Value chain innovation - Breaking the chains


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Innovation in the value chain enables companies to change their business radicall. Particularly businesses that are currently in not-beneficial value systems could be able to innovate out of their position. Breaking the Chains is a presentation about innovating in the value system.

The presentation consists of three parts

1 Value chain thinking
2 Value systems with issues
3 Breaking the chains of value eco systems

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  • Value chain innovation - Breaking the chains

    1. 1. Breaking the ChainsFrom Value chains to value system innovationLecturer: drs. Ir. J.R. Helmus
    2. 2. Part 1:Value chain thinkingPart 2:Value systems with issuesPart 3:Breaking the chains of valueeco systems
    3. 3. Objectives for this lectureAfter this lecture you will be able to:Map value systems in a pluriform wayUnderstand problematic value systemsKnow about several ways to force breakthroughs• have basic knowledge about value chains• know about modelling techniques• have basic knowledge of innovation management• have basic knowledge of cash flows and economics• are open minded and willing to learnI Assume you
    4. 4. 4Part 1:Value chain thinking
    5. 5. Courtesy to Value Chain Partnerships for a Sustainable Agriculture
    6. 6. Extinct valuechains
    7. 7. 9
    8. 8. 10We are the top management team of Philips HealthcareWe have invented a coocklemelookyAnd we need to setup the value chain
    9. 9. 11What Factors would you take into account?
    10. 10. 12Let’s use thePhilips methodby prof dr. Elke den Ouden
    11. 11. 13Four aspects should be mapped inthe Value networkMoneyGoods & ServicesInformationIntangibles
    12. 12. The value chain flow model14
    13. 13. The value chain flow model15
    14. 14. 16One aspect ismissing in thismethodSizedeterminesthe powerof thestakeholder&
    15. 15. 17One aspect ismissing in thismethodSizedeterminesthe powerof thestakeholder&
    16. 16. Mapping power and Effect of stakeholders
    17. 17. 19Needs BarriersWhat kind of decision maker is your stakeholder?What ‘s inside the mind of a stakeholder
    18. 18. Barriers for stakeholders to overcomeWhat keeps potential customers from making the decision to buy anelectric vehicle?There are three types of barriers thatmust be overcome before taking difficultdecisions:• Functional barriers•Price, functionalities, effort, risk• Emotional barriers• fear of taking risk, failing,•Social Barriers• how people see you•Attitude of others to youInformation pointed at the barriers is required to convince yourstakeholders
    19. 19. Always care about the metrics your stakeholderscares about
    20. 20. Filling in your persona in a serious way gives you real insights
    21. 21. Carefully think about the difference between the decisionmaking unit and the stakeholder you are dealing with.Your Audience(e.g. Production manager)His Audience (stockholders)Your message to yourstakeholders could bepart of a broadermessage to a broaderaudience.The RealDMU
    22. 22. 25Part 2:Value systems with issues
    23. 23. The risk that astakeholder isexposed towithin the valuesystemcompared toothersThe ownership ofproduct/services /information andthe moment ofownership transfer
    24. 24. The unbalanced value system of pearsFarmer Pear Cooling storage wholesale Super market Customer
    25. 25. 28Clients Innovation PartnersKnowledge parntnersWhat is the state of culticavation of fruits in the NL in 2020?Open innovation in the agri sector in the Netherlands
    26. 26. Value system of agriculture
    27. 27. Due to the power of the supermarket the farmeris suppresed in its position in the value systemFarmer remains owner of his fruits till – and is exposed to risk 0- tillthe moment of sales a supermarket. Only at that moment thesupermarket pays the farmer for each single piece of fruit
    28. 28. The key player isthe bottleneck inthe value system.He determineswhat passesupstream to thecustomer
    29. 29. Deeper analysis of value systemType Farmer Pear Cooling storage wholesale SupermarketCustomerGoods /serviceMoneyInformationIntangiblesPowerinfluenceriskownershipThe cockiness of the farmers– particularly not willing to cooperate –appeared to be reason that the supermarket wasable to develop its power in the value system.The supermarket simply asks a quote to allfarmers and picks the best.Information streams within the value system areoptimized in favor of the supermarket
    30. 30. The newsvalue systemis known forits issues
    31. 31. 34What technologies will influence the value system in future?What is the future of newspapersWhich innovations for which actors will be beneficial for them?Open innovation session with all actors within the valuesystem
    32. 32. Value systems suit excellently with co-creationsessions for they are an incentive for discussion.
    33. 33. Raw sketch of the Value system of the newspaper industry
