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Business Model Innovation

Business Model Innovation


How to (re)invent your business.
by Marc Sniukas www.sniukas.com

What will we do today?


Agenda

1. 2.
3. 4.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation? What is the Process of Business Model Innovation?

What will we do tomorrow?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

TEACHING
We dont teachwe create opportunities to learn!

LEARNING

Getting to know each other


Who are you? What is your work (company, position, ) Why are you here? What do you know about business model innovation?

About Marc
www.sniukas.com Consultant

Author

Researcher

How to (re)invent your Business Model?


The Framework: Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

What are we going to do today?


Agenda

1. 2.
3. 4.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation? What is the Process of Business Model Innovation?

How to (re)invent your Business Model?


The Framework: Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Why to engage in business model innovation?


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

Get the business model wrong, and there is almost no chance of success...
Prof. David Teece University of California, Berkley.

Business model innovation matters and it is a top priority of CEOs.

Innovation is front and center on the corporate agenda, according to a global survey. Executives are adding more breakthrough innovations and business model changes to their portfolio to fuel the growth engine.
Business Week, November 16, 2009

Why do Business Model Innovation?


Benefits cited by business model innovators

Source: IBM Global CEO Study 2006

Why do Business Model Innovation?


Profit outperformers focus on business model innovation

Source: IBM Global CEO Study 2006

Why do Business Model Innovation?


Operating margin growth in excess of competitive peers

Source: IBM Global CEO Study 2006

Why do Business Model Innovation?


Business model innovators outperform traditional innovators

Source: Businessweek / BCG Innovation Survey 2008

Why is it important to you?


How Business Model Innovation can help you. Entrepreneurs
Market Entry

Managers
Growth

Public Officers
Enhanced Value for Citizens Innovative New Approaches needed New Public Management

Commercializing a New Technology Create New Markets

Competitive Advantage Fend of new entrants

Is it time to renew your business model?


How to tell: Environmental Forces

Is it time to renew your business model?


How to tell: Product/Technology Life Cycle

Stagnating or declining revenues

Source: Moore, GA 2004, Darwin and the Demon: Innovating Within Established Enterprises. Harvard Business Review, 82

Is it time to renew your business model?


How to tell: Product/Technology Life Cycle

Source: Moore, GA 2004, Darwin and the Demon: Innovating Within Established Enterprises. Harvard Business Review, 82

Any Questions?

What will we do today?


Agenda

1. 2.
3. 4.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation? What is the Process of Business Model Innovation?

How to (re)invent your Business Model?


The Framework and Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Dimensions and components of Business Models and Business Model Innovations.


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

What is a business model?


Some definitions
A business model is simply the way of doing business that a firm has chosen: its entire system for creating and providing consistent value to customers and earning a profit from that activity, as well as benefit for its broader stakeholders. It refers to the core architecture or configuration of the firm, specifically how it deploys all relevant resources (not just those within the company boundaries), to create differentiated value for customers at a profit
(Davenport, T. H., M. Leibold and S. Voelpel (2006). Strategic Management in the Innovation Economy. Publicis Wiley.)

The business model is a companys answer to the question of how to make money in its chosen business. It describes, as a system, how the pieces of a business fit together
(Magretta, J. (2002). "Why Business Models Matter." Harvard Business Review 80(5) May: 86-92.)

What is a business model?


The essence and main components

WHO
is your customer?
Markets
Customer Segments

WHAT
do you offer your customers?
Products & Services

HOW
do you do this?
Create Value Deliver Value Capture Value

Solutions
Experiences

Individual Customers

Value Proposition

Describing your business business model


Please describe your business by answering these 3 questions.
Who is your customer?

What is your value proposition?

How are you creating and delivering your offer?

Source: Marc Sniukas

What is a business model?


The different layers / levels of detail of a business model
Offering Customer Needs and job to be done Creation Delivery Capture Activities and processes Network and value chain partners Resources, assets and capabilities Governance structures and processes to all stakeholders

Value Proposition

Value

Organization

Relationships

Financials

Costs Revenues Profit

Source: Marc Sniukas

What is a business model?


Tools for describing your business model

Source: Accenture

Source: The Boston Consulting Group

Source: Innosight Source: businessmodelgeneration.com

Describing your business model

Source: Linder, J. C. and S. Cantrell (2000). "Changing Business Models: Surveying the Landscape." A Working Paper from the Accenture Institute for Strategic Change.

Describing your business model


Four components

Source: Johnson, M, Christensen, C, & Kagermann, H 2008, Reinventing Your Business Model. Harvard Business Review, 86

Describing and visualizing your business model


Why is it important?

Be able to communicate it Speak a common language See the big picture Have a basis for innovation

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

Whats your offer? Which jobs to be done do you satisfy?

