Business Models do fail 10 examples - 5 reasons

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Business Models do fail 10 examples - 5 reasons
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Business Models do fail 10 examples - 5 reasons

  1. 1. Business Models Do Fail10 examples - 5 reasons www.elton-pickford.com
  2. 2. IntroductionPart 110 Business Models that FailedPart 25 Reasons of FailureWhy do Business Models Fail ? Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  3. 3. Business Models do Fail10 examples - 5 reasonsINTRODUCTION Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  4. 4. Why this paper ?This document aims at identifying the root causes of Business Model failures. This analysis issupported by several real cases and constitutes a practical ground to explore the utilization of theBusiness Canvas (Alexander Osterwalder) and the Effervescence Framework (Yannick Mériguet -Elton-Pickford).Elton-Pickford is striving to provide organizations with efficient ways to explore new Business Modelsand publishes regularly case studies on Innovative Business Models. This document counter-balancesthe regular publications on successful Business Models by exposing failures as business reality too.We are proud to offer you this study which we invite you to share and comment with passion.Achievement: January 2013 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  5. 5. PublicationThis document is provided under the terms of Creative Common License BY-NC-SA. Themodification and the distribution of this copyrighted work for noncommercial use only are authorizedunder the reference: BUSINESS MODELS DO FAIL - 10 EXAMPLES - 5 REASONS. Attribution - Licensees may copy, distribute, display and perform the work and make derivative works based on it only if they give the author (Antoine Dumont and Elton-Pickford) or licensor the credits in the manner specified by these . Noncommercial - Licensees may copy, distribute, display, and perform the work and make derivative works based on it only for noncommercial purposes. Share Alike - Licensees may distribute derivative works only under a license identical to the license that governs the original work. Achievement: January 2013 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  6. 6. Understand the BUSINESS MODEL Elton-Pickford Framework What are the fundamental characteristics of Copyright Elton-Pickford the targeted Business Model? How well do Effervescence Framework they fit the context and scenario specificity Created by Yannick Meriguet, Associated at Elton-Pickford & uniqueness? How do they optimize the company strategy?SCENARIOWhat are the specificorganization objectives BUSINESS MODEL CONTEXT(Growth, Performance,Positioning, Differentiation, The context highlights theetc.). What is the internal critical elements to take intocontext of the company account in the external context(Specific competencies, of the company. What are the SCENARIOTension, M&A, Start Up)? OF THE ORGANIZATION CONTEXT key market characteristics,These elements define the socio-economic environment,foundation of the targeted consumer habits, etc. ? Andstrategy. how can it influence the Go To Market Strategy of the organization. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  7. 7. KP KA VP CR CSUnderstand theBusiness Model Canvas KR CHCreated by Alexander Osterwalder, Business Model Generationwww.businessmodelgeneration.comCustomer Segments (CS)The Customer Segments building block defines the different C€ R€groups of people or organization an enterprise aims to www.businessmodelgeneration.comreach and serve. Different types of customer Segments Customer Relationships (CR)exist: mass market, niche market, segmented, etc. The Customer Relationships building block describes the type of relationships a companyValue Proposition (VP) establishes with specific customer segments.The Value Proposition building block describes the bundle Customer Relationships may be driven by differentof products and services that create value for a specific motivations: customer acquisition, customerCustomer Segment. It solves a customer problem or retention and boosting sales. We can distinguishsatisfies a customer need. The Value Proposition can be between several categories of Customercharacterized by its newness, performance, price, etc. Relationships: personnal assistance, self-service, co- creation, etc.Channels (CH)The Channels building block describes how a company Revenue Streams (R€)reaches its Customer Segments to deliver a Value The Revenue Streams building block represents theProposition. Channels can be direct or indirect: internet cash a company generates from each Customerplatform, sales forces, store, retailers, etc. Segment. There are several way to generate Revenue Streams: asset sale, subscription, usage fee, etc. