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Business Model Innovations Blue Ocean Strategy Disruptive Innovations
Desai
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Risks of Innovation Technology Risk: Will it work? R
Market Risk : Will they want it? Technology Risk: Will it work? Routine and Minor Incremental Fundamental Breakthrough Product Innovation Business Model Innovation Product Innovation Business Model Innovation Primary Risk Technology Market Secondary Risk Prepared for PTO Feb 2015
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Business Model Use resources to create Assets
Revenues and Profits Use resources to create Assets Use Profits to reinforce resources Prepared for PTO Feb 2015 Selective Monetizing of Assets
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Key Business Model Innovation questions
What novel activities will satisfy those needs? How will value be created for each of the stakeholders? How could those activities be linked in novel ways? What unmet customer needs will the new business model address? Who should perform those activities? How many revenue models does the new business model innovation offer What novel governance mechanisms can be offered? Prepared for PTO Feb 2015
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Types of Business Models
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Types / classifications of Business Models
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Classification of Business Models -1
Advertising Affiliate Brokerage Community Infomediary Manufacturer Merchant Subscription Utility Prepared for PTO Feb 2015
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Business Model Canvas Prepared for PTO Feb 2015
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Empathy Map Prepared for PTO Feb 2015
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Empathy Map What does a user say and do? What does a user hear?
Attitude in public appearance, behaviour towards others What does a user hear? Boss, friends, influencers What does a user think and feel? What really counts, major worries and aspirations, major preoccupation? What does a user see? Friends, environment, what the market offers? Pains Fear, frustrations, obstacles Gains Wants, needs, measures of success Prepared for PTO Feb 2015
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Validating Business Models
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Value Proposition Designer
CUSTOMER SEGMENT VALUE PROPOSITION Gain Creators Gains Customers’ Jobs WHAT Products and Services WHY Pain Relievers Pains DESIGN OBSERVE Prepared for PTO Feb 2015
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Value Propositions Value propositions come in two forms:
they solve a problem or they fulfill a human social need Social Needs are : friendship, dating, sex, entertainment, art, communication, blogs, confession, networking, gambling, religion, etc. Social needs have always been initiated face-to-face They are now initiated on-line The market size for these applications equals the entire human race These are the ultimate applications Prepared for PTO Feb 2015
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CUSTOMER RELATIONSHIPS
Business Model Canvas KEY PARTNERS Identify key network of partners and suppliers that will make the business model work VALUE PROPOSITION What do you provide to the customer? Define the value to the customers CUSTOMER SEGMENTS Which group of customers do you propose to serve? Describe their profile. KEY ACTIVITIES What are the critical activities that will achieve the business model? KEY RESOURCES What assets do you need to deliver the value to your customers? CUSTOMER RELATIONSHIPS How do you foster and retain relationship with customers? CHANNELS How do you propose to deliver your goods and services to customers? COST STRUCTURE Describe the major cost categories that are required to implement the business model REVENUE STRUCTURE What are the different means by which you can generate revenue from your customers? Prepared for PTO Feb 2015
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Customer Development Pivot Customer Discovery Customer Validation
Business Building Prepared for PTO Feb 2015
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Lean Startup IDEA CODE DATA BUILD LEARN MEASURE
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Business Model Patterns
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Types of Business Models - 4
(Two) Multi-sided market Razor and Blade Rent instead of Buy Peer to Peer Lock-in Franchising Prepared for PTO Feb 2015
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Business Model Patterns 1-20
Add-On Affiliation Aikido Auction Barter Cash- Machine Cross Selling Crowd Funding Crowd Sourcing Customer Loyalty Digitization Direct Selling Ecommerce Experience Selling Flat rate Fractional Ownership Franchising Freemium Push to Pull Guaranteed availability Prepared for PTO Feb 2015
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Business Model Patterns 21-40
Hidden Revenue Ingredient Branding Integrator Layer Player Leverage Customer Data License Lock-in Long Tail Make More of it Mass Customization No Frills Open Business Model Open Source Orchestrator Pay per use Pay what you want Peer to Peer Performance based contract Razor and Blade Rent instead of Buy Prepared for PTO Feb 2015
