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       BUSINESS	
  MODEL	
  HANDBOOK	
  
       How	
  to	
  describe,	
  evaluate	
  and	
  (re)invent	
  your	
  business	
  model.	
  




       By	
  Marc	
  Sniukas	
  
       ©2011	
  Marc	
  Sniukas	
  




	
                                           	
                                                    Page	
  1	
  
CONTENTS	
  

I.	
     The	
  Business	
  Model	
  
                                 ..............................................................................................................................................................................	
  3	
  
         What	
  is	
  a	
  Business	
  Model?	
  ..................................................................................................................................................................................................	
  3	
  

II.	
   Describing	
  Your	
  Business	
  Model	
  ...........................................................................................................................................................	
  4	
  
         WHO	
  is	
  your	
  customer?	
  ......................................................................................................................................................................................................	
  4	
  
         WHAT	
  is	
  your	
  offer?	
  ............................................................................................................................................................................................................	
  5	
  
         HOW	
  are	
  you	
  creating	
  your	
  value	
  proposition?	
  ..................................................................................................................................................................	
  5	
  
         HOW	
  are	
  you	
  delivering	
  your	
  value	
  proposition?	
  ...............................................................................................................................................................	
  6	
  
         HOW	
  are	
  you	
  generating	
  revenues?	
  ...................................................................................................................................................................................	
  6	
  
         HOW	
  do	
  costs	
  occur?	
  ..........................................................................................................................................................................................................	
  6	
  
         Example:	
  Apple	
  iPod	
  /	
  iTunes	
  Business	
  Model	
  ....................................................................................................................................................................	
  7	
  

III.	
   Are	
  you	
  ready	
  for	
  Business	
  Model	
  Innovation?	
  .....................................................................................................................................	
  9	
  

IV.	
   (Re)Inventing	
  Your	
  Business	
  Model	
  ....................................................................................................................................................	
  10	
  
         Redefining	
  the	
  Business	
  ....................................................................................................................................................................................................	
  10	
  
         Redefining	
  the	
  Market	
  ......................................................................................................................................................................................................	
  11	
  
         Redefining	
  the	
  Product	
  .....................................................................................................................................................................................................	
  12	
  
         Redefining	
  How	
  you	
  do	
  Business	
  ......................................................................................................................................................................................	
  15	
  

V.	
   Evaluating	
  Your	
  Business	
  Model	
  .........................................................................................................................................................	
  17	
  
         How	
  innovative	
  is	
  your	
  idea?	
  ............................................................................................................................................................................................	
  17	
  
         The	
  Business	
  Model	
  Scorecard	
          ..........................................................................................................................................................................................	
  18	
  
         Is	
  it	
  a	
  strategic	
  experiment?	
  ..............................................................................................................................................................................................	
  20	
  

VI.	
   Describing	
  Your	
  Environment	
  .............................................................................................................................................................	
  21	
  

VII.	
   Further	
  Reading	
  
                           ..................................................................................................................................................................................	
  22	
  

VIII.	
  References	
  .........................................................................................................................................................................................	
  22	
  

	
  


	
                                                                                        	
                                                                                                                                                        Page	
  2	
  
I.           THE	
  BUSINESS	
  MODEL	
  

WHAT	
  IS	
  A	
  BUSINESS	
  MODEL?	
  

	
  

„A	
   business	
   model	
   describes	
   the	
   rational	
   of	
   how	
   an	
   organization	
  
creates,	
  delivers,	
  and	
  captures	
  value.“	
  (Osterwalder	
  2009	
  14)	
  

	
  

                                                                                 “A	
  business	
  model	
  is	
  simply	
  the	
  ‘way	
   of	
   doing	
   business’	
  that	
  a	
  firm	
  has	
  chosen:	
  its	
  entire	
  system	
  
                                                                                 for	
  creating	
  and	
  providing	
  consistent	
  value	
  to	
  customers	
  and	
  earning	
  a	
  profit	
  from	
  that	
  activity,	
  as	
  
                                                                                 well	
  as	
  benefit	
  for	
  its	
  broader	
  stakeholders.	
  It	
  refers	
  to	
  the	
  core	
  architecture	
  or	
  configuration	
  of	
  the	
  
                                                                                 firm,	
   specifically	
   how	
   it	
   deploys	
   all	
   relevant	
   resources	
   (not	
   just	
   those	
   within	
   the	
   company	
  
                                                                                 boundaries),	
   to	
   create	
   differentiated	
   value	
   for	
   customers	
   at	
   a	
   profit…”	
   (Davenport,	
   Leibold	
   et	
   al.	
  
                                                                                 2006	
  20).	
  

	
  

It	
  is	
  the	
  underlying	
  economic	
  logic	
  that	
  explains	
  how	
  value	
  is	
  delivered	
  to	
  the	
  customer	
  
at	
  an	
  appropriate	
  cost	
  (Magretta	
  2002).	
  

	
  

                                                                                                                 The	
   business	
   model	
   is	
   a	
   company’s	
   answer	
   to	
   the	
  
                                                                                                                 question	
   of	
   how	
   to	
   make	
   money	
   in	
   its	
   chosen	
   business.	
  
                                                                                                                 It	
   describes,	
   “…as	
   a	
   system,	
   how	
   the	
   pieces	
   of	
   a	
  
                                                                                                                 business	
  fit	
  together”	
  (Magretta	
  2002	
  91).	
  

	
  

	
                                                  	
  




	
                                                                               	
                                                                                                                                               Page	
  3	
  
II.           DESCRIBING	
  YOUR	
  BUSINESS	
  MODEL	
  

The	
  goal	
  is	
  not	
  to	
  explain	
  every	
  detail,	
  but	
  the	
  description	
  should	
  be	
  rather	
  to	
  the	
  point,	
  highlighting	
  the	
  essence	
  and	
  the	
  main	
  competitive	
  factors	
  your	
  
business	
  relies	
  upon.	
  	
  

The	
  following	
  process	
  has	
  proven	
  helpful	
  for	
  describing	
  your	
  business	
  model:	
  

       1.     Go	
  through	
  the	
  questions	
   on	
  the	
  next	
  pages	
  and	
  document	
  your	
  answers.	
  It	
  will	
  probably	
   not	
  be	
   necessary	
   to	
   answer	
   every	
   question	
  in	
  great	
  
              detail	
  and	
  some	
  questions	
  might	
  not	
  fit	
  your	
  particular	
  business.	
  Think	
  of	
  the	
  questions	
  as	
  inspiration	
  or	
  a	
  cooking	
  recipe:	
  	
  the	
  recipe	
  gives	
  you	
  
              some	
  directions,	
  but	
  feel	
  free	
  to	
  use	
  your	
  creativity	
  and	
  the	
  style	
  that	
  fits	
  you	
  and	
  your	
  business	
  best.	
  
       2.     After	
   you	
   have	
   formulated	
   your	
   answers,	
   use	
   the	
   Business	
   Model	
   Canvas	
   to	
   illustrate	
   the	
   main	
   points	
   and	
   provide	
   a	
   summary	
   (not	
   a	
   detailed	
  
              description!)	
  and	
  highlight	
  the	
  most	
  important	
  factors	
  of	
  your	
  business	
  model.	
  Have	
  also	
  a	
  look	
  at	
  the	
  examples	
  provided.	
  	
  
              	
  

WHO	
  IS	
  YOUR	
  CUSTOMER?	
  

Which	
  customer	
  segments	
  do	
  you	
  serve?	
  The	
  term	
  customer	
  is	
  used	
                                  •      Which	
  customer	
  segments	
  are	
  you	
  currently	
  targeting?	
  
broadly	
  here.	
  It	
  can	
  include	
  business	
  customers	
  or	
  end	
  customers.	
                                   •      For	
  whom	
  are	
  you	
  creating	
  value?	
  
Instead	
  of	
  describing	
  your	
  direct	
  customers,	
  you	
  might	
  want	
  to	
  think	
                             •      Who	
  are	
  your	
  most	
  important	
  customers?	
  
about	
  the	
  real	
  end	
  customer,	
  who	
  is	
  finally	
  using	
  the	
  product.	
  It	
  might	
                    •      Are	
  your	
  customers	
  local	
  or	
  global?	
  
also	
  be	
  worth	
  to	
  think	
  about	
  who	
  is	
  buying	
  the	
  product,	
  who	
  is	
                             •      Business	
  or	
  consumer?	
  
influencing	
  the	
  decision,	
  who	
  is	
  paying	
  for	
  it	
  and	
  who	
  is	
  finally	
  using	
  it.	
             •      What’s	
  the	
  demographic	
  segment?	
  
