Presentation made to Start-up Leadership Program (SLP) in Chicago October 2012

1. Starcher Group
Linking User Experience and Business Models
Startup Leadership
Chicago, October 6, 2012
Bruce Starcher | Managing Director, Starcher Group LLC | 312 823 7065 | bruce@starchergroup.com | www.starchergroup.com
© Starcher Group LLC For the sole use of client

2. Background
Starcher Group
10 years of business model innovation consulting Across industries
Hewlett Packard - Imaging and Printing Group Mobile Devices
Motorola Mobility Digital Imaging
ACCO Brands Digital Entertainment
Starcher Group LLC Consumer and Commercial Printing
Print Finishing
Medical devices
With different business groups Hospitality
Cosmetics
CEO
Program Management Office
Advanced Research Lab At different levels
Research and Development
Marketing Product
Product Discovery Business
Innovation Ecosystem
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3. Function and Experience
Starcher Group
Function Experience
3.5mm jack I can use any headphones
10,000 songs I can load my entire collection
5 Mp camera I want to post of Facebook
Site landing page ______________________
Should we design the function or the experience?
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4. Consumer Experiences
Starcher Group
Awareness
Dispose Choose
Customer Experience is the
customer’s physical and
Support emotional memories created over Order
time, based on their interactions
with
employees, products, services and
partners across all touch points
and every consumer lifecycle.
Replenish Install
Use Learn
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5. Linking Use Cases and Experiences
Starcher Group
Use Cases (What) Value Delivery System (How) Experiences
Consumer goals Business System Functional
What are our consumers trying to How the organization works It Works
accomplish?
Activities
What are the activities that our
consumers have to perform in order
to meet their goals? Total Product Solution Emotional
How the organization creates It brings me emotional
Scenarios the solution satisfaction
What different choices do our
consumers have for each activity?
Use cases Channels Social
What are the ways to use the How the solution gets to market I want to belong
site, device, accessories, services
and/or … to accomplish the different
scenarios?
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6. Consumer Experience Choices
Starcher Group
The business perspective
Awareness & Selection & Initial Usage & Repurchase &
Consideration Purchase Experience Learning Recommendation
Functionality
Does it perform the functions
that the consumer wants it to?
Usability
How do consumers interact
with the solution and accomplish
goals?
Interoperability
How well does the solution
communicate with software and
hardware from multiple vendors?
Emotivity
How well does the solution
evoke feelings?
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7. Business models at the intersection of Customer, Technology and Business
Starcher Group
• What high-value customers (or potentially • What technology exists today to enable
high value customers) are targeted? my business model?
• For what reasons will customers pay a • What likely technology
premium, switch suppliers or increase their innovations would enable
loyalty? business model innovation?
Customer Technology
Is it desirable? Is it possible?
Is it viable?
Business
• What is the differentiated Business Model value proposition?
• What profit model is used to capture value? How does high profit
happen? Where are or will the Profit Zones” be?
• How can we maximize the sustainability of out-year cash flows?
• What economics and performance systems are required to execute?
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8. The evolution of business model thinking
Starcher Group
Rotma
n
DesignWorks
Schools of Osterwalder
Business Model Canvas
thought
Adrian Slywotzky
Business Design, Profit Models, Value Migration
1990 1995 2000 2005 2010 2015
Joan Magretta:
Why Business
Models Matter MIT: Do Some
Business Models
Perform Better than
Deloitte:
Gerry Lameiro: A Others?
Deconstructing
Guidebook for the Formula for
Contributions Designing Business
Models
Business Model
Innovation
KPMG:
Rethinking
HBR: How Chesbrough: The role of the the
to map business models in capturing the business
your value of innovation model
industry
profit Afuah: Business Models: A
pools Strategic Management
Approach
Christensen: Skate to Chesbrough: Open Business
where the money will be Models
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9. Moving towards network centric business models
Starcher Group
Shift in dominant profit models
Log
IBM Mainframe Intel, Microsoft Skype, eBay Customer- scale
centric
3000
Stages of IT industry expansion
users, m
Network-centric
1000
PC-centric Information
content and
transaction
standards 100
De facto De jure
hardware and internet
Systems-centric software standards
standards
10
Proprietary
Systems
1
1960 1970 1980 1990 2000 2010 2020
Source: David Moschella, The Economist “A survey of the IT industry
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10. Total economic equation
Starcher Group
Moving beyond the traditional product mindset.
