Business Model BibleCreating Value through Innovation<br />The art and science of innovation<br />
Part 3:Product & Service Models<br />The art and science of innovation<br />
The shift from hard product to digital services is a huge challenge and a very hard transformation – history says very few...
Bespoke<br /><ul><li>SAAB
IBM
Le Labo
Moonpig</li></ul>Blockbuster profit<br /><ul><li>Pfizer
Shell
Sony/BMG
AMGEN</li></ul>Brand power<br /><ul><li>Coca Cola
Harley Davidson
Versace
Tiger Woods</li></ul>Product pyramid<br /><ul><li>Tesco
Fosters
Levi Strauss
BMW</li></ul>Value add<br /><ul><li>Thomas Cook
Mintel
Toucan
Dollond & Aitchison</li></ul>Build to sell<br /><ul><li>Astra Zeneca
Cambridge Enterprises
Lycra
Endemol</li></ul>Bundling squeeze<br /><ul><li>Free Broadband
Ford Credit
Microsoft
GSK</li></ul>Platform play<br /><ul><li>Volkswagen
Intel
Stardock
Google</li></ul>Profit multiplier<br /><ul><li>Apple
Disney Corporation
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Edengene Business Model Bible: Product & Service models

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Edengene Business Model Bible: Product & Service models

  1. 1. Business Model BibleCreating Value through Innovation<br />The art and science of innovation<br />
  2. 2. Part 3:Product & Service Models<br />The art and science of innovation<br />
  3. 3. The shift from hard product to digital services is a huge challenge and a very hard transformation – history says very few companies have made it... You have to burn the boats – we have had to throw out our most cherished notions – no longer will we fool ourselves that product innovation would be sufficient to be successful.<br />Antonio M. Perez, CEO of Kodak<br />
  4. 4. Bespoke<br /><ul><li>SAAB
  5. 5. IBM
  6. 6. Le Labo
  7. 7. Moonpig</li></ul>Blockbuster profit<br /><ul><li>Pfizer
  8. 8. Shell
  9. 9. Sony/BMG
  10. 10. AMGEN</li></ul>Brand power<br /><ul><li>Coca Cola
  11. 11. Harley Davidson
  12. 12. Versace
  13. 13. Tiger Woods</li></ul>Product pyramid<br /><ul><li>Tesco
  14. 14. Fosters
  15. 15. Levi Strauss
  16. 16. BMW</li></ul>Value add<br /><ul><li>Thomas Cook
  17. 17. Mintel
  18. 18. Toucan
  19. 19. Dollond & Aitchison</li></ul>Build to sell<br /><ul><li>Astra Zeneca
  20. 20. Cambridge Enterprises
  21. 21. Lycra
  22. 22. Endemol</li></ul>Bundling squeeze<br /><ul><li>Free Broadband
  23. 23. Ford Credit
  24. 24. Microsoft
  25. 25. GSK</li></ul>Platform play<br /><ul><li>Volkswagen
  26. 26. Intel
  27. 27. Stardock
  28. 28. Google</li></ul>Profit multiplier<br /><ul><li>Apple
  29. 29. Disney Corporation
  30. 30. Virgin
  31. 31. Brand Beckham</li></ul>Rapid product<br />cycling<br /><ul><li>Reckitt Benckiser
  32. 32. SWATCH
  33. 33. Zara
  34. 34. Procter and Gamble</li></ul>Residual<br />management<br /><ul><li>LeasePlan
  35. 35. Biffa
  36. 36. Abbey
  37. 37. Cartridge World</li></ul>Second purchase<br /><ul><li>Sony/Columbia
  38. 38. iTunes
  39. 39. IBM
  40. 40. Caterpillar Financial Services</li></ul>Product/service models<br />
  41. 41. Hard times can be the source of innovative inspiration. Some of the best products and services come out of some of the worst times…In the early 1990s, tens of millions of dollars had gone down the drain in a futile effort to develop “pen computing” – but tiny Palm Computing managed to revitalize the entire industry in a matter of months by transforming itself overnight from a software maker into a hardware company.<br />Chris Shipley, Executive of DEMO Emerging Technology Launch Pad <br />
  42. 42. Bespoke<br />Demand side highly individualised generally requiring more time and effort. Higher profits potential on lower volumes of sale. Highly consultative and used widely across the service industry. Increasing in popularity with recent trends away from globalisation to localisation leading to efforts in mass customisation<br />
  43. 43. Bespoke<br />Automotive<br />Technology<br />Allows customers to build their car online allowing greater degrees of customisation at a premium<br />Changed to a more consultative business solutions model that facilitates annuity revenue streams. Since 2001, services and consulting revenues have been exceeded manufacturing<br />Retail<br />Consumer goods<br />Offers unique, personalised perfumes blended in front of customers at the time of purchase in an exclusive boutique setting<br />Online personalised greeting card company that allows users to customise traditional paper cards with names, handwriting and photographs before delivering to the recipient<br />
  44. 44. Blockbuster profit<br />Upfront risk, potential huge returns. A high fixed-cost environment, where profitability is maximised by very high sales volume. <br />Revenue realisation is so powerful that it can the development repay costs many times over.<br />
  45. 45. Blockbuster profit<br />Pharmaceutical<br />Oil and gas<br />Manufactures Lipitor, world's best selling drug for the past five years with revenues in excess of $12Bn. Only 3 out of 10 drugs ever recoup their development costs leading the pharma industry to rely on blockbuster returns<br />High upfront costs including exploration and drilling are offset by the sales of the extracted oil and gas<br />Media<br />Biotechnology<br />The record label speculatively signs bands to produce music which requires significant upfront cost with no guarantees on the level of return but substantial profit on commercially successful signings<br />Developed Epogen, the "billion dollar molecule" that launched the modern day biotechnology industry<br />
