It is interesting to hear the rhetoric and complaint of major record labels, select artists, and politicians in regards to the internet “damaging” the artist. It’s like they are trying to spin it as though the internet “created” the starving artist (pretty sure that concept has been around forever).  In fact, I’d argue it has greatly decreased the starving artist syndrome.

I know several musicians that make nice little livings without having to deal with record labels, recording contracts and the like whatsoever. Distribution is simple, almost free.  Buzz can come from nowhere as wildly viral videos explode on Youtube.  In fact, music is one of the most commonly shared genres on YouTube.

Here are a few videos I really dig of artists I was unfamiliar with before striking gold on YouTube.  It doesn’t mean they are new finds or up-and-coming, just new to me that I really enjoyed. You may be familiar with them but if not, welcome to the fold.

These guys were on the Ellen show, sent them into orbit (40mm views!)

I love this rendition of Coldplay’s Paradise

I found this one a while back but have been following Paul for a bit now. I dig his stuff

One organization that embodies innovation and open thinking as a private organization is a company called Innocentive. So far, I am very impressed with their goals and purpose as a company and the business model they are employing. The following is from their website “about us” page:

Founded in 2001, InnoCentive built the first global web community for open innovation, enabling scientists, engineers, professionals and entrepreneurs to collaborate to deliver breakthrough solutions for innovative R&D-driven organizations. InnoCentive Seekers, who collectively spend billions of dollars on R&D, submit Challenges to the InnoCentive Marketplace where more than 200,000 engineers, scientists, inventors, business people, and research organizations in more than 200 countries are invited to solve them. Solvers who deliver the most innovative solutions receive financial awards ranging up to US$1,000,000. InnoCentive’s Seekers include commercial, government and non-profit organizations such as Procter & Gamble, Avery Dennison, Pendulum, SAP, Eli Lilly and Company, Janssen, Solvay, GlobalGiving and The Rockefeller Foundation.

The concept is based on a community that harbors the connection of “Seekers” and “Solvers” or crowd-sourcing.  The organizations that participate as seekers are essentially inviting outside participation into the R&D process which exponentially expands the reach and capability of their R&D efforts by engaging minds from around the world and rewarding them accordingly.  This is a cooperative effort to solve the worlds problems, find solutions to needs, and develop improvements to civilization and society.  All as a for-profit, free enterprise! The profit motive and market forces will guide the organization to create many of the most important and practical innovations and I look forward to following and participating.  Check them out here!

Many entrepreneurs I run into on a regular basis are extemely “fly by the seat of their pants” type business owners.  They are “movers and shakers” and go from “zero to hero” rather quickly.  These types tend to grow faster than most and also run into substantial problems faster than most.  Growth is a “double-edge sword” if you are not ready for it… (wow, enough buzz phrases yet?).  I work closely with one that has built up and nearly lost it all several times!  Granted, the economy played some tricks on this person but how necessary was it? During the hot times, enough money was flying out of the business on hair-brained ideas to have likely floated the business through some rough waters if a more strategic approach had been taken.  The challenge faced by most of the “entrepreneurial faith” is when to say no to an opportunity or the next “shiny object” that will apparently make business double in no time. I’ve taken this bait enough times to be bigger than Deloitte if it were true. We tend to spread ourselves, our organizations, and our budgets too thin.

So what is the secret?

Well, it is important to first setup your business’ set of core values, mission, and vision. These are meant to be guiding lights within the organization and decision making processes.  Without real parameters, it is difficult to know when to say no.  But these alone can be difficult to judge by as each scenario is different.  Well, if they are built into a model-of-sorts that can almost decide for you, life gets much easier.

Enter the Business Model…

I would venture to guess that more than 9 out of 10 businesses have not put together a business model.  Now, naturally you have one (however poor it may be) just by doing business.  The fact remains that most entrepreneurs think through aspects of their business model but in a compartmentalized fashion, never putting all the pieces together in a more holistic approach. This model is meant to take most key aspects of your business and put them together to make sure they play well. It is also key to keep it relatively simple otherwise it becomes nothing but a fun, theoretical exercise in your final year of graduate school (fun being loosely defined).  The process of thinking through it will definitely bring a certain level of clarity but having a model you can use will transform the way you do business and make decisions.  It has also been said that a great entrepreneur with a mediocre model will fail while a mediocre entrepreneur with a great model will gain phenomenal success.

So what is a Business Model?

Well, it is define as follows by Alexander Osterwalder, in his book “Business Model Generation“:

A business model describes the rationale of how an organization creates, delivers, and captures value.

Their are a few key elements to consider when putting together your model.  I will list these here as they are the next step in your own design. Define these elements for your business.

• Value Proposition – what you offer to your customer, your product or service that creates value.
• Customer Profiles – ideal customer
• A revenue model – how you make money
• Distribution Methods – from value proposition to customer directly
• Fulfillment Process – from your business to value proposition
• Cost Structure
• Competition, competitive strategy
• Resource Management
• Value Network position – recognition of position in overall value network, i.e. from raw materials provider to partners to end users.
• Key Partnerships
• Core Purpose defined – mission, vision, and core values or principles.

I will elaborate on these points in future posts and unveil the construction of the model itself.  For now, begin working through the above mentioned points, defining them for your own idea or business. Once you have a workable model, you will be able to forge ahead with more confidence and surety that you are making wise business decisions.

The major key to sustained success is connected innovation.  That is, continual innovations and improvements to products and practices based on research, feedback, and general connectedness with the serviced demographic.  Innovation is a key characteristic of the entrepreneur.  Every day, entrepreneurs start businesses, have success, and fail.  One of the main factors in this lack of sustainability is not their entrepreneurial spirit but their inability to translate that into an organization.  They either are completely unable to transition from small startup to larger organization or in that transition, lose what made them successful in the first place and allow inefficient, ineffective bureaucracy to infiltrate based on old assumptions of “the way to do it”.  The transition to growth is crucial for sustained success just as the connected innovation that generated the business idea in the first place.