Ecosystem
Solution
Experiences
Regulatory
Consumer Goals Customers
Outsource Partners
Complementary
Technology Partners Products Non-customers
Stakeholders
Consumer
Insurance Suppliers Economics
Acquisition
Monitoring
Flexibility Systems integration
Substitute
Installation Applications Products
Service Related equipment
Financing
Product Operation Competitors
Repair
Training
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11. The “job to be done”
Starcher Group
The consumer perspective
What is the relevant
Gap in customer customer context e.g.
experience where they Time, Money and Home, Driving, Airpor
will “pay”? Ease of Use t, ….
Customer Value Gaps Customer Economics Customer Context
Job to be
done
Customer Motivations Customer Choice Customer Social Networks
What outcome is
desired, whether
What is motivating the What choices does What customer social networks
functional, emotional customer to get this job the customer have? are relevant to the job to be
or social? done? done?
In this slide, I use Customer to mean both customer and/or consumer
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12. Business Models
Starcher Group
The Business Model process ties symptoms &/or opportunities to actionable operating
plans. The outcome cannot be known at the outset so we focus on a repeatable
process that yields excellent results time after time.
Business7
Model7
Process
Customer Ac/ onable
Symptoms Context Value
Business
Strategies
Opera/ ng
Models Plans
Opportunity Gaps Opera/ ng
Plans
How do I develop Where is there a gap What strategies What tactics
context around the in customer articulate the operationalize the
opportunity? experience, where implementation strategies?
the customer is options?
willing to pay to close
the gap?
What Business Model will best
leverage the value described by the
customer value gaps?
© Starcher Group LLC For the sole use of client

13. Business Models
Starcher Group
Context
What is the broader business context and where is the value?
Customer Selection
How do we select profitable customers for our value proposition?
Context Customer Value Gaps
Why will customers pay a premium, switch suppliers or increase loyalty?
Profit Models
How does profit happen?
Profit Revenue
Scope
Models Models Revenue Models
How will we generate revenue and further enable the profit models?
Scope
Strategic Customer
Customer What activities must we perform & what assets must we own?
Control Value
Selec6on
Points Gaps
Strategic Control Points
How can we maximize the sustainability of out-year cash flows?
Economic Opera6ng Organiza6onal Economic Model
Model Model Model What are the economics of the business model?
Operating Model
What operating model is required to execute?
Organizational Model
What organizational design is required to execute?
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14. Business Model Alignment
Starcher Group
A well designed Business Model aligns the entire system, from customer value gap
through implementation, and ensures that there is internal consistency.
Business Implementation
Business Model Elements Models Strategy Elements
Business Model Strategy
Brainstorm Options
Customer Value Gaps Business Models Brainstorm Game elements Games Strategy elements Strategy tree Implementation options (short description) Customer Technology Cost Mfg strategy Distribution Sales&Marketing Channel Service&Support Strategic Control Point SCP strength Profit Model Alliances/partnerships Aligned with Business Design
Low End Consumer 0. Invest in China
•printer/pen price is not competitive (8)
•installation is the #1 customer complaint (7) Olympics games 2008
1B
•not enough channel coverage--city store location (6) - lock in early with HP as the 2008 Olympics partner 1A. Shift market sensitive functions to China Franchise
•media coverage not extensive enough to give necessary information to consumer--reach and media cost (5) - partner, not just sponsor – one of the government‘s priorities is to make the Olympics a success 1B. Differentiated national government partner 1. Competitive advantage through Chinese intimacy
Refill Service w/ warranty HP branded Retail
•current channel behavior is not trustworthy (3) 1C. Differentiated local government partner
•product availability --especially for new products and supplies (3) 1. Enhance/Capture Value from Distribution Channel Original HP ink Vending machine
•inability and confusion over how to get necessary pre-sales information in IT mall, retail store (3)
TIJ2.0 Refill service
