Governments and Business Model Innovation

The DOJ is suing Apple and several book publishers over e-Book pricing. In a word, I am ambivalent.

In my new book, I have a whole chapter on business model innovation facilitated by technology. Here is an extract:

It was fascinating to watch, in contrast, when the iPad was introduced, Apple actually managed to convince book publishers to increase e-book pricing beyond the market standard being set by Amazon.

In technology circles, we look for competitive advantage via
form/factor and feature/function. Mark Johnson of the consulting firm Innosight (which he co-founded with Clayton Christensen, well known for his work on disruptive technologies) says, “It’s far harder for an incumbent to fight back against a business model innovation than it is for
them to match and raise the stakes on a technology innovation”

Repeatedly, Apple has shown a willingness and ability to compete on “business model innovation.” Amazon does the same—it lost money on many e-books at $9.99 as it tried to build customer loyalty around a new way of reading books on Kindles. It has long subsidized shipping of physical books and other items and it offers customers Prime membership, which for $79 a year (in the United States; prices vary in other countries) includes two-day shipping. This is a great deal for frequent customers.

We need much more BMI in technology. Lord knows there are so many ossified business models across technology sectors. I would rather regulators encourage more BMI, not scare it away.

Having said that here’s why I am ambivalent. As an author, I have watched the yo-yo pricing around the e—Book version of The New Technology Elite in the month it has been out. Kindle, iPad and Nook pricing has ranged between $28 and 32. That’s about the same as Amazon hardback pricing even with no printing or shipping costs involved. And it costs more than the Kindle versions of both Isaacson’s Steve Jobs biography and Lashinsky’s Inside Apple put together – far more popular books than mine. I have no influence on the pricing.

My next book will get its own BMI – the author will set the pricing. And it will be fair to his readers.