Business model innovation in practice - case collection from Implement Consulting Group
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Business model innovation in practice - case collection from Implement Consulting Group



Short term competitive advantage is created by exploiting existing business models. But in the long term all markets mature, competition intensifies and turbulence increases. Consequently, new sources ...

Short term competitive advantage is created by exploiting existing business models. But in the long term all markets mature, competition intensifies and turbulence increases. Consequently, new sources of growth must be explored and fresh answers to enduring success must be found.

The classic answer used to be: Innovate or die! But research shows that pouring more money into pure new product innovation does not lead to better performance. To succeed in innovation and to seize new growth opportunities, the scope of innovation must be expanded to encompass the full spectrum of business model components. While rewards are potentially big by rethinking the business model, stepping outside the comfort zone of the core business and known operating models is risky business that must be managed carefully.

The articles in this hands-on case collection investigate how a range of companies have mastered the process as well as have explored and exploited strategic options to identify new paths to creating customer value and capturing profits.

The Danish electric mobility operator CLEVER has turned traditional strategic thinking upside-down to overcome challenges in an immature industry and to pave the way for the mass market breakthrough of the electric vehicle.

The core business of Danish cable operator YouSee is being challenged by disruptive technologies and by launching the online streaming service YouBio, the company has shown that the road to success can include disrupting yourself.

The ground-breaking Daily Maersk service launched by Maersk Line has changed the game in the highly conservative shipping industry by challenging conventional wisdom and opening up a high-end market demanding high reliability, fast delivery and high consistency.

Hopefully, the principles used by the case companies can be translated into your organisational context to help you endeavor beyond the blinders of the dominant logic and to seize new opportunities.



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Business model innovation in practice - case collection from Implement Consulting Group Document Transcript

  • 1. ISSN: 1904-6758 – NR. 5 / 2013STRATEGY & GROWTHViewpoints on ChangeCase collectionCONTENTSP. 3CaseCLEVER:Smart choices in uncertaintimesP. 8ModelDiscovery-driveninnovationP. 10CaseYOUBIO:Winning through disruptingyourselfP. 14CaseDAILY MAERSK:Opening up a new routeto the high endBusiness Model Innovationin practiceNew paths to creating growthand delighting customers
  • 2. 2 Case collectionEDITORIALBusiness model innovation in practiceIntroduction by Morten HejlesenShort term competitive advantage is created by exploitingexisting business models. But in the long term all marketsmature, competition intensifies and turbulence increases.Consequently, new sources of growth must be explored andfresh answers to enduring success must be found.The classic answer used to be: Innovate or die! But researchshows that pouring more money into pure new product in-novation does not lead to better performance. To succeedin innovation and to seize new growth opportunities, thescope of innovation must be expanded to encompass thefull spectrum of business model components. While rewardsare potentially big, stepping outside the comfort zone of thecore business and known operating models is risky businessthat must be managed carefully.The articles in this hands-on case collection investigate howa range of companies have mastered the process as well ashave explored and exploited strategic options to identifynew paths to creating customer value and capturing profits.• The Danish electric mobility operator CLEVER has turnedtraditional strategic thinking upside-down to overcomechallenges in an immature industry and to pave the wayfor the mass market breakthrough of the electric vehicle.• The core business of Danish cable operator YouSeeis being challenged by disruptive technologies and bylaunching the online streaming service YouBio, the companyhas shown that the road to success can include disruptingyourself.• The ground-breaking Daily Maersk service launched byMaersk Line has changed the game in the highly conserva-tive shipping industry by challenging conventional wisdomand opening up a high-end market demanding highreliability, fast delivery and high consistency.Hopefully, the principles used by the case companies canbe translated into your organisational context to help youendeavor beyond the blinders of the dominant logic and toseize new opportunities.STRATEGY & GROWTH
  • 3. 3Issue no. 5 / 2013CASE – CLEVER: SMART CHOICES IN UNCERTAIN TIMESCLEVER: Smart choices in uncertain timesThe Danish electric mobility operatorCLEVER A/S has turned traditionalstrategic thinking upside-down toovercome challenges in an immatureindustry and to pave the way for themass market breakthrough of the elec-tric vehicle. While some companiesare still learning to plan in order toexecute a firmly set strategy, CLEVERhas chosen another path and knowsthat to make it in a highly turbulentindustry, the most sustainable optionis to plan to learn while implementingstrategy.Overestimating short-termchange while underestimatinglong-term changeEver since the Greek philosopherHeraclitus declared that the only con-stant is change, the dictum has beenrepeated so many times that it is almosta cliché. But change is a peculiar thingand comes in many shapes. Zoomingin on technological advances, a generalrule of thumb tells us that change isnever linear but comes in s-curves.However, our expectations are almostalways linear. As human beings, it issimply challenging to perceive changeas a non-linear thing. Consequently, wetend to overestimate short-term changebut underestimate long-term change.The current change within