Describing	
  your	
  customer	
  segments	
  along	
  new	
  characteristics	
  and	
  “the	
                                   •      What’s	
  the	
  life	
  stage	
  segment?
job	
  to	
  be	
  done”	
  (see	
  next	
  part)	
  might	
  open	
  opportunities	
  for	
  re-­‐
segmenting	
  your	
  markets.	
  

	
                                                        	
  




	
                                                                                          	
                                                                                                                                           Page	
  4	
  
WHAT	
  IS	
  YOUR	
  OFFER?	
  

What	
   is	
   the	
   customer	
   value	
   proposition?	
   The	
   customer	
   value	
                              •   What	
  needs	
  does	
  your	
  offer	
  fulfill?	
  
proposition	
   (CVP)	
   is	
   about	
   what	
   products,	
   services	
   and	
   solutions	
   you	
                •   What	
  is	
  the	
  job	
  that	
  your	
  products	
  and	
  services	
  help	
  your	
  
offer	
   your	
   customers.	
   It	
   can	
   be	
   formulated	
   in	
   terms	
   of	
   what	
   need	
   is	
         customers	
  to	
  get	
  done?	
  
fulfilled	
   or	
   what	
   problem	
   is	
   solved	
   for	
   the	
   customer.	
   Customer	
   value	
            •   What	
  problem	
  do	
  your	
  products,	
  services	
  and	
  solutions	
  solve	
  for	
  
propositions	
   can	
   be	
   described	
   as	
   individual	
   products	
   or	
   services	
   or	
   as	
              your	
  customers?	
  
bundles.	
   In	
   case	
   you	
   sell	
   more	
   than	
   one	
   product,	
   you	
   might	
   want	
   to	
      •   What	
  bundles	
  are	
  you	
  offering	
  to	
  each	
  customer	
  segment?	
  
think	
   about	
   the	
   underlying	
   need	
   or	
   problem	
   all	
   of	
   your	
   products	
   or	
  
services	
   fulfill.	
   Maybe	
   the	
   products	
   and	
   services	
   fall	
   into	
   several	
  
categories	
  serving	
  different	
  needs?	
  

	
  HOW	
  ARE	
  YOU	
  CREATING	
  YOUR	
  VALUE	
  PROPOSITION?	
  
What	
  are	
  the	
  key	
  activities	
  you	
  perform?	
  Key	
  activities	
  can	
  include	
                       •   Which	
  activities	
  are	
  the	
  most	
  important	
  to	
  your	
  business?	
  
processes	
  like	
  for	
  example:	
  market	
  research,	
  design,	
  research,	
  product	
                          •   Which	
  do	
  you	
  perform	
  best?	
  
development,	
  sourcing,	
  manufacturing,	
  recruiting,	
  training,	
  IT,	
  licensing,	
                            •   Which	
  do	
  you	
  outsource?	
  
marketing,	
  sales,	
  etc.	
  
What	
  are	
  your	
  key	
  resources	
  and	
  assets?	
  What	
  are	
  your	
  most	
  valuable	
                    •   People	
  
assets	
  and	
  resources?	
  Which	
  do	
  you	
  need	
  to	
  make	
  your	
  business	
  model	
                    •   Technology	
  
work?	
  Key	
  resources	
  can	
  be	
  physical,	
  intellectual,	
  human,	
  or	
  financial.	
  	
                  •   Equipment	
  
                                                                                                                          •   Information	
  
	
  
                                                                                                                          •   Channels	
  
	
                                                                                                                        •   Exclusive	
  access	
  to	
  partnerships	
  and	
  alliances	
  
                                                                                                                          •   Brands	
  
	
                                                                                                                        •   …

Who	
  are	
  your	
  key	
  partners,	
  alliances	
  and	
  suppliers?	
  Who	
  performs	
                             •   Suppliers	
  can	
  be	
  defined	
  as	
  those	
  who	
  fulfill	
  steps	
  in	
  the	
  value	
  chain	
  
important	
  activities	
  in	
  your	
  value	
  chain?	
                                                                    that	
  your	
  company	
  has	
  decided	
  to	
  outsource.	
  
                                                                                                                          •   Partners	
  offer	
  additions	
  and	
  act	
  on	
  a	
  horizontal	
  level	
  as	
  opposed	
  to	
  
	
  
                                                                                                                              suppliers	
  who	
  act	
  on	
  a	
  vertical	
  level.	
  
                                                                                                                          •   Alliances	
  are	
  coalitions	
  with	
  competitors	
  in	
  certain	
  areas.	
  



	
                                                                                        	
                                                                                                                                      Page	
  5	
  
HOW	
  ARE	
  YOU	
  DELIVERING	
  YOUR	
  VALUE	
  PROPOSITION?	
  

How	
  do	
  you	
  reach	
  the	
  customer?	
  Delivering	
  the	
  value	
  proposition	
  is	
  as	
      •      What	
  channels	
  do	
  you	
  use?	
  E.g.	
  direct	
  or	
  indirect	
  sales,	
  high	
  
much	
  about	
  how	
  you	
  sell	
  as	
  about	
  how	
  you	
  reach	
  your	
  customer.	
                     pressure	
  or	
  consultative	
  selling,	
  referrals,	
  internet	
  sales,	
  etc.	
  
                                                                                                              •      How	
  do	
  you	
  organize	
  fulfillment	
  and	
  support?	
  
             	
  
                                                                                                              •      How	
  do	
  you	
  create	
  awareness	
  for	
  your	
  offer?	
  
             	
  
                                                                                                              •      How	
  do	
  you	
  organize	
  after	
  sales?	
  



What	
  is	
  your	
  relationship	
  to	
  the	
  customer?	
  What	
  is	
  the	
  image	
  your	
          •      operational	
  excellence	
  “best	
  buy”	
  
customers	
  have	
  of	
  your	
  company?	
  Are	
  you	
  differentiating	
  yourself	
                    •      product	
  leadership	
  “best	
  product”	
  
through:	
                                                                                                    •      exceptional	
  customer	
  relationship	
  “best	
  brand”	
  


HOW	
  ARE	
  YOU	
  GENERATING	
  REVENUES?	
  
What	
  specific	
  revenue	
  streams	
                      •     Sales	
                                  How	
  do	
  you	
  price?	
  How	
  do	
  you	
                 •     Fixed	
  or	
  dynamic	
  
do	
  you	
  currently	
  have?	
  Where	
                    •     Licensing	
                              fix	
  prices?	
                                                 •     Low,	
  competitive,	
  high	
  
does	
  the	
  money	
  come	
  from?	
                       •     Renting	
  /	
  Leasing	
                                                                                 •     List	
  price	
  
                                                              •     Usage	
                                                                                                   •     Value	
  based	
  
                                                              •     Subscription	
                                                                                            •     Auction	
  
                                                                                                                                                                              •     …	
  

HOW	
  DO	
  COSTS	
  OCCUR?

