A business model is more than a value chain!

According to Prof. Faltin’s innovative entrepreneurship approach entrepreneurs are value plumbers, constructing a network of value flows through the combination of functional components. This is especially true in digital business ecosystems (www.digital-ecosystem.org). Another feature that seems to be more and more applied in e-markets is crowdsourcing. Jeff Howe – the inventor of the term – defines crowdsourcing as “the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call.” More generally one can observe that companies transpose many value creating functions to the customer. These shifts usually follow the formula “gain control of the process by doing it yourself” – as is the case when you reserve your seat in a plane or track your UPS parcel. Let’s take a look at some real cases:

A good example for crowdsourcing is the BBC which recently decided on a strategy, which heavily bets on Usr Generated Content. Matt Locke (http://www.european-futurists.org/wEnglisch/aktuelles/2006_10_19_interview_locke_meldung.php), who heads the BBC’s Open Innovation project (http://open.bbc.co.uk/labs/) is a specialist in facilitating the social adoption of technology, and is leading the BBC’s endeavour, which is meant to make the BBC embrace the fluidity of IP based networks by ‘atomizing’ their content, enabling users to remix and re-contextualise it in the way they want to. This practice would – if becoming the predominant paradigm – shift the media giants role from being a broadcaster providing filtered and supposedly high quality information to being an _information platform_ allowing its users to provide and manipulate contents. In a personal conversation with a BBC journalist I learned that the ‘professional journalist community’ is highly critical of what they dub as a ‘strange experiment’ because they believe user generated content is inherently less accurate and allows publication of potentially wrong and harmful information. One can easily imagine the law suits accusing the BBC of being the media source of false user generated news. Anyway, to allow the users to leave their comfortable but passive ‘information consumerist’ couch and have them engage in a public discourse seems like promotion of the Free Culture a la Lawrence Lessig is fighting for, and which I personally fully support. To wrap up, it is an experiment and there are many open questions, but it is innovation as it should be and it certainly seems to have the potential to make the BBC the first mover in what

Another example is the good old book-swap – revamped as Bookmooch.com, which enables thousands of enthusiasts to ship their goodies around the globe while the ‘money makin’ is happening more on the sideline though Amazon commissions.

A third good example of what Jeff means by crowdsourcing is the virtual world of SecondLife. When reviewing the story of SecondLife one inevitably starts reminiscing the roaring 90ies when Internet start-ups kept reporting exponential user growth rates and enthusiastic entrepreneurial plans for the virtual empires they envisioned to create. Take a look at this company presentation video. However, there is one decisive difference – SecondLife is turning over serious amounts of money and according to business analysts Linden – the company behind SecondLife – is set to become a highly profitable enterprise. And SecondLife’s business model embodies the new 2.0 component based business paradigm perfectly. Linden is responsible for providing the technological platform (the hard- and software that is running the virtual world) and is mainly making its money by selling virtual land property where users can build whatever kind of establishments they want to create. And this the key role of the users – to create the virtual worlds with all the buildings, objects and avatars that make up SecondLife. All Linden provides and continues to expand is the universal scripting language used to create all objects (everything) in this massive-multiplayer-environment, while the users are responsible and let loose to create the actual world.

So as I started to describe in one of my last posts (in German), the modes of production, and even more important the definition of what to charge money for in a virtual environment, are proofing to make fundamentally different business models possible and necessary. Authors like the praised Yochai Benkler (commons-based peer production) or the a bit more esoteric Howard Rheingold are describing and thereby to a certain degree framing the rules of this new game.

We are not there yet, but I believe that the component based approach to entrepreneurship developed by Prof. Faltin and the epistemologic community around him is perfectly applicable to the scenarios described in this reflection.

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