the automo-tive industry is a perfect example ofthis perception bias. For years, electricvehicles have been predicted to revo-lutionise the industry overnight buta closer look at the facts show thatpopular belief is far from reality.On one hand, the electric vehicle is stilla niche product and incumbent auto-mobile manufacturers are reluctant tofully commit themselves to enteringthe electric vehicle market space andswitch to a new technology platform.New technologies require investingin new competences while lookinginto lower after-sales revenues due tolower need for maintenance services.Further, battery technologies are farfrom competitive compared to ordinaryinternal combustion engine technologyboth in terms of driving distance andcosts, leading to unattractive consumerprices and lower profitability levels forautomakers.By Morten Hejlesen and Anne MeyerSource: Dansk Elbil AllianceElectric vehicles in Denmark-2,5005,0007,50010,00012,50015,00017,50020,0002010 2011 2012 2013 2014 2015ElectricvehiclesinDenmarkYearMarket forecast (2010) Actual number of electric vehicles New market forecast (2012)ElectricvehiclesinDenmark-2,5005,0007,50010,00012,50015,00017,50020,0002010 2011 2012 2013 2014 2015ElectricvehiclesinDenmarkYearMarket forecast (2010) Actual number of electric vehicles New market forecast (2012)2010 2011 2013 2014 2015201220,00017,50015,00012,50010,0007,5005,0002,500-
  • 4. 4 Case collectionOn the other hand, the electric vehicledoes hold the promise of enablingenvironmental-friendly transportationwith low greenhouse gas emissionlevels, reducing dependence on oil andimproving the end user driving experi-ence remarkably. In the long term, theloading power on and off electric vehi-cles will also play an important role inan integrated smart grid. Governmentsall over the world have already gonefar to support the adoption of the newdriving technology with tax reductions,support from green investments fundsand with tough standards on tailpipeemissions and fuel efficiency.Yet, the promises have not had thepotential to create the perfect stormfor an electric vehicle mass marketbreakthrough. And a closer look at oldmarket forecasts of electric vehiclesclearly reveals overoptimistic penetra-tion curves that do not match reality.Short-term change was severely over-estimated. However, if technologyperformance improves and manages tooutpace old and competing emergingtechnologies, electric vehicles couldhave a bright long-term future.Today, the electric vehicle industry iscaught in the no-man’s land betweenyesterday’s overoptimistic hype and to-morrow’s game-changing performancelevels. Consequently, it is very uncertainwhen the market will take off and thereis basically no single valid market fore-cast to use as the foundation for a solidgame plan. Further, industry players arestill struggling to position themselvesin the value chain and define attractivebusiness models.Altogether, it is clear that constantchange is not only a question aboutlinear versus s-curve change. The elec-tric vehicle industry is fundamentallydifficult to predict and is characterisedby a high level of turbulence with manyinteracting drivers as well as a lack of adominating industry paradigm.Old and new players in theelectric mobility industryThe electric vehicle not only challengesthe strategies of incumbent automobilemanufacturers, but also opens up amarket space for entirely new playerssuch as battery manufacturers, electricutility companies, manufacturers ofcharging infrastructure equipment anda range of different mobility serviceproviders.A key to bridging the gap to a greenertransportation future is the establish-ment of an adequate changing infra-structure that helps drivers rechargetheir vehicles on long-distance tripsas well as an infrastructure of homechargers for recharging vehicles atnight. Existing electricity infrastructurecan be used for charging but for safetyreasons and to increase the speed ofcharging, special equipment must beinstalled. In other words, there is anentirely new but all-important valuechain role to be filled within production,installation, operation and service ofthe charging infrastructure. So-calledelectric mobility operators (EMOs) areemerging to play the role, but theirapproaches to create and capture valuevary significantly across the globe.CLEVER A/S was one of the first elec-tric mobility operators on the Danishmarket and has served electric vehicleowners since 2009. CLEVER is now themarket leader and provides access toa public charging infrastructure eitherthrough subscription-based or pay-on-demand services as well as installshome chargers that support safe andgreener charging. A key to successin early years has been the roll-out ofa nationwide infrastructure neededto overcome drivers’ so-called ‘rangeanxiety’ which is one of the key barriersfor electric vehicle adoption. Further,CLEVER has successfully worked oninfluencing the political agenda and onforming relationships with key stake-holders in the industry to pave the wayfor electric vehicles. To bust myths,create positive awareness and increaseadoption speed, CLEVER has alsobeen running one of the largest electricvehicle test drive programs in Europe( is owned and financiallybacked by five electric utilities SEAS-NVE, SE, NRGi, EnergiMidt and EnergiFyn, and when it comes to strategicchoices the close links to utilities ob-viously can be seen as a way of colo-nising a new value chain position forthe utilities. The investors are alignedaround a long-term vision supportinggreen transportation and electrificationof society, the desire to capture andprotect market shares in a potentiallyattractive emerging market and tobe on the forefront of the intelligentelectric grid in which the batteries ofelectric vehicles play an important role.However, early optimism about thepromise of astonishing growth ratesprovided by seemingly competentindustry analysts has been replacedby a more modest worldview and theonce highly attractive future with highCASE – CLEVER: SMART CHOICES IN UNCERTAIN TIMESSTRATEGY & GROWTH