What	
  are	
  the	
  most	
  important	
  costs	
  in	
  our	
  business	
  model?	
  What	
  are	
          •      Is	
  your	
  business	
  cost-­‐driven	
  or	
  value-­‐driven?	
  
the	
  cost	
  drivers?	
  Which	
  key	
  resources,	
  activities,	
  partnerships,…	
  are	
  the	
        •      Fixed	
  
most	
  expensive?	
                                                                                          •      Variable	
  
                                                                                                              •      Economies	
  of	
  scale	
  
                                                                                                              •      Economies	
  of	
  scope	
  

	
                                                   	
  




	
                                                                                 	
                                                                                                                                  Page	
  6	
  
EXAMPLE:	
  APPLE	
  IPOD	
  /	
  ITUNES	
  BUSINESS	
  MODEL	
  

“By	
   the	
   late	
   1990s,	
   Apple’s	
   initial	
   pathway	
   to	
   growth	
   was	
   running	
   out	
   of	
   steam.	
   The	
   company’s	
   proprietary	
   approach	
   to	
   designing	
   both	
   hardware	
   and	
  
software	
   limited	
   it	
   to	
   being	
   a	
   niche	
   player	
   and	
   hampered	
   its	
   ability	
   to	
   compete	
   on	
   price.	
   In	
   2001,	
   Apple	
   began	
   introducing	
   a	
   series	
   of	
   successful	
   new	
  
products	
   and	
   services—the	
   iPod,	
   the	
   iTunes	
   online	
   music	
   service,	
   and	
   the	
   iPhone—that	
   propelled	
   the	
   company	
   to	
   the	
   top	
   of	
   its	
   industry.	
   But	
   the	
   shift	
  
wasn’t	
   only	
   a	
   matter	
   of	
   product	
   innovation.	
   Apple’s	
   success	
   resulted	
   from	
   its	
   ability	
   to	
   define	
   a	
   workable	
   business	
   model	
   for	
   downloading	
   music—
something	
  that	
  had	
  eluded	
  the	
  music	
  industry	
  for	
  years.	
  

This	
  combination	
  of	
  product	
  innovation	
  and	
  business	
  model	
  innovation	
  (BMI)	
  put	
  Apple	
  at	
  the	
  center	
  of	
  a	
  market	
  approximately	
  30	
  times	
  larger	
  than	
  its	
  
original	
   market.	
   It	
   also	
   helped	
   expand	
   the	
   company’s	
   share	
   of	
   the	
   traditional	
   computer	
   market,	
   as	
   new	
   customers	
   became	
   so	
   attached	
   to	
   their	
   iPods	
   that	
  
they	
  took	
  another	
  look	
  at	
  Apple’s	
  computers.”	
  (Lindgardt	
  et	
  al	
  2009)	
  

“Apples	
   value	
   proposition	
   is	
   to	
   allow	
   customers	
   to	
   easily	
   search,	
   buy,	
   and	
   enjoy	
   digital	
   music.	
   Apple	
   earns	
   most	
   of	
   its	
   music	
   related	
   revenues	
   from	
   selling	
  
iPods,	
  while	
  using	
  the	
  integration	
  with	
  and	
  online	
  music	
  stores	
  to	
  protect	
  itself	
  from	
  competitors.”	
  (Osterwalder	
  2009	
  46)	
  

	
  

The	
  canvas	
  on	
  the	
  following	
  page	
  can	
  be	
  downloaded	
  from	
  www.businessmodelgeneration.com.	
  




	
                                                                                         	
                                                                                                                                                       Page	
  7	
  
 

(Osterwalder	
  2009	
  46)	
  

	
  



	
                                	
     Page	
  8	
  
III.            ARE	
  YOU	
  READY	
  FOR	
  BUSINESS	
  MODEL	
  INNOVATION? 	
  

In	
  order	
  to	
  assess	
  an	
  organization’s	
  level	
  of	
  strategic	
  innovativeness	
  the	
  following	
  process	
  questions	
  could	
  be	
  helpful.	
  

       •   Who	
  is	
  in	
  charge	
  of	
  developing	
  new	
  ideas?	
  Only	
  top	
  management	
  or	
  the	
  organization	
  as	
  a	
  whole,	
  i.e.	
  everybody?	
  
       •   How	
  diverse	
  is	
  the	
  strategic	
  management	
  team	
  and	
  those	
  contributing	
  the	
  ideas?	
  Think	
  of	
  experience,	
  age,	
  sex,	
  race,	
  national	
  origin,	
  Kelley’s	
  
           personas,	
  etc.	
  
       •   When	
  does	
  strategic	
  planning	
  and	
  assessment	
  take	
  place?	
  Once	
  a	
  year	
  or	
  continuously?	
  
       •   Do	
  strategic	
  discussions	
  revolve	
  around	
  the	
  financial	
  outcomes	
  and	
  the	
  business	
  plan,	
  or	
  around	
  the	
  underlying	
  assumptions?	
  
       •   Does	
  a	
  common	
  language	
  and	
  picture	
  exist	
  for	
  discussion	
  strategy?	
  
       •   Are	
  new	
  strategies	
  analyzed	
  and	
  well	
  planned,	
  before	
  implemented,	
  or	
  does	
  the	
  organization	
  test	
  ideas	
  through	
  strategic	
  experimentation?	
  
       •   Is	
  the	
  portfolio	
  of	
  the	
  strategic	
  experiments	
  well	
  balanced	
  along	
  the	
  dimensions	
  time,	
  risk,	
  and	
  aim?	
  
       •   How	
  well	
  does	
  the	
  innovation	
  portfolio	
  reflect	
  your	
  strategic	
  goals?	
  
       •   How	
  well	
  is	
  strategy	
  communicated	
  and	
  understood	
  within	
  the	
  organization?	
  
       •   Have	
  the	
  barriers	
  to	
  implementation	
  been	
  addressed?	
  

	
                                                    	
  




	
                                                                                  	
                                                                                                                                     Page	
  9	
  
IV.               (RE)INVENTING	
  YOUR	
  BUSINESS	
  MODEL	
  

REDEFINING	
  THE	
  BUSINESS	
  

The	
  essential	
  questions	
  to	
  ask	
  when	
  it	
  comes	
  to	
  redefining	
  the	
  business	
  are:	
  

       •   What	
  are	
  the	
  main	
  industry	
  assumptions,	
  when	
  it	
  comes	
  to	
  pricing,	
  costumers,	
  products	
  and	
  services	
  offered,	
  delivery,	
  etc.?	
  
       •   Does	
  the	
  industry	
  have	
  a	
  product-­‐centric,	
  customer-­‐centric,	
  or	
  rather	
  competency-­‐centric	
  approach?	
  What	
  would	
  a	
  change	
  in	
  approach	
  entail?	
  
       •   Do	
  you	
  let	
  yourself	
  be	
  constrained	
  by	
  the	
  assets	
  and	
  capabilities	
  you	
  possess?	
  
       •   Are	
  you	
  trying	
  to	
  use	
  the	
  assets	
  you	
  have	
  and	
  simply	
  leverage	
  them,	
  or	
  are	
  you	
  continuously	
  striving	
  to	
  build	
  new	
  assets?	
  
       •   How	
  many	
  of	
  your	
  competitors	
  do	
  already	
  posses	
  the	
  same	
  or	
  similar	
  assets?	
  
       •   Which	
  of	
  your	
  assets	
  are	
  truly	
  unique	
  and	
  cannot	
  be	
  imitated	
  or	
  substituted	
  easily	
  by	
  others?	
  	
  
       •   Do	
  companies	
  without	
  these	
  assets	
  face	
  a	
  cost	
  disadvantage	
  in	
  obtaining	
  them?	
  
       •   Which	
  of	
  your	
  assets	
  and	
  capabilities	
  are	
  obsolete?	
  
       •   Which	
  assets	
  would	
  you	
  build	
  if	
  you	
  started	
  anew?	
  
       •   Ask	
  “What	
  if…?”	
  

	
  


	
                                                   	
  




	
                                                                                  	
                                                                                                                           Page	
  10	
  
REDEFINING	
  THE	
  MARKET	
  

       •          Who	
  are	
  currently	
  your	
  costumers?	
  
       •          What	
  are	
  their	
  needs?	
  
       •          Why	
  are	
  they	
  buying	
  your	
  product?	
  What	
  jobs	
  are	
  customers	
  trying	
  to	
  get	
  done?	
  
       •          Which	
  customer	
  needs	
  is	
  your	
  product	
  actually	
  fulfilling?	
  
       •          Are	
  there	
  customers	
  you	
  are	
  not	
  serving	
  now	
  who	
  have	
  similar	
  needs?	
  
       •          Which	
  customer	
  needs	
  and	
  functions	
  can	
  be	
  satisfied	
  best	
  with	
  the	
  company’s	
  unique	
  competencies?	
  
       •          Which	
  customers	
  value	
  most	
  what	
  the	
  company	
  does	
  best?	
  
       •          Are	
  there	
  any	
  existing	
  customer	
  segments	
  being	
  neglected	
  by	
  the	
  industry	
  now?	
  Why	
  are	
  they	
  not	
  being	
  served?	
  
