Business Model Innovation

1. BUSINESS MODEL INNOVATION Marcus Linder 2014-09-30 Marcus Linder 1

2. TOPICS TODAY 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects www.viktoria.se Marcus Linder Sorry, limited time for questions today. BUT – I work here. 

3. THE BUSINESS MODEL CONCEPT 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects

4. ”BUSINESS MODEL” IN BOOKS www.viktoria.se Src: goMoagrcleus nLigndrearms

5. ”BUSINESS MODEL” AT GOOGLE SCHOLAR 35000 30000 25000 20000 15000 10000 5000 0 1990 1995 2000 2005 2010 2015 www.viktoria.se "Business model" @ Google Scholar Search date: 2014-09-10 Marcus Linder

6. ”BUSINESS MODEL” GOOGLE WEB SEARCH 2005 2013 www.viktoria.se 2009 Marcus Linder Src: google trends

7. MANY TRIED TO OWN THE CONCEPT… www.viktoria.se Harvard: Johnson & Christensen 2008 (≈820) UC Berkley: Chesbrough & Rosenbloom 2002 (≈2000) Wharton: Amit & Zott 2001 (≈3100) Bain/Harvard: Magretta 2002 (≈1700) Marcus Linder

8. …and the winner is… www.viktoria.se Marcus Linder

9. Business model: The conceptual logic of how a business creates, delivers and captures economic value [from customers] www.viktoria.se Marcus Linder

10. THE BUSINESS MODEL CANVAS • Language for internal communication – avoid misunderstandings • Template to remember relevant business guesses to work through • Emotional help to focus on ”what we don’t know” – rather than what we have data on www.viktoria.se Marcus Linder

11. EVOLUTION OF THE BUSINESS MODEL CANVAS… www.viktoria.se Src: Osterwalder, A. (2004). The Business Model Ontology-a proposition in a design science approach. PhD, Universite de Lausanne. Marcus Linder

12. EVOLUTION OF THE BUSINESS MODEL CANVAS… www.viktoria.se Osterwalder 2008 Marcus Linder

13. www.viktoria.se Today’s dominant incarnation Marcus Linder

14. BUSINESS MODELS AS VALUE NETWORKS OR PLATFORMS Partners Channels & www.viktoria.se Focal firm’s business model customers ”We are developing a business model in which 22 firms work together to revolutionize home entertainment/international shipping/book reading/etc….” Marcus Linder

15. ”BUSINESS MODELS” AS REVENUE MODELS www.viktoria.se ”They use a razor and blade business model.” ”They use a freemium business model.” Marcus Linder

16. SEARCH VS EXECUTION 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects

17. TWO PARTS TO A FIRM www.viktoria.se The ”performance engine” • Highly optimized ”machine” doing product development and operations – known goal and better/more/cheaper The ”business model innovation project” • Resource consuming group trying to learn under considerable uncertainty – finding new goal Marcus Linder

18. PERFORMANCE ENGINE • Role: Pays all the bills • Goal: Excellence in execution of verified business model • Learning: often immense • Type of learning: optimization of known parameters www.viktoria.se Marcus Linder

19. YOU MUST NOT HURT THE PERFORMANCE ENGINE! It pays the bills – and ALWAYS wins internal power/political struggles Marcus Linder 21

20. BUSINESS MODEL INNOVATION PROJECT • Role: Temporary organization to create new/extend performance engine. Consume today to maybe create tomorrow. • Goal: Design and verification of business hypotheses • Learning: Core task! • Type of learning: Finding parameters to be optimized www.viktoria.se Deals på restauranger, träning, resor, shopping, skönhet och mer Marcus Linder

21. PERFORMANCE ENGINE STRENGTHS www.viktoria.se Well established processes (e.g. NPD) are usually… …but are typically inflexible to deal with: Marcus Linder

22. AGAIN: YOU MUST NOT HURT THE PERFORMANCE ENGINE! It will eat your project for breakfast, if push comes to shove Marcus Linder 24

23. SYSTEMATIC SEARCH 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects

24. WHAT I WAS TAUGHT IN SCHOOL… Marcus Linder 27

25. EXECUTE VS SEARCH Marcus Linder (Slide stolen from Henrik Berglund)

26. Marcus Linder (Slide stolen from Henrik Berglund)

28. 1. Find a great idea. 2. (Do great market research) 3. Launch at great scale 4. Find out you forgot one key question 5. Go home… Marcus Linder