•printer has basic functionality (2) Individual entrepreneurs
•channel reps do not have adequate knowledge (2) - Go after china in the way where you are part of the culture 3E prebate program Franchise
•friendly shopping experience (1) - Door to door like Avon (Wall Street Journal Brazilian market about indigenous sales force)
Non-HP Retail
•Four "p" information availability (1) branded
•simple user guide; tutorial for printing activities; info on how to use special features with application (1) Microenterprise model Vending machine
•out of warranty repair price close to new printer price (1) Become a major employer via microenterprise -- let them find niches of what is successful 6F
Customer Implementation
•recycling/trade-in program for supplies (1) Kodak model ($12,000 puts you into a franchise business)
High end consumer 2A. HP branded retail
•printing purchase doesn't seem exciting enough (I don't look forward to it) (7) 2B. Partner with Large format stores 2. Compress/Capture channel margin
•cutting edge photo software bundle together with media solution for photo/vertical users (6) 2. Create profit from low-end ink 2C. Extend to grocery/convenience channels
•installation is the #1 customer complaint (5)
•friendly shopping experience (4) Refill service kiosk 3B
•driver should scan PC and know how to install (3) HP provides the complete station
•Four "P" information availability (3) Refill kiosk or Re-man kiosk (or both)
•product availability --especially for new products and supplies (3) Can re-fill be free vs. being for money?
•not all products have path for disposal of old machine and replacement; trade-in/trade up (2) (like the free soda refills when you‘re in McDonald‘s dynamic)
•media coverage/aos not extensive enough to give necessary information to consumer (reach and media cost) (2) Ink delivery + pen collection system (keep the old one)
•inability/confusion over how to get necessary pre-sales information at shop front (2) Should we be selling new cartridges?
•fuzzy logic, auto adjust for good photo quality borderless printing in all sizes (2) out of warranty repair price close to new printer price (1)
•printer/pen price not competitive (1) Good/better/best solution in one kiosk 3B
•difficulty to understand which product meets my needs (1) - Refill – good
- Reman – better
Low End Business - Original – best 3A. HP Manual DIY refill ink
•not enough channel coverage (9) 3B. HP self service ink kiosks
Value Gaps Options
rd
•inability/confusion over how to get necessary pre-sales information at shop front (5) Sell HP ink in smaller portions – use the multi-chamber technology to just do a 1/3 refill 3B 3C. HP refill service 3. Extract value from ink
•keep installation simple--install application separately (4) 3D. HP direct delivery service
•mixed quality needs (4) Total print kiosk 3E. MED: door to door supplies sales/service (Avon)
•effective GTM model to serve SMB customer --repeat purchase; loyalties discount (4) - Smart kiosk (add digital photo printing to the refill/reman/original Dotted line connecting 3B to
•looking for prominent brand to re-affirm 'safe' purchase (3) - Offer a stripped down kiosk as well 6C
•out of warranty repair price close to new printer price (3) - What can we do with the with the pay phone/hot spots technology analogy?
•AiO application advice for vertical market (3)
3B, 3C
•customer relationship marketing --if you run out of ink: where and how much to buy; reseller information (2) Work with banks to make refill/reman/purchase as easy as the ATM (only 3 banks that matter in China)
•fuzzy logic, auto adjust for good photo quality borderless printing in all sizes (2) - what about lack of credit cards? Do they have enough bank cards?
•cutting edge photo software bundle together with media solutions for photo/verticals (2)
•refillable supplies (2) Work with others who have high foot traffic
Not explicitly included. Could be investigated later as part of
•outbound sales lacks focus on peripheral products (1) - internet cafes 4A. Move production to China
3B or 6C
- power companies 4B. Align low end printer and pen performance /price with
High End Business - dry goods grocery stores (moms and pops) where people already go customer demand 4. Squeeze margin out of low end printers/pens
•need to have evaluation units to demo products (8) (do the grocery shoppers also buy the printer cartridges or the refills? – would they?) 4C. Outsource low end printer/pen to local OEM
•not differentiated support for HE business (5) 4D. "HP Inside" for white box printer/pen OEMs.