  46. 46. Brand power<br />Brand creation drives profits as previous ‘intangibles’ such as awareness, trust and recognition become tangible as a price premium. <br />Include halo products which establishes significant brand position, which enables complementary and adjacent products to be launched.<br />
  47. 47. Brand power<br />Food and beverage<br />Automotive<br />One of the most powerful brand names in the world. The brand alone was valued at $67bn in 2006 and currently markets 450 sub-brands in 200 countries<br />Employs a brand synonymous with a particular lifestyle and attracts a loyal brand community with licensing of the Harley-Davidson logo accounting for almost 5% of the company's net revenue<br />Clothing and apparel<br />Media<br />From its start as a luxury clothing boutique Versace has used its brand to expand into accessories, fragrances, makeup, home furnishings and interior design<br />One of the most successful golfers of all time who uses his personal brand for endorsement - by 2010 he is expected to become the world's first athlete to pass one billion dollars in earnings<br />
  48. 48. Build to sell<br />Creation of IP by a company unable or unwilling to commercialise it and effectively providing services to another company to deliver part of their business portfolio - a type of outsourcing model<br />
  49. 49. Build to sell<br />Pharmaceuticals<br />Academia<br />AZ acquired CAT/MedImmune to access early-stage vaccines and small molecule technology products platform to fully commercialize product candidates<br />A subsidiary of the University of Cambridge it is responsible for commercialising University discoveries through technology transfer, consultancy & venturing services as well as seed funds<br />Manufacturing<br />Media<br />Lycra® (elastane fibre) was commercialized in 1962, after two decades of research by DuPont. Now used under license from new owners Invista in textiles and other products e.g. nail polish<br />Endemol, an independent TV production company, produces programmes to commissions (e.g. O2’s Cell, the first ever made-for-mobile drama) as well as developing them in-house e.g. Big Brother, which are then sold to TV networks e.g. Channel 4<br />
  50. 50. Bundling squeeze<br />Bundling a range of products together and then optimise margin per customer rather than per product to squeeze single product only competitors out of the market. In oligopolistic and monopolistic industries, product bundling can be seen as an unfair use of market power because it limits the choices available to the consumer<br />
  51. 51. Bundling squeeze<br />Telecommunications<br />Automotive and financial services<br />Virgin Media’s quad play offers consumers digital television, broadband internet, landline and mobile telephones – and better value the more services are taken<br />Bundle of car and manufacturer credit drove most major US retail banks out of the new car financing market<br />Technology<br />FMCG<br />Microsoft Office has become the de-facto standard in office software bundling a word processor, spreadsheet and presentation graphics program<br />Bundling two products into one package, at one price point, delivers convenience, optimised performance and a cost benefit to the consumer – and increased ‘share of throat’ to the manufacturer<br />
  52. 52. Platform play<br />Investing in a multi-product platform and then launch new services to share the overall platform cost across multiple products addressing multiple customers<br />
  53. 53. Platform play<br />Automotive<br />Technology<br />Uses the same automotive design and manufacturing platforms across Skoda, SEAT, Audi and VW brands to minimise cost<br />Uses the Intel platform and combines multi-core architecture with technology and scalable processing across the entire product and services portfolio <br />Online media and technology<br />Online media and technology<br />Created the Impulse digital distribution platform allowing users to quickly and easily find their favourite game or software and download it automatically to PC <br />Google uses its extensive customer data collection and analysis capabilities as the core platform of its broader offers e.g. Google Analytics<br />
  54. 54. Product pyramid<br />Broad product offering pyramid. The base of the pyramid offers low priced high volume products and the apex offers high priced, lower volume products. <br />The base plays a strategic role, often protecting the profitability at the top.<br />
  55. 55. Product pyramid<br />Retail<br />Food and beverage<br />Employs a hybrid sub-brand structure offering the Value budget range, standard own-brand lines and the Finest premium range<br />Expanded its brewing interests into soft-drinks and wine-making including the purchase of the high profit Berringer Blass wine brand to build its product pyramid model<br />Clothing and apparel<br />Automotive<br />Offers three distinct brands - Signature (value channel aimed at large supermarkets), Dockers (mid-range casual ware) and Levi's (501, Red Tab and premium DNA and vintage ranges)<br />Through its acquisitions offers high-performance cars across the entire value range including Mini (budget), BMW (mid range) and Rolls Royce (premium)<br />