  • 5. 5Issue no. 5 / 2013returns is still few years away. Theperception bias has – among otherexternal factors – hit not only CLEVERbut more severely key competitorssuch as Better Place whose investmentintensive strategy is based on high-riskassumptions on winning technologies.Could CLEVER and other players haveforeseen the development? Maybe! Butlooking back, only a few voices ques-tioned fast penetration of the electriccar at the beginning of the century. Theentire electric car industry is currentlystruggling to gain foothold and find aprofitable operating model.Smart choicesin uncertain timesBased on the uncertain future outlookof the industry, the key strategic chal-lenge for the management team ofCLEVER has been to design a businessmodel that balances long-term estab-lishment of a strong competitive posi-tion in an emerging market with stra-tegic choices that minimise short-termexposure to risk and limits investments.While some competitors have chosena big-bet strategy with potentially highupside but unsustainable risk levels,CLEVER has crafted a strategy thatwill help them to compete for the longterm. Digging into the business model,several strategic choices are revealedthat are highly relevant to all strategicinnovators and business modeldesigners.Gain a foothold in the niche beforeconquering the mass marketThe optimistic market forecasts haveled many industry analysts to theconviction that strategies should aimfor mass market adoption and focuson high volume. However, the currentCASE – CLEVER: SMART CHOICES IN UNCERTAIN TIMESPhoto:
  • 6. 6 Case collectionelectric cars do not match B2C massmarket consumer needs. Drivingdistances are too short and retailprices are too high.While getting ready for the massmarket, CLEVER has chosen to focuson a few selected B2B and B2C nichesin which there is a match between carsand customer needs. Further, CLEVERhas understood that value propositionsmust be tailored to the segment-specificneeds.Current customers need total solutionssupported by advanced services asopposed to market offerings optimisedfor low touch and high volume. Inother words, CLEVER has developeda targeted approach for developinghighly valuable niche offerings and willeventually use this market foothold asa stepping stone for expanding intothe mainstream segments when carperformance levels match mass marketdemands.Invest in the ecosystem to create long-term relations and limit risk exposureAll electric mobility operators arecaught in a classic chicken-and-eggdilemma. There will be no cars as longas there is no charging infrastructure– and charging infrastructure invest-ments are unattractive as long as thereare no cars. CLEVER has chosen tolead the way through building a basicnationwide infrastructure and to carrysome of the initial investments neededto kick-start the industry. But on theother hand, CLEVER knows that a singlecompany alone cannot create the marketmomentum needed. Therefore, a keychoice has been to develop solutionsfor partnering with long-term investorswho share the same green transportvision. In other words, CLEVER’s basiccharging infrastructure will be extendedand scaled up through integrating thecharging stations of other infrastructureowners. In that way, the network willbe highly scalable – and risks as wellas investments will be shared amongstakeholders in the ecosystem.This strategy is far from the winner-takes-it-all strategies but offers apromising way forward while risks arestill high. Further, CLEVER’s network-centric approach includes investing indevelopment of long-term relationswith key stakeholders such as car dealer-ships, public authorities, suppliers ofcharging equipment and technologyinnovators within the industry. The aimof investing in the ecosystem is clearlyto be able to leverage a privilegedposition in the future when the industrymatures and becomes more attractive.CASE – CLEVER: SMART CHOICES IN UNCERTAIN TIMESSTRATEGY & GROWTHPhoto:
  • 7. 7Issue no. 5 / 2013Design, test and develop strategicoptions to prepare for the futureCLEVER’s organisation is small andconsequently lack of focus should tosome extent be avoided. However, asmart choice when stakes are highis to diversify investments and buildseveral strategic options. CLEVER, bynow, knows that current market fore-casts could still be incorrect. In suchsituations, diversifying risk is often agood idea and CLEVER will be exploringseveral promising options that can bescaled if the underlying assumptionsturn out to be true. If the coming massmarket turns out to attract strongcompetitors and drive down profitabil-ity in a never-ending low-cost game,CLEVER will be able to launch newmarket offerings that either fortifythe current business model or createentirely new offerings that hold thepotential to be game-changers in theindustry.Obviously, the exact nature of the stra-tegic options is highly confidential buta common denominator is a search forpremium-priced offerings and develop-ment of complex technologies thatcould complement the existing busi-ness model or even expand the cur-rent business model into a two-sidedplatform – e.g., like Google that actsas a platform for people searching theInternet and advertiser – that facilitatesthe exchange of certain services be-tween several customer segments.Plan to learn through assumption-based implementationThe classic model of building new busi-nesses dictates that first a brilliant ideais conceived and transformed into adetailed business plan. Then investorsare convinced to pour money into theproject and the business plan is dili-gently implemented to achieve marketsuccess. However, this approach hasproved to be broken time after timeand simply does not work in high-riskenvironments. When flux is high andthere is no causal relation between bigbets and big pay-offs, the best strategicchoice is to plan to learn – not to learnto plan. Recognizing this takes anenormously courageous managementteam that has the gut to openly admitthat they cannot and will not guaranteereaching the long-term strategic busi-ness goals.The current vision sets a clear direc-tion – but the path to success willchange along the way and so will theshort- and long-term goals. In high-risk environments, management teamsneed to constantly ask themselveswhat management guru Roger Martinhas dubbed the most