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BoS USA Online 2020 Alex Osterwalder & Tendayi Viki

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Presented at opening day of BoS USA Online 2020 with the help of PDQ.com as they went through the process of Designing a Breakthrough Business Model

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BoS USA Online 2020 Alex Osterwalder & Tendayi Viki

  1. 1. Designing Breakthrough Business Models with a Live Case
  2. 2. Your hosts today are… Alex OsterwalderTendayi Viki Mathias Maisberger
  3. 3. 1. Shawn Anderson - Co-Founder 3. Brigg Angus - Director 2. Shane Corellian - Co-Founder
  4. 4. 1 If you like this presentation, please, feel free to share it but keep these copyright restrictions in mind: • The Strategyzer logo should always fully appear on any slide that contains our illustrations and/or content. • This content should not be published on any other online or offline channels other than Strategyzer’s, unless this has been previously agreed upon by Strategyzer AG and formalized in a written agreement. • This content cannot be resold or integrated into any physical or software product. The Business Model Canvas is licensed as creative commons. Enjoy it and adapt it freely, as long as you reference with citation “Strategyzer.com” and share your work under the same license. The Value Proposition Canvas is copyrighted Strategyzer AG and is not to be modified or used in software or other commercial products. Feel free to use the Business Model Canvas and Value Proposition Canvas in meetings or for consulting services under the condition of referencing and citing “Strategyzer.com” and fully displaying the Strategyzer logo. You can find additional information on businessmodelgeneration.com/canvas/bmc under “Legal Info”. 
 Please contact support@strategyzer.com for any inquiry. These slides are copyright of Strategyzer AG and are intended for personal use only. For other uses please inquire about licensing fees with Natasha at sales@strategyzer.com. The following applies to any content you intend to reuse: These slides are copyright of Strategyzer AG and are intended for personal use only. For uses please inquire about licensing fees with our sales team at sales@strategyzer.com The following applies to any content you intend to reuse:
  5. 5. poll 1. Constantly Reinvent itself 2. Compete on Superior Business Models 3. Transcend Industry Boundaries CompanyInvincibleThe Resilient 1. Warm-Up & PDQ Business Model 2. Types of Inno & Business Model Patterns 3. Business Model Shifts AGENDA FOR TODAY 1 Business Models
  6. 6. FROM BUSINESS MODEL CANVAS TO PORTFOLIO MANAGEMENT 2009 Map out your business model strategyzer.com Gain Creators Pain Relievers Pains Gains Products & Services Customer Job(s) The Value Proposition Canvas Value Proposition Customer Segment strategyzer.comThe makers of Business Model Generation and Strategyzer Copyright Business Model Foundry AG Design your value proposition 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights 8 9 The Iterative Process Business Concept Design Design is the activity of turning vague ideas, market insights, and evidence into con- crete value propositions and solid business models. Good design involves the use of strong business model patterns to maximize returns and compete beyond product, price, and technology. The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Testing and reducing risk To test a big business idea you break it down into smaller chunks of testable hypotheses. These hypotheses cover three types of risk. Firstly, that customers aren’t interested in your idea (desirability). Secondly, that you can’t build and deliver your idea (feasibility). Thirdly, that you can’t earn enough money from your idea (viability). You test your most important hypotheses with appropriate experiments. Each experi- ment generates evidence and insights that allow you to learn and decide. Based on the evidence and your insights you either adapt your idea if you learn you were on the wrong path or continue testing other aspects of your idea if the evidence supports your direction. Desirability risk Customers aren’t interested The risk that the market a business is targeting is too small, that too few customers want the value proposition, or that the company can’t reach, acquire, and retain targeted customers. Feasibility risk We can’t build and deliver The risk that a business can’t get access to key resources (technology, IP, brand, etc.), can’t develop capabilities to perform key activities or can’t find key partners to build and scale the value proposition. Viability risk We can’t earn enough money The risk that a business can’t generate successful revenue streams, that customers are unwilling to pay (enough), or that the costs are too high to make a sustainable profit. Reducing Uncertainty and Risk TEST BUSINESS DESIGN Ideate Business Prototype Assess Learn D ec id e Hypothesize Experiment Idea Key Hypotheses Business Model Experiments Value Proposition Key Insights hypothesize experiment learn ideate business prototype assess decid e Test and de-risk business ideas x From Business Model Generation to Invincible Company Job-to-be-Done Key question Key Tool and Process Books Innovate and Design Invent and Improve Map your business, idea, or innovation how do you create sustain- able profits and value for your organization? Business Model Canvas (BMC) or Mission Model Canvas (MMC) Busin (2009 Map your product and service how do you create value for your customers? Value Proposition Canvas (VPC) Value Maximize opportunities and compete on business