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BREAKING THE
DOMINANT LOGIC
How to design and implement
superior business models in
an established company
Felix Hofmann, CEO of BMI Lab AG, Sept 18, 2019
1
The BMI Lab
2
The BMI Lab (Business Model Innovation Lab)
is a spin-off of the Institute of Technology
Management at the University of St.Gallen.
We believe that tomorrow's businesses need
sustainable business models and advanced
innovation capabilities.
Peter Brugger
What is business model innovation
Why it matters for established companies
Six obstacles to BMI in established companies
I’ll leave you with:
• A methodology to successfully design and test new business
models
3
Agenda
The “Wait-and-See-
Problem”
5
Toys R Us faces bankruptcy, putting
3200 jobs at risk The Guardian, Feb 23, 2018
6
7
Toys 'R' Us has accused
Amazon.com of breaking the
contract that gave Toys 'R' Us the
right to be the exclusive toy and
game seller on Amazon's site.
8
“If you don't cannibalize yourself,
someone else
will.”
Steve Jobs
Why is it so Hard to
Innovate an Existing
Business?
9
Challenge #1
Lack of Urgency
Challenge #2
Thinking in Business
Models
13
Definition Business Model Innovation –
The Magic Triangle
<
Value
Propositio
n
Revenue
Model
Value
Chain
What?
How?Why?
Who?
Why is it
profitable?
What do you offer
to the customer?
Who is your target
customer (segment)?
How is the value
proposition created?
A Holistic Innovation Approach
14
“Business Model Innovation means
changing
at least two of a business model’s
dimensions.”
Challenge #3
Disrupting the Dominant
Industry Logic
15
Revenue 2006: EUR 400 m
Revenue 2012: EUR 500 m
16
CEWE DIGITAL
Digital
Analog
Challenge #4
Missing Systematic
Approach
17
5 years of intensive
research –
Detailed analysis of more
than 250 successful
business model
innovations in the last 50
years
19
BMI Pattern Cards
20
Business Model Pattern «Razor and
Blade»
Apple
iTunes
Nestlé
Nespresso
Nestlé
Special.T
Nestlé
BabyNes
Gillette Hewlett-
Packard
Standard
Oil
Company
Based on product + consumables
1880 1904 1984 1986 2003 2010 2012
Challenge #5
Commitment for Long-
term Success
21
Example Mibelle Group
22
The Mibelle Group is the third-largest
force in the European proprietary
brand market and part of the MIGROS
Group.
Serving the largest Swiss retailer
MIGROS, the company is a full-service
customer brand manufacturer.
The Company
Workshops with BMI Lab
BMI Lab guided Mibelle through the Initiation, Ideation and Integration
phases of the Business Model Navigator and provided coaching during
Implementation.
This process resulted in 19
business model ideas.
Business model
concepts
Six of these ideas were chosen to be
developed into business model
concepts.
Business model
ideas
Ideation Process
By providing an online laundry service,
Tick offers a convenient solution
including
• pick-up,
• cleaning as well as
• delivery of clothes.
26
What was Different With This Idea?
27
Joelle
28
66 Practices to Develop Innovation
Culture Agility
Inspiration
Motivation
Alignment
Transparency
Empowerment
The
Innovation
Culture
NavigatorTM
Challenge #6
Resource Allocation
29
90%
30
90% of all startups fail. Source: „Startup Genome Report 1 Why Startups Succeed"
90% of ideas change until success: Source: Bhide, A.V. (2000). The Origin and Evolution of New Business.
Percentage of Startups That Fail
BMI: Affordable Loss
Management: Expected
Return
31
?
?
Affordable Loss
1. Required Profits
2. Required Revenues
3. Number of Units
4. Marketing Budget
5. Other Direct Costs
Return on Sales?
Price?
CAC?
Cost Buffer
7. Anticipated Costs
6. Indirect Costs
2. Allowable Costs
Reverse Financials are based on Discovery-Driven-Planning developed by Rita
Gunther McGrath and Ian C. MacMillan
Reverse Financials
Challenge #7
Evidence-based Decision
Making
33
90% 90%
34
90% of all startups fail. Source: „Startup Genome Report 1 Why Startups Succeed” 2014
90% of ideas change until success: Source: Bhide, A.V. (2000). The Origin and Evolution of New Business.