30. There is a better way! Marcus Linder

31. Marcus Linder

32. BASIC IDEA State business model hypotheses • (not specs, don’t build) Prioritize hypotheses to test • (identifiy ”deal killers”) Iterate as needed, • otherwise realize idea (”build”) Test hypotheses • on market (low fidelity prototypes, possibly incremental dev.) Marcus Linder

33. BUSINESS MODEL CANVAS • Language for internal communication – avoid misunderstandings • Template to remember relevant business guesses to work through • Emotional help to focus on ”what we don’t know” – rather than what we have data on www.viktoria.se Marcus Linder

34. Guess! www.viktoria.se Guess! Guess! Guess! Guess! Guess! Guess! Guess! Guess! STARTING POINT: Marcus Linder

35. GOAL: Validated hypothesis www.viktoria.se Validated hypothesis Validated hypothesis Validated Validated hypothesis hypothesis Validated hypothesis Validated hypothesis Validated hypothesis Validated hypothesis Marcus Linder

36. 3 LAYERED BUSINESS MODEL www.viktoria.se Marcus Linder

37. DATA COLLECTION PHILOSOPHY A bias towards conversations Marcus Linder 44

38. www.viktoria.se Marcus Linder

39. WHY BIAS TOWARDS CONVERSATIONS? You don’t know precisely what and whom to ask • You can keep going even if you guessed wrong, less wasted effort (data) compared to surveys Guess-to-guess cycle time is a determinant of success • Tight cycles (testing few hyp) more cost effective than large (testing many) • Surveys are so cumbersome that you may get only one or two “large” shots! Conversations good at creating “insight” • Help you understand WHY a stakeholder thinks this or that way • Surprisingly powerful for (analytical) generalization • Increases chances of avoiding local optima and find global (less local) optima www.viktoria.se Marcus Linder

40. EMOTION = IMPORTANCE! www.viktoria.se Use a script – but be flexible! Try to get a conversation going! If customers show passion – follow them there and drill down! Marcus Linder

41. LOW FIDELITY PROTOTYPES www.viktoria.se Marcus Linder

42. PRODUCT-MARKET FIT When you present your idea, be most suspicious of ”yeah, that seems real nice”-type answers. (A prior need-based conversation helps with perspective.) www.viktoria.se Converse about this BEFORE you introduce your idea Value proposition Customer needs http://businessmodelalchemist.com/blog/2012/08/achieve-product-market-fit-with-our-brand-new-value-proposition-designer.html Marcus Linder

43. LOW FIDELITY PROTOTYPES TO AVOID FALSE NEGATIVES www.viktoria.se Marcus Linder

44. EMOTION = IMPORTANCE (As a first approximation) Marcus Linder 52

45. PAYMENT = VALIDATION (Later, but before building it properly) Marcus Linder 53

46. ECO-SYSTEMS 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects

47. HOW TO SUCCEED AT INNOVATION Customer insight www.viktoria.se Operational excellence Marcus Linder

48. Missed: complementor insight – there was no carrot or stick for thousands of repair shops to quickly acquire tools and training. Plenty of good market research  end customer insight On time, on spec.  operational excellence www.viktoria.se Got large OEMs on board from start  channel insight In Dec 2007, announced ”no further development” of PAX Launched in 1998 Marcus Linder

49. HOW TO SUCCEED AT INNOVATION www.viktoria.se Customer insight Operational excellence Value network operational excellence Value network insight Marcus Linder

50. RESEARCH PROJECTS 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects

51. ROLES & IN-KIND Creating New Business is Hard Work! • Serious Business Model Validation ≈ 500-2000 hours • Too expensive to run completely by researchers! • (And wont work anyways…) Excellent in-kind task • Risk reduction focus facilitates motivation • Profit focus facilitates motivation www.viktoria.se Marcus Linder

52. RESEARCH OPPORTUNITIES Too-rare-to-study businesses • What are challenges of circular business models? • What are challenges of … Method development: • How can [particular method] be adapted to better suit development for… • …complex business eco-systems, Large established organizations, Non-profits, Particular offering type (multimodal transports, product-service systems, eco-innovation, www.viktoria.se …) Marcus Linder

53. THANK YOU FOR LISTENING 1. Business model concept 2. Search vs. execution 3. Systematic search 4. Eco-systems 5. Research projects www.viktoria.se Marcus Linder