       •          Which	
  consumers	
  or	
  customer	
  groups	
  share	
  the	
  most	
  commonalities?	
  
       •          Are	
  competitors	
  serving	
  segments	
  your	
  company	
  is	
  not?	
  Why?	
  
       •          Is	
  your	
  company	
  serving	
  markets	
  that	
  competitors	
  are	
  not	
  serving?	
  Why?	
  
       •          Who	
  is	
  the	
  real	
  final	
  customer?	
  
       •          How	
  can	
  existing	
  assets	
  and	
  capabilities	
  be	
  leveraged?	
  

Which	
  customers	
  to	
  target?	
  
                                                                                                                                                                               nd        rd
                                            	
                                                     existing	
                  ó	
              noncustomers	
  (2 	
  and	
  3 	
  tier)	
  

                                            	
                                      most	
  profitable	
  	
                   ó	
              less	
  profitable	
  
                                                                                                                                                                          st
                                            	
                                        most	
  satisfied	
                      ó	
              less	
  satisfied	
  (1 	
  tier)	
  

                                            	
                                         specific	
  buyer	
                     ó	
              chain	
  of	
  buyers	
  

                                            	
                               focus	
  on	
  differences	
                      ó	
              focus	
  on	
  commonalities	
  

                                            	
                   focus	
  on	
  finer	
  segmentation	
                        ó	
              focus	
  on	
  de-­‐segmentation	
  

                                            	
                               focus	
  on	
  attributes	
                       ó	
              focus	
  on	
  circumstances	
  
                                                   	
     (of	
  customers	
  and	
  products)	
           	
           	
              	
       (needs	
  and	
  the	
  job	
  done)	
  
           	
  



	
                                                                                          	
                                                                                                   Page	
  11	
  
REDEFINING	
  THE	
  PRODUCT	
  

The	
  following	
  list	
  summarizes	
  questions	
  to	
  consider	
  while	
  thinking	
  about	
  which	
  products	
  and	
  services	
  to	
  offer.	
  

       •   Which	
  of	
  your	
  assets,	
  capabilities,	
  and	
  core	
  competencies	
  are	
  truly	
  unique?	
  
       •   Which	
  of	
  those	
  are	
  most	
  valued	
  by	
  the	
  customer?	
  
       •   What	
  are	
  the	
  customers’	
  needs	
  and	
  wants?	
  What	
  is	
  the	
  job	
  they	
  are	
  trying	
  to	
  get	
  done?	
  What	
  is	
  the	
  problem	
  they	
  are	
  trying	
  to	
  solve?	
  
       •   What	
  job	
  can	
  customers	
  not	
  get	
  done?	
  
       •   How	
  could	
  you	
  build	
  on	
  your	
  core	
  competencies	
  to	
  fulfill	
  these	
  needs	
  better	
  or	
  fulfill	
  different	
  needs	
  with	
  new	
  products?	
  
       •   Why	
  are	
  noncustomers	
  not	
  using	
  your	
  offering?	
  
       •   Which	
  elements	
  of	
  your	
  offerings	
  could	
  be	
  reduced,	
  raised,	
  created,	
  or	
  eliminated	
  so	
  as	
  to	
  fulfill	
  noncustomers’	
  needs?	
  
       •   What	
  could	
  a	
  total	
  solution,	
  making	
  the	
  customers’	
  total	
  experience	
  more	
  worthwhile,	
  look	
  like?	
  
       •   Could	
  the	
  customers	
  design	
  the	
  products	
  or	
  parts	
  of	
  it	
  themselves?	
  
       •   Instead	
  of	
  traditional	
  market	
  research:	
  have	
  you	
  observed	
  the	
  customer,	
  talked	
  to	
  them	
  directly,	
  and	
  tried	
  the	
  product	
  yourself?	
  	
  
       •   What	
  trends	
  can	
  be	
  observed?	
  
       •   How	
  will	
  they	
  change	
  customers’	
  priorities?	
  
       •   What	
  offerings	
  do	
  alternative	
  industries	
  have?	
  
       •   What	
  offerings	
  do	
  other	
  strategic	
  groups	
  have?	
  
       •   What	
  do	
  companies	
  in	
  similar	
  or	
  even	
  completely	
  different	
  industries	
  or	
  countries	
  offer?	
  
       •   What	
  would	
  less	
  profitable	
  customers	
  want?	
  How	
  could	
  their	
  needs	
  be	
  fulfilled	
  in	
  a	
  profitable	
  way?	
  Thus,	
  how	
  could	
  they	
  become	
  an	
  attractive	
  
           market	
  for	
  your	
  company?	
  
       •   Is	
  consumption	
  constrained	
  by	
  any	
  factors,	
  which	
  might	
  be	
  reduced?	
  
       •   What	
  do	
  customers	
  before,	
  during,	
  and	
  after	
  having	
  bought	
  your	
  product?	
  
       •   Is	
  there	
  anything	
  more	
  you	
  could	
  offer	
  to	
  make	
  the	
  whole	
  experience	
  more	
  satisfying?	
  
       •   Which	
  emotions	
  does	
  your	
  product	
  or	
  service	
  evoke?	
  
       •   “Which	
  alternative	
  technologies	
  might	
  meet	
  the	
  customers’	
  requirements?	
  Which	
  rivals	
  are	
  pursuing	
  which	
  approach?	
  
       •   What	
  are	
  the	
  two	
  or	
  three	
  key	
  parameters	
  that	
  influence	
  the	
  customers’	
  decision	
  to	
  buy?	
  How	
  do	
  these	
  relate	
  to	
  the	
  technical	
  performance	
  factors	
  
           or	
  design	
  parameters	
  of	
  each	
  alternative	
  technology?	
  
       •   How	
  far	
  is	
  my	
  company	
  from	
  the	
  limits	
  of	
  each	
  alternative	
  technology?	
  Are	
  there	
  ways	
  to	
  circumvent	
  these	
  limits?	
  
       •   Seek	
  feedback	
  and	
  advice	
  from	
  external	
  experts,	
  suppliers,	
  customers,	
  and	
  distributors.	
  

	
  


	
                                                                                   	
                                                                                                                                     Page	
  12	
  
How	
  to	
  Identify	
  New	
  Products	
  or	
  Services?	
  




                                                                         	
  

	
  

	
                                                	
  




	
                                                                	
            Page	
  13	
  
 


       	
            single	
  product	
  or	
  service	
     ó	
     total	
  solution,	
  bundling	
  

       	
                      functional	
  appeal	
         ó	
     emotional	
  appeal	
  and	
  
       	
                                          	
          	
      experiences	
  	
  

       	
                       focus	
  on	
  product	
      ó	
     focus	
  on	
  function	
  fulfilled	
  and	
  	
  
       	
                                             	
       	
      the	
  job-­‐to-­‐be-­‐done	
  

       	
                    build	
  new	
  features	
       ó	
     raise,	
  reduced,	
  create,	
  
       	
                                            	
        	
      eliminate	
  selectively	
  


	
  
	
            	
  




	
                                           	
                                                                              Page	
  14	
  
REDEFINING	
  HOW	
  YOU	
  DO	
  BUSINESS	
  

The	
  following	
  list	
  summarizes	
  again	
  essential	
  questions	
  when	
  it	
  comes	
  to	
  the	
  redefinition	
  of	
  the	
  business	
  model:	
  

       •   How	
  do	
  you	
  reach	
  your	
  customers?	
  
       •   How	
  easy	
  or	
  difficult	
  is	
  it	
  for	
  the	
  customer	
  to	
  find	
  and	
  buy	
  the	
  product?	
  
       •   How	
  easy	
  is	
  it	
  to	
  do	
  business	
  and	
  interact	
  with	
  your	
  company?	
  
       •   How	
  aligned	
  are	
  our	
  channels	
  and	
  processes	
  with	
  the	
  needs	
  of	
  the	
  customers?	
  
       •   How	
  could	
  you	
  achieve	
  a	
  higher	
  degree	
  of	
  interaction	
  with	
  your	
  customers?	
  
       •   What	
  would	
  be	
  more	
  fun	
  for	
  you	
  and	
  your	
  customers?	
  
       •   How	
  could	
  you	
  improve	
  the	
  customer’s	
  total	
  buying	
  cycle	
  experience?	
  
