Today's innovative business models
If there is one word that best suits the tone and tenor of the start-up world, it would have to be innovation. Innovative ideas, innovative products, and quite simply, invention. It’s all about creating something that in some way works better than what came before or that fulfills a previously inconceivable function. Easier said than done of course, and therein lies the problem with the word. If innovative ideas are just the sudden sparks of brilliance from intelligent people, then how can we talk about innovation productively? We can’t write out a quick solution for hatching game-changing ideas or business models, but what we can do is look at past successes and dissect why they worked in that market. So let’s look at some of these innovative business models , why they’re working, and why they may not work forever because the game is always changing.
When talking about innovative start-up models in the world today, the lean start-up is usually the first to come up, and there’s a reason for that. As already discussed here, the lean start-up is uniquely tooled to today’s market that has an incredibly engaged consumer base that’s interested in being a part of the process of development. The lean start-up leverages this engagement and uses it to make a better products cheaply and more efficiently. However, it’s important not to accept the lean start-up model as the only option and to be critical of its weaknesses as consumer interests continue to evolve.
As Ben Horowitz argues, the lean start-up is not an end in and of itself, it’s just a possible means to the eventual goal of winning the market or achieving critical mass and it might not always be the right option. The market may sometimes be bought by what Horowitz’ calls the “fat start-up” with heavy investor support and a lot of spending. This more traditional approach isn’t necessarily outmoded or less successful although it’s arguably less efficient. So long as you don’t run out of money before you achieve critical mass, you have succeeded. Running fat might be the fastest and tactically superior way to do that. The important thing is staying tuned to what the market is responding to.
The lean start-up is all about releasing what Eric Reis’ calls “the minimum viable product.” There are inherent risks with this kind of mentality. One of the worries as the lean start-up has gained more and more traction is that companies use this as an excuse to try to cash in on incomplete products or watered down “features” that aren’t solving the whole problem for users. If this becomes a persistent problem, consumers will catch on and will be less interested in supporting shoddy releases that are clearly incomplete. If that time comes, and some people have argued that it already has, then releasing a solid, complete product may be the most advantageous way to go. It’s all about reading the market and finding the best fit solution.
Michael Slok says that in terms of business model, you should always try to look ahead rather than backward at what people are already doing. Basically, innovate. Take what is established and look at the opposite. The fat start-up to the lean, if you will. The message here is that you’ll never win by doing what’s already established. This may not always be true, but it’s a valuable lesson all the same. Be disruptive both in product and in model. Shake the market and the market will answer.