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

Whats your offer? Which jobs to be done do you satisfy?

Whos your customer? Which customer segments do you serve?

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

Whats your offer? Which jobs to be done do you satisfy?

Whos your customer? Which customer segments do you serve?

KEY RESOURCES

CHANNELS

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

KEY RESOURCES

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

What are your core activities and processes?


KEY RESOURCES

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

What are your core activities and processes?


KEY RESOURCES

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

What are your main assets and competencies?


COST CENTRES

How do you reach your customers?

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

You are your main suppliers, partners and alliances?

What are your core activities and processes?


KEY RESOURCES

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

What are your main assets and competencies?

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

You are your main suppliers, partners and alliances?

What are your core activities and processes?


KEY RESOURCES

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

What are your main assets and competencies?

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

What is driving cost?

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

You are your main suppliers, partners and alliances?

What are your core activities and processes?


KEY RESOURCES

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

What are your main assets and competencies?

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

What is driving cost?

How do you make money?

Source: Canvas by businessmodelgeneration.com

Any Questions?

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

You are your main suppliers, partners and alliances?

What are your core activities and processes?


KEY RESOURCES

Whats your offer? Which jobs to be done do you satisfy?

Whats your relationship to the customer? Whats your image?


CHANNELS

Whos your customer? Which customer segments do you serve?

What are your main assets and competencies?

How do you reach your customers?

COST CENTRES

REVENUE STREAMS

What is driving cost?

How do you make money?

Source: Canvas by businessmodelgeneration.com

Describing your business model


The business model canvas
KEY PARTNER KEY ACTIVITIES OFFER RELATIONSHIPS CLIENTS

Sales Offer 1 You are your main suppliers, partners and alliances? Offer 2
KEY RESOURCES

R1 Customer 1 Customer 2
CHANNELS

What are your main assets and competencies?

Direct Sales

COST CENTRES

REVENUE STREAMS

What is driving cost?

How do you make money?

Source: Canvas by businessmodelgeneration.com

What will we do today?


Agenda

1. 2.
3. 4.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation? What is the Process of Business Model Innovation?

Hey! Theyre lighting their arrows! Can they do that?


Marc Sniukas - Doujak Corporate Development

Business Model Innovation is about...


The essence

WHO
is your customer? New Markets

WHAT
do you offer your customers?

HOW
do you do this? New Ways of Doing Business

New Offers

New Value Propositions

Source: Marc Sniukas

The Innovation Map


4 Types of Innovation Internal

Operational Innovation

Management Innovation

Continuous

Discontinuous

Product & Service Innovation

Business Model Innovation

External
Source: Marc Sniukas

Nine Inch Nails


KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITION RELATIONSHIPS CUSTOMERS

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Business Model Canvas teamplate by : businessmodelgeneration.com Content by Marc Sniukas

MinuteClinic
Traditional Approach Who Everybody Business Model Innovation Everybody

What Usually full treatment Services covered by health insurance Special treatment for additional cost How A range of specialist Special facilities One central location Solution shops

Focus on basic treatments Quick Convenient Affordable

Generalists Located in shopping malls / inside CVS pharmacies Multiple locations Retail model

Source: Marc Sniukas

Grameen Bank
KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITION RELATIONSHIPS CUSTOMERS

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Business Model Canvas template by : businessmodelgeneration.com Content by Marc Sniukas

Grameen Bank
Traditional Approach Who Business Model Innovation (Rich and middle class) people who Low income clients are reliable to pay back the credits or Poor people who would not get have enough assets as security. any loans from traditional banks (especially women) Small loans to unbanked people

What Classic loans, usually for larger sums to buy assets. How

Strong risk management About 97% make their payments. The returns from the interests belong The borrowers are the owners of to the bank/ shareholders the bank. Profit focus The profit of the bank goes back to the owners. There is no collateral. No lawyers. Social business focus

Source: Marc Sniukas

McCaf
KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITION RELATIONSHIPS CUSTOMERS

KEY RESOURCES

CHANNELS

COST CENTRES

REVENUE STREAMS

Business Model Canvas template by : businessmodelgeneration.com

McCaf
Traditional Approach Who People who want a quick bite to eat Get in, order, get served quickly, get out quickly again Business Model Innovation People who want to sit down and remain seated for a while Create a 3rd place la Starbucks Coffee and cake Made to order (coffee) Pre-produced (cakes) 2 counters Separate seating area for McCaf Key is to increase share of wallet of the customer and keep him for a longer period of time in the restaurant Innovative use of existing assets.

