SPENTREP - Business Model Innovation (reported by Emmanuel Junio)

Business Model
Innovation

Emmanuel Junio
M110059

Topics
I. Business Model (BM)
II. Business Model Innovation (BMI)

Business Model
Business Model describes the rationale
of how an organization creates, delivers,
and captures value (economic, social,
cultural, or other forms of value).
A set of interconnected activities and
processes designed to deliver a
proposition to the customers.

Note: The process of business model
construction is part of business strategy.

BM Canvas
Used to describe,
challenge, design, and
invent business models
more systematically

The BM canvas – a blank space

HOW?

WHAT?

HOW MUCH?

WHO?

9 Building Blocks of the BM
Internal

External
Client
segments

Key activities

Partner
network
Key
resources

Cost structure

Design

Value
proposition

Client
relationships
Distribution
channels

Revenue streams

Insight

BM Block - Who?
Client
segments
Value
proposition

Client
relationships
Distribution
channels

Revenue streams

BM Block – How?
Key activities

Partner
network
Key
resources

Cost structure

Value
proposition

Business Model Framework
Client
segments

Key activities

Partner
network
Key
resources

Cost structure

Value
proposition

Client
relationships
Distribution
channels

Revenue streams

Customer Segments

Describing who a company is offering a value to

Value Propositions

Describing a company’s offer

Channels

Describing how a company reaches its customers

Customer Relationships

Describing the relationships a company builds

Revenue Streams

Describing how a company makes money

Key Resources

Describing what capabilities are required

Key Activities

Describing what activities are required

Key Partners

The partners that leverage the business model

Cost Structure

Describing the cost of the business model

BM Canvas

http://www.businessmodelgeneration.com/canvas

BM Sample: Financial Times

http://www.businessmodelgeneration.com/canvas

BM Conclusion
NO Business Model = No Business at all!

Innovation
Innovation (from Latin “Innovare”)
is the application of better
solutions that meet new
requirements, inarticulated needs,
or existing market needs.
This is accomplished through
more effective products,
processes, services, technologies,
or ideas that are readily available
to markets, governments and
society.

Business Model Innovation
The process of envisioning and
successfully implementing new
ways of doing anything that
creates value for an enterprise
and it’s customers.

Have you ever wondered why
hyper successful companies
like Nokia or Kodak suddenly
lose their edge?

How can firms like Comodore
computers, Nakamichi,
Newsweek, or Polaroid
possibly fail?

Do they not have abundant
R&D resources, top employees
and profound knowledge of
their markets?

But, they had another thing in
common, they all missed the
moment when they should
have left their successful path
to rethink their business
model.

They missed out on radical
innovation because they were
too busy managing daily
business and serving current
clients

..instead of envisioning future
opportunities

In other words, today's success
is the enemy of tomorrow's
success.

The innovation cycle spins
faster than ever in nearly all
industries

Innovation either increases the
customer value of a product or
service

..or it lowers their cost

.. and therefore creates a
competitive advantage

Apple for example creates a
high perceived customer value
with its innovative new
products

and Dell reduces its cost and
working capital through build
to order processes.

Some misconceptions on
innovation..

1. Innovation stems from an
idea that nobody has had
before

2. Big success requires big
resources

3. Innovation breakthroughs
are always based on fascinating
technologies

Luckily they are all wrong!

1. IBM did not invent the
personal computer,
Apple did not invent the MP3
technology,
Amazon did not invent the
online bookstore

2. Successful innovators learn
and recombine, as the
pioneers get eaten by the
wolves

Cisco had virtually non-existent
R&D resources but out-innovated
the largest research lab in the
world, AT&T's Bell labs

14 out of 25 most innovative
firms have innovated their
business model, and not just
their technology

..take firms such as google,
amazon or eBay..

.. great algorithms, Yes.

But it is the business model,
not just the technology that is
responsible for their success

So, what exactly is a business
model innovation?

A Business Model provides
answers to 4 questions..

1. Who is your target
customer?

2. What do you offer to the
customer?

3. How do you create the value
proposition?

4. And, how do you generate
revenue?

And a Business Model
Innovation, changes at least 2
of these dimensions

For the past 50 years,
companies, BMI have
revolutionized one or several
industries.