    34. 34. Key findings of our researchTransforming value system:Position of key player no longer sustainable due to new technologiesthat enable information consumers to skip positions in the valuesystem.Information enrichment is now performed by information consumers aswellInformation is old as soon as it is fixated and printed, whilst newtechnologies enable consumers to continuously gain new information inthe value system.
    35. 35. Electric Vehicles and innovation
    36. 36. Value system of electric vehicles from theperspective of the charging stationNetworkadministratorMeasurementresponsibleData responsibleEnergy producercustomersupplierproviderOwnerchargingstationIHBCD1D2GAFTNMSource:TNOCourtesy to student’s researchTC. Gouw & J. Meijer
    37. 37. Cash flows within the value system• Private (buy a charging station)Courtesy to student’s researchTC. Gouw & J. Meijer• Private (lease a charging station)
    38. 38. Results of financial modellingResults cashflow calculation and simulationResults:- The total value system loosesmoney up to 2024- The provider - key player – is notprofitable, because of the risks,periodic fees for costs- To make exploitation profitable asubscription fee of at least €52 isnecessaryCourtesy to student’s researchTC. Gouw & J. Meijer
    39. 39. The key player withinthis value system is theweakest link
    40. 40. 44Which Extinct car is this?The Mazda RX-7 is a sports car produced by the Japanese automakerMazda from 1978 to 2002. The original RX-7 featured a 1146 cc twin-rotor Wankel rotary engine and a front-midship, rear-wheel drivelayout.
    41. 41. 45Which Extinct car is this?The Mazda RX-7 is a sports car produced by the Japanese automakerMazda from 1978 to 2002. The original RX-7 featured a 1146 cc twin-rotor Wankel rotary engine and a front-midship, rear-wheel drivelayout.
    42. 42. What actions were required at wich actors in thevalue system to implement the Wankel motorsuccesfully??46
    43. 43. 47Mazda should havetrained car mechanicshow to repair wankelmotors and arrangespare partsBut they didn’t….
    44. 44. 48Cicada Innovation 2012GeneralpractitionerDistrict Nurse /Home CareContentMonitoringcocreationcommunicationfinanceFragile elderlyFamily careProduct-service Innovation for Elderly project 2012
    45. 45. Value system of the Dutch Healthcare sectorPoint 1 no care neededPoint 2 minor care requiredPoint 3 intensive care programs for elderly
    46. 46. Value system of the Dutch Healthcare sectorConclusions 1:As soon as more than simple care for elderly is required, the case valuesystem gets needlessly complex. At first the general practitioner is firstvocal point for clients, but as soon as care becomes even a little moreintensive, the value system’s complexity increases.Conclusions 2:Key player in the value system are health insurance companies who aremore and more a decision making unit, although their function isoriginally delegated from the Dutch government.Conclusions 3:Real innovation in healthcare systems is restrained for (positive) cashflows are required for several sources (client, insurance, governement,family) and cash flows are often not supported when particularly whenNature of the innovation is prevention
    47. 47. 51Part 3:Breaking the chains ofvalue eco systems
    48. 48. #1 Why payfor COGSwhen otherpartners arewilling topay?HowIn traditional business thinking it is often thecompany who produces that pays the bills for theCosts of Goods Sold (COGs). Some companies areable to let the COGS be paid for them. Even betterto gain more money from embedding certainsuppliers than the total amount of COGsQuestions-Which component suppliers are picked by clients?-Are there any aftersales possibilities for yourproduct and which stakeholders gain benefit fromthese aftersales?-Which stakeholders within the value chain gainbenefit from endorsement branding?Examples:- Dell
    49. 49. How is that possible???Dell makes profit on sales even before aproduct is soldMicrosoft® Office Starter 2010
    50. 50. #2 money isnot thedetermingfactor in 2.0businesmodelsHowIn tradidional busiensses transactions are based oncash flows. Goods or services are to be paid for, buthave you ever considered other means than goodsor services? You could sell influence, presence orinformation as well.Questions-Which stakeholders gain benefit form havinginflucence in decision making?-Which stakeholders gain benefit from sponsoring?Examples:- Google adds- interest groups willing to pay for decisions in theirfavour (nature conservation, fauna protection)
    51. 51. Which stakeholders have stakes otherthan money?Lets assume we place a light bulb near a park….
    52. 52. HowBeing present as a company in a certain area couldmean that other companies flourish by yourpresence. Think about large factories beingoffshored. This induces employment and a newvalue system in the country being offshored to.Questions:-Which organisations profit from your presence?-What would happen to them if you would suddnelynot exist?-How well do you exploit your partners in theecosystem?-Which crosslinks are made in your ecosystem?-Where are the boundaries of the ecosystem youare part of?Examples- Sillicon Valley ecosystem-Outsourced university mess#3Build anecosystemaround yourservice andlet otherspay for it
