Reinventing Your Business Model


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  • The article mis-quoted the iPod launch-> It’s actually 2001 not 2003The iPod is a portable media player designed and marketed by Apple and launched on October 23, 2001->http://en->wikipedia->org/wiki/IpodThe iTunes Store, formerly iTunes Music Store is a software-based online digital media store operated by Apple Inc-> Opening as the iTunes Music Store on April 28, 2003, with over 200,000 items to purchase
  • Gillette offers the razors fairly cheaply then charges a lot for the replacement blades, locking consumers into a cycle of continuous purchases on high-margin products->
  • Apple did the Gilette razor-and-blades model in reverse:Apple essentially gave away the “blades” (low-margin iTunes music) to lock in purchase of the “razor” (the high-margin iPod)-> “Stories of business model innovation from well-established companies like Apple, however, are rare” –article quote, pg 52->The Rio MP3 player, introduced by Diamond in 1998, was the real new market disruptive innovation compared to Apple's iPod-> But what Apple did differently is that they serviced nonconsumers of digital downloads-> The real disruptive innovation was iTunes - creating an easy, relatively cheap way to consume music-> Users did not even have to purchase an entire CD; songs were available as true singles for the first time-> The consumption of digital music downloading created a need for MP3 players - and the iPod took off->
  • CVP: A description of the value that a product, service or process will provide a customer-> Should be defined abstractly to assure one understands who all the competitors are-> Thus, rather than saying one provides customers with books, one should consider saying that one provides education or entertainment->A clear statement of who the target market for a particular product is, of what key benefits the product will deliver, and of the price that will be charged-> A value proposition is a clear, concise series of factual statements on tangible results from your products or services->The unique added value an organization offers customers through their operations-> 
The logical link between action and payoff that knowledge management must create to be effective; e->g->, customer intimacy, product-to-market excellence, and operational excellence [Carla O'Dell & C->Jackson Grayson]->The primary and essential benefit of a product or service-> For a company, it is the reason for being-> 

All of the definitions reiterate the importance of the customer/client-> Take away all the individualization and personal interpretation and the value proposition is a clearly defined statement that identifies value: value that your client wants, value that you can deliver->
The client is key to the entire process – the client drives the ‘value proposition’
There are as many ‘value propositions’ as there are clients-> Each client is unique and has different needs-> There is no one blanket value proposition-> In order for a value proposition to be effective it has to be customized to each client’s specific needs->
  • Business Model – comprised of 4 main elements – the other 3 elements necessary of course, but we’re focusing on CVP – 1-> CVP 2-> Profit Formula (made up of Revenue model; cost structure; margin model; resource velocity)3-> Key Resources (people, technologies, products, facilities, equipment, channels, and BRAND) – required to deliver the value proposition to the customer4-> Key Processes (training; development; manufacturing; budgeting; planning; sales; service; rules/metrics/norms)
  • The other remarkable example of leveraging nonconsumers to create an effective product offering (and business model) was that of Tata in Mumbai-> The people who could not afford cars were locked out of the marketplace due to wealth constraints-> They instead consumed scooters – sometimes an entire family atop a motor-scooter built for two max-> By creating a relatively affordable car (only ~$2500 USD), a new group of consumers were also created->
  • WalMart – Customers want LOW prices, we provide them with that->BMW – Customers want a car that provides with the ultimate driving experience – willing to pay top-dollar for it
  • Reinventing Your Business Model