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  8. 8. KP KA VP CR CSUnderstand theBusiness Model Canvas KR CHCreated by Alexander Osterwalder, Business Model Generationwww.businessmodelgeneration.com C€ R€Key Ressources (KR)The Key Resources building block describes the most www.businessmodelgeneration.comimportant assets required to make a business model work.Key Resources can be characterized as physical, intellectual,financial, human, etc. Cost Structure (C€) The Cost Structure describes all costs incurred to Key Activities (KA) operate a business model. They can be cost or value The Key Activities building block describes the most driven and be classified as fixed or variable costs. important things a company must do to make its business model work (development, maintenance, production, etc.) Key Partners (KP) The Key Partners building block describes the network of suppliers and partners that make the business model work. Reasons behind partnering may be diverse: Optimization and economy of scale, acquisition of particular resources and activities, reduction of risk and uncertainty, etc. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  9. 9. Part 110 Business Modelsthat Failed Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  10. 10. IridiumCopainsdavant.com TelecomInternet 1998 Vogica Blockbuster Video2009 Spanair Movie rentals Household furnishing 2xmoinscher.com Airlines 2010 2010 Internet 2012 2012 Bic Encarta Kodak Moulinex Publishing Chemistry, digital Perfume Consumer Electronics 2009 2012 1991 2009 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  11. 11. 1copainsdavant.com Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  12. 12. copainsdavant.comIndustryInternet - Social web Scenario Highlights First mover advantageDate of creation Search of profitability2001Corporation Context HighlightsBenchmark Group Growing internet usageCountry of Origin Nationwide efficient broad band infrastructureFrance Social web growing interest New competitorsCase’s period Business Model Highlights2001 - 2012 Social networkMarket type Connect with past friends on internetMass market Freemium / premiumRevenues(2009) Group : 17 M€ / Website : 3,5 M€ Reasons of Failure Customer segment not buying a paid serviceNumber of Employees Likelihood of profitability(Group) 150 Emerging competition Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  13. 13. copainsdavant.comInitial value proposition Deployed strategy New pivotCreated in 2001, "Copains davant" is the After 3 years of existence, with a full free access, In 2007, the company acknowledges the failureFacebook made in France, and enable to re- the company is searching a path to profitability. In of its business model, and re-open the fullconnect with past classmates, publish school 2004, the decision is made to monetize the site, service for free. Revenues will be nowpromotion pictures and communicate via and the internal mailing system along with generated by advertising. Additional servicesinternal mailing system. The company is quickly additional functionalities are now provided as a are created, and in 2010 the management ofbecoming the social web leader in France. paid service. Facing these new constraints, site the company is changed and re-think its entire frequentation is declining and the brand image of positioning and image. the company is hurt. If the value proposition is still attractive for users, they are not ready to pay for such services. The internal mailing system is the cornerstone of the interaction between schoolmates, and if too much constraints (price) exist, they stop to use it, loosing the benefits of the entire value proposition. Things get worst : the growing Facebook platform is penetrating the European market with a modern design, increased functionalities and at no cost for the user. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  14. 14. copainsdavant.com BUSINESS MODEL SOCIAL NETWORK RE-CONNECT WITH PAST CLASSMATES ON INTERNET FREEMIUM / PREMIUM BROAD BAND CONNECTION INTERNET USAGE PENETRATION NATION WIDE EFFICIENT INTERNET FIRST MOVER ADVANTAGE INFRASTRUCTURE DEPLOYEDSCENARIO CONTEXT SEARCH FOR PROFITBILITY EMERGING SOCIAL WEB NEW ENTRANTS FACEBOOK Since 2004 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  15. 