•keep installation simple--install application separately (4) Where do people go daily where we can print for them? 6C, maybe 6D 4E. Global printer/pen recycling
•difficulty to understand which product meets my needs (4) - Mom & pop grocery markets
•AiO application advice for vertical market (3)
•print gauge senses high user and prints coupon for cartridge/media. Gauge indicates how much time left and link to URL or 800# (2) Partner with infrastructure companies
•printer/pen price not competitive (2) - Banks Not explicitly included. Could be investigated later as part of
•convenient recycle center/recycle bin (1) - Electrical companies 3B or 6C
•no on-site service available for HE business (1) - Pay phones
•hp brand awareness (1) 5A. Business specific inkjet products
Sell HP media with advertising printed on the back as cheap media, use it to lower ink prices 5B. Vertically focused SW applications and channels 5. Maximize SME/Enterprise value capture
(or even print ads on the back side of the paper) Not explicitly included. Could be investigated later as part of 5C. Expand enterprise/SME services
6A, 6B, 3E 5D. HP document/photo service shops.
Shift who pays for ink
- print on backside of paper coupons – misc printing
- like grocery store receipts here
- banner ads or printing on the back of the paper
Barter for ink…. 3C
- what else could people for alternatives to cash and ink?
Sell HP ink to refillers
- franchise it
6A. Flank Epson in level 1/2 photo printers/suplpies
6B. First mover photo in select level 2/3 cities
2.5 Total Supplies Hybrid Ideas (combinations of 2 + 5 + media + content) 6C. HP self service photo print kiosks
6D. HP photo print service 6. Increase share of digital photo printing value
―Music match‖ lifetime free level of service (2 and 5) 6E. Electronic hosting/distribution
These could be tactics
- free black ink forever but buy into the photo option 6F. MED: digital photographers
for any number of
-
ideas –4B, 5A, 6A, 6B
always free – not limited time free
Buy more/save more (2 and 5)
- use more ink, save more
- make visible up front -- how far from the next level the customer was
- get usage from printer to get price cut on ink
Coupons (2 and 5)
- after 3 refills you get a coupon
- let printer printout 25% off after it senses 3 rd refill
Trust smart ink
- printer recognizes authenticity of cartridges/ink
- something in ink to provide authenticity
Ink tester
- Create ink tester to test ink in home
Media value chain
- Image cards - media is the ticket
- ―Daily frame‖ snapshots – every day in Britney‘s life
- Take image to friends
- Printing trading cards
- HP provides printing content Could be patr of 3B
downstream
Create a coalition with other vending machine players (Coke, other) to create a ―vending machine destination
center‖ which, with shared vending machine service, can create greater proximity to the customer (2 and 5)
Avon lady system
Could be patr of 3E
- door to door printer cart refill
- home service – cleaning, dusting, and delivery downstream
Dry powder tank packs
- put in the ink powder
- add water to get it to work
Perfume printer; scented media for each season/holiday (2 and 5)
Print on rice paper
- is tree-based paper the most effective in china?
- Hemp paper?
Emphasize photo quality on plain paper – lower cost media (2 and 5)
Get our ink near other cheap liquids ….gasoline, water, etc. Make them associated with an impulse purchase
, a ―daily addiction‖ and away from the positioning of a major purchase. Starbucks
Could be patr of 3B
- Create an emotional attachment to printing – make it a part of regular ―addiction‖
downstream
- Mileage plus – the more Starbucks you buy, the less you pay for ink – collect cross credits
- Is Starbucks catering to Westerners? How can we be culturally sensitive
Combine ink cartridge and money within ATM‘s…. print the money(!!) (serious profit zone)
3. Squeeze profit from low-end printers
Sell re-man printers using the printers that we have in the US as our low cost printer 4E
- pre-certified printers, like BMW does with its used cars
- legitimize
―Ink-bay‖ version of E-bay
Utility model – disposable, reusable; These could be tactics
- get 10% profit @ point of sale for any number of
- + lifetime supply of ink + pop ideas –4B, 5A, 6A, 6B
Lifetime upgrade offer – if you buy again, you get a discount
Take a different direction: Single use cartridge – we work with a partner and their cartridge on the low end
Play the Intel game (printer chip or printer head with our ink) with the white box manufacturers 4D
– like Intel has done with its white box
– reference the market share of ―others‖ in PCs
– HP inside co-branding
Modularize printer
- just upgrade individuals parts These could be
tactics for any
Sell the parts to the consumer and let them make their own printers
- reference the china consumer love of constructing their own technology items number of ideas
–4B, 5A, 6A, 6B
Leverage innards of PC into the printer
- low cost results
3.2 Combined Low-end Printer and Cartridge Systems Innovation (ideas from 2 + 3)
China as a collection point for TIJ 2.0 pens. Ultimate POP by using all of the TIJ 2.0 models
from Europe and the US plus all of the unwanted cartridges and put them into china
-
put high volume product lines there
- call it something other than HP (or sub-brand it with HP) 4E
- dirt cheap
- endorsed by HP but known for lower quality
- Chinese partner involved
- cut barriers to entry
- cost near zero
HP participate in the whole value chain Ink part in 3C
-
supplier of ink to refillers
- spare parts
- a little profit in all pieces rather than high profit in just one
- prices low but volumes high
OEM
- pen tech available to all printer manufacturers 4D?