       •   How	
  could	
  you	
  reach	
  noncustomers?	
  
       •   How	
  could	
  create	
  new	
  distribution	
  channels	
  and	
  innovative	
  points	
  of	
  presence?	
  
       •   How	
  transparent	
  is	
  the	
  information	
  you	
  have	
  available	
  to	
  the	
  customers?	
  Do	
  they	
  have	
  access	
  to	
  vital	
  information,	
  which	
  could	
  enhance	
  their	
  
           experience?	
  
       •   Is	
  your	
  price	
  affordable	
  by	
  the	
  mass	
  of	
  buyers?	
  
       •   How	
  creatively	
  do	
  you	
  work	
  with	
  suppliers,	
  partners,	
  alliances?	
  How	
  could	
  you	
  work	
  with	
  them	
  in	
  such	
  a	
  way	
  that	
  it	
  creates	
  a	
  competitive	
  
           advantage?	
  Are	
  they	
  an	
  integrated	
  part	
  of	
  your	
  business	
  model?	
  
       •   How	
  well	
  do	
  your	
  activities	
  fit	
  internally	
  and	
  externally?	
  
       •   How	
  well	
  do	
  the	
  activities	
  reinforce	
  each	
  other?	
  
       •   Could	
  you	
  redesign	
  core	
  processes	
  differently	
  to	
  improve	
  efficiency	
  and	
  effectiveness?	
  
       •   What	
  is	
  the	
  most	
  expensive	
  part	
  of	
  your	
  existing	
  business?	
  How	
  could	
  decrease	
  this	
  cost?	
  
       •   How	
  can	
  you	
  either	
  perform	
  additional	
  or	
  eliminate	
  unnecessary	
  steps	
  in	
  the	
  value	
  chain?	
  
       •   Could	
  you	
  eliminate	
  certain	
  steps	
  in	
  your	
  value	
  chain	
  altogether?	
  Or	
  maybe	
  outsource	
  them?	
  Could	
  you	
  outsource	
  them	
  to	
  your	
  customers?	
  (Think	
  
           IKEA)	
  
       •   What	
  is	
  the	
  best	
  organizational	
  structure	
  for	
  implementing	
  this	
  strategy?	
  


	
                                                   	
  




	
                                                                                	
                                                                                                                                 Page	
  15	
  
       conventional	
  customer	
  interface	
                                                  ó	
            (co-­‐creating)	
  experiences	
  
       	
                                             	
                                                   	
             easy	
  to	
  do	
  business	
  with	
  

       	
                    conventional	
  pricing	
                                                    ó	
            strategic	
   pricing	
   of	
   the	
   masses	
  
       	
               (either	
  to	
  cover	
  cost	
  or	
                                             	
             (benchmarked	
   against	
   substitutes	
  
       	
     benchmarked	
  against	
  competitors)	
                                                     	
             and	
  alternative	
  industries)	
  

       	
                                           cost-­‐plus	
  thinking	
                             ó	
            price-­‐minus	
  thinking	
  
       	
                                                                  	
                              	
             target	
  costs	
     	
                   	
     	
  

       	
                                        integrate	
  activities	
                                ó	
            network	
  
       	
                                                               	
                                 	
             (with	
   customers,	
   suppliers,	
   partners,	
  
       	
                                                               	
                                 	
             alliances)	
  

       	
                                         low	
  fit	
  of	
  activities	
                        ó	
            high	
  fit	
  of	
  activities	
  

       	
       	
  	
  	
  	
  	
  	
  	
  	
  	
  (internally	
  and	
  externally)	
     	
     	
              	
     (internally	
  and	
  externally)	
  

       	
                             focus	
  on	
  existing	
  assets	
                                 ó	
            start	
  anew,	
  or	
  use	
  existing	
  
       	
                                                              	
                                  	
             assets	
  in	
  a	
  new	
  way	
  


	
  

	
  

	
  




	
  

	
                        	
  




	
                                                                        	
                                                                                                       Page	
  16	
  
V.        EVALUATING	
  YOUR	
  BUSINESS	
  MODEL	
  

HOW	
  INNOVATIVE	
  IS	
  YOUR	
  IDEA?	
  

                                               Assessment #1:
                                               Using the content dimension                  Dump it. It’s
                                               questions, does the idea have the       No   probably just
                                               potential to radically challenge the         evolutionary.
                                               current industry logic?


                                                                Yes

                                               Assessment #2:
                                               Draw the strategy canvas and
                                               strategic innovation profile.
                                               Do these pictures look like a radical
                                                                                                 No
                                               departure from competitors and offer
                                               true differentiation?


                                                                Yes

                                               Assessment #3:                               Can you fine
                                               Does the idea pass the strategic        No   tune the
                                               experiments characteristics test?            idea?


                                                                Yes

                                               Assessment #4:
                                               Implement the experiment and gain            Can you fine
                                               new insights. Is it accepted by the     No   tune the
                                               market? Does it offer superior value?        idea?
                                               It is profitable?


                                                                Yes

                                               Draw the final strategic innovation
                                               profile and strategy canvas, using
                                               feedback from stakeholders and
                                               implement.

                                                                                                            	
  


	
                                                      	
                                                         Page	
  17	
  
THE	
  BUSINESS	
  MODEL	
  SCORECARD	
  

Area	
             	
                                       Rating	
                                                   Description	
     What	
  we	
     What	
  we	
  
                                                                                                                                         know...	
        assume...	
  
Strategy	
         How	
  well	
  does	
  the	
  idea	
                                                                	
                	
               	
  
                   fit	
  with	
  our	
  current	
                 0	
                   5	
                 10	
  
                   strategy?	
  
                   What	
  is	
  the	
  strategic	
            q expanding	
  or	
  defending	
  a	
                  	
                	
               	
  
                   purpose	
  of	
  the	
  idea?	
                current	
  business	
  
                                                               q 	
  building	
  a	
  new	
  one	
  that	
  has	
  
                                                                  already	
  been	
  identified	
  
                                                               q laying	
  the	
  foundations	
  for	
  
                                                                  potential	
  new	
  businesses	
  
Organization	
     Resources	
  &	
                         	
                                                         	
                	
               	
  
                   Competencies	
  
                   Which	
  do	
  we	
  need?	
  
                   Which	
  do	
  exist	
  
                   already?	
  
                   Which	
  need	
  to	
  be	
  
                   build?	
  
                   Change	
  need	
                         	
                                                         	
                	
               	
  
                   Change	
  readiness	
                    	
                                                         	
                	
               	
  
Finance	
          Revenue	
  potential	
                   	
                                                         	
                	
               	
  
Financial	
        (Qty	
  x	
  Price)	
  
Implications	
     Cost	
  (fix	
  +	
  variable)	
         	
                                                         	
                	
               	
  
                   Unit	
  Margin	
  Target	
               	
                                                         	
                	
               	
  
                   Cash	
  Flow	
                           Payoffs	
  in	
  the	
                                     	
                	
               	
  
                   Payback	
                                q near	
  <1	
  yr	
  
                                                            q medium	
  <3	
  yrs	
  
                                                            q long	
  term	
  >	
  3	
  yrs	
  
                   Net	
  Present	
  Value	
                	
                                                         	
                	
               	
  

	
  

	
                                                	
  



	
                                                                                	
                                                                                       Page	
  18	
  
Area	
                 	
                                   Rating	
                                           Description	
     What	
  we	
     What	
  we	
  
                                                                                                                                 know...	
        assume...	
  
