Saul Berman, if you've been around business for a while and availed yourself of strategic consulting at a high level, is someone you've either met or wanted to meet, and last week I lucked out. He has a new book out that I highly recommend, Not for Free, Revenue Strategies for a New World, and over lunch recently, I was able to ask him a few questions about new business models in a socially connected world.
Basically, Berman takes issue with the "free" model, promoted by Chris Anderson, Kevin Kelly and others, which states, roughly, that the propensity of information to become increasingly ubiquitous - and cheap - is an inexorable force when content is digitized. While acknowledging that, especially in media and entertainment (Berman's "canary in the coal mine"), the field Berman's been covering for years, the digitization of entertainment has up-ended business models, the fact remains that stars and producers still make money. One leading example is rock musicians, who may not make as much money cutting albums, but now make much more money than they had previously from live appearances (which formerly were supposed to promote making money by selling albums.)
The great thing about Not for Free is how Berman takes the revolution in the media industry and applies what happened to business models there to traditional enterprises in automotive, consumer electronics, retail, telecom, and many others. As Berman set out to find out how other sectors were faring in a "free" world, he used IBM's CEO studies as a way to determine how important business model innovation, as opposed to the more typical product innovation, was affecting a company's success. "We found that the firms with the fastest profit growth compared to competitors' over the previous three years had put twice as much emphasis on business model innovation as the average firm...." Pretty astounding.
Berman has organized innovation in a "free" world around audience segmentation, pricing and packaging. The book abounds in examples and sources of for ideas, as well as practical "info-graphics" for selling the necessary changes in business process through to upper management and boards.
I enjoyed this book because, as a CEO of a start-up in "media/entertainment" who makes payroll twice a month, the relentless pressure towards cheaper keeps me up at night. Each time I hear some venture-enriched founder say in a dismissive tone, "no, of course we're not making money," I want to die. But I also value how Berman's cases can inspire new models for our own companies and our clients. The trick is to be creative and to adapt quickly, not easy to do in the large enterprise, and Berman does not offer up any easy solutions, cautioning, in fact, that the usual method of "walled garden," corporate experimentation all too often neglects the kind of real-world collaboration necessary for implementation of change.
Fodder for a new book, perhaps? Because like it or not, we're going to need to adapt any which way we can. You can also check out Berman's thinking in this video presentation sponsored by IBM.