Open Business Models: How To Thrive In The New Innovation Landscape by Henry Chesbrough

Author:Henry Chesbrough [Henry Chesbrough]
Language: eng
Format: epub
Tags: Business
Publisher: Harvard Business Review Press
Published: 2006-12-06T00:00:00+00:00

Type 6: Company’s Business Model Is Able to

Change, and Is Changed by, the Market

The type 6 business model is an even more open and adaptive model than types 4 or 5. One important attribute of a company with a type 6 business model is its ability to innovate its own business model. This requires a commitment to experimentation with one or more business model variants, and a willingness to invest some amount of funds and management attention to explore alternative ways to profit from innovation. This experimentation can take a number of different forms. Some companies use corporate venture capital as a means to explore alternative business models in small start-up companies. Some use spin-offs and joint ventures as a means to commercialize technologies outside their own current business model. (Later success with a spin-off or joint venture, in turn, might help the company shift its own business model in that direction.) Some have created internal incubators to cultivate promising ideas that are not yet ready for high-volume commercialization.

Experimentation with the business model also extends to customers and suppliers. In type 6, key suppliers and customers become business partners, entering into relationships in which both technical and business risks are shared. The business models of suppliers are now integrated into the planning processes of the company. The company in turn has integrated its business model into the business model of its key customers. This allows the company to create its business model as a platform to lead its industry, including suppliers and customers. And this platform effectively organizes and coordinates the work of many others in the service of the business model.

Dell is a good example of both the supplier and customer dimensions of this type 6 partnership with suppliers and customers. With regard to its management of suppliers, Dell segments its suppliers, just as it segments its customers. Its relationship with Intel, for example, goes far beyond that of a traditional supplier or vendor. Dell works closely with Intel on future technology planning. It acts as an early test bed for new Intel chips and often is the first company to develop a new motherboard for the next-generation chip. It shares all of its field failure data with Intel. And, until May 2006, Dell purchased its chips exclusively from Intel, rather than buying chips from Intel’s rival, AMD.

Dell also works closely with its enterprise customers, which it segments (and treats quite differently) from its consumer customers. Dell maintains a database of all Dell products sold at each enterprise. The customer can specify a three-year or four-year rotation period for receiving new Dell computer products, and Dell effectively administers the company’s rotation policy on behalf of the customer. It will even create and install a customized software configuration for that customer so that each employee at each company location receives a new PC or notebook every three or four years, loaded with the exact software specified by the customer. This saves IT costs for Dell’s customers and creates strong incentives

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