15. copainsdavant.com KP KA VP CR CS EMAIL : MAINTENANCE 1 MILLION PER DAY MASS MARKET + PLATFORM PROMOTION MASS PERSONALIZATION SOCIAL NETWORK OLD USERS 30 - 40 YEARS KR RE-CONNECT WITH CH 13 MILLIONS OF UNIQUE FORMER CLASSMATES VISITORS / MONTH COPAINSDAVANT.COM EFFICIENT ADVERTISING SALES FORCES SPACE ADVERTISING ADVERTISING CAMPAIGN C€ PLATFORM INFRASTRUCTURE R€ ADVERTISING* HUMAN RESOURCES FREE SERVICE PAID SERVICEwww.businessmodelgeneration.com * Since 2007Source :La Tribune, Le Français CDA résiste toujours, october 2010Capital, Petits meurtres entre amis chez CDA, june 2010Studio Vitamine, CDA : Nouvelle version bêta, february 2012 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  16. 16. 22xmoinscher.com Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  17. 17. 2xmoinscher.comIndustryInternet - Marketplace Scenario Highlights Cost reduction strategy for margin recoveryDate of creation2001 Context HighlightsGroup3 Suisses Numerous emergent competitors Growing Internet UsageCountry of Origin Nationwide efficient broad band infrastructureFrance Business Model Highlights Market PlaceCase’s period Transaction Markup2001 - 2012 Buy/sell - Business to Consumers Secured TransactionsMarket typeMass Market Reasons of FailureRevenues Cost reduction program targeting a core activity of the business (Management)(2007) 3,3 M€ Decreasing traffic (Model viability)Number of Employees Emerging competition (Environment)(Website) 35 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  18. 18. 2xmoinscher.comInitial value proposition Competition & investments Second chanceCreated in 2001, 2Xmoinscher is an internet While the company is communicated breaking The customer acquisition cost was becomingplatform that connect consumers (Buy/sell) event after 2 years, it’s facing important superior to the customer Lifetime value,along with professional (Sell). Users can buy or economic pressures between 2008 and 2012 making the business unprofitable.sell brand new or second-hand products. generating eventually important financial losses. In addition, Ebay, PrimeMinister, Amazon, In march 2012, the company communicates isDuring the transaction, 2Xmoinscher is LeBonCoin create a highly competitive market going bankrupt, few months later Uncle Henrypositioned as trusted partner by securing and which will knock about the sustainability of the buys it and plans to re-open the platform theholding the payment between parties. After the business itself. 15th of October 2012. Stay Tune...transaction is closed without litige the cashtransfer is proceed. At the same time, the company has embarked in a cost reduction program and curbed theirThe revenue model is based on a transaction marketing investments. It will have a hugefees after completion of the sales. impact on the site attractiveness, decreasing significantly the incoming traffic, and the generated revenues. Presence of large fixed costs (platform) will lead to a rapid margin erosion and eventually financial loss. 2Xmoinscher learned the hard way the specificity of a volume business. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  19. 19. 2xmoinscher.com BUSINESS MODEL MARKET PLACE BUY / SELL NEW AND SECOND END PRODUCTS SECURED TRANSACTIONBusiness Model Sustainability isbased on sustaining traffic TRANSACTION FEESvouching generation of revenues. POSITIONNING AS A TRUSTED PARTNER REDUCED EMERGENCE OF SIZABLEINCOMING SITE TRAFFIC COMPETITION COST REDUCTION PROGRAM FOR MARGIN RECOVERY GROWING INTERNET USAGE NATIONWIDE EFFICIENT DECREASE BROAD BAND MARKETING BUDGET INFRASTRUCTURE SCENARIO CONTEXT Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  20. 20. 2xmoinscher.com KP KA VP CR CS PLATFORM MAINTENANCE & DEVELOPMENT SELL / BUY & GENERATE TRUST PARTNERS WITH REVENUE SECURED MERCHANTS & CONSUMERS PLATFORM TRANSACTIONS MARKETING & PROMOTION BUY HALF THE PRICE (NEW & SECOND HAND PRODUCTS) BUYERS - MASS MARKET KR CH HUMAN PLATFORM RESOURCES 2XMOINSCHER C€ ADVERTISING R€ TRANSACTION FEES ON COMPLETED SALES HUMAN RESOURCESwww.businessmodelgeneration.comSource :Journal du Net, Fermeture 2xmoischer, march 2012 Journal du Net, Une page se tourne, 2xmoinscher ferme ses portesTomsguide, 2xmoinscher, Actualité n°2888 PC Impact, 2xfoismoinscher fait ses adieux, News n°69448 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  21. 21. 3Encarta - Microsoft Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  22. 22. EncartaIndustryPublishing / digital Encyclopedia Scenario Highlights Model viabilityDate of creation Differentiation through content quality1993 Multi platform products (CD, DVD, online)GroupMicrosoft Context HighlightsCountry of Origin Improvement of web content in general (site, blog, media etc.)USA New Competitor enters the market with free content and a collaborative platform Business Model HighlightsCase’s period Multimedia Encyclopaedia1993 - 2009 Rich content of high qualityMarket type Sales of CDs, DVDs etc. and online access subscriptionMass MarketRevenues Reasons of FailureNC Profitability of products (Model viability)Number of Employees Emerging competition (Environment)NC Business Model not developed further (Company culture) Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  23. 