important ques-tion in strategy: “What has to hold truefor this option to be a good idea?” Inother words, implementation is aboutlaying out the key assumptions thatneed to hold true for the chosen strate-gic options and enabling fast learningand adjustments of directions. CLEVERhas set a clear direction and made hardchoices to focus efforts but are imple-menting strategy with a new mindset.It is no longer a matter of executinga plan from A to Z. It is a matter ofempowering cross-functional imple-mentation teams to learn and adjustalong the way. And to secure constantoverview of developments and theindustry, all key assumptions guidingthe strategic journey are constantlymonitored and discussed when themanagement team frequently reviewsthe progress at fixed check points inwhich all strategic options are put onthe table and assessed.Summing up, the electric car industryturns out to be an illustrative tale ofoverestimating change in the shortterm and in some cases a tale of apply-ing strategic management principlesthat are best suited for highly predictableindustries. In the midst of the industry,CLEVER stands out and has found asmarter way of navigating turbulencethat does not rest on the need forstability and full visibility when lookinginto the future. The main componentsof the revised strategy for CLEVERare focused value propositions for theniches, systematic ecosystem building,exploration of strategic options and anagile but firmly controlled approach toimplementation.ContactFor further information please contact:Morten Hejlesen,, +45 4138 0012Anne Meyer,, +45 2338 0076CASE – CLEVER: SMART CHOICES IN UNCERTAIN TIMESSources: Management interviews, ICG-analysis and industry reports
  • 8. 8 Case collectionDiscovery-driven innovationMODELSTRATEGY & GROWTHA systematic process for designing and implementing new business modelsSynthesisAnalysisDiscoverAnalyse situationand contextDirectBuild insights andmap opportunitiesDevelopPrototype conceptsand plan implementationDesignCreate ideas anddevelop conceptsDefineFrame thechallengeAbstractReal1) Enable radicalcollaboration and co-creationFive guiding principles fordiscovery-driven innovation:2) Prototype andexperiment to learn fast
  • 9. 9Issue no. 5 / 2013DISCOVERY-DRIVEN INNOVATIONDefineWhat? A clear framing of the growth challenge, definition of ambition levels and joint commitment in the growth teamWhy? To align the business model innovation initiative with the growth strategy and business goalsDiscoverWhat? Research of opportunities across context, customers, competition and capabilitiesWhy? Superior business concepts are formed on the basis of focused deep dives and discovery of surprising factsDirectWhat? Analysis of research findings and creation of growth opportunity maps to prioritise and direct work effortsWhy? Data needs to be filtered and interpreted into actionable insights, directions and design principlesDesignWhat? Creative ideation and cross-functional co-creation of new business ideasWhy? To foster creativity and identify novel approaches to driving growthDevelopWhat? Iterative concept testing, business modelling and planning of learning-based implementationWhy? To reduce risks new business concepts are adjusted through several iterations and market feedback before launch3) Focus oncustomer value creation5) Balance creativityand focused analysis4) Stretch goals andchallenge conventions
  • 10. 10 Case collectionCASE – YOUBIO: WINNING THROUGH DISRUPTING YOURSELFSTRATEGY & GROWTHIn the long run, all businesses mustchoose between self-disruption and orself-destruction. Disruptors know thatnew technologies and emerging busi-ness models will eventually challengeexisting core businesses. Destructorsget caught up in internal power playsand desperate attempts to protect anoutdated core from aggressive com-petitors. The Danish cable operatorYouSee has shown that self-disruptioncan be handled elegantly, and that theroad to success can be paved by mak-ing timely strategic choices.Too much of a good thing?The odds of success when launchingnew products are spectacularly low.Some researchers claim that the in-novation failure rate is as high as 85%in dynamic industries such as fast-moving consumer goods. Thousandsof new products are launched on thesupermarket shelf, but only a coupleof hundred may celebrate the first-year anniversary of their launch.Obviously, the exact innovation fail-ure rate depends heavily on how itis measured and varies significantlyacross industries. However, the surpris-ingly high failure rates should make allstrategists in pursuit of new growthreflect. Have we actually identified areal gap to fill in customer needs?Is it a sizeable opportunity? Can wetarget the customers with a credibleand unique value proposition? Are weable to deliver the value propositionat the right time, at the right place, atthe right price and communicated inan understandable way that resonateswith customers?High failure rates could be a symptomof not fulfilling these seemingly simplecriteria. Instead of focusing on trulydifferentiated innovations, companiestend to end up producing more of thesame thing. Me-too products that arealmost similar to competing marketofferings or merely tweaked to becomejust a little bit better and just a little bitmore expensive. Pursuing this path ofsustaining innovation is a natural choicefor many incumbent companies to fulfilthe demands of the existing customerbase and to exploit existing core com-petences. However, while focusing onthis type of sustaining innovation thattypically results in increasingly com-plex offerings, companies open up aYOUBIO: Winning through disrupting yourselfBy Morten HejlesenInternationaltrafficBillionsofminutes2005 2006 2007 2008 2009 2010 2011 2012050050100150200250300350450400International Skype trafficInternational phone trafficInternational Telephone and Skype Traffic, 2005-2012