What Pre-made food prepared constantly according to demand Standard menus Some variations allowed How 1 counter Standardized processes Central locations with high frequencies The key is to serve a maximum number of people during a given time

Source: Marc Sniukas

Nintendo Wii
Traditional Approach Who Kids Hard Core Gamers Business Model Innovation Everybody from 4-99 The whole family Casual Gamers Family Console Low tech console Focus on fun rather than technical performance

What High Tech High Performance Console

How

High tech, high end processors for Low tech, lower power processors, speed and graphics, connect over the no additional features internet, additional features (DVD, New movement technology internet,...) lower cost high cost lower sales price (190.- ) high sales price (250-300.- )

Source: Marc Sniukas

How innovative is your business model?


The Business Model Evaluation Spider

Dimension

Scale
1 5
3rd innovative tier noncustomers least profitable least satisfied commonalities chain of buyers circumstances traditional existing customers most profitable most satisfied differences single buyer attributes single product according to industry (either functional or emotional) product improve and raise

Who

What

approach Customers Profitability Satisfaction Segmentation Buyer Attributes vs Circumstances Total Solution Appeal Product vs Function Features

total solution; experiences against conventional logic function selectively raise, reduce, create, and eliminate experiences; every element of buying cycle addressed new streams strategic pricing aligned with strategic price of the masses high fit, creative rearrangement of activities new assets

How

Customer interface conventional logic Revenue streams and pricing Cost Activity system Assets conventional logic not aligned with strategic price of the masses low fit, me too logic existing assets

Source: Marc Sniukas

How innovative is your business model?


The Business Model Evaluation Spider

Activity System

Assets 5

Customers

Cost

Profitability

3 Revenue Streams 2 Satisfaction

1 Customer Interface Segmentation

Features

Buyer

Function 1 = conventional me too 2 = imitative innovation 3 = slightly innovative; some new ideas; not too risky Appeal 4 = innovative; risky new ideas 5 = radically different
Source: Marc Sniukas

Circumstances Total Solution

What will we do today?


Agenda

1. 2.
3. 4.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation? What is the Process of Business Model Innovation?

How to (re)invent your Business Model?


The Framework and Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

How to achieve business model innovation within your company?


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

The process of business model innovation


A discovery driven approach

Setting the Stage

A Discovery-Driven Approach

Source: Marc Sniukas

Source: Marc Sniukas

How to (re)invent your Business Model?


The Process
Define the purpose, scope and focus of innovation activities Align business and innovation strategies Build leadership alignment & commitment Build a common language and understanding Definition of governance structures and processes Identifying internal and external opportunities Sensing, seeking and shaping opportunities Describe the current business model Explore and understand consumer and customer needs, motivations, behaviors Understand emerging markets, industry and socioecological trends

Setting the Stage


Bringing successful ideas to market Financial impact Incubation Acceleration Transition

A Discovery-Driven Approach

Turn ideas into market ready concepts Road-test the idea portfolio with key stakeholders, consumers, internal and external Prototyping, Technical feasibility Experimentation & learning Customer & stakeholder feedback Business planning, venturing, secure founding Decide of organizational and governance structures Evolution & optimization

Design new business models Develop and select ideas Develop an idea portfolio Idea Generation (In-house, cross-units, external) Idea Evaluation Idea Selection Strategic decision making

Setting the stage


Getting ready
Description Input Tasks
Project Set Up (Business Model Innovation idea) 1. 2. 3. 4. 5. Define purpose, scope and focus (Why) Define and build team (Who) Define goals and metrics Define governance structure, process and project plan (How) Build leadership commitment Project Brief/Assignment Project plan incl. milestones, tasks, responsibilities, 1st resource planning per phase Team is established Common understanding about the project has been created Stop/Go decision Team established and resources have been committed Kick-off workshop Business Model Handbook Project Brief Project Planning

Output

Gate Tools

Source: Marc Sniukas

Any Questions?

Discovery
Gaining insights
Description Input Tasks
Identify internal and external opportunities Project Brief 1. 2. 3. 4. Company Assessment Market Assessment Industry Assessment Future Trends Assessments Description AS IS of current business model, market, competition, industry Description of opportunities Description of first ideas Update project planning incl. resources needed estimation for next phase Stop/Go Decision Is the idea still interesting? Is it worth spending the resources for the next phase? Desk and real life research Who/What/How, Canvas, SWOT Customer Profile, Value Curve, Buyer Experience Cycle 5 Forces

Output

Gate
Tools

Source: Marc Sniukas

Discovery
Gaining insights

Source: Marc Sniukas

What does your customer want?


The Customer Profile
What does he THINK and FEEL?

Fears, worries, aspirations, wants, needs, frustrations,....

What others say Influencers Companies ...

What does he HEAR?

What does he SEE?


Environment Others What does the market offer? ...

What does he DO?