- we supply consumables and ICs
Don‘t try to make money in China
- WW system – everything that needs recycling gets funneled into China
- Solve environmental issues for HP in Europe
- Give them great value
- Slow other companies down
- Cheap re-man.
- Eventually make money (or not)
- Free initial = in follow on == second product
- But…. we want to avoid being know for the low end
- Sell in the US and Europe as green products
4. Defend/Grow SME and Enterprise Value
Bimodal supertanker for SME 5A – please let me
- high speed draft mode - very fast know the costs of the
- super economy mode lab version of this!
- high quality output mode
- high capacity ink
Case parts for business furniture solutions
Sort of in 6A –
- woodworking custom cabinets
Lifestyle,
- cheap labor
BMW oil change
- pay one price with ink included
- pay x and get y copies 5A – please let me
- gets cpp down, even if POP is higher know any thoughts on
- get backend payments right up front cost!
- eliminates bad experience and hassle
- lease model – connect to service/warranty
- this was tested on low end consumer but didn‘t play – would it play in SME?
The up front payment with a club is critical
Market differently
- like shampoos – normal, dry, frizzy
- right printer to the right segment
- segment based on use
If we knew high use – based on usage we rebate
- Actual vs. assumed usage These could be
- Make sure to get someone the right printer at the right price tactics for any
number of ideas
High use segment based on use knowledge of the customer –4B, 5A, 6A, 6B
- if we knew who the high user was, we could rebate prices of products based on usage
- actual vs. assumed usage
- make swre to get the right printer
One stop shopping
- Understand needs and then become the printer of choice
Non – classical partnership
- office equipment (steelcase/herman miller)
- built in printer
- take advantage of infrastructure
- drawers and shelves optimized for our form factor
Government 1A/B – but quid pro quo is dead – sweetheart deals
- give them free printers if they outlaw competition being appealed around the country , Pepsi in Sichuan
example
Utilities
- meter reader for printer ―ink in basement‖
Printer design for China (non Western) Printer design for
- what does it take to print asian characters? Swath width China in 4B, 5A,
- red – communist/mao red – no one has done a good job of achieving it yet 6A, but not the
- China‘s commitment to communism is closely tied to nationalism and community specific red, etc.
(vs. real economics), so there is nothing that prevents HP from supporting its symbols
Network
- can we/should be we more of a solutions player to these companies, not just a cross business
printer? 5C
- can we get into business with Legend?
If we want to be perceived as an appropriately Chinese company,
1A
© Starcher Group LLC For the sole use of client
we have to look like more than a Western group trying to beat the Chinese groups
Should we buy Legend? That is a long-story, we have a history that goes way back. We need to get over that history.
High end print heads
- 2x (more advanced) print head technology built @ lower cost thatn TIJ2.0 Help?
- Small PEN body
- Sell for $5
- Get a cheap ink cartridge
5B
Software for vertical industries in order to drive relevance and ink usage (we use in the US already)
5. Grow Share of Photo Printing Market
Photoprinting meteor pack
- Paper link pack – Astro/meteor
- Does this make refill harder? Does it become a barrier to refill?