23. EncartaInitial value proposition Change of habits Fierce competitionStarted in 1993, Encarta proposed a digital In 2001, Wikipedia enters the market. The These actions have no impact on theEncyclopedia available on multiple technology content is created and maintained by the users Customer’s behaviour. In 2009, Encarta has acarriers (CD, DVD, online) and in multiple themselves on a free basis, which continuously low market share of 1.27%, against 97% forlanguages. This product by Microsoft established improves the quality of the platform. Two years Wikipedia.itself very quickly as the Market leader, later, this platform overtakes Encarta by thecompeting with its 36500 articles (2007) number of articles. At this time, Wikipedia has more then threeagainst large multimedia corporations. millions articles in English. As a consequence, As a reaction, Encarta improves the content Microsoft decides not to continue its business actuality and proposes a free light access to a model and exits the Market end of 2009. limited amount of articles. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  24. 24. Encarta BUSINESS MODEL UNIVERSAL MULTIMEDIA ENCYCLOPAEDIA 35 000 ARTICLES RICH AND HIGH QUALITY CONTENT 26 000 MEDIAS SALES OF DIGITAL PRODUCTS, SUBSCRIPTION FOR ONLINE ACCESS HIGH CAPABILITY TO MODEL VAIBILITY IMPROVEMENT OF WEB CONTENT CREATE CONTENT VERY REVENUE STREAMS / RAPIDLY IN GENERAL (SITE, BLOG, MEDIA, MANUFACTURING COSTS ETC.)SCENARIO DIFFERENTIATION THROUGH CONTEXT CONTENT QUALITY ENTRY OF A COMPETITOR WITH A FREE AND COLLABORATIVE MULTI-PLATFORM PRODUCTS BUSINESS MODEL (CD,DVD, Online) Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  25. 25. Encarta KP KA VP CR CS CONTENT PUBLISHING MULTIMEDIA ENCYCLOPEDIA MASS MARKET PROMOTION OF THE ENCYPLOPAEDIA RICH AND HIGH QUALITY CONTENT KR CH WEB PLATFORM HUMAN RESOURCES CD / DVD C€ HUMAN RESOURCES R€ SALES OF DIGITAL PRODUCTS SALES OF SUBSCRIPTION FOR ONLINE ACCESSwww.businessmodelgeneration.comSource :Première, Encarta, coulé par Wikipédia, ferme définitivement ses pages, march 2009NouvelObs, L’encyclopédie en ligne Encarta va fermer, march 2009Clubic, Microsoft fermera Encarta cette année, march2009 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  26. 26. 4Iridium - Motorola Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  27. 27. IridiumIndustry Scenario HighlightsTelecom Services Take over Market leadershipDate of creation Deploy a large scale network1991 Manage the world wide phone network Win a major technological challengeGroupMotorola Context HighlightsCountry of Origin Development of competitionUSA Alternative emerging Technologies Cost reduction of Telecom infrastructure Rising customer demandCase’s period1991 - 1998 Business Model Highlights Call from anywhere in the worldMarket type Terminal salesMass Market Subscription salesRevenuesNC Reasons of FailureNumber of Employees Profitability of the value proposition (Model viability) Emerging competition (Environment)NC Technological development (Environment) Project management (Management) Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  28. 28. IridiumInitial value proposition Evolution of the technological BankruptcyIn 1991, Iridium starts building a mobile environnement In 1998, Iridium starts and 9 months later, thephone system which allows communication company goes into bankruptcy. Customers facefrom anywhere. This system would cover any During the 8 years of project work, mobile technical failures, the product doesn’t work incities, any agglomerations and any square communication developed quickly. Telco operators cars or buildings, as the usage is only possiblemeter on earth, being at sea, in the jungle, in deployed terrestrial networks, thus covering the outside, requiring a open connection to thethe mountains. main access zones. In parallel, the costs of satellite array.The system, developed by Motorola, bases communication and of acquiring the cell phones Moreover, the value proposition is very costly:on an array of satellites displaced around the have dropped considerably. access costs 7 USD per minute against 50globe. cents for a traditional carrier. To this adds the acquisition of the phone for moreThis phenomenal project costs app. 6bn than 3’000 $.USD, and includes the launch of 15 rocketsand more than 75 satellites. It started itsoperation in 1998. iridium Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  29. 