Business Model Innovation | Terwilliger

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Jay Terwilliger of Creative Realities discusses Business Model Innovation

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Business Model Innovation | Terwilliger

  1. 1. Business  Model  Innova6on   Jay  Terwilliger   October  31,  2011   Value  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.  
  2. 2. How  We  Define  Innova&on   “Business  Innova-on  is     the  process  of  envisioning   and  successfully  implemen-ng   new  ways  of  doing  anything     that  creates  value  for  an   enterprise  and  its  customers”  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  2  
  3. 3. NATIONAL ACADEMY OF ENGINEERINGProduct  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  3  
  4. 4. What  was  Apple’s  biggest   innova&on  in  the  past  20  years?  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  4  
  5. 5. A  Business  Model  Innova&on  -­‐   iTunes   The  Digital  Media  Store  that  enables  their  future  growth   Movies   TV  Shows   Podcasts   Music   Books   Apps   iTunes  U   Social  Networking  for  Product  Development  and  Management  Associa6on   Digital  Media   Over  800  Universi&es  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  5  
  6. 6. PlaWorm  Trajectory   2011:  Online  store   2011:  Online  store  for  music,  movies,  TV   moves  to  the   shows,  podcasts,  University  courses,   cloud   books  and  more   2003:  First  legal  online  store  for  the  purchase   of  music   2001:  January  Music  Player  Applica&on  for   Apple  Computers  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  6  
  7. 7. A  Business  Model  -­‐  iTunes   Turns  just  another  computer,  mp3  player,  cell  phone,  tablet,  TV  adapter  into   compe&&vely  advantaged  plaWorms  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  7  
  8. 8. How  To  Envision  the  Future  and  Get   Tradi6onal   There  First  CRI  Future  Pull     Model   (Induc6ve)   (Deduc6ve)   4 1   1   Long- Long- 3 Term Future History 3 Term Future History 2 Near Near Present Present Future Future 3 2 3 Not surprisingly, what the Sometimes, what the organization does now is organization does now is always relevant in this no longer relevant in this future! future!Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.  
  9. 9. Apple  Example   Year   01  02  03  04  05  06  07  08  09  10  11   iPhone  4    iPhone   iPodphoto   Nano   Digital            iPod   Touch    Hub   ??   Enabler   App  Store   iTunes  Store    iPad      iTunes  Mac’s   iMovie   Apple  TV   iPhoto   iDVD  Product  Development  and  Management  Associa6on   GarageBand   P PlaWorm  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  9  
  10. 10. Why  are  you  here?   •  I’m  “interested”  in  the  subject   •  Our  business  model  is  broken/under  aeack   •  Our  world  is  changing  and  business  as  usual   isn’t  /won’t  con&nue  to  work   •  Our  business  model  is  no  longer  profitable   •  We  have  an  idea  that  won’t  work  in  our   exis&ng  business  model   •  We  need  more  growth  than  just  new  products   can  generate   •  We  have  latent  competencies  we  could   leverage  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  10  
  11. 11. Here’s  the  Plan   •  The  framework/context  for  this  session   •  Crea&ng  Value  is  the  goal   •  Let’s  iden&fy  some  new  Business  Models  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  11  
  12. 12. What  is  a  business  model?   A  business  model  is  a  framework   Create   for  crea&ng  and  delivering   economic,  social  and/or  other   forms  of  value,  and  capturing   that  value  for  the  business.   Value   Why  is  this  important?   To  create  sustainable,   compe&&ve  advantage  Deliver   Capture  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  12  
  13. 13. Think  in  3  dimensions   •  Sustainable  Compe&&ve  Advantage   Create   happens  when  all  three  of  the  Value   components  are  aligned,  cohesive  and   working  in  harmony.   •  A  new  business  model  can  be  created  in   an  exis&ng  space  by  changing  one  or  two   Value   of  the  three  elements….  Deliver   Capture  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  13  
  14. 14. Successful  Business  Models  The  real  power  is  when  each  element  works  in  concert   Target   Need   Unique  Benefit   Create   Value   Resources   Revenue   Deliver   Capture   Ac&vi&es   Cost  Structure   Profitability  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  14  
  15. 15. Think  in                Dimensions   What  Value  am  I  crea&ng…   for  whom?   What   How  do  I  best   resources  and   capture  that   ac&vi&es  will   value?   Transac&on?   best  deliver   Price?   that  value?   Costs?    Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  15  
  16. 16. So  what’s  our  objec&ve?   1.  No  one  “owns”  it  now   2.  It’s  worth  owning   3.  You  have  a  way  to  own  it.   1.  You  are  the  “only”  player   •  You  and  the   2.  You  can  charge  enough  of  a  premium   customer  drive   price  to…   price  based  on   3.  Recover  our  investment  &     value,  not  on  a   make  money   compe6tor’s  price   Source: Milind Lele, Monopoly RulesProduct  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.  
