September has arrived. The shakeup is in full swing. And while the medium is variable, BMi (Business Model Innovation) is the mechanism, and that’s what we will explore in the following post.

With old-world businesses on the downfall, the #NewEraBiz is shooting up through the cracks to fill the gaps; but to make the this process happen requires new models, new business models to be precise.

While everything new and exciting gets broadly categorized under the umbrella of innovation, let’s break down the different types:

  • technological innovation brings new technologies to our lives that increase efficiency, enhance comfort and aid us in discovering the unknown;
  • social innovation brings new processes, concepts and structures to help meet the world’s most pressing social needs;

Yes these types of innovation are fundamental pillars of society, but they are not the key variable in the ‘world-changing’ equation; business model innovation is. And if necessity is the mother of invention, BMi is the mother of big change and sustainable impact.

What is BMi?

A business model is defined as the rationale of how an organization creates, delivers and captures value. Innovation is defined as executing new ideas to create value.

Business model innovation is a process of reinventing the business model itself in order to deliver and capture enough value associated with the new creation to bring it to market. While the actual definition is tricky, SustainAbility ‘settled’ on the following definition:

“ a new or novel form of exchange at some point along a company’s value chain.”

+ How Firms Innovate Their Business Models for Sustainability

Not exactly posterboard material for inspiration, but very practical in the sense that a company wants to SHIFT on their current value chain by and develop a new model to capture that value.

Because without a new mechanism to capture value, and generate sustainable cashflow, we are left with another technology that collects dust on a workbench or another social venture that inspires a few people in a boardroom but never actually reaches its intended target. To bring the types of ideas to fruition that make fossil fuels obsolete or access to clean water universal, there needs to be a business model there to back it.

Why?

According to the authors of the upcoming book ‘The Risk Driven Business Model …’ (HBR, 2014) who have studied hundreds of business models in their thesis:

“we often see that groundbreaking technology rarely achieves mass adoption without a corresponding innovation in the business model around the sale/use of the technology.”

We could substitute ‘social innovation’ in for ‘technology’ as well, but overall, the point is clear, we need to focus on the target:

“there are numerous innovative technologies that are waiting for an innovative business model that will facilitate their use and adoption, and there are numerous business model innovations that can make everyday activities more sustainable.”

To be able to survive through the ups and downs of bringing something truly innovative to the market, we need to create models that will enable organizations to profit and grow sustainably. BMi is the foundation, the fundamental building block for the #NewEraBiz.

Let’s look at three examples from all different parts of the world to illustrate this point:

Inspiration

Tesla: US-based electric car pioneer led by iconoclast Elon Musk

BMi: developed battery-swap system so that drivers can charge cars (approx. 90 sec) faster than they can refuel conventional cars at a gas station. Tesla identified the biggest barrier to mass-scale adoption of electric cars as the battery, so they developed an innovative way to deal with this problem that would put them on even footing with gas-powered cars. While drivers will have to drop the fresh battery off on the return leg of their journey and pay a ‘transport fee,’ this BMi could be enough to convert a few more customers to Tesla, enough to build critical mass.

Fast Pack Swap Event from Tesla Motors on Vimeo.

+ More about Tesla from the Lumos Blog

M-Pesa: simple SMS money-transfer system that revolutionized Kenya and other surrounding African markets

BMi: Vodafone realized the solution to this problem was not a high-tech mobile solution, but a low-tech communication one. So they built a bare-bones SMS app and trained a countrywide network of M-Pesa agents to collect and transfer the money; in the process, they created a new business model for one of the world’s most successful ‘mobile’ apps.

+ more on M-Pesa from the Lumos Blog

Catarse: the top crowdfunding platform in Brasil, Catarse is building a platform that empowers Brazilians to reinvent their collective realities via collaborative financing

BMi: While still a work in progress, Catarse is starting to move away from Kickstarter’s product-driven rewards model and focus on tapping into the power of Brasil’s social capital. Using a subscription-based curation model, where campaigns are categorized and packaged based on social issues and then targeted at specific members of the community, Catarse hopes to hone in on more specific themes and drive social innovation through its network. Catarse makes 13% on all funds raised through its platform.

+ More on Catarse from the Power of Sharing

In all three cases, the technology used to initiate the solution takes a back seat to the BMi. Each example showed the potential for scalable social impact, but didn’t stray from the objective of developing a sustainable business model.

Let’s look at three strategies to answer the next part of the #NewEraBiz BMi equation:

How?

Target select networks of people who are most closely affected by the problem you are trying to solve and take an open and transparent approach to engaging with them.

Use social media and rich medium (ie. video) to open the conversation, reach out to community leaders and influencers, and use feedback to form market-entry strategies.

example: Catarse published a blog prior to launching in order to engage the Brasilian creative community and source their first four projects

Work with a local partner. Make use of any technology that already exists. Align incentives so that everyone is motivated to make the venture work.

example: M-Pesa worked with mobile operator Safaricom and microfinance institute Faulu to develop their pilot project and entry strategy into the Kenyan market.