Percentage of Startups That Pivot
Business Model InnovationManagement
35
Flexible Goals
36
Business Model Testing Cycle
37
Testing Cards
Our Methodology
St.Gallen Business Model NavigatorTM
DESIGN REALIZATIO
NImplementatio
n
Test the business
model
Test
Adapt
Try and Learn
Market
Introduction
Iteration
Initiation
Analyze the
ecosystem
Players
Change
Drivers
Ideation
Adopt the patterns
Iteration
Similarity
Confrontation
55+ Patterns
Integration
Detail the business
model
I d e a s e l e c t i o n
Internal
Consistency
External
Consistency
Iteration
What?
How?Why?
Who?
Old
Business Model
What?
How?Why?
Who?
Old
Business Model
What?
How?Why?
Who?
New
Business Model
39
40
Superior Business Models
1
High
Low
External Scalability
Low
High
Internal
Scalability
1
3
St. Moritz
Skiing
Resort
Steinway
& Sons
2
2 3
Uber
Zalando
PAN AM
Stanford
Online
DB
Navigator
iPhone
Google
Search
1. Pick a Big and Growing
Market
2. Think of Market Constraints
3. Target the Right Customers
4. Do Something That is
Relevant
5. Use External Resources
6. Develop and Monitor a
Virtuous Cycle
7. Add Virality to Your
Business Model
8. Use Algorithms and
Automation
9. Find the Right People to
Scale
Outlook
• Deep dive into tools (Patten Cards, Reverse Financials, Testing
Cards etc.)
• Scalability of Business Models and Platforms
• Business Model Testing
• How to Manage Innovation Culture
• Sustainable and Circular Business Models
… let me know what topic you’d prefer!
42
Upcoming Webinars
• https://bmilab.com/workshops
• München, 7 & 8 November 2019, Deutsch
• St.Gallen, 19 & 20 November 2019, English
Super Early Bird Price (€1800 2200) available until September
27, 2019
43
Upcoming Workshops and Q&A
Contact Me & Learn More
44
bmilab.com
https://www.linkedin.com/in/felixhofmann1/

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How to Design and Implement Superior Business Models

  • 1. BREAKING THE DOMINANT LOGIC How to design and implement superior business models in an established company Felix Hofmann, CEO of BMI Lab AG, Sept 18, 2019 1
  • 2. The BMI Lab 2 The BMI Lab (Business Model Innovation Lab) is a spin-off of the Institute of Technology Management at the University of St.Gallen. We believe that tomorrow's businesses need sustainable business models and advanced innovation capabilities. Peter Brugger
  • 3. What is business model innovation Why it matters for established companies Six obstacles to BMI in established companies I’ll leave you with: • A methodology to successfully design and test new business models 3 Agenda
  • 5. 5 Toys R Us faces bankruptcy, putting 3200 jobs at risk The Guardian, Feb 23, 2018
  • 6. 6
  • 7. 7 Toys 'R' Us has accused Amazon.com of breaking the contract that gave Toys 'R' Us the right to be the exclusive toy and game seller on Amazon's site.
  • 8. 8 “If you don't cannibalize yourself, someone else will.” Steve Jobs
  • 9. Why is it so Hard to Innovate an Existing Business? 9
  • 11.
  • 12. Challenge #2 Thinking in Business Models
  • 13. 13 Definition Business Model Innovation – The Magic Triangle < Value Propositio n Revenue Model Value Chain What? How?Why? Who? Why is it profitable? What do you offer to the customer? Who is your target customer (segment)? How is the value proposition created?
  • 14. A Holistic Innovation Approach 14 “Business Model Innovation means changing at least two of a business model’s dimensions.”