So how do you maintain that power within an organization of 10, 50, 100, 1000, or even 10,000?  An effective organization will be made up of two types of people: Entrepreneurs and Intrapreneurs.  You’re likely familiar with entrepreneurs but what is an intrapreneur? The popular Wikipedia includes this entry:

Intrapreneurship is the act of behaving like an entrepreneur, except within a larger organization… In 1992, The American Heritage Dictionary acknowledged the popular use of a new word, intrapreneur, to mean “A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation”. Intrapreneurship is now known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques that are more traditionally thought of as being the province of entrepreneurship.

Entrepreneurs will be found at the head of the organization as owners, key executives, and department heads. Intrapreneurs will essentially make up the rest of the organization.  The key to success, therefore, is instilling the responsibility, trust, respect, and expectations of entrepreneurship throughout the organization and within each position.  

As any regular reader will know, two of my most popular topics or themes are entrepreneurship and congruent with that, innovation.  Well, I want to share a theory of mine regarding innovation.  I don’t know if “theory” is the right word but it works for me.  It is a concept that I think a fair amount about.  It is the solution to many of our society’s and planet’s problems. And, guess what… it includes innovation!!

Common discussions in today’s society include efficiency, uses of limited resources, care of the environment, and related topics.  This are concerning and critical issues but one piece of the discussion that is often missing is the opportunities that lie ahead.  This includes innovation, technology, and more.  Many of the discussions are in a closed box as though we will never innovate or improve again and are left to find improved efficiency with what we have.  The result is always lackluster performance with incremental influence and essentially no solution to today’s issues.  Take examples such as cap & trade.  Scientific evidence suggests little, if any, measurable improvement by such enacted measures.  So why do we, as a society, interest ourselves in the wasted resources (in this case, increased economic costs), for little result? Again, the discussion and solution are discovered within the closed box and the supporting groups and individuals feel doing something is better than nothing, even without favorable result.  So what happens when we up top the box? Welcome to the key of societal development.

Well, Chris Anderson over at WIRED just published yet another article that is sure to get its fair share of praise.  I’m sure it will gain a following and eventually be another book, following up “Free” and “The Long Tail“, both of which essentially started as articles in the mag.  I will start by saying I’m a fan of Chris and his work.  Those two books are some of my favorite business-ish books. Well, on to the article.  This latest incarnation of thought is titled “The New Industrial Revolution” as it is emblazoned on the cover of the February 2010 issue, or “Atoms are the New Bits” as titled within (I don’t know what they want it called).  The line of thought in this piece can be seen not only in Chris’s previous works but many strains of it can be seen throughout WIRED over the past few years. One of the key points that I’d like to highlight regards community & open-source development.

As seen in both Free and The Long Tail, community and open-source are the future of industry, advancement, and entrepreneurship. Even large, blue chips are taking part to some degree.  Take Microsoft’s decisions to open beta-test its latest Windows and Office packages as an example.  Other companies are entirely based on these community participation models. This free or near-free participation and approach has been tested, and proven, with the web and the constant content generation found there. Now, as can be interpolated from the article title, the open-source and open availability of these digital bits is being translated into near-free atoms! Actual physical products and goods are the next step to prove the concept of opensource.  As we translate all the content, development, and innovation of the web into physical products, entrepreneurial opportunity will explode and prices, competition, and innovation will accelerate at levels unseen. Now, resistance will obviously occur, but pressing forward will yield tremendous return.  Threadless is one company that is a common example of this opensource bits-to-atoms process, and a good one at that.  They have demonstrated the win-win possibilities of the model in creating not only more unique, high-quality products but at reasonable prices with low-overhead, high profit business returns. This is only the beginning, of course, as Chris introduces us to much more complex possibilities than t-shirts.

Take Local Motors as an example that he mentions.  They have actually begun production on a car that was designed and voted on by a community, in fashion of Threadless’ t-shirts.  It will be built mostly using “after-market” parts and assembled individually as orders come in.  Interestingly, Local Motors follows a model described in another WIRED article found back in June here. Currently Local Motors is coming out as a niche company, giving little competition to the major car conglomerates but that will likely change as Local Motors develops or others come into the game.  This is only the beginning! Local’s design-to-market turn around is a distant dream to any detroit competition.  As Chris states:

the company says it can take a new vehicle from sketch to market in 18 months, about the time it takes Detroit to change the specs on some door trim.

Even better is the open availability of the design plans under creative commons license.  This allows components, add-ons, mods, and more to be created by anybody, unveiling countless other business possibilities. This is just one example of companies taking technology, community, and open-source to the world of physical products, to “atoms”.  Many other examples may not scale like Local Motors nor have the desire to do so.  The fact is many small entrepreneurial ventures, with today’s technology and tools, have the opportunity to compete with the behemoths or simply fill niches that are untouchable by them.  It is a beautiful thing to behold.  And we aren’t talking about the digital realm here.  This is manufacturing, production, products, this is atoms!  With simple tools such as 3D printers (for less than a grand), access to custom limited-run manufacturing at remarkably affordable prices (thanks again internet), and open community feedback, the opportunity pool is much deeper than it used to be!  Even nuclear power is being approached with this technique as I discussed here regarding yet another WIRED article.  Like I said, this theme can be seen throughout their articles over the last while.

So what does all this mean for the entrepreneur?  Well, if you haven’t picked it up already, its all about endless opportunity and open, community development of ideas!  With that in mind, what do you think? Any other great examples of similar business models in use?  Let me know!!