    53. 53. Cash Flows of RyanAir• Cash flow• influence• Data flow• Goods• presence• Sponsoring
    54. 54. Cash Flows of RyanAir• Cash flow• influence• Data flow• Goods• presence• SponsoringIt is not the customer who pays for the ticket, it isthe ecosysem (taxi, hotel, catering, airport etc)
    55. 55. HowThe cradle to cradle principle is well known in mostsectors. Have you ever thought about the value ofyour products and services being regarded by youas waste? In a flat world there is always someoneeager for you waste.Questions:-Which side products are produced in yourcompany?- Is there any leakage of value in your company?-What are you now selling for free to yourcustomers?Examples-Factories in chemical industry are often connectedand use each others output#4Your waste issomeonesgold
    56. 56. HowData is the new currency in our future world.Imagine that within a few years everything you canimagine will be stored on servers. Data is big BigData. Even your products/services generate date(that is most probably currently not stored). Haveyou ever thought about the possibilities of yourdata?Questions:-What knowledge do you have on certain subjectsthat your suppliers would like to have?-What kind of data is created by your products?-Is there anything you would like to know aboutyour products that you would pay for?-If you would have an endless amount of endlesstypes of sensors, where would you put then?Examples-The batteries of electric vehicles subject of largedata gathering. The long term stamina and productimprovements based on usage data are of highvalue.#5data is thenewcurrency
    57. 57. Question: What kind of data generated by the Car2Goproduct service system would be valuable for what kind ofstakeholders?
    58. 58. HowValues chains tend to be linear, which wassomething from the past. With current technology itis often possible just to skip parts of the valuesystem. The thought experiment of skipping themcould be a source for innovation.Questions:-Which parts of your value system are essential?-What would happen if you eliminate certain actorsin the value system?-Are there new technologies available that enablenew routes in the value system?- would it be possible to swap certain actors in thevalue system?Examples- social media and being connected everywhereenables digital businesses- Think about the new Albert iPhone app thatenables customers to buy groceries on an iPhone-The news sector is an example. Imagine whatwould happen if newspapers are printed in thesupermarket#6Skip parts ofthe currentvalue system
    59. 59. What if you would print the lastest version ofyour favorite newspaper in the supermarket?++Even better, the newspaper could beadjusted to :-your news preferences-the daily news you have already consumed- Requested background information on news
    60. 60. HowPeople tend to think in patterns they already know.We have always done it this way, is an often usedargument against change. Well, remind yourselfthat the pattern that got you into trouble will neverbe the pattern that gets you out of it.Questions:- ask the five Why why why why why?- What do you see if you look at completely otherbusinesses? Are there things within the valuesystem they do different ?-Ask someone new and totally blunt in your sectorfor his vision on your value system.Examples-Why is it that in shopping centers first all shopsneed to be supplied with goods and then the goodsare taken back home. That is 2x unnecessarytransport of goods- Why#7 Thinkdifferent67
    61. 61. No problem can be solved from the samelevel of consciousness that created it.
    62. 62. Why is it that shopping goods are bought in shops?FirstAll shops in the Amsterdam center areprovided with goods by trucks. This causestraffic within the city center on quiet times.The shops need to have stockrooms. Andafter suppling, the trucks drive back to thewharehouse.And thenCustomers come to shops buy goods andneed to take them back home. Assumingthe customers live outside the city center,the goods never needed to be in the citycenterWhy notHave empty shops where you can buyproducts and as soon as you buy goods, theyare transported from warehouses tocustomers home
    63. 63. HowFixed patterns limit the space you have to innovate.These patterns form a blind spot in findingsolutions. Open innovation gives you theopportunity to work with partners from completelydifferent sectors to work together so you can relax.Surprising solutionsQuestions-What patterns and assumptions are valid in yourbusiness?At what rate are these patterns based?You call once a totally different industry, how theselife patterns that you accept as truth in this industryand what patterns are formed there?Examples:-The government is slowBankers are just out on economic profitIn a non-profit sector will earn badA newspaper daily and always appears on paper#7 breakthrough fixedpatternsabout yourbusiness
    64. 64. To:transport is never necessaryFrom: Without transport there is no supply
    65. 65. To:All transport is done by…From: Transport is always done by trucks,boats, airplanes
    66. 66. 4-6-2013Jurjen Helmus@JRHelmusJ.R.Helmus@hva.nl0645464751