Business Model Innovation

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

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

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

Sometimes, business model innovation isn’t needed to leverage a game-
changing opportunity in the market
Existing Business Model – Old Business Model Assessment
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

The approach to business model innovation follows 3 steps
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

Companies adapting a new business model should be patient for growth
Business Model Innovation – Adaption and Revision
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

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.
Customer Value
Proposition
1
Profit Formula
2
Key Resources
3
Key Processes
4

Contents
Case Examples
Templates
Overview

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

1
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