  • 11. 11Issue no. 5 / 2013CASE – YOUBIO: WINNING THROUGH DISRUPTING YOURSELFback door to market entrants offeringdisruptive innovations. Disruptive inno-vations are characterised by simplicity,convenience as well as lower prices andare served to customers that do nothave an outspoken need for advancedproducts.Skype’s simple Internet-based voiceand video communication service isan illustrative example of disruptiveinnovation. While research shows thatinternational telephone traffic grew5% in 2012 to 490 billion minutes, it isestimated that cross-border Skype-to-Skype voice and video traffic grew44% in 2012 to 167 billion minutes. Theincrease of nearly 51 billion minutes ismore than twice achieved by all inter-national carriers in the world combined.In other words, massive amounts ofcustomers seeking simple and cheaptelephony solutions are turning theirbacks on traditional telcos. Skype is thestraightforward and inexpensive choice.Disruptive innovations such as Skypeand no-frills low-cost airlines typicallyunderperform in mainstream marketscompared to established products. Buton the other hand they are valued bylow-end segments and in many cases,the small low-end niche markets growbig. Disruptors eventually challengeincumbents by moving up-market whilecompeting on a fundamentally differentperformance trajectory.The key to enabling disruptive innova-tion in established companies is foundat the intersection of smart use of newtechnologies and intelligent businessmodel design while having a deepunderstanding of the internal obsta-cles that might turn up along the way.Imagine knocking on the CEO’s doorand selling the idea of cannibalizing theexisting customer base by developing anew business model that – by the way– potentially will lead to lower profita-bility levels in the long run. Not exactlya dream scenario!Disruptive business modelsare all around usWhile disruptive innovation in estab-lished companies typically is not a partof dream scenarios, most CEOs recog-nise the dystopian nightmare scenarioof small entrants attacking from low-endtrenches eating up market shares andeventually eradicating incumbents.Disruption can be observed in almostany industry, and especially the riseof Internet-based communicationtechnology has been a key driver inthe design of many disruptive businessmodels.Consider the entire media industry. Allvalue chain players involved in supply-ing, producing or distributing music,books, movies, newspapers, games,television and pictures have experi-enced the disruptive powers of theInternet and a new range of Internet-enabled devices. In 2012, there were2.4 billion Internet users worldwide andmore than 1.1 billion Internet-enabledsmart-phone subscribers accountingfor more than 13% of global Internettraffic. More than 119 million tabletswere sold in 2012. Add to that the radi-cally changing behavioural patternsamong Internet users with more than 1billion monthly active Facebook usersand over 4 billion hours of video beingwatched each month on YouTube.The story about the music industryand new business models like Apple’siTunes and music streaming servicessuch as Spotify, Wimp and TDC Play iswell known. Within video rental services,the rise and fall of Blockbuster is thetale of poor strategic planning in themidst of disruptive market entrants.At its peak in 2004, Blockbuster hadmore than 9,000 stores in the US but isnow operating less than 500 stores andis continuously shutting down storesworldwide due to the rise of cheap andconvenient over-the-top online videoservices such as Netflix, Hulu, HBO andAmazon Instant Video.As a matter of fact, Netflix userswatched more than a 1 billion hours ofvideo in June 2012. Moreover, the on-demand video services are disruptingtraditional flow-tv broadcasters andcable television services thus pavingthe way for a shift in consumer behav-iour toward services that are streamedonline. All of the mentioned video ser-vices are perfect examples of low-enddisruptions providing just “good enough”content to their customers at low prices.
  • 12. 12 Case collectionSTRATEGY & GROWTHTraditional cable operators have beencompeting on “adding value” to existingofferings through moving up-marketby developing advanced video-on-demand offerings, multi-device sup-port as well as advanced householdintegration services. All new entrantshave chosen a different performancetrajectory and are based on low-marginbusiness models that seem quite un-attractive to incumbent companies.Entrants have quite simply changedthe rules of the game.Taking a closer look at the Danishmarket, 2012 was the year of videostreaming service premieres. Netflix,HBO Nordic, ViaPlay and YouBio werelaunched to compete with traditionalcable operators and existing onlineservices. Typically, new providers areoffering access to a selection of movies,TV shows and different sorts of uniquecontent as well as attracting customersthrough free trial periods. Netflix triedto capture customers producing itsown TV show, House of Cards, YouBiois combining subscription-based accessto content with pay-per-use premieremovies and ViaPlay is trying to attractcustomers through offering access toproprietary sports content.While market shares are still changingon a daily basis, a survey from 2013shows that Netflix was used by 16%of the population during the last 6months. YouBio is placed second usedby 11% of the population. Altogether,29.7% of the Danish households haveat least one streaming service sub-scription and more than 31% of thehouseholds are using the service atleast once a day.Disrupt yourselfor get disruptedWhile the entry of global players suchas HBO and Netflix is opening upthe competitive space, the launch ofYouBio proves to be a highly interest-ing case in point when it comes tounderstanding the dynamics of disrup-tive innovation from within establishedcompanies.YouSee, the largest cable operatorin Denmark and a subsidiary of TDC,launched the YouBio business model.YouSee currently has 1.2 million cableTV customers in Denmark, and is thecountry’s second largest provider ofbroadband services. Revenues reached4,572 mDKK in 2012 and were up 7.3%compared to 2011. The 2012 gross profitmargin was 58% making YouSee atremendously profitable company. Butthe disruptive forces of new global andlocal streaming services have pushedYouSee to make hard choices andto compete for the long run. Whileflow-tv still is expected to attract asizeable customer base, streaming ser-vices will no doubt severely challengetraditional premium cable packages.The full impact of new players is yetto be seen, but the long-term trend isevident.In retrospect, it seems straightforwardthat YouSee had to open up for poten-tially cannibalizing the company’s ownbase of premium cable customers.But accepting the slow decline of thetraditional business model has led toa number of tough choices and hasstretched the competence base of theorganisation. Four key success factorsthat have helped YouSee in the trans-formation can be observed:Set a long-term vision to avoidsticky old business modelsTo introduce a new disruptive businessmodel from within requires dedicationto compete for the long term and strongleadership unity supporting a departurefrom old ways of working. One mightCASE – YOUBIO: WINNING THROUGH DISRUPTING YOURSELF