Behaviors Attitudes Appearance ...

What does your customer want?


The Customer Profile
What does he THINK and FEEL?

Fears, worries, aspirations, wants, needs, frustrations,....

What others say Influencers Companies ...

What does he HEAR?

What does he SEE?


Environment Others What does the market offer? ...

What does he DO?


Behaviors Attitudes Appearance ...

Source: Xplane

How do you reach your customers?


Buyer Experience and Channels

Pre-Purchase Steps
Awareness Evaluation Purchase

The Six Stages of the Buyer Experience Cycle


Delivery Use Supplements Maintenance Disposal

Customer Productivity: In which stage are the biggest blocks to customer productivity?

The Six Utility Levers

Simplicity: Convenience: Risk: Fun and image:

In which stage are the biggest blocks to simplicity? In which stage are the biggest blocks to convenience? In which stage are the biggest blocks reducing risk? In which stage are the biggest blocks fun and image? In which stage are the biggest blocks to environmental friendliness?

Environmental friendliness:

Source: Marc Sniukas. Adapted from Kim and Mauborgne Blue Ocean Strategy Harvard Business School Press, 2005

How do you reach your customers?


Buyer Experience and Channels

Pre-Purchase Steps
Awareness Evaluation Purchase

The Six Stages of the Buyer Experience Cycle


Delivery Use Supplements Maintenance Disposal

Source: Marc Sniukas

Channels

What is your value proposition?


Low Cost Airline high Average Airline Car Transport

low
Price Meals Lounges Seating Class Choice Hub Connectivity Friendly Service Frequent Point to Point Departures

Following Kim and Mauborgne Blue Ocean Strategy Harvard Business School Press, 2005

What is your value proposition?


The Value Curve

high

low

Who are your non-customers?


Why are they not buying?
1st group: soon-to-be non-customers: They minimally use the current offering, but are constantly searching for something better or different and ready to switch easily. They are closest to the existing customers. 2nd group: refusing non-customers: They either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means. These customers are willing to buy, but not at the current terms. 3rd group: unexplored non-customers: They are the farthest away from the existing market. Typically they are being ignored completely as potential customers by the industry, either because they have always been assumed to belong to another industry or are not being considered worth the effort.

Any Questions?

What will we do tomorrow?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

Thanks for your attention! ....See you tomorrow.

Business Model Innovation


How to (re)invent your business.
by Marc Sniukas www.sniukas.com

What did we do yesterday?


Agenda

1. 2.
3.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation?

How to (re)invent your Business Model?


The Framework: Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

What did we do yesterday?


Agenda

1. 2.
3.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation?

How to (re)invent your Business Model?


The Framework: Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Why to engage in business model innovation?


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

Why do Business Model Innovation?


Benefits cited by business model innovators

Source: IBM Global CEO Study 2006

Is it time to renew your business model?


How to tell

What did we do yesterday?


Agenda

1. 2.
3.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation?

How to (re)invent your Business Model?


The Framework and Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Dimensions and components of Business Models and Business Model Innovations.


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

What is a business model?


The essence and main components

Source: Marc Sniukas

What is a business model?


Tools for describing your business model

Source: Accenture

Source: The Boston Consulting Group

Source: Innosight Source: businessmodelgeneration.com

What did we do yesterday?


Agenda

1. 2.
3.

Why is Business Model Innovation important? What is a Business Model?


What is Business Model Innovation?

How to (re)invent your Business Model?


The Framework and Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Dimensions and components of Business Models and Business Model Innovations.


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

Hey! Theyre lighting their arrows! Can they do that?


Marc Sniukas - Doujak Corporate Development

Business Model Innovation is about...


The essence

Source: Marc Sniukas

What will we do today?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

What will we do today?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

The Telco Business Model


3 models in one

Source: businessmodelgeneration.com

Bharti Airtel Limited


A new business model for the telco industry Bharti Airtel Limited, the largest telecom service provider in India, chose to strategically outsource its core functions. For a typical telecom operator, the pain point during the growth phase is planning for network requirements and preparing budgets for such a capital expenditure. Capacity has to be built ahead of demand, which usually means the telecom operator has to absorb the cost of unused capacity. Source: http://blogs.hbr.org/cs/2010/05/reverse_innovation_success_in_the_tele. html

Business Model Innovation is about


The Essence

WHO
is your customer? New Markets

WHAT
do you offer your customers?

HOW
do you do this? New Ways of Doing Business

New Offers

New Value Propositions

Source: Marc Sniukas

Business Model Innovation


Where to start?

New Markets

New Value Proposition New Ways of doing business

New Offers

Source: Marc Sniukas

What will we do today?


Agenda

1.

How to develop and design new Business Models? I.