models How do I maximize opportunities and improve my business with the best business model design? Business Model Patterns (invent patterns and shift patterns) The In Busin (2009 Test and De-Risk Test and de-risk your idea How do you reduce the risk of pursuing a business idea that won’t work? Customer Development (Steve Blank) and Agile Engineering / Lean Startup (Eric Ries), Test Card, Learning Card The S (Steve Lean Value Pick the right experiments to test your idea What are the most appropriate experiments to test and de-risk your ideas? Experiment Library Testin Measure the reduction of risk and uncertainty Am I making progress from idea to realistic business model? Strategyzer Innovation Metrics The In Design Innovation Culture and Manage Portfolio Stay ahead of competition and become invincible How do you prevent disruption and constantly reinvent yourself? Portfolio Map, Portfolio Actions The In Create an (innovation) culture How do you design, test, and manage an innovation culture? Culture Map (CM), Innovation Culture Assessment The In Invest in the best ideas Which ideas and teams should I invest in? Strategyzer Growth Funnel (SGF), Innovation Project Scorecard (IPS) The In Align (innovation) teams How do you pull through execu- tion and keep teams aligned? Team Alignment Map (TAM) The Te (2020 The Invincible Company is the fourth in the series of Strategyzer books. It complements the previous books and addresses a number of jobs-to-be-done for innovation teams, entrepreneurs, and senior leaders who manage entire organizations. The new content is based on what we’ve learned from working with leading organizations around the world and from studying the world’s few Invincible Companies. strategyzer.com/books strategyzer.com/invincible Written by Alex Osterwalder Yves Pigneur Fred Etiemble Alan Smith Designed by Chris White Trish Papadakos You’re holding a guide to the world’s best business models. Use it to inspire your own portfolio of new ideas and reinventions. Design a culture of innovation and transformation to become… This book integrates with Business Model Generation, Value Proposition D The nv nc b e Company Manage your portfo o & create an nnovat on cu ture Resou ce Ac v y Pa ne You Va ue P opos on You Cus ome Cos Channe Re a onsh p Revenue ADAPTABILITY FEASIBILITY Can we bu d t ? VIABILITY Can we generate va ue ? DESIRABILITY Do the customers want t ? Exercice — TED 1984
  7. 7. - Bruno Giussani, Global curator & director of TED “When people sit in a room to listen to a speaker, they are offering her something extremely precious […]: a few minutes of their time and of their attention. Her task is to use that time as well as possible 2003 Map out TED Conferences’s Business Model KEY PARTNERS KEY ACTIVITIES CUSTOMER RELATIONSHIP CUSTOMER SEGMENTSVALUE PROPOSITION KEY RESOURCES CHANNELS COST STRUCTURE REVENUE STREAMS TED conferences Conferences KEY PARTNERS KEY ACTIVITIES CUSTOMER RELATIONSHIP CUSTOMER SEGMENTSVALUE PROPOSITION KEY RESOURCES CHANNELS COST STRUCTURE REVENUE STREAMS Staging conferences Personal Invitations TED Speakers Staff & Curators Conference fees Privilegeda b c d e f 2 1 3 6 4 5 write down the full sequence of 6 letters matching the numbers TED conferences Invite-only influencers Conferences abcdef
  8. 8. KEY PARTNERS KEY ACTIVITIES CUSTOMER RELATIONSHIP CUSTOMER SEGMENTSVALUE PROPOSITION KEY RESOURCES CHANNELS COST STRUCTURE REVENUE STREAMS 3 6 4 1 5 2 a b c d e f 2 1 3 6 4 5 Solution: dfaceb Staging conferences Personal Invitations TED Speakers Staff & Curators Conference fees Privileged TED conferences Invite-only influencers Conference logistics Visibility Sponsors Sponsoring Conferences 2 Types of Innovation & Business Model Patterns
  9. 9. High uncertainty Low uncertainty THE EXPLORE/EXPLOIT CONTINUUM 3 types of innovation +transformative sustaining +efficiency improve processes & existing business model, refine value propositions replace and extend value propositions, new channels, new geographies new business models, value propositions, and entirely new growth engines THE EXPLORE/EXPLOIT CONTINUUM +transformative sustaining +efficiency poll
  10. 10. business people don’t just need to understand designers better; they need to become designers “ ”– Roger Martin, Rotman School @ Toronto ‣A repeatable configuration of different business model building blocks to strengthen an organization’s overall business model Business Model Pattern with 27 flavors that new ventures and established companies can apply to build better, more competitive business models. We describe each pattern so that you can make use of it as a reference library. Case Illustration Each case serves to highlight a pattern in action. We don’t outline the company’s entire business model—just show how it applied a particular pattern to build a more competitive business model. In reality, an entire business model might combine several patterns. more different flavors. These are variations of a particular pattern to help you understand different ways to apply the pattern in question. tration – Greenfield – Business Model Pattern – Case Illustration – Pattern Building Blocks – Optional Pattern Building Blocks – Original Business Model Blocks – Other Business Model Blocks Pattern New Business Model Business Models Canvas INVENT Invent Patterns Backstage Disruption • Resource Castles • Activity Differentiators • Scalers Profit Formula Disruption • Revenue Differentiators • Cost Differentiators • Margin Masters Frontstage Disruption • Market Explorers • Channel Kings • Gravity Creators 226 Shift Pattern Library INVENT Invent Patterns Library