For Instance, IKEA has
redefined how we buy
furniture.

Tomtom has transformed the
navigation business.

or Ebay has changed the world
of trade

..yet only 10% of these BM
innovations were novel and
introduced NEW BM patterns

.. the other 90%..

..merely adapted, refined or
combined these patterns

for instance, innovative
companies often apply creative
imitation

they ask themselves, how can
a BM innovation from another
industry revolutionize our own
industry?

..there are ~55 BM's that are
responsible for all BM
innovations..

Examples are:
•
•
•
•
•
•

Flat Rate
Supermaket
Rent instead of buy
Experience Selling
E-commerce
Razor and Blade pattern

“Razor and Blade”
..since 1904 Gillette has been giving
away razors to next to nothing
but selling its blades to exceedingly
high prices..

.. Nespresso creatively imitated this
pattern, selling cheap coffee
machines and expensive coffee and
revolutionized the coffee industry

.. and many other companies apply
the razor and blade pattern too!
• Apple's i-Tunes
• Amazon's kindle or
• HP's inkjet printers

Now, what do you have to do
to innovate your business
model?

I advise you to follow 4 steps:
•
•
•
•

Initiation
Ideation
Integration
Implementation

1. During initiation, you
analyze your current BM

Again, you ask the questions:
• Who is your target customer?
• What do you offer to the
customer?
• How do you create the value
proposition?
• And, how do you generate
revenue?

2. During Ideation, you
confront this BM with the 55
BM innovation patterns and
develop new models

how would Nespresso conduct
your business?

is there a match between your
product and the experienced
selling pattern?

challenge your basic
assumptions and the dominant
logic of your industry..

but don't try to re-invent the
wheel, instead use analogies
and learn from other industries

3. During Integration, you need
to check the consistency of the
BM

..this is important detail work,
wherein you examine all 4
questions regarding
Organizational Fit

4. Finally, during
Implementation, it is time to
awaken the beast! But be
careful!

In INNOVATIVE CYCLES:
1. You design a BM
2. Build a Pilot
3. Test the Pilot
and return to the
design phase

It is important to not
only gain Qualitative
and Quantitative data

..to verify or falsify your
assumptions about your
new BM

..but also not to forget
about the SOFT factors
of innovation

.. thanks to incorrect
Management behavior

.. and organizational
resistance more than
70% of all change
initiatives fail!

Therefore, keep a few
rules in mind!

First, only implement 1
BM at a time

Second, clearly
communicate the BM
and the need for change

Third, don't over
emphasize short term
KPIs (innovation needs
time)

Fourth, get top
management commitment.
without their sponsorships
BM innovation is doomed
to fail

Finally, overcome the NOT
INVENTED here syndrome

Let's wrap it up then!

Innovation is the key factor..

to defeat path dependency..

and stay competitive in today's economy..

yet, innovation is not necessarily about new technologies,
excessive R&D, or about creating completely new ideas..

most of the time, innovation is learning from others..

or re-inventing your BM, not just your technology..

this can be done in a structured process of..

Initiation..

Ideation..

Integration..

and Implementation..

•
•
•
•
•

you analyze your BM
apply the 55 BM innovation patterns
check for inconsistencies and
start implementing carefully
keeping in mind success factors and pitfalls

Are you ready then to revolutionize your own industry?

Try to creatively learn from the Giants who shoulders your
standing on

Think BIG, and think DIFFERENT!

Steve Jobs did it, so why can't you!?

References
BusinessModelsInc.com
BMI, Prof. Dr. Oliver Gassman
http://www.item.unisg.ch/en/Chairs/Innovation+Mgmt/Research/Business+Model+Innovation
http://www.im.ethz.ch/education/HS13/MIS13/VL_BMI___IT_012efl.pdf
http://www.wu.ac.at/wutv/other/elgar_fleisch.pdf

BusinessModelGeneration.com
Wikipedia, Google, WWW..

SPENTREP - Business Model Innovation (reported by Emmanuel Junio)

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SPENTREP - Business Model Innovation (reported by Emmanuel Junio)