Innovation	
           How	
  innovative	
  is	
  the	
     WHO	
                                              	
                	
               	
  
Potential	
  for	
     new	
  model?	
                      q Known	
  to	
  company	
  and	
  
disruption	
           (Technology/Value	
                          industry	
  
                       Proposition,	
  Market,	
            q Known	
  to	
  industry,	
  new	
  to	
  
                       Supply	
  Chain)	
                           company	
  
                                                            q New	
  for	
  company	
  and	
  
                                                                    industry	
  
                                                            WHAT	
                                             	
                	
               	
  
                                                            q Known	
  to	
  company	
  and	
  
                                                                    industry	
  
                                                            q Known	
  to	
  industry,	
  new	
  to	
  
                                                                    company	
  
                                                            q New	
  for	
  company	
  and	
  
                                                                    industry	
  
                                                            HOW	
                                              	
                	
               	
  
                                                            q Known	
  to	
  company	
  and	
  
                                                                    industry	
  
                                                            q Known	
  to	
  industry,	
  new	
  to	
  
                                                                    company	
  
                                                            q New	
  for	
  company	
  and	
  
                                                                    industry	
  
Key	
  risk	
          Competition	
                        low	
                mid	
              high	
     	
                	
               	
  
factors	
                                                                                                      	
  
                       Weaknesses	
                         	
                                                 	
                	
               	
  
                                                                                                               	
  
                       Threats	
                            	
                                                 	
                	
               	
  
                                                                                                               	
  
                       Expected	
  blocks	
  /	
            	
                                                 	
                	
               	
  
                       hurdels	
  to	
  
                       implementation	
  
Key	
  success	
       Strengths	
                          	
                                                 	
                	
               	
  
factors	
                                                                                                      	
  
                       Opportunities	
                      	
                                                 	
                	
               	
  
                                                                                                               	
  


	
                                                                           	
                                                                                    Page	
  19	
  
IS	
  IT	
  A	
  STRATEGIC	
  EXPERIMENT?	
  

Ten	
  characteristics:	
  

       •   They	
  require	
  departure	
  from	
  the	
  corporation's	
  proven	
  business	
  definition	
  as	
  well	
  as	
  its	
  assumptions	
  about	
  what	
  makes	
  a	
  business	
  successful	
  (i.e.,	
  
           they	
  require	
  forgetting).	
  	
  
       •   They	
  leverage	
  some	
  of	
  the	
  existing	
  assets	
  and	
  capabilities	
  of	
  the	
  corporation	
  (i.e.,	
  they	
  require	
  borrowing	
  –	
  they	
  are	
  not	
  simply	
  financial	
  investments	
  
           in	
  startups).	
  	
  
       •   They	
  are	
  not	
  simply	
  product-­‐line	
  extensions,	
  geographic	
  expansions,	
  or	
  technological	
  improvements	
  that	
  enhance	
  proven	
  businesses.	
  	
  
       •   They	
  target	
  emerging	
  and	
  poorly	
  defined	
  industries	
  created	
  by	
  non-­‐linear	
  shifts	
  in	
  the	
  industry	
  environment.	
  
       •   They	
  are	
  launched	
  before	
  any	
  competitor	
  has	
  proved	
  itself,	
  and	
  when	
  there	
  is	
  no	
  clear	
  formula	
  for	
  making	
  a	
  profit.	
  	
  
       •   They	
  have	
  very	
  high	
  potential	
  for	
  revenue	
  growth	
  (for	
  example,	
  10x	
  over	
  3-­‐5	
  years).	
  
       •   They	
  require	
  development	
  of	
  at	
  least	
  some	
  new	
  knowledge	
  and	
  capabilities.	
  
       •   They	
  are	
  led	
  by	
  general	
  managers	
  who	
  face	
  multiple	
  dimensions	
  of	
  uncertainty	
  across	
  multiple	
  functions.	
  Potential	
  customers	
  are	
  often	
  mere	
  
           possibilities.	
  Value	
  propositions	
  are	
  often	
  just	
  guesses,	
  because	
  customers	
  themselves	
  have	
  yet	
  to	
  figure	
  out	
  exactly	
  what	
  they	
  want.	
  The	
  value	
  chain	
  
           and	
  underlying	
  technologies	
  for	
  delivering	
  the	
  new	
  products	
  or	
  services	
  are	
  often	
  unproven.	
  	
  
       •   They	
  are	
  expected	
  to	
  remain	
  unprofitable	
  for	
  several	
  quarters	
  or	
  more.	
  They	
  are	
  too	
  expensive	
  to	
  repeat.	
  
       •   It	
  can	
  remain	
  difficult	
  to	
  know	
  whether	
  the	
  experiment	
  is	
  succeeding	
  or	
  failing	
  for	
  several	
  quarters.	
  Feedback	
  is	
  delayed	
  and	
  ambiguous.	
  	
  

	
  

Source:	
  Govindarajan,	
  V.	
  and	
  C.	
  Trimble	
  (2005b).	
  "Organizational	
  DNA	
  for	
  Strategic	
  Innovation."	
  California	
  Management	
  Review	
  47(3)	
  Spring:	
  47-­‐76.	
  

	
  

	
                                                     	
  




	
                                                                                   	
                                                                                                                                       Page	
  20	
  
VI.             DESCRIBING	
  YOUR	
  ENVIRONMENT	
  

Sensing	
  and	
  seizing	
  opportunities.	
  The	
  main	
  purpose	
  of	
  describing	
  the	
  environment	
  is	
  to	
  sense	
  opportunities	
  that	
  can	
  then	
  be	
  seized	
  through	
  entirely	
  new	
  
business	
  models	
  or	
  the	
  reinvention	
  of	
  existing	
  ones.	
  

The	
  need	
  for	
  inventing	
  new	
  business	
  models	
  or	
  for	
  reinventing	
  existing	
  ones	
  can	
  arise	
  from	
  internal	
  and	
  external	
  sources.	
  Internally	
  the	
  goal	
  of	
  organic	
  
growth	
   can	
   be	
   one	
   of	
   these	
   sources	
   for	
   example.	
   Another	
   source	
   could	
   be	
   a	
   new	
   technology	
   that	
   needs	
   to	
   be	
   brought	
   to	
   market	
   with	
   a	
   new	
   business	
  
model.	
  

External	
  pressure	
  like	
  increased	
  competition,	
  new	
  entrants,	
  or	
  shifting	
  customer	
  needs	
  can	
  make	
  it	
  necessary	
  to	
  think	
  about	
  new	
  business	
  models	
  as	
  well.	
  	
  

This	
  section	
  deals	
  with	
  describing	
  these	
  external	
  trends	
  and	
  pressures	
  that	
  might	
  require	
  new	
  business	
  models,	
  but	
  might	
  also	
  offer	
  new	
  opportunities	
  
that	
  can	
  be	
  seized	
  with	
  the	
  help	
  of	
  a	
  new	
  business	
  model.	
  The	
  aim	
  is	
  not	
  to	
  find	
  an	
  answer	
  to	
  all	
  of	
  these	
  trends	
  and	
  environmental	
  factors.	
  The	
  list	
  is	
  
meant	
   to	
   provide	
   inspiration	
   for	
   areas	
   to	
   look	
   into.	
   Focus	
   on	
   those	
   that	
   you	
   think	
   have	
   the	
   biggest	
   impact	
   on	
   your	
   business,	
   be	
   it	
   as	
   a	
   threat	
   or	
   an	
  
opportunity.	
  

Here’s	
  an	
  overview	
  of	
  external	
  forces	
  to	
  think	
  about.	
  

           Key	
  Trends	
                                               Macro-­‐Economic	
  Forces	
                                       Industry	
  Forces	
                                              Market	
  Forces	
  
       •    Regulatory	
                                           •     Global	
  market	
  conditions	
                             •      Suppliers	
                                                •     Market	
  attractiveness	
  
       •    Technological	
                                        •     Capital	
  markets	
                                         •      Stakeholders	
                                             •     Market	
  share	
  
       •    Social	
                                               •     Economic	
  infrastructure	
                                 •      Competitors	
                                              •     Market	
  segments	
  
       •    Cultural	
                                             •     Commodities	
  and	
  other	
                                •      New	
  entrants	
                                          •     Needs	
  and	
  demand	
  
       •    Socio-­‐Economic	
                                           resources	
                                                  •      Substitute	
  products	
  and	
                            •     Market	
  issues	
  
       •    Demographic	
                                          •     …	
                                                                 services	
                                                 •     Switching	
  costs	
  
       •    …	
                                                                                                                       •      …	
                                                        •     …	
  


	
  

	
                                                          	
  




	
                                                                                            	
                                                                                                                                                           Page	
  21	
  
VII.        FURTHER	
  READING	
  

Sniukas,	
  M.	
  (2010)	
  „Reshaping	
  Strategy	
  –	
  The	
  Content,	
  Context	
  and	
  Process	
  of	
  Strategic	
  Innovation“	
  VDM	
  Verlag.	
  	