  11. 11. FRONTSTAGE DISRUPTION ?What did all these three companies add to their business model that keeps them ahead of competition? They added “switching costs” that make it difficult for customers to leave or switch to competitors. Gravity Creators Gravity Creators Lock in Customers Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams
  12. 12. iPod with this amazing device you can put thousand songs in your pocket ... and you’re locking us in because it has just become more difficult to switch devices 1 2 3 4 56 iPod: 1’000 songs in your pocket Mass market iPod hardware & software Switching cost Recurring transactional sales Retail Gravity Creator Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams iTunes BACKSTAGE DISRUPTION
  13. 13. Question for You What do these three business models have in common ? They created a competitive advantage with key resources that are difficult or impossible for competitors to copy Resource Castles RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE ource tles d ats competitive age with key es that are or impossible by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? User Base Castles — Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles — Create a business model with network effects in which a number of users represents value to on more other distinct set of users, and vi versa. That makes it hard for anybody with less users to compete or to catch VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP R&D CUSTOMER SEGMENT BRAND VALU PROPOS MARKETING & BRANDING VP THA RELIES “THE OT SIDE OF PLATFO VP THA RELIES “THE OT SIDE OF PLATFO USER ACQUISITION PLATFORM OPERATIONS USER BASE A GENERAL USER ACQUISITION COST USER BASE B PLATFORM Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams Resource Castles 164 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key User B model numbe for oth to esta makes Build Moats Illustration — Dyson
  14. 14. - James Dyson, inventor & founder of Dyson “The key to success is failure… Success is made of 99 percent failure. 164 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g., intellectual property, brand, etc.). Assessment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+10−1−2−3 38 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible to copy by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g. intellectual property, brand, etc.). Assesment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+20-1-2-3 164 RESOURCE COST D HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy Our key resources are significantly inferior to those of our competitors. Assessment Question Do we own key resources that are diff give us a significant competitive adva −1−2−3 PREMIUM CONSUMER APPLIANCES High-end mass market Research & development R&D Costs 100 million machines as of 2017 Premium Price Intellectual proprietary & patents $700 Vs $40 Resource Castles IP Castle Build Moats Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams 170 INVENTPATTERNS 170 171 BACKSTAGEDISRUPTION 245 years Wedgwood’s Jasper vases have stayed in continuous production since 1774.⁴⁰ In the 1980s, James Dyson developed revo- lutionary, bagless, cyclonic vacuum technol- ogy. He attempted to license it to vacuum manufacturers, but the companies rejected his ideas. The technology was indeed better but this product would remove the recurring revenues from bag and filter sales. Dyson didn’t give up and manufac- tured his own vacuum in 1993, fighting off several patent infringement lawsuits along the way. Subsequently, Dyson’s business portfolio grew by continuing to manufac- ture superior products from patented IP. The company expanded into hand dryers, fans, air purifiers, hair dryers, robot vacu- ums, and even electric cars. Each product is the result of a leap in technology (with patented IP). Dyson Starting with a vacuum in 1993, Dyson tackles a wide range of prod- uct engineering challenges with an ingenious approach. It invests heavily in R&D to launch innovative, best- in-class products that it sells at a premium and protects with patents. 1 Invest Heavily in R&D Dyson’s ambition is to produce the best in class or nothing in each product range it enters. The company reinvests approximately 20% of its earnings into research and development. 4 Sell at a Premium Dyson sells its home appliances at a premium price point. With a $700 price tag for its upright vacuum, Dyson is the most expensive vacuum on the market, with the cheapest alternative selling for $40. 2 Patent Aggressively Dyson protects its product innovations with many pat- ents. For the development of the Supersonic Hair Dryer, Dyson spent $71 million and filed 100 patent applications. The company reportedly spends over $6.5 million per year on patent litigation.³⁷ 3 Differentiate with the Best Products and Services Dyson uses its IP to create the best product within each category it competes. Its vacuums, for instance, include technologies that have never been incorpo- rated into its competitors’ products. Research & development Intellectual property & patents Premium consumer appliances High-end mass market Premium price Research & development cost Engineers Brand Design & manufacturing 2 3 4 1 Brand Dyson developed a strong brand by transform- ing the sleepy home appliance market into one filled with cutting edge technology and sleek industrial design. Dyson has often been dubbed the “Apple of home appliances,” as the company strives for perfection before releasing a product. Her Majesty's Potter Queensware fine ceramic pottery Marketing and branding costs Innovative marketing of Queensware Royal pottery Queen of England royal patrons Aspirational households High-end retail sales IP Castle 1993 2019 Wedgwood used his royal recognition to target aspirational consumers who wanted to drink tea like the upper class, but could not necessarily afford expen- sive porcelain. He created a brand in an area where there was none previously. Wedgwood also convinced consumers to buy pottery for display rather than use and used the strength of his brand to protect his business from competition for decades. Wedgwood In 1765, Josiah Wedgwood wins a royal pottery competition and is declared Her Majesty’s Potter. He uses that recognition to build a strong and defensible brand, markets his pieces as Queensware, and generates a fortune of $3.4 billion in today’s market value. Brand Castle 1765 2019 6x more investment in R&D than competitors, on average.