Designing For Innovation: Business Models

Designing For Innovation: How can I Business Models improve the way I do business Presentation to IIBA-OO January 2009 Michael Lachapelle

What are the expectations for today

why have a business model?

how do we describe our business without a common language

how do we communicate about the business? so other people understand

how we implement our business? outdated methods?

how do we change a business? re-invent the wheel?

what is innovation?

technology innovation

process innovation

product & service innovation

business model innovation

four levels of innovation business model innovation product & service innovation process innovation technology innovation

Nearly all CEOs are adapting their business models — two-thirds are implementing extensive innovations. More than 40 percent are changing their enterprise models to be more collaborative. IBM Global CEO Study 2008 Extensive Business 69% Moderate Model Innovation 29% over next 3 Limited / none years 2%

Benefits Cited by Business Model Innovators percent of respondents Source: Expanding the Innovation Horizon [IBM, Global CEO Study 2006]

How does one describe a business model?

THE BUSINESS MODEL CANVAS

a business model describes the logic and rationale underlying the way in which we implement the business strategy areas

business model framework HOW WHAT WHO HOW MUCH

BUILDING BLOCKS

business model framework KEY CLIENT INFRASTRUCTURE OFFER CLIENT RESOURCES RELATIONSHIPS PARTNER VALUE CLIENT NETWORK PROPOSITION SEGMENTS KEY DISTRIBUTION ACTIVITIES CHANNELS COST REVENUE FINANCE STRUCTURE STREAMS

the big picture Key Resources Client Relationship Value Partner Network Key Activities Distribution Channel Client Segments Cost Structure Revenue Model

Value creates revenue Key Resources Client Relationship Value Partner Network Key Activities Distribution Channel Client Segments Cost Structure Revenue Model

Creating value requires infrastructure Key Resources Client Relationship Value Partner Network Key Activities Distribution Channel Client Segments Cost Structure Revenue Model

Infrastructure generates costs Key Resources Client Relationship Value Partner Network Key Activities Distribution Channel Client Segments Cost Structure Revenue Model

Operational viability Key Resources Client Relationship Value Partner Network Key Activities Distribution Channel Client Segments Cost Structure Revenue Model

describing SAMPLE business model

Amazon.com’s basic business model… Courtesy of Alexander Osterwalder, with permission fulfillment mass customization content CLIENT CLIENT KEY ACTIVITIES KEY ACTIVITIES RELATIONSHIPS management RELATIONSHIPS affiliates IT management delivery mass customers PARTNER CLIENT retail stuff PARTNER CLIENT 3rd party sellers OFFER overOFFER globally NETWORK SEGMENTS the web NETWORK SEGMENTS affiliates warehouses & inventory Amazon.com DISTRIBUTION DISTRIBUTION IT infrastructure KEY RESOURCES KEY RESOURCES CHANNELS CHANNELS affiliates people fulfillment REVENUE REVENUE technology & COST STRUCTURE sales margins COST STRUCTURE FLOWS FLOWS content marketing

Four questions about Amazon.com‘s business model what is their BM‘s major weakness? what are their BM‘s strongest competencies? where are their BM‘s highest costs? what big strategic innovation could Amazon bring to their BM? Courtesy of Alexander Osterwalder, with permission

Innovating the business model Courtesy of Alexander Osterwalder, with permission activities relationship fulfillment mass customization offer content CLIENT clients CLIENT CLIENT CLIENT KEY ACTIVITIES CLIENT CLIENT KEY ACTIVITIES partners management affiliates RELATIONSHIPS RELATIONSHIPS SEGMENTS SEGMENTS SEGMENTS SEGMENTS IT management delivery retail stuff mass customer over the web globally CLIENT PARTNER CLIENT PARTNER CLIENT CLIENT CLIENT CLIENT CLIENT OFFER CLIENT CLIENTS 3rd NETWORK OFFER party sellers CLIENTS SEGMENTS SEGMENTS NETWORK SEGMENTS SEGMENTS SEGMENTS SEGMENTS SEGMENTS SEGMENTS IT services warehouses & Internet companies Amazon.com (e.g. S3, EC2) inventory affiliates DISTRIBUTION DISTRIBUTION CLIENT CLIENT CLIENT CLIENT KEY RESOURCES IT infrastructure affiliates KEY RESOURCES CHANNELS CHANNELS SEGMENTS SEGMENTS SEGMENTS SEGMENTS Internet interfaces people resources channels fulfillment Sales margins Sales margins technology & REVENUE REVENUE CLIENT CLIENT CLIENT COST STRUCTURE CLIENT COST STRUCTURE content FLOWS FLOWS SEGMENTS SEGMENTS SEGMENTS SEGMENTS utility fees costs revenues marketing

The Innovating Approach How does one innovate Consider Consider the clients the clients Start with as-is Create prototype Set the to-be Start with as-is Create prototype Set the to-be business model innovative models business model business model innovative models business model Consider the Consider the four questions four questions

If you wish to use material from this presentation please observe the rules of creative commons licensing. Content and development support provided by: Content and development support provided by: Dr. Alexander Osterwalder, PhD Dr. Alexander Osterwalder, PhD His material is posted on: business-model-design.blogspot.com His material is posted on: business-model-design.blogspot.com Business Model Community located at: www.thebusinessmodelhub.com Business Model Community located at: www.thebusinessmodelhub.com For further information, discussion you can contact me at: For further information, discussion you can contact me at: (w) mike.lachapelle@tpsgc-pwgsc.gc.ca (w) mike.lachapelle@tpsgc-pwgsc.gc.ca (h) michaell@magma.ca (h) michaell@magma.ca

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Designing For Innovation: Business Models

by Patrick van Abbema on Feb 13, 2009

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Designing For Innovation: Business Models — Presentation Transcript