  First	
  chapter	
  available	
  for	
  download	
  at	
  
www.sniukas.com	
  

	
  

VIII.       REFERENCES	
  

Davenport,	
  T.	
  H.,	
  M.	
  Leibold	
  and	
  S.	
  Voelpel	
  (2006).	
  Strategic	
  Management	
  in	
  the	
  Innovation	
  Economy.	
  Publicis	
  Wiley.	
  

Osterwalder,	
  A.	
  (2009).	
  Business	
  Model	
  Generation	
  –	
  A	
  Handbook	
  for	
  Visionaries,	
  Game	
  Changers,	
  and	
  Challengers.	
  Self	
  Published	
  	
  

Lindgardt	
  Z.,	
  M.	
  Reeves,	
  G.	
  Stalk,	
  and	
  M.S.	
  Deimler	
  (2009)	
  “Business	
  Model	
  Innovation:	
  When	
  the	
  Game	
  Gets	
  Tough,	
  Change	
  the	
  Game.”	
  Boston	
  
Consulting	
  Group	
  report.	
  

Magretta,	
  J.	
  (2002).	
  "Why	
  Business	
  Models	
  Matter."	
  Harvard	
  Business	
  Review	
  80(5)	
  May:	
  86-­‐92.	
  




	
                                                                              	