II.

Who is the customer?


What is the need / job to be done?

III.

How are you satisfying that need?

What will we do today?


Agenda

1.

How to develop and design new Business Models? I.


II.

Who is the customer?


What is the need / job to be done?

III.

How are you satisfying that need?

Which customers do you target?


Creating new markets

existing
most profitable most satisfied specific buyer

noncustomers (2nd and 3rd tier)


less profitable less satisfied (1st tier) chain of buyers

focus on differences
focus on finer segmentation focus on attributes (of customers and products)

focus on commonalities
focus on de-segmentation focus on circumstances (needs and the job done)

Source: Marc Sniukas

Who is the customer?

B2B
B2C

Satisfaction

Profitability
Non-Customers

Characteristics

Demographics

Source: Marc Sniukas

What will we do today?


Agenda

1.

How to develop and design new Business Models? I.


II.

Who is the customer?


What is the job to be done?

III.

How are you satisfying that need?

What is the job to be done?

1.

What problem is the customer trying to solve? *Customer] wants to [solve problem] in [this context+. Which features are important to the customer? What does he want and value? What are barriers for the customer?
Price: How cheap / expensive are existing solutions? Access: How easy / complicated is it to get / install existing solutions? Usage: How easy / complicated is it for the customer to use existing solutions? Experience: What are barriers to a good experience?

2.

3.

How do you reach your customers?


Buyer Experience and Channels

Pre-Purchase Steps
Awareness Evaluation Purchase

The Six Stages of the Buyer Experience Cycle


Delivery Use Supplements Maintenance Disposal

Customer Productivity: In which stage are the biggest blocks to customer productivity?

The Six Utility Levers

Simplicity: Convenience: Risk: Fun and image:

In which stage are the biggest blocks to simplicity? In which stage are the biggest blocks to convenience? In which stage are the biggest blocks reducing risk? In which stage are the biggest blocks fun and image? In which stage are the biggest blocks to environmental friendliness?

Environmental friendliness:

Source: Marc Sniukas. Adapted from Kim and Mauborgne Blue Ocean Strategy Harvard Business School Press, 2005

What will we do today?


Agenda

1.

How to develop and design new Business Models? I.


II.

Who is the customer?


What is the need / job to be done?

III.

How are you satisfying that need?

How to you define your product?


Creating new offerings

focus on existing assets

start anew, or use existing assets in a new way total solution, bundling

single product or service

functional appeal

emotional appeal and experiences focus on function fulfilled and the job-to-be-done raise, reduced, create, eliminate selectively

focus on product

build new features

Source: Marc Sniukas

How do you do business?


Creating new ways for creating, delivering and caputring value

conventional customer interface conventional pricing


(either to cover cost or benchmarked against competitors)

(co-creating) experiences easy to do business with strategic pricing of the masses


(benchmarked against substitutes and alternative industries)

cost-plus thinking

price-minus thinking; target costs network (with customers, suppliers, partners, alliances)

integrate activities

low fit of activities


(internally and externally)

high fit of activities


(internally and externally)

Source: Marc Sniukas

How to (re)invent your Business Model?


25 Strategies
WHO #11 Target non-customers #12 Target less profitable customers #1 Challenge industry assumptions #13 Target the least satisfied customers WHAT #14 Target the chain of buyers #2 Offer complementary products and services #15 Segment according to commonalities #3 Offer solutions and experiences #16 Segment according to circumstances #4 Offer bundles #5 Switch your appeal: functional versus emotional #17 Desegment the customer based HOW #6 Focus on the job to be done #7 Selectively eliminate, reduce, raise and create #8 Look at subsitutes #9 Expand the use of your assets and capabilities #10 Look at the customer experience #18 Reinvent the customer interface (channels) #19 Reinvent your customer relationships #20 Invent new revenue streams #21 Price differently #22 Reinvent you cost base #23 Re-assess your key activities #24 Collaborate with suppliers, partners, the network and ecosystem #25 Look at completely different industries

Source: Marc Sniukas

What is your value proposition?

Type
Product Service Solution Experience

Features
Focused Extensive

Form
Tangible Intangible

Custom
Generic Tailored

Breadth
Single Bundled

Lifetime
Consumable Durable

How is the value proposition purchased?

Supplier
Direct Indirect

Support
Light Heavy

Frequency
Often Rarely

Availability
On-Demand Limited

Timing
Immediate Delayed

Autonomy
Assisted Independent

Strategy
Planned Unplanned

Location
Traditional New

How is payment done?

Form
Cash Financed

Price
Fixed Variable

Frequency
Pay per item Flat fee

Frequency
Once Installment

Timing
Up-front Afterwards

Payer
Single Multiple

What is your value proposition?