29. Iridium BUSINESS MODEL CALL FROM ANYWHERE IN THE WORLD SALES OF PHONES Development of terrestrial networks SALES OF SUBSCRIPTIONS TO BECOME THE WORLD LEADER ON THE TELECOM MARKET RISE OF COMPETITION TO DEPLOY A LARGE SCALE NEW EMERGING TECHNOLOGIES NETWORKSCENARIO CONTEXT COSTS DECREASE OF THE TELECOM TO MANAGE THE WORLD PHONE INFRASTRUCTURE NETWORK INCREASE IN CUSTOMER DEMAND The initial customer TO WIN A MAJOR TECHNOLOGICAL segment is quite CHALLENGE restricted. A mass Market is developing shortly after the Launch Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  30. 30. Iridium KP KA VP CR CS NETWORK DEVELOPMENT AND MASS MARKET MAINTENANCE KR CH FINANCIAL RESOURCES TELECOM NETWORKS 6bn USD PHONE FROM 75 SATELLITES ANYWHERE C€ NETWORKS & INFRASTRUCTURE 15 ROCKETS R€ COMMUNICATION: 7$ USD p. min. 75 SATELLITES SALES OF PHONES: 3’000$ USDwww.businessmodelgeneration.comSource :Libération, Iridium menace de sonner dans le vide, March 2000Steve Blank, No Business Plan Survives First Contact With A Customer, November 2011Stéphanie Legrand, Mémoire de recherche IAE de Lille, 2000 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  31. 31. 5Spanair Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  32. 32. SpanairIndustryAirline carrier – Transportation Scenario Highlights High variable costsDate of creation Financial tension (debts)1986 Cost reduction strategy based mainly on fixed costsGroup Airplane crash in 2008IEASA (80,1%) - SAS AB (19,9%)Country of Origin Context HighlightsSpain High competitive Market New entrants Cost of fuel Security norms & constraintsCase’s period High Customer’s sensitivity on security policies1986 - 2012Market type Business Model HighlightsMass Market General airplane transportation Main destinations: Spain, Europe, Latin AmericaRevenues(2009) 670 M€ Reasons of FailureNumber of Employees Massive increase in fuel costs (Environment)(2008) 4 000 High competitive forces (Environment) Costs reduction with major impact on the main value proposition (Management) Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  33. 33. SpanairA new company A high tension Market The last flightSpanair starts in Spain in 1986. Its first flights After 2000, the air transportation Market becomes Meanwhile, new security rules have beenare conducted in 1988. Quickly, Spanair more competitive. Notably, new entrants introduced, requesting more stringent maintenancedevelops to a major player in air destabilize the market forces through new business procedures and quicker renewal of airplanes. Thistransportation in Spain and soon gains a models based on low price value propositions. impacts highly on the fix costs situation. On themarket share of 22%, directly behind the First financial losses appear here and there. The other hand, consumers are getting more critical,main player Iberia. Even though the main following years are marked by an important rise of after different air crashes that happened during thisflights are domestical flights, the company fuel cost, a sensitive key element of the business period. Many consumers start to look at security &proposes European flights with more than model, which impacts on the margin dramatically. maintenance ranking of the airlines.100 destinations. This second element adds to the already very tense financial situation of most companies. On August, 20th 2008, flight nbr. 5022 misses theAt the end, Spanair transported more than take-off and explodes on the ground. Most11 mio. passengers yearly, with more than During Summer 2008, the management starts a passengers die immediately. The following200 daily flights. During its whole history, the cost reduction program aiming at reducing head investigations reveal some neglected maintenancecarrier transported app. 104 mio. count by 25%, stopping app. 10 destinations and elements, showing weaknesses in the maintenancepassengers. grounding of 15 airplanes. programs, as well as consequential impacts of over aging airplanes. Following this, Spanair looses the main part of its Customer base. A destroyed image and growing debts end in the closure of all activities in Jan. 2012 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  34. 34. Spanair BUSINESS MODEL MAJOR DESTINATION : SPAIN, EUROPE, LATIN AMERICA Many Spanish and Foreign Fuel MAJOR VARIABLE COSTS HIGHLY COMPETITIVE MARKET companies NEW ENTRANTS Major impact on FINANCIAL DIFFICULTIES, LOW-COST margin DEBTS FUEL PRICE FLUCTUATION CONSTRAINTS THROUGH NEW FIXES COSTS REDUCTION SECURITY NORMSSCENARIO CONTEXT AIRPLANE CRASH IN 2008 GROWING CUSTOMER AWARENESS OF SECURITY RULES Loss of trust from many customers Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  35. 