A basic presentation made to a group of entrepreneurs on how design + algorithms are disrupting industry business models

1. © Gerard J Rego 2018
Gerard J Rego
Wharton Fellow '05, Reuters DV Fellow, Stanford University '05
SEIR INSEAD - '10-'15 and PEIR Stanford University ‘14
gerardjrego@gmail.com
Design + Business Models a
101 Primer (peeping into)

2. © Gerard J Rego 2018
The heart of competitive advantage is the Algo & Design

3. © Gerard J Rego 2018
Profit Pools 101
https://gerardjrego.com/2014/01/30/profit-pool-101-and-google-sells-handset-business-to-lenovo/

4. © Gerard J Rego 2018
Profit Pools – Ex: Agriculture
https://www.shellfoundation.org/ShellFoundation.org_new/media/Shell-
Foundation-Reports/shell_foundation_transforming_agricultural_supply_chains.pdfhttps://assets.kpmg.com/content/dam/kpmg/pdf/2013/06/agricultural-and-food-value-chain-v2.pdf

5. © Gerard J Rego 2018
1.Upstream – IP?
2.Midstream – Scale?
3.Downstream -
Discovery?
The Profit Pool – Where are you playing?

6. © Gerard J Rego 2018
1.Designing for Habit
2.The Core loop
3.Economics of
Experience
The Core Loop. What is your business?

7. © Gerard J Rego 2018
Fortune 500:
A study by planners at Shell found that by 1983, ..That’s an average
mortality rate of 12 companies per year, or one per month.
Forbes 100
In 1917, from the largest 100 US companies. By 1987, 61 of those
companies no longer existed. Over the seventy year span, in other
words, an average of about one company per year disappeared.
S&P 500
The S&P 500 list provides a third reference point. In 1957, the S&P
listing of 90 top companies was expanded to 500. By 1997, only 74 of
the original 500 companies remained, an average mortality rate of
more than 10 per year.
Company Mortality
http://www.innovati
onlabs.com/BusMod
elWarfare.pdf

8. © Gerard J Rego 2018
Key Trends
1. Unbundling Profit Pools
2. Design (around Core Loop) is the new DNA
3. Subscription is the new business model
4. Deep Algorithmic ability + Business Model beats Midstream +
Downstream Assets
5. Midstream & Edge of Downstream is algorithmized
6. The new Collateral is Algorithm +Business Model

9. © Gerard J Rego 2018
Every single company being unbundled by the long tail

10. © Gerard J Rego 2018
Every Profit Pool is being unbundled!
https://www.cbinsights.com/research/disrupting-european-banking-fintech-startups/
1. Upstream (High Value)
2. Midstream (Lowest Value)
3. Downstream (Trading Desk,
High Value)
4. Downstream (Lower Value)

11. © Gerard J Rego 2018
Design is driving the value, powered by core tech

12. © Gerard J Rego 2018
Design is beyond what most people think
The Leading Business by Design (2013) report also
suggests that the bank keeps showing a high track
for change and innovation. Holding the reputation
of digital pioneer, Barclays demonstrating the
transformational power that Digital has. They use
Digital to overturn old, hence declining, business m
Design in the banking industry
The Barclays case study
20 Aug 2015 | 17:00 GMT
The Secret of Airbnb’s Pricing Algorithm
The sharing economy needs machine intelligence to set prices

13. © Gerard J Rego 2018
http://faculty.washington.edu/espiro/wordpress/wp-
content/uploads/2015/06/spiro.et_.al_sn_2013.pdf
Determine the Clustering Coefficient to
determine the effect of merchants being able to
complete the demand by Subscribers for SKUs
Closeness Centrality of Merchants and
Subscribers
Degree Centrality of Merchants and
Subscribers
Potential Connections (PC) = n*(n-1)/ 2
Network Density (N) = Actual
Connections /Potential Connections
= Connections /n*(n-1)/2
Algorithms are the starting point of Design

14. © Gerard J Rego 2018
Simple yet fundamental competitive advantage

15. © Gerard J Rego 2018
Algorithms determining competitive advantage

16. © Gerard J Rego 2018
Midstream & Edge of Downstream - Algorithmized
https://www.technologyreview.com/s/603493/10-breakthrough-technologies-2017-self-driving-trucks/

17. © Gerard J Rego 2018
https://www.cbinsights.com/research/insurance-car-subscription-partnerships/?
Subscription is the New Business Model
80% of customers
are demanding new
consumption
models - The
Economist, 2014
50% of people in
France are
moving away from
traditional
ownership –
Institut français
d’opinion publique
(IFOP)
80% of German
companies have dealt
with the issue of
subscription business
models.
– IDG Research Services
$420B spent on
subscriptions in
the US in 2015, up
from $215B in
2000.
– Credit Suisse

18. © Gerard J Rego 2018
Algorithmic ability + Business Model beat pure Asset play
Asset play Algo + Marketplace

19. © Gerard J Rego 2018
IP in the business model
http://www.mckinsey.com/industries/healthcare-systems-and-
services/our-insights/how-us-healthcare-companies-can-thrive-amid-
disruption
In a particularly spectacular display of
corporate delusion, John Deere—the
world’s largest agricultural machinery
maker —told the Copyright Office that
farmers don’t own their tractors. Because
computer code snakes through the DNA
of modern tractors, farmers receive “an
implied license for the life of the vehicle
to operate the vehicle.”
It’s John Deere’s tractor, folks. You’re just
driving it
KYLE WIENS
BUSINESS 04.21.15 09:00 AM

20. © Gerard J Rego 2018
Business model –Auto or Power company?

21. © Gerard J Rego 2018
Connecting the Pool
http://financials.morningstar.com/ratios/r.html?t=AAPL

22. © Gerard J Rego 2018
Profit Pool 101

23. © Gerard J Rego 2018
Disconnected Pool…
http://financials.morningstar.com/ratios/r.html?t=DE

24. © Gerard J Rego 2018
https://www.google.com/patents/US20130246207
The new Collateral – Algo + Business Model
Goldman Sachs confirms $1.6B investment in Uber
KIA KOKALITCHEVA JANUARY 21, 2015 2:46 PM
.article-byline
Uber is still raising money, it turns out, with a new $1.6 billion in
convertible debt from Goldman Sachs.
Mortgaged as collateral

25. © Gerard J Rego 2018
Workshop Open House

26. © Gerard J Rego 2018
Open House
Gerard J Rego
Wharton Fellow '05, Reuters DV Fellow, Stanford University '05
SEIR INSEAD - '10-'15 and PEIR Stanford University ‘14
gerardjrego@gmail.com