Apple’s development of iTunes of course features strongly in demonstrations of the concept, as in Christensen et al in HBR. Music was going digital, so what a great idea to give consumers a neat device to play music that you had to buy through a central online store. Question is – what on earth were the music production companies doing – sleeping?!

I like Coldplay, who are signed up with EMI, so what do I actually want? – just the music by the band, produced by the company. So surely I just key ‘Coldplay’ into Google which takes me to an EMI web-page where I can sample a track and buy it? Being quite bright, I might even just key ‘www.emi.com/coldplay‘ into my browser and get the same. No chance! [try it for yourself, the URL is actually http://www.emi.com/page/emi/Discography_UK/0,,12641~931488,00.html].

So I find what I want – now can I buy it? no. Why not? Why does there have to be anyone else involved in this transaction? I quite understand that 10 years ago the record companies wanted to protect their CD sales, but surely the writing was on the wall for that business model years ago. It looks like the smart players in this situation were the bands themselves, who realised they could offer something that neither Apple nor the record companies could take from them – live shows, worth millions and just great for the fans. Recorded music for the bands now looks like a promo give-away to drive demand for tickets that will make them very, very rich.

Can the record companies still take back control of their own product? Maybe – and maybe they can exploit Apple to do so. There’s plenty of potential added-value content – extended length tracks, video and so on – so Apple could keep selling the basic content and the record companies develop the facility to sell direct to us all the really good stuff. My friend in the industry tells me that they have been able to do much of this for over 5 years, but instead of taking charge many have instead stumbled from crisis to crisis as Apple at one end and the bands at the other have stolen all the value.

More on strategy at www.strategydynamics.com.

The basic idea is fine – many innovations like iPod/iTunes will only work if they redefine how money is made, by whom, for what. Large corporations may need to develop new models in order to exploit radical innovations.  But that’s not the situation facing most firms, especially right now. 

After a few years of chasing intriguing but fanciful new opportunities, many businesses have over-extended themselves, and neglected the core business that makes reliable money. The article reports that 50% of executives believe the hype that they should be seeking ‘business model innovation’ – hardly surprising, since they have been heavily sold this message by HBR and others over several years.

What most actually need to do right now is re-focus on what works and do it effectively. If they spend their time instead looking still more avidly for some fantasy new world, they may find there’s no business left to take there.

I am not saying for a moment that business model innovation is a bad idea – just not relevant for the vast majority of firms. As the article notes, “Fully 11 of the 27 companies born in the last quarter century that grew into the Fortune 500 in the last decade did so through business model innovation.” So … 16 didn’t, and 473 stayed there without doing so – and that’s ignoring the many cases of attempted inovation that failed catastrophically. Anyone still backing eBay using Skype to transform its payment model, or Time-Warner using AOL to transform delivery of media content, or Hyundai to dominate the car industry through eliminating dealers from the business model?

The article is also pretty generous in defining what counts as business model innovation, e.g. Apparently, Tata didn’t launch low-cost cars to low income families in India, it offered a transforming proposition to families travelling on scooters.