35. Spanair KP KA VP CR CS FLIGHT PROMOTION PASSENGER REASSURE CUSTOMERS AIRPORTS TRANSPORTATION ON FLIGHT SECURITY INDIVIDUALS TRAVEL AGENCIES AIRPLANE PROFESSIONALS MAINTENANCE KR QUICK TRIPS TO SPAIN OR ABROAD CH AIRPLANES (75) TRAVEL AGENCY AIR ALLIANCE PILOTS ** INTERNET SITE OF SPANAIR C€ FUEL AIRPORTS TAXES AIRPLANE MAINTENANCE R€ SALES OF FLIGHT TICKETS AIRPLANE ACQUISITION HUMAN RESOURCESwww.businessmodelgeneration.comSource :Le Monde, La compagnie aérienne Spanair en faillite, tous ses vols annulés, January 2012,Air Journal, Spanair en faillite, January 2012,L’expansion, Spanair en faillite, January 2012. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  36. 36. 6Eastman KodakCompany Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  37. 37. Eastman Kodak CompanyIndustryChemicals – Manufacturing of photographic films Scenario Highlights Work against Market evolutionDate of creation Reinforce existing business model1881 Introduce as many patents as possible to block the emerging digital MarketFounderGeorge Eastman Context HighlightsCountry of Origin Technology developments strongly enabling digital photographyUSA Photography is getting a mass product for individuals Rising customer demand New competitors in phase with changing Customer requirementsCase’s period1930 - 2012 Business Model Highlights Manufacturing of photographic filmsMarket type High marginsSegmented Markets (Individuals + Professionals)Revenues(1995) 15 Mds $ - (2011) 6 Mds $ Reasons of Failure Change in behaviour: Camera as a consumer good for mass marketsNumber of Employees(1954) 73 000 - (2011) 7 600 (Environment) Technology development: digital revolution (Environment) Strong focus on Margin protection (Company culture) Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  38. 38. Eastman Kodak CompanyTechnological Innovation Change in Customer CollapseIn 1880, Georges Eastman, founder of requirements At the end of the 80’s, first competitors enterKodak, invents a special coating machinery the market with digital cameras. Between 1990that enables the mass production of dry In the early 80’s, Kodak invents digital photography. and 1999, Kodak introduces about 1’000films for photography. For a hundred years, However, the company is not determined to patents in digital photography, but neverthe company will dominate the world of develop further this technological innovation. achieves its final goals, as digital photography iscinema and photography. Management estimates that the latter could be a closer to Electronics than traditional major threat to the actual activity, the sale of photography.Kodak bases the growth strategy on the film argentic-based films.production and generates record sales In less than 10 years, the company will reducegrowth and huge margins (app. 80%). In The organization got used to very high margin, this workforce by 63’000. Handicapped by its own1981, Turnover of Kodak achieves 10 bn for years and years. As a reaction, it tried to past, Kodak is not able to change direction, andUSD. protect the existing business instead of satisfying Sony, Canon or Fuji will cause the collapse of the changing market requirements, thus shifting Kodak in 2012. away from the real changing market. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  39. 39. Eastman Kodak Company BUSINESS MODEL MANUFACTURING OF PHOTOGRAPHIC FILMS MANUFACTURING OF PHOTO CAMERA Rise and growth of digital photography app. 80 % VERY HIGH MARGINS TECHNOLOGY DEVELOPMENT COUNTERACT AGAINST MARKET PHOTO CAMERA AS EVOLUTION CONSUMER GOODS IN A MASS MARKETSCENARIO REINFORCE THE EXISTING BUSINESS CONTEXT MODEL CHANGE IN CUSTOMER REQUIREMENTS PATENT AS MUCH POSSIBLE IN ORDER TO BLOCK THE DIGITAL MARKET NEW COMPETITORS IN PHASE WITH CUSTOMER EXPECTATIONS
  40. 40. Eastman Kodak Company KP KA VP CR CS MANUFACTURING OF ADDITIONAL PRODUCTS * PHOTOGRAPHIC FILMS Printers Ink cartridges INDIVIDUALS Photo papers One-time usage cameras PROFESSIONALS PHOTO CAMERAS KR PHOTOGRAPHIC FILMS CH WWW.KODAKEXPRESS.COM * R&D RESELLER PATENTS ** NETWORK C€ HUMAN RESOURCES RAW MATERIAL R€ HIGH MARGINS 80 % ** ROYALTIES 75% of GB in 2011www.businessmodelgeneration.com * From mid 90’sSource : ** Commercialization in 2003www.kodak.frLe Figaro, Kodak se déclare en faillite, January 2012Philippe Silberzahn, Fin de Kodak, victime dilemme de l’innovateur, January 2012Knowledge@Wharton, «What’s Wrong with This Picture : Kodak’s 30-year Slide into Bankruptcy», february 2012 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  41. 