  56. 56. Profit multiplier<br />The profit multiplier model is used by firms which try to leverage their base IP (brand, trademark) and build multiple avenues to grow profitability.<br />Unlike a multi-component business model which repackages the same base product, the profit multiplier uses the same base IP to expand the product portfolio<br />
  57. 57. Profit multiplier<br />Technology and media<br />Media<br />Apple expanded the original iPod base technology to include other lines such as the iPod Nano, iPod Shuffle, and associated accessories<br />A character that continues to record profits for Disney now celebrating its 80th anniversary<br />Consumer offers<br />Fashion<br />Leveraged Virgin brand into various avenues; travel (Virgin Atlantic, Virgin Galactic, Virgin Trains), communications (Virgin Mobile), financial services (Virgin Money) etc<br />The Beckham’s perfume, sunglasses, clothing, endorsements and merchandise amount to David being set to earn $275m over 5 years in the US, while their perfume line alone is valued at over £100m at retail<br />
  58. 58. Rapid product cycling<br />A model that deliberately accelerating the lifecycle of the product portfolio to better address customers and differentiate against competitors - even if it means that popular products are terminated or substantially cannibalised<br />
  59. 59. Rapid product cycling<br />Chemicals<br />Clothing and apparel<br />A principle philosophy of the company which generates more than 40% of revenues come from products launched in previous 3 years<br />Offers limited edition watches as standard to stimulate demand and engender a feeling of product exclusivity<br />Clothing and apparel<br />Retail<br />Inditex owned Zara uses customisable patterns for its clothing, allowing for changes to me made quickly in response to changing trends – meaning that product turnaround is far shorter than the industry average<br />Use technology and customer experience to rapidly innovate and churn and constantly evolve well known product lines such as Ariel detergents<br />
  60. 60. Residual management<br />Focus on generating upside value by extracting additional value from the residual value of an asset. Recycling and re-manufacturing models are increasing in popularity and have become sufficiently well-established to challenge the primary industries they support<br />
  61. 61. Residual management<br />Business services<br />Waste management<br />World's largest vehicle leasing provider which has opened new distribution networks and online systems to maximise the resell value of their stock<br />Makes money not only from the removal but the treatment of waste, and offers waste management advisory services<br />Financial services<br />Business services<br />Maximises the potential value of its residual asset i.e. its long-term customer base to generate 90% of its profits<br />Specialise in the remanufacturing of ink and toner cartridges. OEM manufacturers are embedding challenges into cartridge refill to combat the increasing market share of the remanufacturers<br />
  62. 62. Second purchase<br />Establishing a business as a secondary purpose to add value to the core business. Key applications are assets financing with adjacent solutions created specifically to enhance or expand the market opportunity for the portfolio, and adjacent product platforms<br />
  63. 63. Second purchase<br />Media<br />Media<br />Purchased Columbia to leverage its media position to support new emerging Sony consumer electronics standards/products post BetaMax<br />Digital media application interface established to support sales of the iPod. Acts as an interface to manage the contents on Apple's iPod and iPhone products<br />Technology<br />Construction and mining equipment<br />Provides specialist financing to support the sales of their core technology product portfolio covering stand alone acquisitions and IT business transformation projects<br />Offers a range of financing solutions covering their machinery, power, marine and project financing product ranges<br />
  64. 64. Value add<br />Purchase of products and services from the producer/wholesaler and adding value e.g. through bundling, analysing or branding before selling to the end user for a premium<br />
  65. 65. Value add<br />Leisure<br />Business services<br />Bundles various elements that make up a package holiday from different suppliers adding value by synchronising and coordinating the elements for the holiday maker<br />Supplies consumer, media and market research, that is analysed and sold as coherent reports through three delivery platforms Premier (analysis), Oxygen (online analyst opinion) and Inspire (forecast trends) <br />Telecommunications<br />Optical<br />(M)VNO – buys mobile, fixed line and broadband connectivity from infrastructure holders, adding value by economical and simple bundling and packaging to the end-user<br />Dollond & Aitchison, like most opticians buy frames and lenses, then glaze and fit them together to their patients’ requirements, selling them at a substantial profit<br />

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