  17. 17. Think  in                Dimensions   Create   Customer  Value  Proposi6on   •  What  is  the  segment?   •  What  are  their  unique  needs?   •  What  can  I  offer?   •  Is  it  meaningful?   •  How  differen&ated   Deliver   Key  Resources   •  Physical  Assets  (plant,  equipment,   loca&on,  etc.)   Value   Capture   •  Human   •  Organiza&onal   Profit  Formula   •  Informa&onal   •  Revenue:   •  Etc.   •  How  you  will  charge   •  Cost   Key  Ac6vi6es   •  What  it  will  cost   •  Things  you  do,  how  you  do  them  Product  Development  and  Management  Associa6on   •  Processes  35th  Product  Innova6on  Management  Annual  Global  Conference   •  Etc.  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  17  
  18. 18. Apple  iPod   The  “Offer”   •  Cool,  Personal,  Portable  Music   The  product:   •  Great  design   •  Incremental  technology   99¢   -­‐69¢   30¢  The  Innova&on:   •  Online,  digital  music   Value  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  18  
  19. 19. Ownable  Space  –  The  “Value”  Opportunity   Begins  with  a  clearly  definable  segment  with   enough  prospects,  an  unmet  need  and  money  to   spend  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  19  
  20. 20. The  Value  Proposi&on   Simply  put:   “Why  should  you  buy  my  offer  versus   someone  elses?”  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  20  
  21. 21. The  Heart  of  the  Model  is  the  Value  Proposi&on   For target end user Describe  target   Who wants/needs Describe   compelling reason to buy The Business Describe   Provides key benefit Describe   Unlike existing Describe   alternatives Uniqueness -- key differentiators, which may include a relative price pointProduct  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  21  
  22. 22. Ford’s  Automobile  Value   Proposi&on   "I will build a motor car for the great multitude... It will be so low in price that no man making a good salary will be unable to own one and enjoy with his family the blessing of hours of pleasure in Gods great open spaces.” -- Henry Ford 1922 "The  day  will  come  when  the  whole  no-on  of  car  ownership  is   an-quated.”   -­‐-­‐  Bill  Ford   Great,  grandson   October,  2000   (If  you  are  guaranteed  mobility  on  demand  from  a  local  network,  will   you  s&ll  want  to  pay  for  a  car?)  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  22  
  23. 23. Let’s  look  at  an  “easy,”  familiar   Industry   Car  Rental   Original  Industry  insight:  Air  travel  offers  people  a  way  to  travel  fast   from  point  A  to  Point  B…  and  then  they  have  no  way  to  get  to  and   around  their  ul&mate  des&na&on  (Unmet  Need).     Original  Industry  belief :       “People  need  to  rent  cars  when  they   travel”  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  23  
  24. 24. Industry  Value  Proposi&on   For target end user Travelers  (Primarily  Air)   Who wants/needs A  car  at  their  flight  des&na&on   compelling reason to buy The Business The  Car  rental  business   A  range  of  vehicle  op&ons  at   Provides key benefit every  airport,  with  a  minimum  of   travel  interrup&on  and  hassle.   Unlike existing alternatives Uniqueness -- key differentiators, which may include a relative Hertz:  Faster  (#1  Gold  reserva&on/ price point pickup)  Product  Development  and  Management  Associa6on   Avis:  (Beeer  service  “ Try  Harder”)  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  24  