41. 7Blockbuster Video Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  42. 42. Blockbuster VideoIndustryMovies rentals Scenario Highlights Offer a wide selection of moviesDate of creation1985Group Context HighlightsEchostar Expansion of internet New comersCountry of OriginUSA Business Model Highlights Wide selection of movies for rent Exclusive offer of new movies for rentCase’s period Develop stores in residential areas and malls1985 - 2010Market typeMass market - Individuals Reasons of Failure New usage (environment): illegal downloading, streamingRevenues(2002) 5,5 bn USD New comers (environment): emerging competitors New technologies (environment): internet, downloading, VODNumber of Employees48 000 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  43. 43. Blockbuster VideoInnovation in services A changing environnement An abrupt endIn 1985, Blockbuster opens its first movie In mid 2000, new signs of change are emerging in In 2009, Blockbuster creates an automatedrental store in Dallas. From VHS tape to the environment. Customers expectations are distribution network to rent movies. The goalDVD, the company will have an exponential changing and new comers are disturbing the of this mass deployment is to come back as agrowth. In early 90s, the demand is existing market. Competitors appear and offer key player. For economic reasons, some shopsbooming. mail-delivered movie rental with a wider catalog. will be replaced by machines. Technological improvements will also disturb Despite this, the company filed for bankruptcyMovie rental allows to compensate the Blockbuster business model. Concurrently to in 2010.limited TV channels at that time and offers a internet development, streaming websites will The company left behind more than 6000wide and attracting catalog of movies. 9 explode along with all illegal downloading franchised and proprietary shops spread overyears after its creation, Blockbuster will be possibilities. 18 countries representing about 48000valued at $ 7.6 billion. employees. In addition, more and more TV channels propose new offers such as video on demand. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  44. 44. Blockbuster Video BUSINESS MODEL 87 million customers WIDE OFFER OF MOVIES + 6000 shops RENTALS Twenty countries NEW MOVIES PROXIMITY WITH RESIDENTIALS AREAS AND MALLS New usages Illegal downloading Streaming websites INTERNET EXPANSION OFFER A WIDE SELECTION OF CONTEXTSCENARIO MOVIES NEW COMERS (between 2002 and 2010) Mail-delivvred rental Video On Demand development Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  45. 45. Blockbuster Video KP KA VP CR CS DEVELOPMENT OF THE CONTENT OF THE OFFER INFORMATION ON USER STUDIOS DEVELOPMENT OF BEHAVIOUR NETWORK INDIVIDUALS KR WIDE MOVIES RENTAL OFFER CH 87 MILLIONS OF CUSTOMERS 48 000 EMPLOYEES DEDICATED SHOP + FRANCHISES DEDICATED DISTRIBUTION PRIORITY ON NEW MOVIES 6 000 SHOPS NETWORK IN 18 COUNTRIES C€ 40 % OF TURNOVER INFRASTUCTURE R€ MOVIES RENTAL DISTRIBUTED TO EMPLOYEES EXCLUSIVITY ON MOVIES * STUDIOSwww.businessmodelgeneration.com * On a dedicated periodSource :Le figaro, 24 september 2010 ; L’expansion, 11 may 2007 ;Financial Times, 24 february2010 ; The Times, 28 february 2010.Le Monde, 17 february 2010 ; Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  46. 46. 8Moulinex Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  47. 47. MoulinexIndustryManufacturer of small appliances Scenario Highlights Financials difficulties in 90sDate of creation Success story and recognizedd brand1937 Worldwide presenceFounderJean Mantelet Context HighlightsCountry of Origin Bursting of the family unitFrance Development of womens employment Emergence of strong asian competitors Small appliances associated with feeling of pleasureCase’s period1937 - 2001 Business Model Highlights Manufacturing of small appliance for women marketMarket type Mass production and low marginMass Market Originally, strong innovation on productRevenues(1998) 1,21 Billion € Reasons of FailureNumber of Employees Decrease of product sales with low margin (Business model viability)(1998) 11 000 Emerging competitors (Environment) Financial management (Management) Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  48. 