³⁸ 100 million machines were manufactured by Dyson as of 2017, produced at a rate of 80 thousand per day.³⁹ Dyson's R&D Investment Average Competitor Investment HISTORICAL CASE TRIGGER QUESTION How could we make difficult-to- copy resources a key pillar of our business model? Resource Castles 164 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key User B model numbe for oth to esta makes Build Moats 38 39 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible to copy by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g. intellectual property, brand, etc.). User Base Castles — Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles — Create a business model with network effects in which a large number of users represents value to one or more other distinct set of users, and vice versa. That makes it hard for anybody else with less users to compete or to catch up. TRIGGER QUESTION How could we create a multi-sided platform that depends on the existence of two or more large user bases? IP Castles — Use protected intellectual property (IP) to outcompete others. Offer distinct value propositions that are hard or impossible to copy if you don’t own the IP. TRIGGER QUESTION How could we use pro- tected intellectual property as a competitive advan- tage (in arenas where it hasn’t mattered before)? Brand Castle — Use a strong brand to outcompete others. Focus on value proposi- tions in which a strong brand is an essential component. TRIGGER QUESTION How could we make brand a relevant com- petitive advantage (in an area where it hasn’t been so far)? VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP PROTECTED INTELLECTUAL PROPERTY R&D COST R&D CUSTOMER SEGMENT PREMIUM PRICE BRANDED VALUE PROPOSITION MARKETING & BRANDING LOVEMARK BRAND PREMIUM PRICE LOVEMARK BRAND MARKETING & BRAND COST CUSTOMER SEGMENT VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” USER ACQUISITION PLATFORM OPERATIONS USER BASE A GENERAL USER ACQUISITION COST USER A USER B USER BASE B PLATFORM Assesment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+20-1-2-3 Resource Castles 164 RESOURCE COST D HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key Build Moats 164 16 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g., intellectual property, brand, etc.). User Base Castles – Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles – Create a business model with network effects in which a large number of users represents value to one or more other distinct sets of users, and vice versa. That makes it hard for anybody else with fewer users to compete or to catch up. TRIGGER QUESTION How could we create a multisided platform that depends on the existence of two or more large user bases? IP Castles – Use protected intellectual property (IP) to outcompete others. Offer distinct value propositions that are hard or impossible to copy if you don’t own the IP. TRIGGER QUESTION How could we use pro- tected intellectual property as a competitive advan- tage (in arenas where it hasn’t mattered before)? Brand Castle – Use a strong brand to outcompete others. Focus on value proposi- tions in which a strong brand is an essential component. TRIGGER QUESTION How could we make brand a relevant com- petitive advantage (in an area where it hasn’t been so far)? VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP PROTECTED INTELLECTUAL PROPERTY R&D COST R&D CUSTOMER SEGMENT PREMIUM PRICE BRANDED VALUE PROPOSITION MARKETING & BRANDING LOVEMARK BRAND PREMIUM PRICE LOVEMARK BRAND MARKETING & BRAND COST CUSTOMER SEGMENT VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” USER ACQUISITION PLATFORM OPERATIONS GENERAL USER ACQUISITION COST USER A USER B USER BASE B USER BASE A PLATFORM Assessment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+10−1−2−3 164 165 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g., intellectual property, brand, etc.). User Base Castles – Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles – Create a business model with network effects in which a large number of users represents value to one or more other distinct sets of users, and vice versa. That makes it hard for anybody else with fewer users to compete or to catch up. TRIGGER QUESTION How could we create a multisided platform that depends on the existence of two or more large user bases? IP Castles – Use protected intellectual property (IP) to outcompete others. Offer distinct value propositions that are hard or impossible to copy if you don’t own the IP. TRIGGER QUESTION How could we use pro- tected intellectual property as a competitive advan- tage (in arenas where it hasn’t mattered before)? Brand Castle – Use a strong brand to outcompete others. Focus on value proposi- tions in which a strong brand is an essential component. TRIGGER QUESTION How could we make