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outdated methods?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