Low Cost Airline high Average Airline Car Transport

low
Price Meals Lounges Seating Class Choice Hub Connectivity Friendly Service Frequent Point to Point Departures

Following Kim and Mauborgne Blue Ocean Strategy Harvard Business School Press, 2005

What will we do today?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

How to evaluate business models?


3 different types of experimentation

How to evaluate business models?


Paper based approach
Area Rating Description What we know...
Strategy How well does the idea fit with our current strategy? What is the strategic purpose of the idea? 0 5 10

What we assume...

expanding or defending a current business building a new one that has already been identified laying the foundations for potential new businesses

Organization

Resources & Competencies Which do we need? Which do exist already? Which need to be build? Change need Change readiness

Finance Financial Implications

Revenue potential (Qty x Price) Cost (fix + variable) Unit Margin Target

How innovative is the model? Does it have the potential for competitive advantage through differentiation?

Does fit our organization? Can we implement it? Do we have the capabilities and resources?

How to evaluate business models?


Paper based approach
Strategy
How well does the idea fit with our current strategy? What is the strategic purpose of the idea? expanding or defending a current business building a new one that has already been identified laying the foundations for potential new businesses

Organization
Resources & Competencies Which do we need? Which do exist already? Which need to be build? Change need Change readiness

Financials
Revenue potential Cost Unit Margin Target Cash Flow Payback Net Present Value

Innovation
How innovative is the new model? Known to company and industry Known to industry, new to company New for company and industry

Risks
Competition Weaknesses Threats Expected barriers

Success Factors
Strengths Opportunities

What will we do today?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

How to (re)invent your Business Model?


The Framework and Dimensions to consider

Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

How to achieve business model innovation within your company?


Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

The process of business model innovation


A discovery driven approach

Setting the Stage

A Discovery-Driven Approach

Source: Marc Sniukas

Source: Marc Sniukas

How to (re)invent your Business Model?


The Process
Define the purpose, scope and focus of innovation activities Align business and innovation strategies Build leadership alignment & commitment Build a common language and understanding Definition of governance structures and processes Identifying internal and external opportunities Sensing, seeking and shaping opportunities Describe the current business model Explore and understand consumer and customer needs, motivations, behaviors Understand emerging markets, industry and socioecological trends

Setting the Stage


Bringing successful ideas to market Financial impact Incubation Acceleration Transition

A Discovery-Driven Approach

Turn ideas into market ready concepts Road-test the idea portfolio with key stakeholders, consumers, internal and external Prototyping, Technical feasibility Experimentation & learning Customer & stakeholder feedback Business planning, venturing, secure founding Decide of organizational and governance structures Evolution & optimization

Design new business models Develop and select ideas Develop an idea portfolio Idea Generation (In-house, cross-units, external) Idea Evaluation Idea Selection Strategic decision making

Setting the stage


Getting ready
Description Input Tasks
Project Set Up (Business Model Innovation idea) 1. 2. 3. 4. 5. Define purpose, scope and focus (Why) Define and build team (Who) Define goals and metrics Define governance structure, process and project plan (How) Build leadership commitment Project Brief/Assignment Project plan incl. milestones, tasks, responsibilities, 1st resource planning per phase Team is established Common understanding about the project has been created Stop/Go decision Team established and resources have been committed Kick-off workshop Business Model Handbook Project Brief Project Planning

Output

Gate Tools

Source: Marc Sniukas

Discovery
Gaining insights
Description Input Tasks
Identify internal and external opportunities Project Brief 1. 2. 3. 4. Company Assessment Market Assessment Industry Assessment Future Trends Assessments Description AS IS of current business model, market, competition, industry Description of opportunities Description of first ideas Update project planning incl. resources needed estimation for next phase Stop/Go Decision Is the idea still interesting? Is it worth spending the resources for the next phase? Desk and real life research Who/What/How, Canvas, SWOT Customer Profile, Value Curve, Buyer Experience Cycle 5 Forces

Output

Gate
Tools

Source: Marc Sniukas

Discovery
Gaining insights

Source: Marc Sniukas

Who are your non-customers?


Why are they not buying?
1st group: soon-to-be non-customers: They minimally use the current offering, but are constantly searching for something better or different and ready to switch easily. They are closest to the existing customers. 2nd group: refusing non-customers: They either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means. These customers are willing to buy, but not at the current terms. 3rd group: unexplored non-customers: They are the farthest away from the existing market. Typically they are being ignored completely as potential customers by the industry, either because they have always been assumed to belong to another industry or are not being considered worth the effort.