brand a relevant com- petitive advantage (in an area where it hasn’t been so far)? VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP PROTECTED INTELLECTUAL PROPERTY R&D COST R&D CUSTOMER SEGMENT PREMIUM PRICE BRANDED VALUE PROPOSITION MARKETING & BRANDING LOVEMARK BRAND PREMIUM PRICE LOVEMARK BRAND MARKETING & BRAND COST CUSTOMER SEGMENT VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” USER ACQUISITION PLATFORM OPERATIONS GENERAL USER ACQUISITION COST USER A USER B USER BASE B USER BASE A PLATFORM Assessment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+10−1−2−3 164 165 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g., intellectual property, brand, etc.). User Base Castles – Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles – Create a business model with network effects in which a large number of users represents value to one or more other distinct sets of users, and vice versa. That makes it hard for anybody else with fewer users to compete or to catch up. TRIGGER QUESTION How could we create a multisided platform that depends on the existence of two or more large user bases? IP Castles – Use protected intellectual property (IP) to outcompete others. Offer distinct value propositions that are hard or impossible to copy if you don’t own the IP. TRIGGER QUESTION How could we use pro- tected intellectual property as a competitive advan- tage (in arenas where it hasn’t mattered before)? Brand Castle – Use a strong brand to outcompete others. Focus on value proposi- tions in which a strong brand is an essential component. TRIGGER QUESTION How could we make brand a relevant com- petitive advantage (in an area where it hasn’t been so far)? VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP PROTECTED INTELLECTUAL PROPERTY R&D COST R&D CUSTOMER SEGMENT PREMIUM PRICE BRANDED VALUE PROPOSITION MARKETING & BRANDING LOVEMARK BRAND PREMIUM PRICE LOVEMARK BRAND MARKETING & BRAND COST CUSTOMER SEGMENT VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” USER ACQUISITION PLATFORM OPERATIONS GENERAL USER ACQUISITION COST USER A USER B USER BASE B USER BASE A PLATFORM Assessment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+10−1−2−3 164 165 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g., intellectual property, brand, etc.). User Base Castles – Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles – Create a business model with network effects in which a large number of users represents value to one or more other distinct sets of users, and vice versa. That makes it hard for anybody else with fewer users to compete or to catch up. TRIGGER QUESTION How could we create a multisided platform that depends on the existence of two or more large user bases? IP Castles – Use protected intellectual property (IP) to outcompete others. Offer distinct value propositions that are hard or impossible to copy if you don’t own the IP. TRIGGER QUESTION How could we use pro- tected intellectual property as a competitive advan- tage (in arenas where it hasn’t mattered before)? Brand Castle – Use a strong brand to outcompete others. Focus on value proposi- tions in which a strong brand is an essential component. TRIGGER QUESTION How could we make brand a relevant com- petitive advantage (in an area where it hasn’t been so far)? VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP PROTECTED INTELLECTUAL PROPERTY R&D COST R&D CUSTOMER SEGMENT PREMIUM PRICE BRANDED VALUE PROPOSITION MARKETING & BRANDING LOVEMARK BRAND PREMIUM PRICE LOVEMARK BRAND MARKETING & BRAND COST CUSTOMER SEGMENT VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” VP THAT RELIES ON “THE OTHER SIDE OF THE PLATFORM” USER ACQUISITION PLATFORM OPERATIONS GENERAL USER ACQUISITION COST USER A USER B USER BASE B USER BASE A PLATFORM Assessment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+10−1−2−3 USER BASE CASTLES PLATFORM CASTLES IP CASTLES BRAND CASTLES FLAVORS DIFFERENT FLAVOURS
  15. 15. Exercise — Waze How would you map out Waze’s business model using the ‘Resource Castles’ pattern ? RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE ource tles d ats competitive age with key es that are or impossible by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? User Base Castles — Create a business model with network effects in which a large number of users equals the relative value for other users. Acquire a large user base to establish a competitive advantage that makes it hard for anybody else to catch up. TRIGGER QUESTION How could we establish a competitive advantage rooted in a large user base and network effects in our value proposition? Platform Castles — Create a business model with network effects in which a l number of users represents value to on more other distinct set of users, and vic versa. That makes it hard for anybody with less users to compete or to catch u VP THAT GETS BETTER WITH MORE USERS USER ACQUISITION USER BASE USER ACQUISITION COST USER DIFFERENTIATED VALUE PROPOSITION BASED ON IP R&D CUSTOMER SEGMENT BRAND VALU PROPOSI MARKETING & BRANDING VP THA RELIES O “THE OTH SIDE OF T PLATFOR VP THA RELIES O “THE OTH SIDE OF T PLATFOR USER ACQUISITION PLATFORM OPERATIONS USER BASE A GENERAL USER ACQUISITION COST USER BASE B PLATFORM Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams Resource Castles Real time traffic navigation a Acquisition Costs d Driver communityc User acquisition b Traffic data & algorithms e Drivers (& editors) f write down the full sequence of 6 letters (a…) matching the numbers 164 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? User Base Castles – Create model with network effects number of users equals the for other users. Acquire a la to establish a competitive a makes it hard for anybody e USER ACQUISITION USER BASE USER ACQUISITIO COST R&D 1 2 3 5 4 1 5 3 4 3 2 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible to copy by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams 1 2 3 4 5 Resource Castlesa d c b e f 164 RESOURCE COST HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible TRIGGER QUESTION How could we make difficult-to-co Solution: afcebd Free Real time traffic navigation Acquisition Costs User acquisition Drivers (& editors) Driver community Traffic data & algorithms
