Business Models in the Software Industry

Disruptive Business Models

Software industry and disruption

The software industry is all about disruptive business models. The key question remains: How do you plan and build disruptive business models? What are examples of disruptive business models? What did companies with distruptive business models do different than other companies? How can a company offer for the prize of zero? All of these questions can be answered by looking at disruptive business models.

Business model canvas and disruption

Let us adress these questions based on the business model canvas. The business model canvas is a well known approach by Osterwalder to model business models. Osterwalder published his approach in the book Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers.

A business model is described there on a "canvas" that shows e.g. the value proposition, cost, channels, revenue, suppliers, key resources and key partners.

Here is an example of Google´s search business on the business model canvas:

Where in the business model can disruption happen?

Now that we know the business model canvas, we can take disruption mechanisms and put them into the canvas. I use the information from Mark W. Johnson´s ideas on seizing the white space and put them on the canvas. And i use information from Profit from Software Ecosystems book

Let me explain some of the boxes below.

Offer standardized low price version of high price product

There is a high price product, like secure data rooms. You build disruptive business models by offering that product in  a standardized low price version. Examples i like are

  • UberX, a service from Uber that offers cheap transportation services
  • Motel One which is a motel chain that offers very affordable overnight stays 
  • Securedocs, who disrupt the secure data room industry by offering a cheap yet safe data room for companies.

Shop at home with device

Nothing is more convenient than shopping at home. Technology can put that convenience to a new level.

Here are my most-liked examples:

  • Amazon has invented Amazon Fresh, a device that can scan barcodes of products at home or can listen to your wishes. Just say: chocolate sprinkles and the sprinkles will be at your door the next morning.
  • Amazon Fire scans for products that can be ordered, from Amazon, of course. no more searching for names or products in catalogs. scan, shop, done.
  • hybris Commerce Suite: lets you shop on any device (smart tv, Ipad, Phone)

Integrate and combine channels

In some industries there are opportunities in integrating and combining channels to build disruptive business models. No matter how you reach customers to sell goods, no matter where customers turn their attention, you might leverage all these channels as one.

Here are my favorites:

  • Stylight social shopping. Stylight has integrated normal people showing off purchased apparel in social networks with a shopping experience. Pictures of these people can appear in the shop and items can be ordered right away.

Prize of zero fed by other revenue streams

There is no better way to disrupt than offering a product or service for a price of zero. But you have to make sure you get some compensation or you finance that business model with revenues from your other business models. Advertising revenue has been stressed a lot in the software business for this purpose, but it only works in rare cases. So, which other sources of revenue to fund a low price are there? Here are my examples:

  • Google search. The service offered by Google is free. If you look at it more carefully, there is a compensation. it is data about the interest and the searches a user starts. This data is sold to advertisers. Revenue from advertising feeds free search.

Communities instead of sales force

Outsourcing for the prize of (almost) zero and scaling your salesforce dramatically. These are the benefits of leveraging product communities for supporting, maintaining and even selling your products. Network effects can accelerate this effect even more. Examples are:

  • Nespresso community
  • Skype was and is mostly promoted by its community. the network effects of having additional people join.
  • Open Source communities

Do more to adress the job

Just do a little more than your competition. Sounds easy, but it might take some hard thinking to deliver. Here are examples:

  • German epost does not only store your mail while you are away from home, they will scan all incoming letters and provide them online for you to look at it.
  • Life is good. Social retail. Shopping is great. Might be even greater if you are doing good while you are shopping.

More information to come soon. Many of these ideas are in the book Profit from software ecosystems



Content on this site comes from the two books

Mergers and Acquisitions in the Software Industry

other background literature is:

Osterwalder, Business model generation 

Mark W Johnson, Seizing the white space

R. Meyer, K.M. Popp, Profit from software ecosystems

(C) Dr. Karl Popp 2017,2018