  25. 25. The  industry  business  model   Create   Customer  Value  Proposi6on   •  Quick  and  easy  personal  transporta&on   available  wherever  your  travels  take  you.   Deliver   Key  Resources   Capture   •  6500  loca&ons  worldwide   •  550,000  vehicles   Profit  Formula   •  Airports  worldwide  –  prime,  on-­‐site   where  possible   Value   •  Revenue:   •  Pay  by  day   •  Premium  for  one-­‐way   Key  Ac6vi6es   •  Mileage   •  Gold  –  go  to  directly  to  car,  agreement   •  Gas,  insurance,  etc.   complete  at  car   •  Gold  –  charge  your  card   •  Buy  and  sell  vehicles  profitably   •  Cost   •  Worldwide  reserva&on  center  (1970)   •  Instant  return  (1987)   •  Buy  and  sell  “Fleets”  of  cars  in  Product  Development  and  Management  Associa6on   •  #1  Gold  –  no  lines  or  paperwork  (1989)   close  rela&onship  with  35th  Product  Innova6on  Management  Annual  Global  Conference   •  Premium,  fun  and  specific  brand  vehicles   manufacturers   35 th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   •  Hertz  Car  Sales   •  Plate  Pass   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  25  
  26. 26. Which  eventually  led  to   commodi&za&on   •  Faster/easier   •  Beeer  service/ cleaner  cars   •  Lower  price   •  Etc.  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  26  
  27. 27. Time  for  Business  Model   Innova&on     •  Where’s  the  opportunity?       •  What’s  working/what’s  not?   •  What  other  segments  exist/have  needs  that   could  create  value?  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  27  
  28. 28. Enterprise  Changed  the  Game   Exis&ng  Industry  belief:    “People  need  to  rent  cars  when  they  travel”   Enterprise  Insight:    “People  need  to  rent  cars  when   they  are  at  home”   –  Personal  vehicle  is  being  repaired   –  Personal  vehicle  is  not  sufficient  for   temporary  need  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  28  
  29. 29. Enterprise                    Value  Proposi&on   People  who’s  vehicle  is   temporarily  unavailable  or   For target end user insufficient  for  need   Who wants/needs Convenient,  Temporary   compelling reason to buy Transporta&on   The Business Enterprise  Rent-­‐a-­‐Car   A  range  of  vehicle  op&ons  near   Provides key benefit your  home   Unlike existing We  are  local,  we  will  pick  you  up  if   alternatives Uniqueness -- you  need  it,  and  we  are  available   key differentiators, which may include a relative price point at  and  through  most  auto  repair   shops  or  dealers  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  29  
  30. 30. The                                                                  business   model   Create   Customer  Value  Proposi6on   •  Quick  and  easy  personal  transporta&on   available  where  you  live  and  need  it   Deliver   Key  Resources   Capture   •  5399  loca&ons  in  North  America  (within   15  miles  of  90%  of  U.S.  Pop)   Profit  Formula   Value   •  Suburban  real  estate  in  smaller   •  Revenue:   footprints  than  compe&&on  (closer  and   less  costly)   •  Dealers  pay  as  loaners   •  Insurance  Co’s  pay  as  temporary   replacements   •  Low  cost  daily,  miles,  etc.  for   Key  Ac6vi6es   direct  customers   •  We’ll  pick  you  up   •  Cost   •  Rental  through  auto  dealers,  repair  shops,  etc.   •  Buying  power  of  purchaser  of  7%   (pick  up  and  deliver  there)   of  all  new  vehicles  in  U.S.  Product  Development  and  Management  Associa6on   •  Insurance  pays  directly  35th  Product  and  telephone  reserva&ons   Annual  Global  Conference   •  Online   Innova6on  Management   •  Small,  rural  loca&ons  cost  less  to  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   own/operate   October  29  –  November  2,  2011  |  Phoenix,  Arizona   •  No  “buses,  e0   ©Crea&ve  Reali&es,  Inc.   p.  3 tc.”  
