by Mark W.Johnson, Clayton M.Christensen, and
One Secret to maintaining a thriving business is recognizing
when it needs a fundamental change.
model is worth
T h e a n swe r i s
YES only if the
new model changes
the industr y or
To see past the borders of what is and into the land
of the new, Companies need a road map.
Realize that success
...by not thinking about
business models at all
...with thinking the
opportunity to satisfy a real
customer who needs a job
Construct a blueprint
laying out how your company
will fulfill that need at a profit
That plan has four elements
Compare the new
model to your existing
model to see how much
you’d have to change it
to capture the
First Step Second Step Third Step
A Business Model consists of four interlocking elements that,
taken together, create and deliver value.
operates according to
an effective business
A successful company is one that have found to create
value for customers. CPV
It is not possible to invent
or reinvent a business
model without first
identifying a clear
Job to be done to solve an important problem or
fulfill an important need for the target customer.
Offering, which satisfies the problem
or fulfills the need. This is defined not
only by what is sold but also by how
it is sold.
The profit formula is the blueprint that defines how the
company creates value for itself while providing value to the
How much money can
be made: price x volume.
Start by setting the price
required to deliver the CVP
and then work backwards
from there to determine
what the variable costs and
gross margins must be.
How costs are allocated:
includes cost of key
assets, direct costs,
indirect costs, economies
How much each
transaction should net to
achieve desired profit
How quickly resources
need to be used to
support target volume
The two elements that describe how the value which is
created will be delivered to the customer and the
Needed to deliver the
Operational and managerial
processes that allow a
company to deliver value in a
way they can successfully
repeat and increase in scale.
People, Technology, products,
Rules and metrics such as credit
terms, lead times, supplier terms.
Norms: opportunity size needed for
investment, approach to customers
Major changes to any
of these four elements
affect the others and
Established companies can often create new products that disrupt
competitors without fundamentally changing their own business
When a new
These circumstances often require business model change
Address needs of large groups who find
existing solutions too expensive or
The Nano’s goal is to open car ownership
to low-income consumers in emerging
Capitalize on new technology, or leverage
existing technologies in new markets.
A company develops a commercial
application for a technology originally
developed for military use.
Bring a job-to-be-done focus where it
FedEx focused on performing customers
unmet “job” : Receive packages faster and
more reliably than any other service could
Fend off low-end disruptors.
Mini-mills threatened the integrated steel
mills a generation ago by making steel at
significantly lower prices.
Respond to shifts in competition.
Power-tool maker Hilti switched from
selling to renting its tools. Low-end
entrants had begun chipping away at the
An opportunity to...
A need to...
Creating a new model for a new business does not mean the
current model is threatened or should be changed. A new model
often reinforces and complements the core business.
Embraces the Low End
pay for value-added
R&D, sales, and
Spot-market pricing, low
overhead to accommodate
lower margins, high
No frills, bulk prices,
sold through the
IT system, lowest-cost
Customer Value Proposition Profit Formula
Key resources and
new opportunities in low-margin
setting up a separate
business unit that
operates in an entirely
Investment paid back in just
The Elements of a Successful Business Model.
identifying all of the
constituent parts of a
Understand how the
model fulfills a potent
value proposition in a
Judge how well the
existing model could
be used to fulfill a
What it needs to
do to construct a
Be patient for