Business Model Innovation

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Innovative business models can reshape industries and drive tremendous growth. However, many organization find business model innovation difficult. The framework outlined in this presentation is based on the HBR article "Reinventing Your Business Model," authored by Clayton Christensen, Mark Johnson, and Henning Kagermann.

A successful business model has 3 key components:

*Customer Value Proposition. The model helps customers perform a specific "job," which alternative offerings don't effectively address.

*Profit Formula. The model generates value for your organization through such factors as revenue model, cost structure, margins, and inventory turnover.

*Key Resources and Processes. Your organization has the people, technology, products, equipment, facilities, and brand required to deliver the defined value proposition to the target customers. It also must have the processes to leverage these resources.

This document includes instruction slides, slide templates, and case examples.

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Business Model Innovation

  1. 1. Crowdsourced Business Presentation Design Service Business Model Innovation Reinventing Your Business Model February 25, 2014 Innovative business models reshape industries and drive tremendous growth. The framework outlined in this presentation is based on the HBR article “Reinventing Your Business Model,” co-authored by Christensen. It includes instructional slides, case examples, and template slides. Topics include Customer Value Proposition, Profit Formula, Key Resources and Processes. ORIGINAL PROJECT DETAILS http://pptlab.com/ppt/HBR-Reinventing-Your-Business-Model-17
  2. 2. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 4 Contents Business Model Elements Case Examples Templates Business Model Innovation Approach Overview This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  3. 3. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 7 Even though there is very strong awareness of the need for business model innovation, it is a very rare occurrence Business Model Innovation – Awareness and Failure Source: Reinventing Your Business Model, Johnson, Christensen, Kagermann (2008) There is strong awareness of the need for business model innovation … • A 2005 survey by the Economist Intelligence Unit revealed over 50% of executives believe business model innovation will become even more important for success than product or service innovation • A 2008 IBM survey of corporate CEOs revealed the same • Almost all CEO respondents reported the need to adapt their business models • More than 68% said that extensive changes were needed … but stories of business model innovation from well-established companies like Apple, are very rare! Why is this? • An American Management Association study found that only 10% of innovation investments at global companies are focused on developing new business models • Two key problems drive in lack of model innovation: • Lack of definition. Little formal study has been into the dynamics and processes of business model development • Lack of understanding. Few organizations understand their existing business model well enough—the premise behind its development, its natural interdependencies, and its strengths and limitations This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  4. 4. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 10 Sometimes, business model innovation isn’t needed to leverage a game- changing opportunity in the market Existing Business Model – Old Business Model Assessment Source: Reinventing Your Business Model, Johnson, Christensen, Kagermann (2008) Companies should not undertake business model innovation lightly. Examples include when P&G introduced Swiffer and Febreze products leveraging its existing business model Q: When can we just use the old model? A: When you can fulfill the new customer value proposition… • With your current profit formula • Using most, if not all, of your current key resources and processes • Using the same set of core metrics, rules, and norms you now use to run your business 1 2 3 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  5. 5. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 13 The approach to business model innovation follows 3 steps Business Model Innovation Approach Source: Reinventing Your Business Model, Johnson, Christensen, Kagermann (2008) New business models often look unattractive to internal and external stakeholders at the outset—to see past the borders, companies need a new roadmap. FOCUS ON THE OPPORTUNITY CONSTRUCT A BLUEPRINT COMPARE NEW MODEL WITH EXISTING 1 2 3 • Success starts not by thinking about business models—it starts with thinking about the opportunity to satisfy a real customer who needs a job done • Construct a blueprint laying out how your company will fulfill that need at a profit • This plan has 4 elements: 1. Customer Value Proposition 2. Profit Formula 3. Key Resources 4. Key Processes • Compare the new business model with your existing one to see how much you’d have to change it to capture the opportunity • Once you do this, you will know if you can use your organization or need to build out a separate new business unit • Remember, every successful company is already fulfilling a real customer need with an effective business model— whether that model is explicitly understood or not This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  6. 6. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 16 Companies adapting a new business model should be patient for growth Business Model Innovation – Adaption and Revision Source: Reinventing Your Business Model, Johnson, Christensen, Kagermann (2008) A profitable business model is the best early indication of a viable model. • The secret to adapting a successful business model is patience • Successful new businesses typically revise their business models four times on the road to profitability • While a thorough, well-considered business model innovation process can often shorten this cycle, successful incumbents must tolerate initial failure and grasp the need to course correct along the way • Companies have to focus on learning and adjusting as much as on strategy execution • Companies with new business model should be patient for growth (to allow the market opportunity to unfold)—but impatient for profit (as an early validation that the model works) • Established companies’ attempts at transformational growth typically arise from product and technology innovations—their efforts are often characterized by prolonged development cycles and fitful attempts to find a market This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  7. 7. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 19 The Customer Value Proposition addresses how you will help the customer complete an important job Customer Value Proposition A successful company has found a way to help customers get an important “job” done—where job is a fundamental problem in a given situation that requires a solution The more important the job is to the customer, the lower the level of customer satisfaction with current options for getting the job done, and the better your solution is than existing alternatives (and lower the price), the greater the customer value proposition (CVP) Opportunities for creating CVP are greatest when alternative products have not been designed with the real job in mind and you can design an offering that gets that job done perfectly OVERVIEW DETAILS • To invent or re-invent a business model, you must first identify a clear customer value proposition • The most important attribute of a customer value proposition is precision—how perfectly it addresses the customer to be done and nothing else • This precision is often difficult to achieve • Organizations trying to create the new often neglect to focus on one single job—they dilute efforts by attempting too many things • One way to generate a precise customer value proposition is to think about the 4 common barriers keeping people from getting a particular job done: • Insufficient wealth • Insufficient access • Insufficient skill (e.g. QuickBooks broke the skill barrier for small business owners without accounting knowledge) • Insufficient time (e.g. MinuteClinic broke the time barrier for patients with minor health issues) It is impossible to invent or reinvent a business model without first identifying a clear customer value proposition. Source: Reinventing Your Business Model, Johnson, Christensen, Kagermann (2008) Customer Value Proposition 1 Profit Formula 2 Key Resources 3 Key Processes 4 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  8. 8. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 22 Contents Business Model Elements Case Examples Templates Business Model Innovation Approach Overview This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  9. 9. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 25 Contents Business Model Elements Case Examples Templates Business Model Innovation Approach Overview This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  10. 10. PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 28 A need to…An opportunity to… Insert headline Five Circumstances for Model Innovation The opportunity to address through disruptive innovation the needs of large groups of potential customers who are shut out of the market entirely because existing solutions are too expensive or complicated for them 1 The opportunity to capitalize on a new technology by wrapping a new business around it or the opportunity to leverage a tested technology by introducing it to a new market 2 The opportunity to bring a job-to-be-done focus where one currently does not yet exist—this is common in industries where companies focus on products or customers segments, which lead them to refine existing products more and more 3 The need to fend off low-end disrupters 4 The need to respond to a shifting basis of competition—it is inevitable that what defines an acceptable solution in a market now will change over time, leading core market segments to commoditize 5 HIGHN/AN/AMEDIUMHIGH This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-innovation-136
  11. 11. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

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