  16. 16. SCORING Questions for leaders TRIGGER QUESTION How could we make difficult-to- copy resources a key pillar of our business model? ASSESSMENT QUESTION FOR LEADERS Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? Resource Castles 164 RESOURCE COST D HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible for competitors to copy. TRIGGER QUESTION How could we make difficult-to-copy Our key resources are significantly inferior to those of our competitors. Assessment Question Do we own key resources that are diff give us a significant competitive adva −1−2−3 Build Moats 38 RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible to copy by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to those of our competitors. Our key resources can’t easily be copied or emulated for the next couple of years and they give us a significant competitive advan- tage (e.g. intellectual property, brand, etc.). Assesment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+20-1-2-3 Frontstage Market Explorers: How large and attractive is the untapped market potential we are going after? +10−1−2 +3+2−3 Channel Kings: Do we have large- scale and, ideally, direct access to our end-customer? +10−1−2 +3+2−3 Gravity Creators: How easy or difficult is it for our customers to leave or switch to another company? +10−1−2 +3+2−3 Backstage Resource Castles: Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +10−1−2 +3+2−3 Activity Differentiators: Do we create significant value for customers because we perform and configure activities in disruptively innovative ways? +10−1−2 +3+2−3 Scalers: How rapidly and how easily can we grow our business model without sub- stantial additional resources and activities (e.g., building infrastructure, finding talent)? +10−1−2 +3+2−3 Profit Formula Revenue Differentiators: Do we use strong revenue streams and pricing mechanisms to monetize value creation for customers? +10−1−2 +3+2−3 Cost Differentiators: Is our cost structure conventional or disruptive? +10−1−2 +3+2−3 Margin Monsters: Do we have strong margins from low costs and high prices? +10−1−2 +3+2−3 Assessment Questions for Leaders 213 Frontstage Market Explorers: How large and attractive is the untapped market potential we are going after? +10−1−2 +3+2−3 Channel Kings: Do we have large- scale and, ideally, direct access to our end-customer? +10−1−2 +3+2−3 Gravity Creators: How easy or difficult is it for our customers to leave or switch to another company? +10−1−2 +3+2−3 Backstage Resource Castles: Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +10−1−2 +3+2−3 Activity Differentiators: Do we create significant value for customers because we perform and configure activities in disruptively innovative ways? +10−1−2 +3+2−3 Scalers: How rapidly and how easily can we grow our business model without sub- stantial additional resources and activities (e.g., building infrastructure, finding talent)? +10−1−2 +3+2−3 Profit Formula Revenue Differentiators: Do we use strong revenue streams and pricing mechanisms to monetize value creation for customers? +10−1−2 +3+2−3 Cost Differentiators: Is our cost structure conventional or disruptive? +10−1−2 +3+2−3 Margin Monsters: Do we have strong margins from low costs and high prices? +10−1−2 +3+2−3 Assessment Questions for Leaders 213 Frontstage Market Explorers: How large and attractive is the untapped market potential we are going after? +10−1−2 +3+2−3 Channel Kings: Do we have large- scale and, ideally, direct access to our end-customer? +10−1−2 +3+2−3 Gravity Creators: How easy or difficult is it for our customers to leave or switch to another company? +10−1−2 +3+2−3 Backstage Resource Castles: Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +10−1−2 +3+2−3 Activity Differentiators: Do we create significant value for customers because we perform and configure activities in disruptively innovative ways? +10−1−2 +3+2−3 Scalers: How rapidly and how easily can we grow our business model without sub- stantial additional resources and activities (e.g., building infrastructure, finding talent)? +10−1−2 +3+2−3 Profit Formula Revenue Differentiators: Do we use strong revenue streams and pricing mechanisms to monetize value creation for customers? +10−1−2 +3+2−3 Cost Differentiators: Is our cost structure conventional or disruptive? +10−1−2 +3+2−3 Margin Monsters: Do we have strong margins from low costs and high prices? +10−1−2 +3+2−3 Assessment Questions for Leaders 213 Backstage Disruption Profit Formula Disruption Frontstage Disruption 227 ft Pattern Library Value Proposition Shifts p. XXX From Product to Recurring Service p. XXX From Low-Tech to High-Tech p. XXX From Sales to Platform Frontstage Driven Shifts p. XXX From Niche Market to Mass Market p. XXX From B2B to B2(B2)C p. XXX From Low Touch to High Touch Profit Formula Driven Shifts p. XXX From High Cost to Low Cost p. XXX From Transactional to Recurring Revenue p. XXX From Conventional to Contrarian Backstage Driven Shifts p. XXX From Dedicated Resources to Multi-Usage Resources p. XXX From Asset Heavy to Asset Light p. XXX From Closed to Open (Innovation) ASSESSMENT Questions for Leaders