  • 15. Challenge #3 Disrupting the Dominant Industry Logic 15
  • 16. Revenue 2006: EUR 400 m Revenue 2012: EUR 500 m 16 CEWE DIGITAL Digital Analog
  • 18. 5 years of intensive research – Detailed analysis of more than 250 successful business model innovations in the last 50 years
  • 20. 20 Business Model Pattern «Razor and Blade» Apple iTunes Nestlé Nespresso Nestlé Special.T Nestlé BabyNes Gillette Hewlett- Packard Standard Oil Company Based on product + consumables 1880 1904 1984 1986 2003 2010 2012
  • 21. Challenge #5 Commitment for Long- term Success 21
  • 23. The Mibelle Group is the third-largest force in the European proprietary brand market and part of the MIGROS Group. Serving the largest Swiss retailer MIGROS, the company is a full-service customer brand manufacturer. The Company
  • 24. Workshops with BMI Lab BMI Lab guided Mibelle through the Initiation, Ideation and Integration phases of the Business Model Navigator and provided coaching during Implementation.
  • 25. This process resulted in 19 business model ideas. Business model concepts Six of these ideas were chosen to be developed into business model concepts. Business model ideas Ideation Process
  • 26. By providing an online laundry service, Tick offers a convenient solution including • pick-up, • cleaning as well as • delivery of clothes. 26 What was Different With This Idea?
  • 28. 28 66 Practices to Develop Innovation Culture Agility Inspiration Motivation Alignment Transparency Empowerment The Innovation Culture NavigatorTM
  • 30. 90% 30 90% of all startups fail. Source: „Startup Genome Report 1 Why Startups Succeed" 90% of ideas change until success: Source: Bhide, A.V. (2000). The Origin and Evolution of New Business. Percentage of Startups That Fail
  • 31. BMI: Affordable Loss Management: Expected Return 31 ? ? Affordable Loss
  • 32. 1. Required Profits 2. Required Revenues 3. Number of Units 4. Marketing Budget 5. Other Direct Costs Return on Sales? Price? CAC? Cost Buffer 7. Anticipated Costs 6. Indirect Costs 2. Allowable Costs Reverse Financials are based on Discovery-Driven-Planning developed by Rita Gunther McGrath and Ian C. MacMillan Reverse Financials
  • 34. 90% 90% 34 90% of all startups fail. Source: „Startup Genome Report 1 Why Startups Succeed” 2014 90% of ideas change until success: Source: Bhide, A.V. (2000). The Origin and Evolution of New Business. Percentage of Startups That Pivot
  • 39. St.Gallen Business Model NavigatorTM DESIGN REALIZATIO NImplementatio n Test the business model Test Adapt Try and Learn Market Introduction Iteration Initiation Analyze the ecosystem Players Change Drivers Ideation Adopt the patterns Iteration Similarity Confrontation 55+ Patterns Integration Detail the business model I d e a s e l e c t i o n Internal Consistency External Consistency Iteration What? How?Why? Who? Old Business Model What? How?Why? Who? Old Business Model What? How?Why? Who? New Business Model 39
  • 40. 40 Superior Business Models 1 High Low External Scalability Low High Internal Scalability 1 3 St. Moritz Skiing Resort Steinway & Sons 2 2 3 Uber Zalando PAN AM Stanford Online DB Navigator iPhone Google Search 1. Pick a Big and Growing Market 2. Think of Market Constraints 3. Target the Right Customers 4. Do Something That is Relevant 5. Use External Resources 6. Develop and Monitor a Virtuous Cycle 7. Add Virality to Your Business Model 8. Use Algorithms and Automation 9. Find the Right People to Scale
  • 42. • Deep dive into tools (Patten Cards, Reverse Financials, Testing Cards etc.) • Scalability of Business Models and Platforms • Business Model Testing • How to Manage Innovation Culture • Sustainable and Circular Business Models … let me know what topic you’d prefer! 42 Upcoming Webinars
  • 43. • https://bmilab.com/workshops • München, 7 & 8 November 2019, Deutsch • St.Gallen, 19 & 20 November 2019, English Super Early Bird Price (€1800 2200) available until September 27, 2019 43 Upcoming Workshops and Q&A
  • 44. Contact Me & Learn More 44 bmilab.com https://www.linkedin.com/in/felixhofmann1/