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Business Model Patterns 40-55
Revenue Sharing Reverse Engineering Reverse Innovation Robin Hood Self Service Shop in Shop Solution Provider Subscription Supermarket Target the poor Trash to cash Two sided Market Ultimate Luxury User Designed White Label Prepared for PTO Feb 2015
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Growing Amazon Amazon Kindle 2007 Amazon Web Services 2002
Amazon Store 1995 Amazon Web Services 2002 Amazon Kindle 2007 Prepared for PTO Feb 2015
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Growing Nestle BabyNes 2012 Special T 2010 Nespresso 1986
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Growing NetFlix Digitization 2008 Flat rate Subscription Long Tail
1999 Digitization 2008 Prepared for PTO Feb 2015
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Business Model Types – 4.1 Two Sided Market Razor and Blade 1950
Diners Club 1964 JC Decaux 1984 Sat.I 1995 Amazon Store 1997 Priceline 1998 Google 2004 Facebook 2005 MyHammer 2007 Zattoo 2008 Groupon 1880 Standard Oil 1904 Gillette 1984 Hewlett Packard 1986 Nestle Nespresso 2003 iPOD , iTunes 2007 Amazon Kindle 2010 Nestle Special T 2012 Nestle BabyNes Prepared for PTO Feb 2015
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Business Model Types – 4.2 Rent Instead of Buy Peer to Peer 1916
Saunders System 1959 Xerox 1985 Blockbuster 1987 Rent a Bike 1997 Mobility car share 2000 Machinery Link 2001 CWS – boco 2006 Luxusbabe 2007 FlexPetz 2008 Car2Go 1995 eBay 1996 Craigslist 1999 Napster 2003 Couchsurfing 2005 Zopa 2006 Slideshare Twitter 2008 Airbnb 2010 RelayRides 2011 Gidsy Prepared for PTO Feb 2015
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Business Model Types – 4.3 Lock-in Franchising 1904 Gillette 1949 Lego
1975 Microsoft 1984 Hewlett Packard 1986 Nestle Nespresso 2010 Nestle Special T 2012 Nestle BabyNes 1860 Singer Sewing M/C 1948 McDonald’s 1967 Marriott Intl 1971 Starbucks 1974 Subway 1992 Fressnapf Naturhouse 1997 McFit 2001 Backwerk Prepared for PTO Feb 2015
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Business Model Types – 4.4 Digitization Experience Selling 1994
Spiegel Online WXYC 1996 Hotmail 1997 CEWE color 1998 SurveyMonkey 1999 Napster 2001 Wikipedia 2004 Facebook 2007 Dropbox 2008 Netflix 1903 Harley Davidson 1956 IKEA 1958 Trader Joe’s 1971 Starbucks 1983 Swatch 1986 Nestle Nespresso 1987 Red Bull 1993 Barnes and Noble 2010 Nestle Special T Prepared for PTO Feb 2015
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Business Model Design Tool
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Business Model Design Canvas
Key Partner-ships Key Activi-ties Key Resour-ces Cost Model Value Proposi-tions Customer Relationships Channels Revenue model Customer Segments Key Partners In Store sales Local resources Get others to do the work Faster Loyalty programs Physical to Cyber upfront payment Main Stream Where used sales Cloud based resources Capex Cheaper Standardized offering Direct to Customers Subscription Long Tail Local Processing Buy resources Opex Better (___________) Customized offering Customer pick up Transaction Fee Expert Remote processing Lease resources Indoor to outdoor Broadcast Company delivery Discount Hobbyist In house Client based Outdoor to Indoor On Demand Social Networks Freemium Novice Outsourced Server based Wireless Retail Premium Developer Managed Mobile Dealer / Distributor Razor and Blade Educated Person to Person Push based on profile Resellers Reverse Auction Lesser educated Person to Thing Pull when needed Aggregator Auction Gold collar Thing to Thing Deliver and not pick up Portal EMI White collar Long activities Ease of carrying Margin play Blue collar Short activities Hire purchase Volume Play Teenagers Purchase in parts Milestone base d payment Working adults Renewable Retired professionals Prepared for PTO Feb 2015
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Blue Ocean Strategy Prepared for PTO Feb 2015
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Steps in business model innovation design
List past business model innovations relevant to your company Categorize the business model innovations Rearrange the categories under Business Model Canvas components Draw the Business Model Curve for your current business model Modify the current Business Model Curve to create a new Business Model Validate the feasibility and viability of the new business model Repeat steps 5 and 6 until you find a viable new business model Prepared for PTO Feb 2015
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Innovation opportunities
Substitute industries Southwest Strategic product groups Walkman Chain of buyers Philips Alto, Canon Complementary products and services Borders Functional and emotional appeal Swatch, Body shop Trend Ecommerce Blue Ocean Strategy - prepared especially for PTO
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Blue Ocean Strategy - prepared especially for PTO
Buyer Utility Price Cost Adoption Hurdles Viable Blue Ocean Idea Blue Ocean Strategy - prepared especially for PTO
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Blue Ocean Strategy - prepared especially for PTO
Utility Levers Customer productivity Simplicity Convenience Risk Fun and Image Environmental friendliness Blue Ocean Strategy - prepared especially for PTO
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Buyer Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal Blue Ocean Strategy - prepared especially for PTO