  17. 17. 3 Business Model Shifts Making the shift from competitive advantage to transient strategy - Rita McGrath, Columbia “ ” Shift Pattern New Business Model Original Business Model IMPROVE Shift Patterns 226 Shift Pattern Library Value Proposition Shifts p. XXX From Product to Recurring Service p. XXX From Low-Tech to High-Tech p. XXX From Sales to Platform Frontstage Driven Shifts p. XXX From Niche Market to Mass Market p. XXX From B2B to B2(B2)C p. XXX From Low Touch to High Touch Backstage Driven Shift • From Dedicated to Multi-Usage • From Asset Heavy to Asset Light • From Closed to Open (innovation) Profit Formula Driven Shift • From High Cost to Low Cost • From Transactional to recurring revenue • From Conventional to Contrarian Frontstage Driven Shift • From Niche to Mass Market • From B2B to B2(B2)C • From Low to High Touch Value Proposition Shift • From Product to Service • From Low-Tech to High-Tech • From Sales to Platform IMPROVE Shift Patterns Library
  18. 18. SPECIALIZED CHANNELS NICHE MARKETING NICHE VALUE PROPOSITION NICHE MARKET HIGH-PRICE REVENUE NICHE BRAND Original niche market business model Mass market pattern 242 243 is the shift from niche market player to mass market player. This often requires a simpli- fication of the value proposition to cater to a larger market. The lower price that such a simplified value proposition commands is compensated by a larger volume of revenues from the mass market. This shift requires marketing activities, channels, and a brand that are tailored to the mass market. STRATEGIC REFLECTION How might we simplify our value proposition to break out of a niche market and cater to a mass market? How might we change marketing and brand to reach a mass market? How can we compensate for lower prices and increased marketing costs with more revenues from a larger mass market? EXAMPLE TED From Niche Market to Mass Market MASS MARKETING COST MASS CHANNEL LOW-PRICE HIGH-VOLUME REVENUE MASS MARKET MASS MARKET VALUE PROPOSITION MASS MARKETING MASS MARKET BRAND A radical shift of who is targeted and how products and services are delivered Frontstage Driven Shifts From Niche Market to Mass Market p.XXX TED From B2B to B2(B2)C p.XXX Intel Inside From Low Touch to High Touch p.XXX Apple Genius Bar SPECIALIZED CHANNELS NICHE MARKETING NICHE VALUE PROPOSITION NICHE MARKET HIGH-PRICE REVENUE NICHE BRAND Original niche market business model Mass market pattern 242 243 is the shift from niche market player to mass market player. This often requires a simpli- fication of the value proposition to cater to a larger market. The lower price that such a simplified value proposition commands is compensated by a larger volume of revenues from the mass market. This shift requires marketing activities, channels, and a brand that are tailored to the mass market. STRATEGIC REFLECTION How might we simplify our value proposition to break out of a niche market and cater to a mass market? How might we change marketing and brand to reach a mass market? How can we compensate for lower prices and increased marketing costs with more revenues from a larger mass market? EXAMPLE TED From Niche Market to Mass Market MASS MARKETING COST MASS CHANNEL LOW-PRICE HIGH-VOLUME REVENUE MASS MARKET MASS MARKET VALUE PROPOSITION MASS MARKETING MASS MARKET BRAND A radical shift of who is targeted and how products and services are delivered Frontstage Driven Shifts From Niche Market to Mass Market p.XXX TED From B2B to B2(B2)C p.XXX Intel Inside From Low Touch to High Touch p.XXX Apple Genius Bar SPECIALIZED CHANNELS NICHE MARKETING NICHE VALUE PROPOSITION NICHE MARKET HIGH-PRICE REVENUE NICHE BRAND Original niche market business model Mass market pattern 243 is the shift from niche market player to mass market player. This often requires a simpli- fication of the value proposition to cater to a larger market. The lower price that such a simplified value proposition commands is compensated by a larger volume of revenues from the mass market. This shift requires marketing activities, channels, and a brand that are tailored to the mass market. STRATEGIC REFLECTION How might we simplify our value proposition to break out of a niche market and cater to a mass market? How might we change marketing and brand to reach a mass market? How can we compensate for lower prices and increased marketing costs with more revenues from a larger mass market? EXAMPLE TED From Niche Market to Mass Market MASS MARKETING COST MASS CHANNEL LOW-PRICE HIGH-VOLUME REVENUE MASS MARKET MASS MARKET VALUE PROPOSITION MASS MARKETING MASS MARKET BRAND s SPECIALIZED CHANNELS NICHE MARKETING NICHE VALUE PROPOSITION NICHE MARKET HIGH-PRICE REVENUE NICHE BRAND Original niche market business model Mass market pattern 243 is the shift from niche market player to mass market player. This often requires a simpli- fication of the value proposition to cater to a larger market. The lower price that such a simplified value proposition commands is compensated by a larger volume of revenues from the mass market. This shift requires marketing activities, channels, and a brand that are tailored to the mass market. STRATEGIC REFLECTION How might we simplify our value proposition to break out of a niche market and cater to a mass market? How might we change marketing and brand to reach a mass market? How can we compensate for lower prices and increased marketing costs with more revenues from a larger mass market? EXAMPLE TED From Niche Market to Mass Market MASS MARKETING COST MASS CHANNEL