Development
Designing options
Description Input Tasks
1. 2. 3. Development of business model concepts Develop business model idea portfolio and evaluate ideas Insights from discovery phase First ideas Develop Business model innovation idea portfolio Evaluate BM portfolio Develop list of assumptions to be tested

Output

Idea / option portfolio Evaluation of ideas List of assumptions to be tested incl. resource requirements and how they will be tested Business case for each business model
Go to testing: Stop/Go Decision Justified to start conversion/testing/experimentation phase? Budget decision 25 ways Who-What-How, Canvas Value Curve Spider, Scorecard, Hypotheses List, Business Case

Gate Tools

Source: Marc Sniukas

Conversion
Experimenting in practice
Description Input Tasks
1. 2. 3. 4. Conversion of concepts into real-life Testing concepts and receiving market feedback Business concepts approved for test Customer tests Technical feasibility Organizational gap analysis Implementation and change roadmap Final Business Model Evaluation Strategy is developed Organizational structure is defined Partners/Network are defined Tested Business Model is profitable Launch decision Budget approval Business model is profitable

Output

Gate

Tools

Experimentation Feedback loops Market tests

Source: Marc Sniukas

Commercialization
Launch, incubation and transition
Description Input Tasks
1. 2. 3. 4. Implementation and launch Launch new business model Successfully tested Business Model Innovations Implementation Start-Up / Incubation Acceleration Transition New Market New Value Proposition Growth Competitive Advantage Launch review (12 months) Business model review Business model optimization Integration into holding

Output

Gate

Tools

Strategy Change Management Venturing

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
April 15 May 6-7

Group Mgmt Meeting

BU
Mgmt

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Workshop
Presentation of Business Models Preparation of GMM
Research on innovative Business Models and Trends. Final version until April 29 to SIO

Division
Mgmt

Group 2010
Group 2011 +

Business Model Description by Division Mgmt and their teams.

Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
BU
Mgmt

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Division
Mgmt

Group 2010
Group 2011 +

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
BU
Mgmt

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook Business Model Description by Division Mgmt and their teams.

Division
Mgmt

Group 2010
Group 2011 +
Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
April 15 BU

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Workshop
Presentation of Business Models Preparation of GMM

Mgmt

Division
Mgmt

Group 2010
Group 2011 +

Business Model Description by Division Mgmt and their teams.

Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
April 15 BU

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Workshop
Presentation of Business Models Preparation of GMM
Research on innovative Business Models and Trends. Final version until April 29 to SIO

Mgmt

Division
Mgmt

Group 2010
Group 2011 +

Business Model Description by Division Mgmt and their teams.

Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
April 15 May 6-7

Group Mgmt Meeting

BU
Mgmt

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Workshop
Presentation of Business Models Preparation of GMM
Research on innovative Business Models and Trends. Final version until April 29 to SIO

Division
Mgmt

Group 2010
Group 2011 +

Business Model Description by Division Mgmt and their teams.

Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

Starting up Business Model Innovation


The Process
March 10
April 15 May 6-7

Group Mgmt Meeting

BU
Mgmt

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Workshop
Presentation of Business Models Preparation of GMM
Research on innovative Business Models and Trends. Final version until April 29 to SIO

Division
Mgmt

Group 2010
Group 2011 +

Business Model Description by Division Mgmt and their teams.

Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

1. Description

2. Inspiration 3. Creation

Step 1 Description

1. Description
Our past. Our present.

Path of life
How your organization became what it is today
What was the original idea of the founders? What where the main life changing events in your companys history? (e.g. internationalization, crisis,) What was the focus of the phases between? (e.g. growth, innovation, integration,) What where the main challenges in the respective phases and how did your organization master them? What are the main strengths and mastered challenges you can build your future on? What are 2-3 milestones for the future?

Source: Marc Sniukas

Path of life
The Process
Please form mixed groups of 3 people and discuss the path of life of your Business Unit. A-B-C Interviews A interviews B; C observes & gives feedback B interviews C; A observes & gives feedback C interviews A; B observes & gives feedback Please summarize the main points of your discussion.
A B C

Total Time = 60 3x 15 interview + 5 feedback

Business unit groups


1
Discussion in the business unit groups on 1. Path of life of the business unit Main insights from the A-B-C group discussion.

2
2. Current business model Discussion of the main key success factors of the model including the Economic Engine.

Market place
Business model exhibition Please choose a business model that you are interested to find out more about After 15 minutes when you hear the signal, please change to the next business model booth. In total there will be 3 rounds of Business Model presentations & discussions.

Step 2 Inspiration

2. Inspiration

Perspective 2020 How will our environment develop? What are relevant trends for us? What will be coming up in the future and what will be the implications?

2
Discussion of innovative business model examples

2. Inspiration
Looking outside

Scenario Speed Dating

1. Please take your scenario card from your booklet and study it for a couple of minutes. 2. Find a partner 3. Discuss with your partner: - What could it mean for our - Future if my, your or both trends come true? 4. Please change partner and discuss the two trends again.