Editor's Notes

  1. https://www.theguardian.com/business/2018/feb/23/toys-r-us-faces-bankruptcy-putting-3200-jobs-at-risk
  2. http://uk.businessinsider.com/heres-how-amazon-may-have-led-toys-r-us-demise-2017-9?r=US&IR=T https://qz.com/1080389/a-dot-com-era-deal-with-amazon-marked-the-beginning-of-the-end-for-toys-r-us/ With the surge of online retail shops, Toys R Us signed a 10 year agreement in 2000 to be the exclusive vendor of toys on Amazon. The agreement was ended in 2004 after Toys R Us sued Amazon for letting other toy vendors sell on its site. For Toys R Us, missing the opportunity to develop its own e-commerce presence early on. The company filed for bankruptcy in September 2017, four months after announcing its plan to revamp its website. Mistake: Missing to adapt to the new online sales channel. http://www.nytimes.com/2004/05/25/business/toys-r-us-sues-amazoncom-over-exclusive-sales-agreement.html
  3. Und des wegen ist es so wichtig, sich immer wieder zu hinterfragen und ab und an muss man etwas tun, was das eigene Kerngeschäft angreift oder vielleicht sogar zerstört. »If you don’t cannibalize yourself, some else will» Ich finde eigentlich immer, dass der Satz nicht so richtig Sinn ergibt. Oder ich hab ihn nicht richtig verstanden. Wie auch immer, er ist von Steve Jobs, der bleibt drin ;)
  4. Dieser Ansatz ist aber auch sehr sehr risikobehaftet, was wäre, wenn es keine Joelle gegeben hätte, wie es oftmals der Fall ist? Wie kann man Mitarbeiter Inspireiren, empower, und mit agilen Prozessen unterstützen Dinge selbst in die Hand zu nehmen?
  5. Dafür haben wir in St.Gallen den Innovation Culture Navigator entwickelt – 66 Best Practices um die Unternhemenskultur auf mehr Innovation auszurichgten. Sehr spannend finde ich in den Zusammenhang auch den Case von Zalando. Das Unternehmen wurde 2008 gegründet und hat bereits schon nach 5 Jahren das Zalando Innovation lab Entstanden ist das Lab aus einer Hackweek kurz vor Weihnachten 2013 --> später hat sich daraus ein Lab und Kompetenzcenter entwickelt. Mitarbeiter, die einen Preis mit ihrem Prototpyen gewannen haben anschleissend 20% Arbeitszeit frei bekommen um an den Ideen weiterzuarbeiten.
  6. Risiko - Neben den Inhalten der Kiste ist Ihnen auch die Verteilung der Inhalte exakt bekannt. - Zunächst sollen Sie in Kiste 1 greifen. Hierin befinden sich rote und weiße Kugeln zu je gleichen Teilen. Fragt man Sie nach Ihrer Zahlungsbereitscha für einen Griff in die Kiste, wenn eine rote Kugel 100 Euro wert ist, wird diese rational nachvollziehbar unter dem Erwartungswert einer mittleren Auszahlung von 50 Euro liegen. Unsicherheit - Sie wissen zwar um die Inhalte der Kiste, die konkrete Verteilung der Inhalte ist Ihnen indessen aber nicht bekannt. - Stellen Sie sich nun vor, Sie sollen Ihre Zahlungsbereitschaft kund tun, wissen aber nichts über die Häufigkeit bestimmter Inhalte. Im klassischen Managementdenken würden Sie – solange die Spielregeln dies zulassen – durch Markforschung versuchen, die Vertei- lung zu erheben. Im konkreten Beispiel könnten Sie andere Spieler beim Ziehen beob- achten und somit die Verteilung der wertvollen roten Kugeln schätzen. Aufgrund einer möglichen Schätzungenauigkeit werden Sie – ebenfalls rational nachvollziehbar – einen Risikoabschlag einrechnen. So könnten Sie beispielsweise entscheiden, maximal 30 Euro für einen Griff in die Kiste zu bezahlen. Ungewissheit - Der mögliche Inhalt der Kiste ist Ihnen gänzlich unbekannt und verändert sich zudem ständig. - Versuchen sie nun abschließend Ihre Zahlungsbereitscha zu ermitteln, wenn Sie über den Inhalt der Kiste rein gar nichts wissen: Kein Wissen über Kugeln oder andere Inhal- te, keine Verteilung, kein Wissen um den Wert des Inhalts. Auch das Beobachten anderer Spieler bringt Sie in dieser Situation extremer Ungewissheit nicht weiter: Sie erhalten diffu- se und mehrdeutige Informationen. Sicherlich können Sie komplett auf die Spielteilnahme verzichten. Aber was wäre, wenn Sie im Nachhinein erfahren, dass andere Spieler Diaman- ten aus der Kiste gezogen haben?