LOW-PRICE HIGH-VOLUME REVENUE MASS MARKET MASS MARKET VALUE PROPOSITION MASS MARKETING MASS MARKET BRAND s hifts 230 SALES CHANNEL PRODUCT- RELATED COST PRODUCT- RELATED ACTIVITIES PRODUCT CUSTOMER SEGMENT SALES PRODUCT- RELATED RESOURCES Original product business model Recurring service pattern 231 is the shift from manufacturing (and/or buying) and selling products toward providing a recurring service. Selling products on a transactional basis requires a continuous effort for every sale and it is often unpredictable. Recurring services require upfront customer acqui- sition costs that lead to recurring revenues. Revenues become more predictable and grow exponentially, because you build on top of a continuously growing base of customers. STRATEGIC REFLECTION How might we grow recurring and predictable revenues by providing a recurring service, rather than selling a product? Upfront acquisition costs per customer might be higher, but revenues become more predictable and the lifetime value of customers often increases. Product and/or technology innovation can often provide the foundation for new services. EXAMPLE HILTI A radical shift of the value created for customers From Product to Recurring Service COST OF SERVICE SERVICE DELIVERY CHANNELS GET CUSTOMER TO USE SERVICE UPFRONT CUSTOMER ACQUISITION COST RECURRING REVENUE CUSTOMER SEGMENT SERVICE SERVICE PROVISIONING SERVICE RESOURCES Value Proposition Shifts From Product to Recurring Service p. 232 Hilti From Low Tech to High Tech p. 236 Netflix From Sales to Platform p. 238 The App Store From Product to Recurring Service Customer acquisition costs Tool manufacturing & distribution High quality tools 232 IMPROVEPATTERNS 232 In 2000, one of Hilti’s customers asked for a holistic tool management solution. That made Hilti realize that customers didn’t want to own tools, but always wanted their workers to work productively. Hilti began an initial pilot program for tool fleet manage- ment in Switzerland and eventually rolled out the service worldwide in 2003. With tool fleet management, Hilti became more relevant to construction companies by reducing nonproductive time for workers and adding a gain of taking on more cus- tomer jobs (e.g., tool repair). Hilti also discovered that customers were willing to lease more tools than they had ever purchased. Some even asked Hilti to include non-Hilti tools in the service to completely pre- vent nonproductive time due to broken tools. When the 2008 financial crisis hit the con- struction sector, many stopped purchasing new equipment. Yet Hilti’s business model shift from a product to a recurring service allowed it to overcome the crisis and it has continued to grow since. Hilti Hilti shifts from selling high quality tools to selling tool fleet manage- ment services to construction compa- nies, after a key customer requests a holistic tool management system to increase productivity. From Product to Recurring Service 2000 2003 1 From Product to Recurring Service and Revenues Managers of building companies have a lot more to worry about than just buying tools. Hilti recognizes that in 2000 and starts offering to track, repair, replace, and upgrade the whole tool fleet for their clients. This increases their productivity by ensuring they always have the right tools, properly maintained and reliable at all times. Hilti allows customers to lease the tools through a monthly subscription rather than paying for them upfront – enabling predictability of costs for building company managers and recurring revenues for Hilti. SALES CHANNEL PRODUCT- RELATED COST PRODUCT- RELATED ACTIVITIES ∗ PRODUCT CUSTOMER SEGMENT SALES PRODUCT- RELATED RESOURCES Original product business model Recurring service pattern CUSTOMER SEGMENT Original product business model CUSTOMER SEGMENT Recurring service pattern 230 231 is the shift from manufacturing (and/or buying) and selling products toward providing a recurring service. Selling products on a transactional basis requires a continuous effort for every sale and it is often unpredictable. Recurring services require upfront customer acqui- sition costs that lead to recurring revenues. Revenues become more predictable and grow exponentially, because you build on top of a continuously growing base of customers. STRATEGIC REFLECTION How might we grow recurring and predictable revenues by providing a recurring service, rather than selling a product? Upfront acquisition costs per customer might be higher, but revenues become more predictable and the lifetime value of customers often increases. Product and/or technology innovation can often provide the foundation for new services. EXAMPLE HILTI A radical shift of the value created for customers From Product to Recurring Service COST OF SERVICE SERVICE DELIVERY CHANNELS GET CUSTOMER TO USE SERVICE UPFRONT CUSTOMER ACQUISITION COST RECURRING REVENUE CUSTOMER SEGMENT ∗ SERVICE SERVICE PROVISIONING SERVICE RESOURCES Value Proposition Shifts From Product to Recurring Service p.XXX Hilti From Low to High Tech p.XXX Netflix From Sales to Platform p.XXX The App Store STRATEGIC REFLECTION How might we grow recurring and predictable revenues by providing a recurring service, rather than selling a product? [sources: Mark W. Johnson, photo: Hilti.com] Illustration — HILTI Hilti shifted from selling high quality tools to providing online tool fleet management “The big benefit of recurring service revenues helped us to stabilize our business during the financial crisis, a time when most contractors wouldn’t purchase new equipment - Christoph Loos, CEO of Hilti

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