When you have a vision, the only way to make it a reality is by continuously experimenting.

example: Tesla’s battery-swap system. Will it lure more people towards Tesla? More than likely, but there is only one way to truly find out.

Overall, the SHIFT is happening and the #NewEraBiz is gaining progressively more momo with each passing day. But we need more, much more. To accelerate the SHIFT and drive greater impact, we need to focus less on the ideas and more on the model. While the medium is variable, the mechanism is BMi – let’s make it happen!

What great examples have you seen of BMi?


+ BMi: FINANCE
+ DIGITAL: InterC Strategy


PLAN – the Business Model

Sometimes the best place to find inspiration for innovation is in the third world. Despite the tough times, a pervasive spirit of entrepreneurship and creativity work together in third-world countries to help overcome major challenges. In this month’s version of Businesses with Bang!, we look at M-Pesa, an innovative mobile money transfer system developed in the heart of Kenya.

Perhaps synergy is one of the most cliché words used in business, but anyone who looks at the M-Pesa story would be hard pressed to find a better way to describe it. Started as a pliot project in 2003, a group of partners from countries around the world came together to change the face of commerce in Kenya.

In Kenya, the word Pesa stands for money, while the M represents mobile. Back in 2003, a Vodafone executive identified a challenge Kenyans faced; money was not mobile, it couldn’t be transferred efficiently from one person to another. As a company that thrived on building high-tech solutions for communication problems, Vodafone realized that this project was the opposite; they needed to build a communication solution using low-tech devices. To get the project off the ground, both Vodafone and the UK’s Department for International Development (DFID) kicked in capital from the Financial Challenge Deepening Fund.

Once the funding was in place, Vodafone partnered with Safaricom, Kenya’s leading mobile service provider, Faulu, a local microfinance institution (MFI), and the Commercial Bank of Africa, to set the project in motion. After negotiating a series of hurdles, a six-month trial period was launched using a group of 450 Faulu customers in October 2005; it was very successful. Vodafone was convinced enough to commit its resources to full-scale commercialization of the project in 2006. On September 13, 2007, Safaricom and Vodafone announced the official launch of M-Pesa in the Kenyan marketplace.

M-Pesa is a money transfer service facilitated by mobile phones. Clients with an M-Pesa account can transfer money to anyone in Kenya via SMS. No bank account or Safaricom account are required to register an M-Pesa account, users simply deposit money into their M-Pesa account and they can begin using the service. If an individual receives an SMS money transfer from an M-Pesa member, then they can go withdraw it from a registered M-Pesa agent. The country has thousands of agents (approximately 17,000) scattered throughout various urban and rural centres, making the service accessible to Kenyans whether they work at a big city bank or a small farm in the country.

When the service launched, expectations were kept in check, as it was unclear how quickly the uptake of the service would be due to many potential limiting factors. Among the most prominent were the social factors, such as agents’ reluctance to hand over money based on a simple text message, and the populations general lack of understanding of how to use mobile devices. Beyond that, there were a number of logistical and infrastructure issues that needed to be managed. Despite the difficulties, Safaricom registered 20,000 users within the first month, well ahead of expectations.

Since that time, M-Pesa has gone viral, everybody’s using it. At the end of July 2010, there were almost 12 million M-Pesa users, as subscribership has grown approximately 60% year-over-year (y-o-y) since inception. The amount of money being transferred person-to-person (P2P) has increased 30% y-o-y since 2007, reaching approximately $410.1 million US in July. Safaricom has reaped the rewards for their involvement, as profits from M-Pesa account for approximately 18% of the company’s total profits and they have achieved an 80% market share in the Kenyan mobile market.

The best part of all is that Kenyans genuinely love the service and it’s re-shaping their lives. Now a rural farmer can get paid for his crop and send money to his family in the same day. M-Pesa has become so popular that it is used as a verb, as people say “M-Pesa me” for money transactions. In fact, you can’t go to a bar in Western Kenya without M-Pesa. While there are still some problems that affect the service, such as cash float and reach issues, M-Pesa has made a profound and lasting impact on Kenyan society.

The success didn’t stop in Kenya. In September, M-Pesa was launched in South Africa through the mobile operator Vodacom, which is round three for the service after it was successfully deployed in Tanzania.

Overall, the M-Pesa story has proved that social and economic rewards are not mutually exclusive in business. Projects like this one must overcome significant challenges to achieve success, but the rewards are exponential. It took strong leadership from Vodafone and a committed effort from all partners to get M-Pesa off the ground. Hopefully we can now use this model to develop similar initiatives in places all around the world. With innovation lagging in Canada, it’s time to open our eyes to projects like M-Pesa and imagine the possibilities, because they’re endless.

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