  7. Normally: Cost estimation, market share based, use rule of thumb. Takes a lot of time, never truly accurate, suggests that it is so the numbers become holy. Reverse financials: Bottom up, start with profits you want or are required to make. Starts with FRAMING and SCOPING (General Assumptions) then moves to SPECIFYING DELIVERABLES (break down assumptions into smaller manageable ones). ANCHORING EFFECT Stipulate profit and ROS (3-25%). Base on goals, benchmark, go for higher than current. Revenue and allowable costs. Q: Can we produce this? Do we have the capacity? Deliverables: Unit of Sales (Rev Model: Subscription, € p. m2/m3) Price per unit: how much will it costs to acquire 1 customer or sell 1 unit? Multiply by “# of units” = mkt budget Direct costs: Material, Packaging, Direct Labour Costs Indirect costs: Rent, Salaries, Amortization, Utilities etc.
  8. Risiko - Neben den Inhalten der Kiste ist Ihnen auch die Verteilung der Inhalte exakt bekannt. - Zunächst sollen Sie in Kiste 1 greifen. Hierin befinden sich rote und weiße Kugeln zu je gleichen Teilen. Fragt man Sie nach Ihrer Zahlungsbereitscha für einen Griff in die Kiste, wenn eine rote Kugel 100 Euro wert ist, wird diese rational nachvollziehbar unter dem Erwartungswert einer mittleren Auszahlung von 50 Euro liegen. Unsicherheit - Sie wissen zwar um die Inhalte der Kiste, die konkrete Verteilung der Inhalte ist Ihnen indessen aber nicht bekannt. - Stellen Sie sich nun vor, Sie sollen Ihre Zahlungsbereitschaft kund tun, wissen aber nichts über die Häufigkeit bestimmter Inhalte. Im klassischen Managementdenken würden Sie – solange die Spielregeln dies zulassen – durch Markforschung versuchen, die Vertei- lung zu erheben. Im konkreten Beispiel könnten Sie andere Spieler beim Ziehen beob- achten und somit die Verteilung der wertvollen roten Kugeln schätzen. Aufgrund einer möglichen Schätzungenauigkeit werden Sie – ebenfalls rational nachvollziehbar – einen Risikoabschlag einrechnen. So könnten Sie beispielsweise entscheiden, maximal 30 Euro für einen Griff in die Kiste zu bezahlen. Ungewissheit - Der mögliche Inhalt der Kiste ist Ihnen gänzlich unbekannt und verändert sich zudem ständig. - Versuchen sie nun abschließend Ihre Zahlungsbereitscha zu ermitteln, wenn Sie über den Inhalt der Kiste rein gar nichts wissen: Kein Wissen über Kugeln oder andere Inhal- te, keine Verteilung, kein Wissen um den Wert des Inhalts. Auch das Beobachten anderer Spieler bringt Sie in dieser Situation extremer Ungewissheit nicht weiter: Sie erhalten diffu- se und mehrdeutige Informationen. Sicherlich können Sie komplett auf die Spielteilnahme verzichten. Aber was wäre, wenn Sie im Nachhinein erfahren, dass andere Spieler Diaman- ten aus der Kiste gezogen haben?
  9. Whatsapp used push notifications Paypal reacted on new needs for online payment when ebay was growing
  10. Links unten: überhaubt nicht skallierbar (Nischenmarkt, an einem Standort, für eine Industrie) – kein schlechtes Geschäftsmodell dennoch: Google: Hochgradig Skalierbar: Digital, Platform, Global, - Wer von euch hat diesen Monat einen Lohn von Google bekommen?? Wir alle arbeiten für Google!