1. Business Model Innovation

2. Refresher: 3 Types of Innovation
Product
Process
Business Model
Bryce

3. Business Model Innovation
Innovation to Create Value
Improving efficiencies through LEAN and other options, New Technology, Designs that are innovative and change people’s behaviours
Innovation Enablers that Resource Change
Access to financial resources, new warehousing or locational opportunities, new skilled staff or competencies, better deployment of capabilities and resources
Innovation that captures value
Focusing on effectiveness innovations and business model processes to appropriate value that is under-utilized, unassigned, or not value priced

4. WHY CRITICAL TO CONSIDER

5. A Business Model Framework
Capabilities
Customer Value
Revenue
Who
Value Proposition
Purchaser
User
Influencer
Partner
Financial
Delivery
Costs
Activities
External
Channels to Market
Relationships
Partnerships

6. Futures

7. Business Model Examples
Tools

8. THREE QUESTIONS WHY HOW WHAT
Business Model Innovation is about transforming key elements of your business or inventing completely new ways of doing business.
THREE QUESTIONS
WHY
HOW
WHAT

9. INTRODUCTION EXERCISE:
At the table where you are sitting introduce yourself to those around you not by the WHAT, nor the HOW, but WHY?
Why you do what you do? Make it customer centric!!

10. HOW TO DRIVE BMI IN AN ESTABLISHED COMPANY
Need a clear process, with clear tasks and a dedicated team driving the efforts.
Tools can help, but they are not enough; the process and the allocation of resources are crucial.
‘how things are done around here’, how value has traditionally being created and captured is hard to break!!

11. Business Model Innovation 1: Optional revenue logics
Customer focus – traveller
Scale = purchasing discounts
Joint promotion of cheaper carrier (JetStar)
Operational excellence + safety gives customer loyalty
Brand association linked to nationalism – customer loyalty
Revenue logic: Build traveller loyalty + alternative cheaper carrier
Customer focus – airports
Reverse auctioning of landing rights – positive cash flow
Operational excellence – low operating costs
Listing fees for all on board goods – positive cash flow
Revenue logic: Profit sharing with the airport + hybrid / media model
What other customer segments have you not thought of?
How else could you deliver your capabilities & offerings?

12. Business Model Innovation 2: Customer Knowledge
A business model is the recipe of your business built around an indepth customer / consumer knowledge and insight of their needs
“Last year one million quarter inch drills were sold. Not because people wanted quarter inch drills but because they wanted quarter inch holes.”
President of Black & Decker
“What we sell is the ability of a 43-year-old accountant to dress in black leather, ride through small towns and have people be afraid of him.”
Harley-Davidson marketing executive

13. Business Model Innovation 3: Options for appropriating value
You are producing romantic pocket books for teenage females and younger middle age females with lower levels of education
You are distributing through bookshops etc.
Your price to the consumer is $1
Your distribution channel keeps 50%
Your author gets 20%
Your operating costs are 25%
This leaves you with 5% in profit contribution [or $0.05]
How do you quadruple the profit contribution without increasing the price?

14. Appropriating value – Mills & Boon
Get into the customer eco-system – what do we know about the customer? What the customer wants?
People who wanted to write, who wanted to talk about writing, and publish their writings
The Radio play eco-system
The TV series eco-system
The Advertisement eco-system
The E-Distribution eco-system for books
The Mobile pay-as-you-go entertainment eco-system The
Peer-to-peer publishing eco-system
The Education eco-system
The Product placement eco-system
The Gaming eco-system
The Bundled product eco-system

15. Business Model Innovation 4: Options for appropriating value
Assuming you owned a chain of restaurants where global sales were sliding south rapidly, how would you double your turnover within 6 months?
What assets and capabilities do you have to resource the change?
What business model innovations could you apply?

16. Appropriating value: McCafé
Ecology of existing & potential customer
Utilise existing assets – chain of restaurants – new store layout and atmosphere
Re-branded to McCafé
Linked to the family and environmental concerns (Rainforest Alliance)
Capture more customers at breakfast time and won them over from coffee chains to its lower-priced drinks (cheaper than Starbucks)
Linking generational expectations – coffee and cake with BigMac - people linger longer and buy more
New revenues from old assets

17. Business Model Innovation 5: Options for appropriating value
Imagine you want to make $750,000 in 30 hours with a new music album
How would you go about it, without a record company (who has sacked you because you were leaking music)
Also you don’t want to be bothered by licensing so you use creative commons license?
How would you connect with your fans to create a reason to buy?

18. Appropriating value – Nine Inch Nails
C2Fs + RtB = Business Model = $$$$s
NIN Rigorously connected to fans
Ghost I IV Album 1st Album
Created numerous options for interaction between the fans
Free download of 9 tracks by inserting your address
$5 got you full 36 tracks + 46 page PDF file on the band and music = cheaper than iTunes
$75 for the deluxe box with DVD, Blue Ray, and other cool stuff
$300 Ultra Deluxe pack, only 2,500 personally signed packs = this sold out in 30 hours = $750,000
Issued under Creative Commons License, encouraged fans to remix it, share it, post it to blogs, play on podcasts, give it away…..
Amazon lists it as the highest selling album for 3 years running
The Slip 2nd Album
Totally free album download – HQ MP3 with live Google maps of where it was being downloaded and live networks to join to engage with others
+ embedded tickets to purchase online for the next concert – 5,000 $70/head = $375,000 x 3 concerts = $1,125m

19. Geofabric product manufactured in Australia

21. Instrumental value Intrinsic Extrinsic
Value derived from the deployment of the offering
Value derived from the possession of the offering
Value derived from the appreciation of the offering
Instrumental
value
Intrinsic
Extrinsic
© Copyright Göran Roos 2011

22. Exercise:
Apply this thinking to two companies at your tables and consider how you might shift up the value proposition with the positioning of your offerings?

23. Business Problem Solving Production & System Integration
Clipping the Ticket
Business Problem Solving
Consulting
Product Design
Supplier Management
Production & System Integration
Product Delivery
Installation & Commissioning
Product Life Cycle
On-site Management
Asset Management
Process Outsourcing
Front – End Services
Back-End Services
Product Sales & Operations
Where in this value chain are you not clipping the ticket?
What are your options for appropriating value?

24. Hallmark of a good business model
Your profit exceeds your revenue from the base offering
Where price or volume are not the only option

25. Engage your team!!