Step 3 Creation

3. Creation
Developing ideas

25 Ways to Business Model Innovation


Method cards

WHO WHAT HOW

Source: Marc Sniukas

Creation of ideas
Group work in the Business Units Based on the insights you gained, please develop ideas for new business models The ideas can be - Cross functional ideas - Ideas for new business models - Social business ideas - Ideas for your own business unit Please note them on post its Please choose ONE most promising idea Please write them on post its and stick them on the canvas Chose the Most Promising Idea

Time: 60

Market place
Business model exhibition

Free floating and discussing of the ideas developed by the business units.

Time: 60

The Future Space


The Overall Process
March 10
April 15 May 6-7

Group Mgmt Meeting

BU
Mgmt

Division Mgmt Meetings


Introduction to Business Model Innovation Introduction Future Space Process Preparation Handbook

Workshop
Presentation of Business Models Preparation of GMM
Research on innovative Business Models and Trends. Final version until April 29 to SIO

Division
Mgmt

Group 2010
Group 2011 +

Business Model Description by Division Mgmt and their teams.

Draft until March 29 to SIO Coaching Sessions with SIO Final Version until April 7 to SIO

Source: Marc Sniukas

What happened next?


After the Future Space

1. Ideas were clustered and further described. 2. Holding Board took decision on which ideas to drive on a group level. 3. Project Teams were set up to evaluate the details of group wide ideas. 4. Division and Business Unit ideas went straight into the strategy & budgeting process for the following year.

Architecture 2011
The sequence of activities
Nov
2010 Core Team Meeting Kick Off

Dez
Core Team Meeting

Q1
2011 Core Team Meeting Division 1 Division 2

Q2
Core Team Meeting Division 3 Division 4

Q3
Core Team Meeting Division 1 Division 2

Q4
Core Team Meeting Division 3 Division 4

2012

Core Team Board Update Project 1 Project 2 Project 3 Project 4 Project 5

Setting the stage Team Kick Off Hire Project Manager Hire Project Manager Hire Project Manager

Discovery Setting the stage

Development

Conversion Commercialization Conversion

Discovery Project Manager Project Manager Project Manager

Development Setting the stage Setting the stage Setting the stage

Conversion

Discovery

Development

Discovery

Development

Conversion

Discovery

Development

Conversion

Source: Marc Sniukas

Organizational Set Up
Driving Strategic Innovation
Steering Committee

Strategic Innovation Office

Cross Division Cross Teams Division Project Cross Division Project Teams Cross Division Project Teams Cross Division Project Teams Project Teams

Strategic Innovation Core Team

Within Division WithinTeams Division Project Within Division Project Teams Within Division Project Teams Within Division Project Teams Project Teams

What will we do today?


Agenda

1. 2.
3. 4.

How to develop and design new Business Models? How to evaluate Business Models?
Case Study What are characteristics of Business Model Innovators?

How to (re)invent your Business Model?


The Framework and Dimensions to consider Why are some companies good at it and others not?
Context Conditions Surrounding Business Model Innovation Activities Purpose Input to Business Model Innovation Activities

Process Flow of Business Model Innovation Activities

Content Result of Business Model Innovation Activities

Apdated from De Wit and Meyer Strategy: Process, Content, Context 3rd edition 2004 Thompson Learning

How do you organize your innovation activities?


The Innovation Wheel Formal Focused Open

NewCo Evolutionary
Innovation tensions

Inside Revolutionary

Outside

CoreCo

Closed
Informal
Source: Marc Sniukas

Holistic

Questioning attitude Rewards success and failure, punishes inaction Tolerates mistakes Slack is welcomed Supports risk taking and change Supports teamwork and collaboration

Variety (internal and external) Collaboration Educated in regard to the strategy and skills needed

Set the context Guide the process in a participative and fair way Clearly communicate reasons, and expectations Educate employees Shield creative teams from distractions and pressure Appreciate distinctiveness in people and their thinking Welcome change Ask itself what it does to promote or inhibit innovation and how to get rid of these obstacles.

People Culture Leadership

Are you ready for Business Model Innovation?


Systems
Support the process of strategic innovation Enable collaboration Enable the use and creation of knowledge Reward risk taking and action Used to create relationships with customers Metrics & rewards support innovation

Structure Processes
Fast and unbureaucratic Decentralized decision making Support idea generation, experimentation and execution Fast and flat Small units Encourages collaboration Autonomous teams at the front line

Source: Marc Sniukas

The difficulty lies not in the new ideas,...

but in escaping from the old ones.


John Maynard Keynes

Thanks for your attention!