In January, in a highly unusual move, Toyota Motors announced it had offered to share its automated safety system which uses self-driving technology to keep cars from crashing, with its car manufacturing rivals.
The system, which is known as Guardian, takes control of a vehicle to steer it around an impending crash or accelerate it out of the path of an oncoming vehicle that may, for instance, be running a red light.
Gill Pratt, chief executive officer of Toyota Research Institute, said the technology is set to roll out early next decade and has the potential to save so many lives that the automaker felt compelled to share it with any company that would like to use it.
Self-Driving Cars – A $10 Trillion Market
Experts predict that self-driving cars and related mobility services could become a $10 trillion market. Toyota’s seemingly selfless act could generate large royalties and potentially establish its reputation as a safety and technology leader. Toyota said this effort is about saving lives in a world where there are 1.3 million deaths in auto accidents each year.
Ryan Eustice, senior vice president of automated driving at the Toyota Research Institute said, “This is a super advanced driver assist system”.
Toyota has been developing the technology for three years, which can take over and guide a vehicle when a driver becomes drowsy, distracted or drunk.
Why would Toyota do this? Besides wanting to make the world a better place, the answer is – profits.
Business-Model Innovation
Business-Model Innovation is the key to generating large revenue streams.
Business-model innovation involves the design or architecture of an entire system by which the enterprise provides value to customers, its actual delivery, and the related customer recruitment. This involves identifying how it plans to entice customers to pay for products/services and converting those payments to profit.
For example, the development of new shatterproof glass that could withstand tornado force winds would be a product innovation that could reap significant profits, but not one that would constitute an entirely new business-model innovation in the glass industry.
Business-model innovation also describes the less glamorous processes of how an organization creates, delivers, and captures value as opposed to only creating a new product or service. It requires management to do more up-front work to assess what customers want, how they wish to receive it, and how the enterprise can organize to best meet those needs.
For example, Google rose to power using business-model innovation. Google didn’t invent the Internet and computers; it simply used those tools to engineer new search engine business models, which created new value propositions for the public and, as a result Google became one of the most profitable companies in history.
With regards to business-model innovation, as we have discussed in prior Newsletters, to truly benefit from innovation and not have a “one-hit wonder” with innovation, three basic items need to be put in place:
- A culture of innovation needs to be created in a company and its workplace
- A specific strategy of how a company desires to use innovation must be developed
- The organization needs to focus on “business model” types of innovation because they can lead to large potential revenue streams
Platforms—Where the Big Profits Are
The ultimate business model innovation is one that is, in fact, a business model “platform”.
Historically, and even more so now, creating business-model, radical innovations that are, in fact, business platforms are where enormous profits are. Consider recent successful companies that are getting billion-dollar valuations—AirBnb, Uber, Instagram, Whatsapp. A prior generation of business model platforms include: Amazon, eBay, Apple’s App Store and Intuit’s QuickBooks-App Store. They are business-model innovations that are, in reality, business model platforms.
What is a platform? It is a business model that creates value by enabling exchanges between two or more interdependent groups, usually consumers and a service or product provider. It is founded on the concept of providing a “one-to-many” service model.
Metaphorically speaking, creating a business innovation platform is like building a cutting-edge playground for all the neighborhood kids, not imposing a price for admittance, but instead charging a small fee for providing a safety guard. Why would you not want to use a great, secure playground?
eBay Is a Business Model Platform
Let’s take eBay as a platform example. They created an on-line bid and auction website where people with items to sell did so while eBay made a small percentage of the sale. Both the seller and buyer of the item got what they wanted, which encouraged more people to become eBay participants.
Soon, people had moved from selling items occasionally to establishing companies whose sole focus was selling items on it. eBay had created a platform where they took a small fee for facilitating the transaction and the seller, buyer, and eBay all were winners.
A platform’s underlying concept is similar to a computer’s operating system that establishes a general operating environment in which specialized computer application software operates. In this analogy, the innovation platform is the operating system and the customers and service/product providers are the application software that operate within its confines.
The Five Basic Attributes of Business Model Platforms
A business model platform has five basic attributes:
- It aims to meet a ubiquitous need in the marketplace.
- It is responsible for managing the business processes associated with it and fulfilling the needs of the parties that utilize it.
- It focuses on the value it brings to the participants rather than inputs such as labor and physical assets.
- It serves more than one customer, ideally the masses.
- Its developers earn increasing revenue and profits as the size (scaling) of its customer base grows.
With regards to Toyota, their hope in making this offer is to earn large royalties from licensing their technology to other manufacturers and generate additional equipment and software fees from companies wanting to integrate their products with Toyota’s platform.
Developing Business Model Platforms
How do you identify and create business model innovations?
First, the above three items listed under Business-Model Innovation need to become a reality within your organization.
Then, using overall innovation strategy you have established, focus your efforts on trying to develop business model innovations that are so good, they can become business model platforms. Look for innovations that can serve large groups of people who need a business process that would simplify their lives.
If you could use assistance with identifying and developing business model platforms, please contact us using the information below so we can be a resource to you in this critical area.
Fountainhead Consulting Group, Inc. is an Innovation and Business Planning firm. During the past 17, years we have shown over 1,200 companies how to achieve their goals by using our unique, comprehensive, and systematic FastTrak Innovation Program™, Innovation Academy™, and Structure of Success™ methodologies. Using the components in these methodologies, each month we examine an aspect of how to transform your business or organization into a true 21st Century enterprise.
Office: (770) 642-4220
www.FountainheadConsultingGroup.com
George.Horrigan@FountainheadConsultingGroup.com
Tags: entrepreneur, innovation, small business consulting, small business planning, start a business
