Amazon and its ever changing Business Model

In the HBR blogpost Amazon Constantly Audits its Business Model authors Karan Girotra and Serguei Netessine take the reader through the journey of Amazon and its ever evolving business models. How they started with limited inventory and drop-shipping for the non-inventory model and gradually moved to complete inventory based business, and logistics became a key component of their business model. It became their strength to the extent that they have started services based on their logistics.

Essence of this journey is that businesses have to keep evolving, keep building new strengths and playing around them. Do not get struck with the first success of the company and something that we in India called emotional attachment. Specially in the fields that are still evolving, that have no established proven models and actually no established consumption patterns as well, it makes no sense to assume a limited success as ultimate success.

Even for businesses that have established business models, they may be missing on a larger potential if they ignore the evolving environment in which the business exists and that is always so dynamic.

Challenges of Business Model Innovation

Business Model Innovation is a paradigm shifting innovation that changes the way business operates, making it the most difficult to execute. It needs involvement of everyone in the system from top management to all employees. It also means a different way to engage with customers or deal with entirely new set of customers. Karan Girotra and Serguei Netessine in their HBR blog Why Large Companies Struggle With Business Model Innovation talk about three challenges for business model innovation in organizations.

First challenge they see is lack of top management support, that I think is must for any kind of innovation initiative to be successful in the firms. Yes, it is even more important when it comes to business model innovation as it involves a bigger change and can not be done by individuals without a proper execution strategy. Second challenge that they mention is reluctance to experiment. I like the way they describe the All or None approach that managements tend to follow. At the same time, I also know that it is not easy to experiment business models as it to experiment a new product or new service. New Business model involves fundamental changes to the system and that can be huge risk. Experimentation may or may not be possible every time, though it may be the need of the hour. Failure to pivot – their third challenge is interesting insight, something that most businesses can take care of.

Limits of open innovation

Jim Whitehurst of Red Hat talks about the limits of open innovation in this video.

Good food for thought. You need to understand situations where open innovation works and where it may not. Sometimes it may work completely independently, sometimes it may work on the part of the complete innovation cycle. It can be a great source of idea generation where the product has consumers and it can be source where say the product is a software or a service.

Can you identify how is open innovation relevant for your organization?

Gandhian Model for Innovation.

Raghunath Mashelkar, a scholar & scientist talks about the Gandhian Model for Innovation in a Strategy & Business interview , which in one line means getting more from less for more people. It is inspired by Gandhi’s belief that Earth provides for everyone’s needs but not greed. 

He sites Tata Nano and Arvind Eye care as the leading example of this model. Describing in detail how the technology has helped the fishermen in coastal areas through knowledge of availability of fish and also the buyers of the fish, he talks about the role of technology in changing people’s lives. 

The model has now existed for sometime now and well studied and well documented, but associating it with Gandhi’s name, gives it a lot more weight.