    1. 1. <li>Reinventing Your Business ModelDec 2008, Harvard Business Review<br />authors:<br />Mark Johnson<br />Clayton Christensen<br />Henning Kagermann<br /></li><li>Why did the iPod succeed?<br />1998 – Diamond Rio Launch<br />2001 – Apple iPod Launch<br />Photo 2: www-&gt;flickr-&gt;com/photos/peemmfivekay/2285194342<br />PHOTO 1-&gt; http://www-&gt;flickr-&gt;com/photos/nrkbeta/2279686789/<br /></li><li>Not the product, but theBusiness Model<br />$$$<br />$<br />Photo 4:http://www-&gt;flickr-&gt;com/photos/shuttercat7/3116959633/<br />Photo 3: http://www-&gt;flickr-&gt;com/photos/kylemay/2078976171/<br /></li><li>Not the product, but theBusiness Model<br />$$$<br />$<br />http://www-&gt;apple-&gt;com/itunes/<br />http://store-&gt;apple-&gt;com/us/browse/home/shop_ipod/family/ipod_classic<br /></li><li>“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself-&gt;”-Peter Drucker<br /></li><li>Customer Value Proposition {CVP}<br />Business Model’s #1 element<br />Help consumers get a solution for their fundamental problem<br />Niche is key <br />Why do consumers need you?<br /></li><li>CVP can be created due to-Nonconsumers-<br />Scooters and Motorcycles<br />Traffic, small side streets<br />Can’t afford the premium cars<br />Video 1<br />Video 2<br />SOLUTION: create a small car that’s supremely affordable<br />Video 3<br /></li><li>CVP and Business Model Brainstorming<br />WalMart<br />BMW<br />Image: http://arkjournal-&gt;com/uploaded_images/Always-Low-Prices-799991-&gt;jpeg<br />http://www-&gt;cartype-&gt;com/pics/124/small/bmw_logo_1-&gt;jpg<br /></li><li>CVP Creation<br />What’s your favorite (successful) brand?<br />What do you think its CVP would be?<br /></li><li>New Business Model<br />Where’s an area of non-consumption in our society today?<br />or<br />What problem do you have as a consumer that a company (existing or not) could help you solve?<br /></li><li>Thank You!<br />By Melissa Bird-Vogel<br />Twitter: @missybirdbird<br />Email: mbbv@u-&gt;washington-&gt;edu<br />Credits Next Slide<br /></li><li>Sources<br />Creative Commons Attributions:<br />1-&gt; &amp;lt;div xmlns:cc=&amp;quot;http://creativecommons-&gt;org/ns#&amp;quot; about=&amp;quot;http://www-&gt;flickr-&gt;com/photos/nrkbeta/2279686789/&amp;quot;&amp;gt;&amp;lt;a rel=&amp;quot;cc:attributionURL&amp;quot; href=&amp;quot;http://www-&gt;flickr-&gt;com/photos/nrkbeta/&amp;quot;&amp;gt;http://www-&gt;flickr-&gt;com/photos/nrkbeta/&amp;lt;/a&amp;gt; / &amp;lt;a rel=&amp;quot;license&amp;quot; href=&amp;quot;http://creativecommons-&gt;org/licenses/by-sa/2-&gt;0/&amp;quot;&amp;gt;CC BY-SA 2-&gt;0&amp;lt;/a&amp;gt;&amp;lt;/div&amp;gt;<br />&amp;lt;div xmlns:cc=&amp;quot;http://creativecommons-&gt;org/ns#&amp;quot; about=&amp;quot;http://www-&gt;flickr-&gt;com/photos/peemmfivekay/2285194342/&amp;quot;&amp;gt;&amp;lt;a rel=&amp;quot;cc:attributionURL&amp;quot; href=&amp;quot;http://www-&gt;flickr-&gt;com/photos/peemmfivekay/&amp;quot;&amp;gt;http://www-&gt;flickr-&gt;com/photos/peemmfivekay/&amp;lt;/a&amp;gt; / &amp;lt;a rel=&amp;quot;license&amp;quot; href=&amp;quot;http://creativecommons-&gt;org/licenses/by-nc-nd/2-&gt;0/&amp;quot;&amp;gt;CC BY-NC-ND 2-&gt;0&amp;lt;/a&amp;gt;&amp;lt;/div&amp;gt;<br />&amp;lt;div xmlns:cc=&amp;quot;http://creativecommons-&gt;org/ns#&amp;quot; about=&amp;quot;http://www-&gt;flickr-&gt;com/photos/kylemay/2078976171/&amp;quot;&amp;gt;&amp;lt;a rel=&amp;quot;cc:attributionURL&amp;quot; href=&amp;quot;http://www-&gt;flickr-&gt;com/photos/kylemay/&amp;quot;&amp;gt;http://www-&gt;flickr-&gt;com/photos/kylemay/&amp;lt;/a&amp;gt; / &amp;lt;a rel=&amp;quot;license&amp;quot; href=&amp;quot;http://creativecommons-&gt;org/licenses/by/2-&gt;0/&amp;quot;&amp;gt;CC BY 2-&gt;0&amp;lt;/a&amp;gt;&amp;lt;/div&amp;gt;<br /> Other photos have URL source attribution, Apple Products from Apple website-&gt;<br />Article Reference:<br /> Johnson, M-&gt;, Christensen, C-&gt;, Kagermann, H-&gt; (December 2008)-&gt; Reinventing Your Business Model-&gt; Harvard Business Review-&gt;<br /></li>