  • 13. 13Issue no. 5 / 2013argue that YouSee had no other choice,but consider the hall of fame of greatdisrupted companies such as Kodak,Borders and Blockbuster. If there isno long-term vision but only a strictshort-term focus on milking existingbusinesses, disruptors will eventuallyovertake your business.YouSee’s vision to be the preferredprovider of TV, movies, music andcommunication to Danish householdssets the bar higher and supports vision-ary leadership choices. Add to that, afundamentally entrepreneurial workingculture that might seem a bit loosehere and there but most definitely sup-ports innovative experimentation anda high level of employee engagement.Don’t get ahead of the s-curve andwatch competitive moves closelyTiming is everything when it comes toperfecting a market entry. YouTube wasfounded in 2005 and online streamingservices have been around for manyyears. The management team ofYouSee has watched competitors suchas Netflix closely for a long time andback in 2008 the team decided to startmoving from the traditional world ofcables into the world of Internet-basedtechnologies. However, YouBio was notlaunched before 2012 and it shows thatdisruptive business models must betimed perfectly with the threat of com-petitive entries, broad dissemination ofsupporting technologies such as high-speed broadband connections andmobile devices and a sufficient criticalmass of customers willing to switchor test new solutions.If YouSee had entered the marketsome years earlier, the net effect couldhave been a massive cash burn due toimmature technologies and lack of asizeable customer base. Looking back,YouSee executives would have pre-ferred a slightly earlier entry to avoidthe market dominance of Netflix. Butbeing a fast follower is far better thangetting too early into the game.Learn to compete through makingdisruptive innovation an evolutionaryprocessOn the surface, disruptive innovationseems to be all about overnight revolu-tions that alter the rules of the gamein a very short period. As describedabove, YouSee purposefully chose tostart learning and building new compe-tences back in 2008. Key steps includedto build competences for streamingexisting FlowTV channels over the topthrough on the Web, to build compe-tences for handling different devices aswell as to build a new business modelfor online rental movies. In that sense,disruptive innovation for YouSee is lessrevolutionary and more evolutionary.Thus, the final strategic choice tolaunch YouBio could be taken withsome confidence. Sticking to the origi-nal core would have made YouBio ahighly risky bet but clever managementchoices have systematically reducedrisk levels through a slow but safe step-by-step approach.Leverage existing complementaryassets and capabilities to commercialisesuccessfullyThe story about the success of YouBiois not a story about innovative newtechnologies that have been protectedand are almost inimitable for othercompanies. While core technologiesare new to YouSee, they certainly arenot new to the world. More precisely,the success is built on leveraging arange of existing assets and capabili-ties. Even though competitors enterthe market space, they will have a hardtime copying all the complementaryassets. These assets include the strongYouSee brand, an extremely strongcustomer base of almost 45% of allDanish households and strong relationsto content providers such as moviedistributors and existing broadcasters.The strong position in the Danish mar-ket built around complementary assetsalso explains why YouSee has no inter-national expansion plans. The core tech-nology is relatively simple and needsstrong supporting assets to survivecompetition and to win customers.Many businesses do not survive bigtechnology shifts and get caught upin internal resistance to change. As acontrast, YouSee has proactively madeimportant strategic choices that havesupported the successful launch of anew disruptive business model. In aworld of near-constant disruptions,the art of disrupting yourself is a rarebut highly needed competence thatmust be handled carefully. Sticking tocore competences in a rigid way andclinging to old business models on theother hand will most likely lead to self-destruction in the long run.ContactFor further information please contact:Morten Hejlesen,, +45 4138 0012CASE – YOUBIO: WINNING THROUGH DISRUPTING YOURSELFSources: Management interviews, ICG-analysis, industry reports and internet sources (,,,,,,,
  • 14. 14 Case collectionSTRATEGY & GROWTHCASE – DAILY MAERSK: OPENING UP A NEW ROUTE TO THE HIGH ENDMaersk launched the Daily Maerskservice in 2011 to change the rules ofthe game in the highly conservativeshipping industry. The new businessmodel was designed to tackle threefundamental industry challenges: Un-reliability, environmental impact andcomplex services. As a consequence,Maersk Line has turned challengesinto opportunities and succeeded inopening up a high-end market seg-ment demanding high reliability, fastdelivery and high consistency.Rethink the existing marketthrough introducing newcompetitive factorsArguably, one of the most impressivestrategic moves a company can makeis to rethink the existing market andfundamentally challenge competitorson a new set of competitive factors.When Apple launched the iPhone it wasa slap in the face to an industry stuckwithin dominant logics of traditionalmobile phone design, user