Where Are All The Business Innovations?
I had an excellent lunch today with Antti Akonniemi, the CEO and founder of Kisko Labs and Ville Vesterinen. Among other things, we discussed business models and how stuck up companies are in their methods of innovation. I mean think about it, at least we've come across a ton of different companies with a ton of consumer internet applications for all sorts of needs. But when we discuss what their business model is - it is usually limited to advertising, freemium, subscription, premium or some sort of mix of these.
However, I had a talk with an anonymous for now, but very successful entrepreneur earlier on this week and we discussed his new business idea about a service concept where the innovation was in the business model for the consumer. The service concept usually would cost around 1500e and nobody in their right mind would pay such money - looking at the current market and the way things are done. However, when you package it with a financial company and a monthly payment plan of 49e the whole scheme is beginning to look a lot more appealing, extremely appealing actually. The beauty of the idea is that my friend's company does not have to take any of the financial risk as it's "sold" to the financial organisation partnering in the business plan. I'm sorry I can't disclose more here, but what I wanted to tell with this example is that with a simple business innovation you can create a lot more value for the consumer and thus create a lot better chance for the concept to fly.
Nevertheless, back to Kisko Labs - they've come up with an interesting concept for enabling new innovation in the Nordics. What Kisko Labs is trying is that they're taking a pro active approach to web development for start-ups. They're willing to do an equity swap in return for web development for start-ups with a great business idea. Kisko Labs has of course a healthy consulting and development business to support this cash flow-less venture. I believe this could prove a killer approach for startups with great ideas in a time when venture money is tight.
If you look at this from a larger scale - the last great business innovation (that flew big time in the consumer market) I saw, was the iTunes 0,99 USD/EUR for a track. You take the existing business and package it differently, economically. But seriously speaking - where are all the business innovations? Shouldn't times like these be good drivers for new packaging of existing and already proven business cases?
Disclosure: We have some small scale innovation going on with Kisko Labs, which we will disclose just before Le Web.
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Good to hear it. I hope Kisko has enough human resource and free cash flow to sustain such act; as supporting web development for a start-up, either just consulting or programming directly, would look like a non-profit thing at first.
My take is Kisko should improve their English version web site and put more in their portfolio and team page. I love the idea, and if possible, want to talk with the guys about the innovation. Also, would be nice to see Kisko supporting some of the finalists in Slush Helsinki.
Resourcing has been planned and should not be a problem.
We're always happy to talk about innovations! Email me at antti (at) kiskolabs.com and let's schedule a meeting.
We already had some talks with some of the Slush finalists, but if you feel left out - just pitch to us :)
Sorry about the English section @ Kiskolabs.com! We just released it in a hurry because of LeWeb. We'll keep improving it!
I think reason for that is simple. Most of the startupers are not specialists at modeling :) that's why we try to innovate in areas we have the expertise.
Also, one suggestion I heard from experienced advisor and also from VCs. "Don't experiment with business models too much. There are few that works pretty well, just pick-up the one suitable for your product."
Thanks to Antti (V.) for this very nice and thoughtful article.
I'm "the other guy" from Kisko Labs and I'd like to (hopefully) clarify and elaborate on some of the points of our offering models. We've come up with our "sweat equity" and profit sharing models for a few reasons.
One main driver has been the current climate in project contracting, at least in IT world. Clients want to invest the least amount of money to a project and get the maximum value out of it. This is especially true when the project does not have a clearly defined business driver and value proposition behind it. Contractors often want to invest the least amount of time and effort, and get the maximum amount of money out of the project. When both parties try to maximize on each other's minimums, they don't share a common goal. Antti (A.) elaborates this further in his latest blog post (http://anttiakonniemi.com/2008/12/04/why-contracting-doesnt-work/).
Profit sharing often appeal the clients very much once they realize that 1) we're usually offering practically zero downside to them, 2) their idea for new business might really be a decent one, because someone else is believing in it and 3) the project will truly have a common goal of profitable business for both parties. However, Finns seem to have some way to go in accepting this kind of model because of the cultural heritage. If a company stands to gain 5 MEUR from a successful project and the collaborator's share is 1 MEUR, this isn't such a big deal in other countries but some Finns tend to have this "En kai mää nyt sulle miljoonaa anna" ("Why would I pay you one million") attitude. ;)
Profit sharing will probably be our preferred way of doing business in the near future, because it lets us to work on interesting projects that have a great growth potential and upside, and we're in position to "exit" these businesses once our work has been completed but still continue to reap the rewards until our agreement runs out.
"Sweat equity" is the ultimate cooperation model where the fruits of the labor are usually realized long after the "investment" as with capital investments. In these cases we're looking beyond just the idea and want to see some type of customer and market development so that we can be assured of the feasibility and profitability of the business. Jussi Laakkonen wrote recently a great blog post on customer development that should be read by every startup and entrepreneur once in a while. Also the book that Jussi recommends is worth of purchasing. I have to re-read it soon, too. You can check out Jussi's piece at http://jussilaakkonen.wordpress.com/2008/11/13/customer-development-or-why-910-startups-fail/.
I think it's a great idea. I'd like to see lawyers, accountants and designers adopt the same model. I once had a vision of a company that had all the machinery in place to make a great idea happen, and that worked on a sweat equity basis or at least a partial sweat-equity basis. As Lauri says, it seems to offer a better balance of incentives.
Great article. It's good that things are moving to this direction more and more. Almost anyone is capable to invest some "sweat equity" as long as everyone also remembers to keep their balance and not take too much risk to loose their basic cash flow.
One big question that we have been wondering is that, why have there not been any real innovation in vc funding model?
Isn't the VC people one of the smartest people out there? At least that the impression they are giving...
They go trough kazillion new business ideas and innovative new business models and yet, their own model has not been innovated, ever.
We got tired of this and decided to do something about it!
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