48. MoulinexHistory of the group Pricing policy End of the story In 1950, Jean Mantelet developed a differentIn 1932, Jean Mantelet invents the vegetable This booming market quickly attractes pricing strategy from its competitors. Instead ofmill. Wishing to end by finding lumps in mash competitors, firstly european and then asian establishing a selling price based on cost pricepotatoes prepared by his wife, he decided to ones. The market was huge and attracting. The including depreciation of production equipment, hecreate the famous "Potato Masher" or "Presse- low complexity of products and the low level of focused on the consumer. His approach is basedPurée". Manufacturing and distribution of these maintenance for this type of goods reduced on the consumers ability to buy the product byproducts are a great success. seriously entry barriers. defining a "democratic" price.This new equipment allows solving a shared The entrepreneur looks for a mass production toproblem to all housewifes at that time. In 1957, In the 90s starts the decline of the group. A ensure low costs and a minimum profitability.it operates his business under the brand slowdown in gross markets can be explained byMoulinex. In 1962, appears a strong motto: the saturation of several customer segments."Moulinex free women" Worlwide exposure Sales suddenly collapsed. The emblematic founder died in 1991. It leaved room for internal a period of thirty and mores the beginning of dissension, mismanagement and a lack ofthe consumer society. It means liberation of The exponential market growth allows Moulinex innovation. In an effort of diversification of itshousehold chores and automation of dedicated to be located in several countries. At the end 80s, products, he company made a major acquisitiontasks. Moulinex will then have huge Moulinex products are distributed in more than (Krups) which increased its debts and reduced itsopportunities to address these new needs. 135 countries. However, the company activity is flexibility. Despite several massive restructuring largely based in France. Only 20% of the turnover and merger attempts or capital opening, theWithin only few years, the brand will invent no is generated abroad against 40% for SEB, its main French jewel is closed in 2001, September 7th.less than 70 products among which we find the competitor.coffee grinder, the multi-function robot, the iron The brand still exists today. It has been acquiredor the microwave. by SEB group together with some French production units. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  49. 49. Moulinex BUSINESS MODEL IN 1931 BY THE SMALL APPLIANCES FOUNDER, THE PRODUCTS MANUFACTURING «POTATO MASHER» MASS PRODUCTION LOW MARGIN The increase of single- parent families promote STRONG INITIAL VALUE PROPOSITION the market growth INNOVATION IN PRODUCTS FINANCIAL ISSUES IN THE 90’S MARKET GROWTH DEPENDS ON HOUSEHOLDS NUMBER OLD SUCCESS STORY Looking for time savings in houshold STRONG BRAND INCREASE OF WOMEN chores EMPLOYMENT SCENARIO CONTEXT WORLWIDE PRESENCE DECLINE OF AVERAGE 135 COUNTRIES HOUSING SIZERepresents only 20% EMERGENCE OF STRONG of Moulinex ASIAN COMPETITORS Decline of storage turnover areas: search for multi- functions products Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  50. 50. Moulinex KP KA VP CR CS BRAND PROMOTION ADVERTISING RESELLERS NETWORK LOGISTICS DISTRIBUTION SMALL APPLIANCES ADVERTISING AGENCIES MASS PRODUCTION WOMEN EQUIPMENTS 180 000 UNIT / DAY* 135 COUNTRIES KR CH STRONG BRAND SMALL APPLIANCES IMPORTANT REAL ESTATE STORES RESOURCES HUMAN RESOURCES MASS-MARKET RETAILING Unskilled labor Mainly women C€ R€ SELL EQUIPMENTS WITH IMPORTANT REAL ESTATE ADVERTISING REASONNABLE PRICE RESOURCES BUDGET PRESSURE ON PRICE 20% OF TURNOVER HUMANS RESOURCES LOW MARGIN DONE ABROADwww.businessmodelgeneration.com * Production for 16 plants in 1980Source :Marketing Magazine N°144, Saga Française à succès, 2010 ; OuestFrance, La bataille des millions, 2009Ministère de l’industrie, Approche sectorielle - électroménager, 1999 Stratégies, Moulinex se robot que je ne saurais voir, 1998.Mémoires d’entreprises, Moulinex,1993 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  51. 51. 9Cuisines Vogica Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
  52. 52. VGC DistributionIndustryFurniture fabrication Scenario Highlights Financial difficultiesDate of creation Strong decline of customer satisfaction1976LeadershipWilliam Ego Context HighlightsCountry of Origin Economic CrisisFrance Highly competitive environment Business Model Highlights Activities unbundlingCase’s period Failure of key partners2000 - 2010 Customer segmentation (professional / individuals)Market type Important logistics activitiesMass MarketRevenues Reasons of Failure(2008) 107 Million € Financial Management (Management)Number of Employees Failure of key partners (Business model execution)(Groupe) 1 000 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013

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