interfacesand revenue models. When Nestleintroduced its simple and convenientNespresso coffee brewing solution, theyshook up the existing ways of preparinga premium cup of coffee – no moreneed for highly complicated manualdrills to brew a quality shot of espresso.Both iPhone and the Nespresso ma-chine are sustaining innovations thathave altered the rules of the game bytranslating deep customer understand-ing into unique and differentiated solu-tions for the existing customer base.Neither has dramatically expanded themarket. More precisely, both marketofferings have taken the companies up-market by targeting the latent needs ofhighly profitable customer segmentsthat were willing to accept remarkablyhigher price points than the industryaverage. Add to that, the intelligentrazor-and-blades logic underlying bothbusiness models with constantly recur-ring revenues through sales of mobilephone apps and coffee pods.The key to seizing the high end iscustomer centricity. While some com-panies are still focusing on selling greatproducts and services with fantasticfeatures, customer-centric companiestake an outside-in perspective andfocus on providing unique benefitsaligned with segment-specific needsand wants. Further, the best companiesare able to document and prove thevalue created for a specific customer inreturn for the customer’s associatedpayment (see figure 1 on the nextpage).In some industries, the validity of thecustomer value proposition can bedocumented in monetary terms whileother industries need to prove measur-able value creation on a broader rangeof parameters that are key to customersatisfaction – e.g., sustainability, speed,convenience, reliability, flexibility.Oftentimes, the unique features andnew competitive factors that create thebasis for differentiation are to be foundin communication, sales approach ordistribution network and not the productitself. Customer benefits outdo technicalfeatures.A giant challengesindustry conservatismOne might argue that big companiesseldom act as nimble and agile as aspeedboat but popular belief doesnot always turn out to hold true. Asa matter of fact, one of the biggestchanges in the shipping industry hasbeen introduced by one of the industrygiants, Maersk Line, in 2011.The shipping industry plays a key rolein the global economy. It has grownand changed dramatically in the lastthirty years. Globalisation, regulatorychanges and the impact of economicgrowth have resulted in increased effi-ciencies, increased merger activity, andincreased growth. Since 1970 interna-tional cargo has more than trebled andthe industry today is facing increasedcompetition, dropping demand, priceDAILY MAERSK:Opening up a new route to the high endBy Thomas Børve & Morten Hejlesen
  • 15. 15Issue no. 5 / 2013CASE – DAILY MAERSK: OPENING UP A NEW ROUTE TO THE HIGH ENDFeaturesFeatures arethe fact-basedcharacteristicsof a given product,service or solutionValuedifferentiators arethe features thatare unique and thatcustomers perceiveas valuableA value propositionis a proposition ofthe value which wedeliver – based onassumed pains andassociated featuresand valuedifferentiatorsA segment valueproposition is aproposition ofquantitative valuebased on assumedsegment-specificpains and associatedfeatures and valuedifferentiatorsA customervalue propositionis a proven andfact-based valuewhich a specificcustomer willreceive in returnfor the customer’sassociated paymentValue differentiators“Assumed” “Proven”Generic valueproposition(market promise)Segment valuepropositionCustomervalue propositionFigure 1From product features to customer benefitspressure and ever more demandingcustomers. In order to meet thesedemands, shipping firms make largeinvestments in rolling and floating stock,and funding these investments is crucialto sustaining growth (see figure 2).One of the more recent investmentscomes from Maersk Line, the world’slargest container shipping companywith 25.000 employees, 600 vesselsand more 300 offices around theglobe. The investment is called DailyMaersk and is basically a service aimedat reducing the inventory of the shipperthrough increased reliability, frequencyand consistency.Prior to Daily Maersk, on average only1 in 2 containers arrived on time.Customers with explicit needs forhaving goods delivered on time hadcompensated for the lack of reliabilityby building expensive safety stocksat critical locations. This resulted ina negative impact on the customers’supply chain efficiency, impacting cashflows and profitability.In the spring of 2010, Maersk Lineinterviewed selected customers to gainmore insight into the needs of customers.Maersk Line worked from a hypothesisof being able to perform daily ship-ments and deliver 100% reliability onthe Asia-Europe trade line based on aredundant network. Analysis showedFigure 2Development of seaborne trade since 1970Millions of tons loaded19702,56619803,70419904,00820005,98420108,408
  • 17. 17Issue no. 5 / 2013CASE – DAILY MAERSK: OPENING UP A NEW ROUTE TO THE HIGH ENDthat daily shipments, increased con-sistency and reliability would meansignificant inventory reductions andup to 500 USD saved per container forcustomers. In the beginning, most cus-tomers were sceptical towards the newservice reliability of Daily Maersk but itquickly proved shippers that it will beable to remove shipping buffers thathad been built in to the lead time.With Daily Maersk, customers couldsuddenly have absolute confidence inthe date containers would be avail-able for delivery, improving inboundplanning and also providing flexibilityif they arrived early and cargo wasrequired urgently. The collaborative ap-proach that the Maersk Line sales teamuses when selling Daily Maersk is quiteunique for a shipping line. The salesteam seeks to understand and map thesupply chain of their customers andthis allows Maersk Line to gain a betterunderstanding of customer businessprocesses and further opportunityto drive value and reliability for ourinbound shipments.Daily Maersk was designed andlaunched in the summer of 2011 andhas proven quite successful. Although”absolute reliability” was not achieved(98%), 76% of 175 surveyed customersacknowledged the benefits from DailyMaersk and