the parent had for their child, their nest is empty and they are hopping mad. The parent was unprepared and unwilling to prepare and guide their child through that most important time, when the relationship between them starts evolving into adulthood.
    I do have some sympathy for the industry, because there is a sense of loss for the systems, opportunities, income and industry that they have worked hard to develop over many decades.
    On the other hand all children grow up, move out of home and create their own vision, independent of the parent. It is very important for the parent to still be involved in the child’s life, but it will be in a different way, with different economies. It is this side, the concept of evolving new business models that the music industry have dragged their feet on, and it has hurt them hard.
    An example of this is an experience I had six months ago when the Australian Music Industry Association (AMIA) generated a viral video titled ‘in-tune’ aimed at school aged children in an attempt to press their case regarding piracy. The video has Australian musicians talking about the industry and the effects of piracy on their wallets. Some of the artists involved asked to be edited out of the video when it was released and AMIA had to recut and re-release the video.
    I took offense to the tone of the content and the way the video seemed to point the finger at the audience for the woes of the industry. So I decided to write a public letter to the industry to express a different point of view. I asked my good friend Adam Purcell (and co podcamp Australia organisor) to co sign the letter and launched the website which highlights the letter and asks people to become signatories. The letter reads:
    “To the Music Labels:
    We have appreciated your place in our lives up to date and look forward to what is yet to come, however, a rift has come between us which can no longer be ignored or excused.
    You the Music Industry have failed to move with us in our discovery of new and exciting ways to interact, collaborate, and communicate. We have embraced the digital space and the opportunities it affords us, and we have changed because of this. We are developing new forms of entertainment which have transformed the way we interact with each other, with you, and with music. This is an ongoing process, and we are excited about what we will discover tomorrow.
    For some reason you assume that we are the same as yesterday, and you are kidding yourself.
    You wrongly place the blame of declining CD sales on others. Our source of entertainment has diversified, and we are no longer as interested in the concept of the ‘album’.
    There is no digital music battle or piracy war. That is a figment of your imagination, and, every time you preach our digital crimes to us, we ‘tune out’ of your deranged ranting. Your declining profits are the symptom of a business model that is fast becoming irrelevant.
    You want us to pay? We want you to pay attention.
    You have an amazing opportunity to develop new and exiting ways to interact with us and develop a future-sustainable digital economy, and we are willing to put our money where we perceive there is value.
    We would like to have an ongoing relationship with you, but we will not wait for you. Our new digital community is smarter than before, we mass collaborate and have access to any information at anytime. We are capable of making our own way, but better still, we would like you to join us.”
    What happened next was unexpected as the media picked up on the letter. I was interviewed for several major newspapers and digital news providers who wished to show an alternative angle on the issues the music industry are vocalising. The letter even sparked a live television debate.
    To quote myself the Sydney Morning Herald article, “We may be coming into an age where … the song, instead of being a commercial product that you can earn money from, may become the advertisement to bring people to your gigs.” This may be the future of this industry, we don’t know, because it is in development with a massive “Watch This Space” sign above the industry and its economies.
    As always the blogosphere took up arms and developed the conversation and concepts even further.
    It is a topic I am passionate about, developing new business models that provide value in new and exciting ways.
    I believe, at its core, that is what music issue really comes down to. Evolve or become irrelevant.

  9. I was in a Discount Tire the other day and I was amazed with their operation. So refreshing to the mechanics smiling and taking jabs at each other. Nice to see the Manager on Duty taking orders from clients and conversing regularly with those in the waiting area.
    I was also impressed with the way the employees answered the phone. Top to bottom, these guys/gals had a great business model. I’m not sure if the business model was even in writing. Everybody at the place knew what their job was and when to perform it. Very well oiled machine.
    Way too much talk this day in age for me to keep up with when serving clients. I happen to agree with the approach of Bach Anon in his book Dropping Almonds. Stay loyal to those you serve and those that serve you and everything else is elementary.

  10. Jared, I appreciate your comment and story. I am actually very impressed with what happened to your letter and your well worded thoughts about today’s conditions.
    It is always those to see ahead that stand out and not the ones who follow what is current.

  11. Your post has on internet marketing is definitely true. Internet marketing has opened new ways of attracting visitors to the website giving the webmasters a way of earning cash as well as web status. Let’s see what the future holds for internet marketing.

  12. Great post. It give a lot of relief to emerging entrepreneurs who get continual flack from the rigid corporates we need to with.
    Hope they tap into this innovative thinking.

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