  31. 31. Time  for  Business  Model   Innova&on     •  Where’s  the  opportunity?       •  What’s  working/what’s  not?   •  What  other  segments  exist/have  needs  that   could  create  value?  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  31  
  32. 32.                                                Value  Proposi&on   For target end user City  Dwellers   Frequent  transporta&on  without   Who wants/needs the  cost  and  hassle  of  car   compelling reason to buy ownership  in  a  city   The Business zipcar  “Wheels  when  you  want  them”   A  convenient,  hassle-­‐free  and  cost   Provides key benefit effec&ve  alterna&ve  to  owning   your  own  car  in  the  city   Unlike existing You  can  reserve  a  car  remotely,   alternatives Uniqueness -- pick  it  up  a  nearby  off-­‐street   key differentiators, which may include a relative parking  area  and  use  it  for  any   price point length  of  &me  (over  60  minutes)   Product  Development  and  Management  Associa6on   you  need   35th  Product  Innova6on  Management  Annual  Global  Conference   October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  32  
  33. 33. Ownable  Space  –  The  “Value”  Opportunity   A  clearly  definable  segment  with  enough   prospects,  an  unmet  need  and  money  to  spend   The  Future?   The  Lease   The  Metro   The  Repair  &   The  Traveler   Temporary  Use  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  33  
  34. 34. Tips  &  Tools   Are  you:     –  Reinven&ng  your  exis&ng   Business  Model?   –  Crea&ng  a  new  business   model?   –  Suppor&ng  a  new   plaWorm  with  a  new   business  model?   Each  is  a  different  challenge,  with   different  assump&ons,  “sacred   cows”,  opportuni&es  Product  Development  and  Management  Associa6on  35  Product  Innova6on  Management  Annual  Global  Conference   thOctober  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   th October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  34  
  35. 35. Think  in                Dimensions   Create   Customer  Value  Proposi6on   •  What  is  the  segment?   •  What  are  their  unique  needs?   •  What  can  I  offer?   •  Is  it  meaningful?   •  How  differen&ated   Deliver   Key  Resources   •  Physical  Assets  (plant,  equipment,   loca&on,  etc.)   Value   Capture   •  Human   •  Organiza&onal   Profit  Formula   •  Informa&onal   •  Revenue:   •  Etc.   •  How  you  will  charge   •  Cost   Key  Ac6vi6es   •  What  it  will  cost   •  Things  you  do,  how  you  do  them  Product  Development  and  Management  Associa6on   •  Processes  35th  Product  Innova6on  Management  Annual  Global  Conference   •  Etc.  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  35  
  36. 36. #1:  Get  clear  on  theValue   Proposi&on   “If  you  don’t  know  where  you’re   going…  any  road  will  take  you   there.”   -­‐  The  Cheshire  Cat  to  Alice  in  Wonderland  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  36  
  37. 37. Ques&ons  to  ask  yourself   •  Is  the  segment  large  enough  (now/soon)     –  (worthwhile)?   •  Is  it  growing?  (Future  Trends)     –  (sustainable)   •  Is  the  problem/need  clear  and  important?   –  (Importance)   •  How  is  the  need  currently  being   addressed?   –  (exclusivity/differen&a&on)   •  Can  I  envision  an  “elegant”  solu-on  that  is   not  available  or  easily  duplicated?  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  37  
  38. 38. Useful  frameworks   Map  the  flow   of  your   business   model   Organize  the  key  elements  of  your  model   Understand   Your   competencies  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  38  
  39. 39. The  Business  Model  Map   •  Visualize  your  business…  Map  it!   –  Butcher  paper,  post-­‐its  and  your   imagina&on   –  Start  with  your  target  &  needs   and  work  backward   •  How  do  they  learn  about  you?   •  How  do  they  interact  with  you?   •  What  is  the  transac&on?   •  How  is  it  made/fulfilled?   •  How  is  it  delivered   –  Where  do  you  add  value?     Where  would  a  partner  add   more?   •  Change  it  –  Op-mize  it  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  39   p.  39  
  40. 40. Business  Model  Elements   Framework   •  Working  with  your  map,  consider  the  key  elements  of  your  Business   Model   •  Consider  choices,  alterna&ves,  opportuni&es  to  innovate   •  What  will  you  own?,  what  will  you  outsource/partner?   •  Use  the  map  to  see  how  they  all  work  together  and  influence  each   other  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  40  
  41. 41. Get  real  about  competencies  &   Value        Core   Future              Basic   Latent   •  How  will  you  “own”  this?   –  What  unique  power/value  do  you  really  bring?   –  What  necessary  value  will  you  have  to  obtain?   •  Objec&vely  assess  your  competencies   –  Consider  competencies  in  four  “buckets”   –  Kid  yourself  now,  and  your  will  pay  for  it  later.  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  41  
  42. 42. Test,  learn,  refine…  Create  the   Value!  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  42  
  43. 43. Let’s  Play   1.  Pick  an  Industry   2.  Iden&fy  a  Segment  with  a  Need   3.  What’s  a  key  element  that   could  trigger  a  whole  new   business  model?  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  43  
  44. 44. Example:  More  Cars  for  people?   •  What  segments  might  develop?   –  Seniors  –  who  can’t  afford  cars  the  way  they  used   to   –  High  School   –  College   –  Global  workforce   •  What’s  the  insight?  –  Value  Proposi&on  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   44   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.  