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Buyer Utility Map Buyer Experience Cycle Utility Levers Purchase
Delivery Use Supplements Maintenance Repair Utility Levers Productivity Simplicity Convenience Risk Fun and Image Environmental Blue Ocean Strategy - prepared especially for PTO
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Profit Model of Blue Ocean Strategy
Strategic Price Target Profit Target Cost Streamlining and Cost innovations Partnering Pricing Innovation Blue Ocean Strategy - prepared especially for PTO
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Blue Ocean Strategy - prepared especially for PTO
Strategy Canvas High low Architectural Aesthetics Eating facilities Lounges Bed Quality Room noise Price Hygiene Factors dear to the customers Blue Ocean Strategy - prepared especially for PTO
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Blue Ocean Strategy - prepared especially for PTO
Value Curve I High low Architectural Aesthetics Eating facilities Lounges Bed Quality Room noise Price Hygiene Two Star Hotels Blue Ocean Strategy - prepared especially for PTO
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Four Actions Framework
Reduce New Value Curve Create Eliminate Raise Blue Ocean Strategy Blue Ocean Strategy - prepared especially for PTO
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Blue Ocean Strategy - prepared especially for PTO
Value Curve II 2* hotel High low Architectural Aesthetics Eating facilities Lounges Bed Quality Room noise Price Hygiene 1* hotel Two Star and One Star Hotels Blue Ocean Strategy - prepared especially for PTO
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Blue Ocean Strategy - prepared especially for PTO
Value Curve III 2* High 1* low Architectural Aesthetics Eating facilities Lounges Bed Quality Room noise Price Hygiene Formule 1 Accor Chain - Formule 1 hotels Blue Ocean Strategy - prepared especially for PTO
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Disruptive Innovation
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Technology disruption / evolution
Analog Cellular, 1992 800 MHz Digital Cellular, 1995 Deregulation 1993 1.5 GHz Digital Cellular, 1997 3 G Digital Cellular 2004 Cost Cordless phones 1994 Personal Hand Phones, 1997 Time From Nomura Research Institute
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Progress due to supporting innovations
Innovator’s Dilemma Incumbents’ Dilemma: Pioneer or Follow? Performance demanded at the high end of the market Product Performance Progress due to supporting innovations Progress due to disruptive innovations Performance demanded at the low end of the market or in a new emerging segment Time
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Innovator’s Dilemma Product Performance Time
Performance demanded at the high end of the market Product Performance Progress due to supporting innovations Progress due to disruptive innovations Performance demanded at the low end of the market or in a new emerging segment Time
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Progress due to supporting innovations
Innovator’s Dilemma Performance demanded at the high end of the market Product Performance Progress due to supporting innovations Progress due to disruptive innovations Performance demanded at the low end of the market or in a new emerging segment Time
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Types of disruptions High end disruption Low End disruption
New Market Disruption Low End disruption BOP Addressing those left behind
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Technology disruptions in Disk Drive Industry
Core technology Ferrite Oxide Heads 1-50 millions of megabytes per square inch (MoMBPSI) 1985 – 1995 Thin – film heads 12 – 600 MoMBPSI (12x) 1992 - Magneto resistive heads > 1000 MoMBPSI (>20x)
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Innovations in Disk Drive Industry
14 inch Winchester drives 300 – 400 MB 8 inch – Shugart Associates, Micropolis, Prism, Quantum MB 5.25 – Seagate, Micropolis 1988 - 3.5 – Conner Peripherals spin off of SeaGate and Miniscribe 1992 1.8 – IBM ….
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Innovation Evolution Paths
Aka Innovation Rule
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From Niche to consumers
If an innovation is in “Enterprise” stage Then if the markets and technology are ready then create innovation for department level Else if the technology is ready then wait for the markets to be ready if the market is ready then develop the technology … Special - Defense Innovation Rule 1 Enterprise – mainframes Departmental - minicomputers Personal - PCs Mobile - Laptops Pocket - Smartphones
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Innovation evolution paths
Innovation evolution path for computers
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Drivers for innovation of computers
Innovation evolution path for computers Drivers for innovations in computers
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Market leadership & Innovation evolution
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Summary Understand the role of Business Model in a company
Introduction to multiple types of Business Models Business Model Reengineering Business Model Design Canvas Prepared for PTO Feb 2015
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