found that their transporta-tion chain had become more efficient.60% of surveyed customers haddirectly saved on logistics costs.Maersk Line firmly believes that it haschanged and as a direct result customersare seeing their supply chains becomemore efficient. In quite a few casesMaersk Line has been able to demon-strate the value in terms of US dollarsas a direct effect of using Daily Maersk.Further, shipping with Daily Maersksaves 13% CO2 emissions per TEUmoved compared to the industryaverage on the Asia-Europe trade.Unlocking the valueof customer centricityTo launch the Daily Maersk businessmodel, Maersk has taken a customer-centric path to unlock new potentialsof the existing market. Some of the keysuccess factors that can be observed are:Implement a culture of customer centri-city and build on deep customer insightsMaersk Line has worked for many yearsto build a foundation of customercentricity initially within the frame-work of the existing business model. In2009, an initiative to improve customerexperience was launched building onin-depth customer research revealingseveral unknown customer pain points.Reliability was one of the key issuesobserved. Consequently, Maersk Lineintroduced “proactive notifications”in order to support customers whomake changes in logistic operations orinventory in case of delays. The initia-tive paved the way for an emotionallyinformed view of the customer. Whendesigning Daily Maersk, deep customerinsights were used as the founda-tion for business model design. Thisincluded understanding the details ofthe customers’ supply chain processesand mapping the customer’s journeyto assess interactions with Maersk andspot the real pains and needs to be ad-dressed. Maersk continues to challengeindustry traditions and has secured anastounding 873,838 likes on Facebookand a comprehensive presence onmore than 8 other social media plat-forms to listen and talk to customers.Make the customer value propositiontangible and prove value creationDifferent pain killers can relieve acustomer pain. While “proactive noti-fications” tried to dampen the pain ofdelays, Daily Maersk has addressed theroot cause and is dramatically reduc-ing the risk of delays completely. Inother words, customer value creationhas been boosted. For Maersk, it hasbeen key to both position and differen-tiate Daily Maersk in a convincing andtrustworthy way. To really convincecustomers, Maersk does not rely onfancy marketing campaigns alone buton hard facts. All customers are offeredcustomized and industry-specific valuepropositions. The value creation poten-tial is initially assumed, but throughcustomer interactions it is verified,proved and calculated so that benefitsin monetary terms are clearly outlinedfor customers. Further, Maersk makessure to tailor value messages to differentstakeholders within the customer’sorganisation.Changing the way of selling andbuilding the right competencesTraditionally, transportation serviceshave been thought of as simple trans-actional offerings resulting in fairly low-level tactical sales dialogues with cus-tomers. Daily Maersk has changed thatby introducing proven value proposi-tions that offer to improve the perfor-mance of the customer’s supply chain.To move from tactical talks to strategicdialogues about supply chain perfor-mance improvements required a newbusiness model and also building newleadership, sales and marketing capa-bilities at Maersk. Therefore, Maersk
  • 18. 18 Case collectionis continuously working on installinga stronger commercial mindset in theorganisation. Daily Maersk is basedon getting early into the buying cycleand addressing pains higher up in thecustomer organisation. To help Maersksucceed, capabilities and processesfor engaging Maersk executives in thesales cycle have been built and newvalue-based ways of working with salesopportunities have been developed tosecure aligning the new business modelwith sales force capabilities.Combine thinking big and bold witha prototyping mindsetWhile differentiation can open up anew high-end segment, shipping is fun-damentally a volume operations busi-ness. To succeed with a new businessmodel in this well-established industry,small bets are simply not a sustainableoption. Maersk has wisely chosen toinvest heavily, to decisively try to shapethe industry into a new direction and tofocus efforts on one concept. In highlyuncertain and immature industries, thisstrategy would most likely have failed.E.g., the current cash burn and expectedfall of Better Place in the electricvehicle industry proves this point. In amature industry, the introduction of anew high-end business model needs tobe powerful and supported by a strongfinancial backbone. Maersk has doneall of this very well and marketing andpublic relations efforts deserve respect.However, behind the scenes the DailyMaersk concept was introduced fivemonths before launch to validate theconcept and fine-tune performance. Inother words, thinking big when launch-ing went hand in hand with a learningand prototyping mindset.At one end of the business modelinnovation continuum, you will findagile start-ups appearing out of theblue ready to disrupt mature industriesfrom the low end. At the other end, youwill find big and powerful players likeMaersk Line that moves up-market totap the potential of underserviced andhighly demanding customers. DailyMaersk is a brilliant case in point thatbusiness model innovation at its coreis all about customer centricity andfinding the best way of fulfilling botharticulated and latent customer needs.ContactFor further information please contact:Morten Hejlesen,, +45 4138 0012Thomas Børve,, +45 2338 0020Sources: Management interviews, ICG-analysis, and industry reportsSTRATEGY & GROWTHCASE – DAILY MAERSK: OPENING UP A NEW ROUTE TO THE HIGH ENDPhoto:
  • 19. Implement Consulting Group is a Scandinavian consulting company with more than 300 employeesin Denmark, Sweden and Norway.We help private and public sector companies implement strategic change with impact.DenmarkStrandvejen 56DK-2900 HellerupTel. +45 4586 7900www.implement.dkSwedenTegnérgatan 35SE-111 61 StockholmTel. +46 8 723 13 12NorwayMunkedamsveien 35N-0122 OsloTel. +47 2389 7260