  45. 45. End   p.  45  
  46. 46. Business  Model  Innova&on  w/NPD   •  The  following  story  is  for  use  if  the  subject  of   BMI  in  the  course  of  NPD  is  of  interest  to  a   significant  por&on  of  the  audience.   •  It’s  of  a  client  who  engaged  in  Business  Model   innova&on  when  the  product  they  wanted  to   develop  was  not  possible  within  their  exis&ng   business  model  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  46  
  47. 47. Think  beyond  the  product   •  Situa&on:     –  80%  of  Bacardi  rum  sales  were  in-­‐home  use   –  Only  17%  of  in-­‐home  use  was  in  the  types  of   exo&c  drinks  people  enjoyed  in  bars   •  Problem/Need   –  People  who  enjoy  exo&c  rum  drinks  in  bars  and   STOP   restaurants,  want  to  enjoy  them  at  home  but  find   it  too  difficult  to  make  a  quality  version   themselves   (Bacardi  Business   •  Solu&on:   Model  doesn’t   –  Create  quality,  all-­‐natural  exo&c  drink  mixers   fit)   (margarita,  pinacolada,  daiquiri,  mojito,  etc.)   •  Result:   –  Bacardi  receives  5%  of  mixer  sales  as  royalty   –  Sales  of  rum  for  in-­‐home  use  increased  2-­‐3%   represen&ng  a  profit  of  $50  Million  annually  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  47  
  48. 48. The  Heart  of  the  Model  is  the  Value  Proposi&on   For target end user Adult  Spirits  Users  when  at  home   Who wants/needs To  be  able  to  easily  prepare  restaurant/bar   quality  exo&c  drinks  for  personal  and  social   compelling reason to buy occasions   The Business Bacardi  Frozen  Mixes  business   All-­‐Natural,  quality  exo&c  drink  mixes  that   Provides key benefit you  just  add  the  rum  and  blend   Unlike existing Bacardi  mixes  are  all-­‐natural,  and  frozen  for     fresh,  quality  taste  that  is  not  available  in   alternatives Uniqueness -- alterna&ves  that  are  highly  processed,  high-­‐ key differentiators, which may include a relative sugar,  ar&ficially  sweetened  liquid  or  dry   price point forms  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  2011  |  Arizona  Biltmore    |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  48  
  49. 49. The  Basics   Create   Customer  Value  Proposi6on   For  Adult  drinkers  who  enjoy  exo&c  mixed  drinks  at   bars  and  restaurants,  but  can’t  serve  or  enjoy  them  at   home  because  they  are  too  difficult  to  make  and   exis&ng  mixes  are  of  poor  quality.   Deliver   Key  Resources   Capture   •  Frozen  food  manufacturing   Profit  Formula   •  Frozen  food  distribu&on   •  Revenue:   •  Supermarket  distribu&on   Value   •  5%  Royalty  on  every  sale  of   frozen  mix   •  Incremental  2%  sales  increase   equal  to  $50  Million   Key  Ac6vi6es   •  Cost   •  Partner     •  Minimal  A&P  Product  Development  and  Management  Associa6on  35th  Product  Innova6on  Management  Annual  Global  Conference  October  29  –  November  2,  Product    IArizona  BManagement  Annual  GArizona   35th   2011  | nnova6on   iltmore    |  Phoenix,   lobal  Conference   October  29  –  November  2,  2011  |  Phoenix,  Arizona   ©Crea&ve  Reali&es,  Inc.   p.  49  

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