                                                                                                                                   Page	
  22	
  

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Business Model Handbook

  • 1.             BUSINESS  MODEL  HANDBOOK   How  to  describe,  evaluate  and  (re)invent  your  business  model.   By  Marc  Sniukas   ©2011  Marc  Sniukas       Page  1  
  • 2. CONTENTS   I.   The  Business  Model   ..............................................................................................................................................................................  3   What  is  a  Business  Model?  ..................................................................................................................................................................................................  3   II.   Describing  Your  Business  Model  ...........................................................................................................................................................  4   WHO  is  your  customer?  ......................................................................................................................................................................................................  4   WHAT  is  your  offer?  ............................................................................................................................................................................................................  5   HOW  are  you  creating  your  value  proposition?  ..................................................................................................................................................................  5   HOW  are  you  delivering  your  value  proposition?  ...............................................................................................................................................................  6   HOW  are  you  generating  revenues?  ...................................................................................................................................................................................  6   HOW  do  costs  occur?  ..........................................................................................................................................................................................................  6   Example:  Apple  iPod  /  iTunes  Business  Model  ....................................................................................................................................................................  7   III.   Are  you  ready  for  Business  Model  Innovation?  .....................................................................................................................................  9   IV.   (Re)Inventing  Your  Business  Model  ....................................................................................................................................................  10   Redefining  the  Business  ....................................................................................................................................................................................................  10   Redefining  the  Market  ......................................................................................................................................................................................................  11   Redefining  the  Product  .....................................................................................................................................................................................................  12   Redefining  How  you  do  Business  ......................................................................................................................................................................................  15   V.   Evaluating  Your  Business  Model  .........................................................................................................................................................  17   How  innovative  is  your  idea?  ............................................................................................................................................................................................  17   The  Business  Model  Scorecard   ..........................................................................................................................................................................................  18   Is  it  a  strategic  experiment?  ..............................................................................................................................................................................................  20   VI.   Describing  Your  Environment  .............................................................................................................................................................  21   VII.   Further  Reading   ..................................................................................................................................................................................  22   VIII.  References  .........................................................................................................................................................................................  22         Page  2  
  • 3. I. THE  BUSINESS  MODEL   WHAT  IS  A  BUSINESS  MODEL?     „A   business   model   describes   the   rational   of   how   an   organization   creates,  delivers,  and  captures  value.“  (Osterwalder  2009  14)     “A  business  model  is  simply  the  ‘way   of   doing   business’  that  a  firm  has  chosen:  its  entire  system   for  creating  and  providing  consistent  value  to  customers  and  earning  a  profit  from  that  activity,  as   well  as  benefit  for  its  broader  stakeholders.  It  refers  to  the  core  architecture  or  configuration  of  the   firm,   specifically   how   it   deploys   all   relevant   resources   (not   just   those   within   the   company   boundaries),   to   create   differentiated   value   for   customers   at   a   profit…”   (Davenport,   Leibold   et   al.   2006  20).     It  is  the  underlying  economic  logic  that  explains  how  value  is  delivered  to  the  customer   at  an  appropriate  cost  (Magretta  2002).     The   business   model   is   a   company’s   answer   to   the   question   of   how   to   make   money   in   its   chosen   business.   It   describes,   “…as   a   system,   how   the   pieces   of   a   business  fit  together”  (Magretta  2002  91).             Page  3  
  • 4. II. DESCRIBING  YOUR  BUSINESS  MODEL   The  goal  is  not  to  explain  every  detail,  but  the  description  should  be  rather  to  the  point,  highlighting  the  essence  and  the  main  competitive  factors  your   business  relies  upon.     The  following  process  has  proven  helpful  for  describing  your  business  model:   1. Go  through  the  questions   on  the  next  pages  and  document  your  answers.  It  will  probably   not  be   necessary   to   answer   every   question  in  great   detail  and  some  questions  might  not  fit  your  particular  business.  Think  of  the  questions  as  inspiration  or  a  cooking  recipe:    the  recipe  gives  you   some  directions,  but  feel  free  to  use  your  creativity  and  the  style  that  fits  you  and  your  business  best.   2. After   you   have   formulated   your   answers,   use   the   Business   Model   Canvas   to   illustrate   the   main   points   and   provide   a   summary   (not   a   detailed   description!)  and  highlight  the  most  important  factors  of  your  business  model.  Have  also  a  look  at  the  examples  provided.       WHO  IS  YOUR  CUSTOMER?   Which  customer  segments  do  you  serve?  The  term  customer  is  used   • Which  customer  segments  are  you  currently  targeting?   broadly  here.  It  can  include  business  customers  or  end  customers.   • For  whom  are  you  creating  value?   Instead  of  describing  your  direct  customers,  you  might  want  to  think   • Who  are  your  most  important  customers?   about  the  real  end  customer,  who  is  finally  using  the  product.  It  might   • Are  your  customers  local  or  global?   also  be  worth  to  think  about  who  is  buying  the  product,  who  is   • Business  or  consumer?   influencing  the  decision,  who  is  paying  for  it  and  who  is  finally  using  it.   • What’s  the  demographic  segment?   Describing  your  customer  segments  along  new  characteristics  and  “the   • What’s  the  life  stage  segment? job  to  be  done”  (see  next  part)  might  open  opportunities  for  re-­‐ segmenting  your  markets.           Page  4  
  • 5. WHAT  IS  YOUR  OFFER?   What   is   the   customer   value   proposition?   The   customer   value   • What  needs  does  your  offer  fulfill?   proposition   (CVP)   is   about   what   products,   services   and   solutions   you   • What  is  the  job  that  your  products  and  services  help  your   offer   your   customers.   It   can   be   formulated   in   terms   of   what   need   is   customers  to  get  done?   fulfilled   or   what   problem   is   solved   for   the   customer.   Customer   value   • What  problem  do  your  products,  services  and  solutions  solve  for   propositions   can   be   described   as   individual   products   or   services   or   as   your  customers?   bundles.   In   case   you   sell   more   than   one   product,   you   might   want   to   • What  bundles  are  you  offering  to  each  customer  segment?   think   about   the   underlying   need   or   problem   all   of   your   products   or   services   fulfill.   Maybe   the   products   and   services   fall   into   several   categories  serving  different  needs?    HOW  ARE  YOU  CREATING  YOUR  VALUE  PROPOSITION?   What  are  the  key  activities  you  perform?  Key  activities  can  include   • Which  activities  are  the  most  important  to  your  business?   processes  like  for  example:  market  research,  design,  research,  product   • Which  do  you  perform  best?   development,  sourcing,  manufacturing,  recruiting,  training,  IT,  licensing,   • Which  do  you  outsource?   marketing,  sales,  etc.   What  are  your  key  resources  and  assets?  What  are  your  most  valuable   • People   assets  and  resources?  Which  do  you  need  to  make  your  business  model   • Technology   work?  Key  resources  can  be  physical,  intellectual,  human,  or  financial.     • Equipment   • Information     • Channels     • Exclusive  access  to  partnerships  and  alliances   • Brands     • … Who  are  your  key  partners,  alliances  and  suppliers?  Who  performs   • Suppliers  can  be  defined  as  those  who  fulfill  steps  in  the  value  chain   important  activities  in  your  value  chain?   that  your  company  has  decided  to  outsource.   • Partners  offer  additions  and  act  on  a  horizontal  level  as  opposed  to     suppliers  who  act  on  a  vertical  level.   • Alliances  are  coalitions  with  competitors  in  certain  areas.       Page  5  
  • 6. HOW  ARE  YOU  DELIVERING  YOUR  VALUE  PROPOSITION?   How  do  you  reach  the  customer?  Delivering  the  value  proposition  is  as   • What  channels  do  you  use?  E.g.  direct  or  indirect  sales,  high   much  about  how  you  sell  as  about  how  you  reach  your  customer.   pressure  or  consultative  selling,  referrals,  internet  sales,  etc.   • How  do  you  organize  fulfillment  and  support?     • How  do  you  create  awareness  for  your  offer?     • How  do  you  organize  after  sales?   What  is  your  relationship  to  the  customer?  What  is  the  image  your   • operational  excellence  “best  buy”   customers  have  of  your  company?  Are  you  differentiating  yourself   • product  leadership  “best  product”   through:   • exceptional  customer  relationship  “best  brand”   HOW  ARE  YOU  GENERATING  REVENUES?   What  specific  revenue  streams   • Sales   How  do  you  price?  How  do  you   • Fixed  or  dynamic   do  you  currently  have?  Where   • Licensing   fix  prices?   • Low,  competitive,  high   does  the  money  come  from?   • Renting  /  Leasing   • List  price   • Usage   • Value  based   • Subscription   • Auction   • …   HOW  DO  COSTS  OCCUR? What  are  the  most  important  costs  in  our  business  model?  What  are   • Is  your  business  cost-­‐driven  or  value-­‐driven?   the  cost  drivers?  Which  key  resources,  activities,  partnerships,…  are  the   • Fixed   most  expensive?   • Variable   • Economies  of  scale   • Economies  of  scope           Page  6  
  • 7. EXAMPLE:  APPLE  IPOD  /  ITUNES  BUSINESS  MODEL   “By   the   late   1990s,   Apple’s   initial   pathway   to   growth   was   running   out   of   steam.   The   company’s   proprietary   approach   to   designing   both   hardware   and   software   limited   it   to   being   a   niche   player   and   hampered   its   ability   to   compete   on   price.   In   2001,   Apple   began   introducing   a   series   of   successful   new   products   and   services—the   iPod,   the   iTunes   online   music   service,   and   the   iPhone—that   propelled   the   company   to   the   top   of   its   industry.   But   the   shift   wasn’t   only   a   matter   of   product   innovation.   Apple’s   success   resulted   from   its   ability   to   define   a   workable   business   model   for   downloading   music— something  that  had  eluded  the  music  industry  for  years.   This  combination  of  product  innovation  and  business  model  innovation  (BMI)  put  Apple  at  the  center  of  a  market  approximately  30  times  larger  than  its   original   market.   It   also   helped   expand   the   company’s   share   of   the   traditional   computer   market,   as   new   customers   became   so   attached   to   their   iPods   that   they  took  another  look  at  Apple’s  computers.”  (Lindgardt  et  al  2009)   “Apples   value   proposition   is   to   allow   customers   to   easily   search,   buy,   and   enjoy   digital   music.   Apple   earns   most   of   its   music   related   revenues   from   selling   iPods,  while  using  the  integration  with  and  online  music  stores  to  protect  itself  from  competitors.”  (Osterwalder  2009  46)     The  canvas  on  the  following  page  can  be  downloaded  from  www.businessmodelgeneration.com.       Page  7  
  • 8.   (Osterwalder  2009  46)         Page  8  
  • 9. III. ARE  YOU  READY  FOR  BUSINESS  MODEL  INNOVATION?   In  order  to  assess  an  organization’s  level  of  strategic  innovativeness  the  following  process  questions  could  be  helpful.   • Who  is  in  charge  of  developing  new  ideas?  Only  top  management  or  the  organization  as  a  whole,  i.e.  everybody?   • How  diverse  is  the  strategic  management  team  and  those  contributing  the  ideas?  Think  of  experience,  age,  sex,  race,  national  origin,  Kelley’s   personas,  etc.   • When  does  strategic  planning  and  assessment  take  place?  Once  a  year  or  continuously?   • Do  strategic  discussions  revolve  around  the  financial  outcomes  and  the  business  plan,  or  around  the  underlying  assumptions?   • Does  a  common  language  and  picture  exist  for  discussion  strategy?   • Are  new  strategies  analyzed  and  well  planned,  before  implemented,  or  does  the  organization  test  ideas  through  strategic  experimentation?   • Is  the  portfolio  of  the  strategic  experiments  well  balanced  along  the  dimensions  time,  risk,  and  aim?   • How  well  does  the  innovation  portfolio  reflect  your  strategic  goals?   • How  well  is  strategy  communicated  and  understood  within  the  organization?   • Have  the  barriers  to  implementation  been  addressed?           Page  9  
  • 10. IV. (RE)INVENTING  YOUR  BUSINESS  MODEL   REDEFINING  THE  BUSINESS   The  essential  questions  to  ask  when  it  comes  to  redefining  the  business  are:   • What  are  the  main  industry  assumptions,  when  it  comes  to  pricing,  costumers,  products  and  services  offered,  delivery,  etc.?   • Does  the  industry  have  a  product-­‐centric,  customer-­‐centric,  or  rather  competency-­‐centric  approach?  What  would  a  change  in  approach  entail?   • Do  you  let  yourself  be  constrained  by  the  assets  and  capabilities  you  possess?   • Are  you  trying  to  use  the  assets  you  have  and  simply  leverage  them,  or  are  you  continuously  striving  to  build  new  assets?   • How  many  of  your  competitors  do  already  posses  the  same  or  similar  assets?   • Which  of  your  assets  are  truly  unique  and  cannot  be  imitated  or  substituted  easily  by  others?     • Do  companies  without  these  assets  face  a  cost  disadvantage  in  obtaining  them?   • Which  of  your  assets  and  capabilities  are  obsolete?   • Which  assets  would  you  build  if  you  started  anew?   • Ask  “What  if…?”             Page  10  
  • 11. REDEFINING  THE  MARKET   • Who  are  currently  your  costumers?   • What  are  their  needs?   • Why  are  they  buying  your  product?  What  jobs  are  customers  trying  to  get  done?   • Which  customer  needs  is  your  product  actually  fulfilling?   • Are  there  customers  you  are  not  serving  now  who  have  similar  needs?   • Which  customer  needs  and  functions  can  be  satisfied  best  with  the  company’s  unique  competencies?   • Which  customers  value  most  what  the  company  does  best?   • Are  there  any  existing  customer  segments  being  neglected  by  the  industry  now?  Why  are  they  not  being  served?   • Which  consumers  or  customer  groups  share  the  most  commonalities?   • Are  competitors  serving  segments  your  company  is  not?  Why?   • Is  your  company  serving  markets  that  competitors  are  not  serving?  Why?   • Who  is  the  real  final  customer?   • How  can  existing  assets  and  capabilities  be  leveraged?   Which  customers  to  target?   nd rd   existing   ó   noncustomers  (2  and  3  tier)     most  profitable     ó   less  profitable   st   most  satisfied   ó   less  satisfied  (1  tier)     specific  buyer   ó   chain  of  buyers     focus  on  differences   ó   focus  on  commonalities     focus  on  finer  segmentation   ó   focus  on  de-­‐segmentation     focus  on  attributes   ó   focus  on  circumstances     (of  customers  and  products)         (needs  and  the  job  done)         Page  11  
  • 12. REDEFINING  THE  PRODUCT   The  following  list  summarizes  questions  to  consider  while  thinking  about  which  products  and  services  to  offer.   • Which  of  your  assets,  capabilities,  and  core  competencies  are  truly  unique?   • Which  of  those  are  most  valued  by  the  customer?   • What  are  the  customers’  needs  and  wants?  What  is  the  job  they  are  trying  to  get  done?  What  is  the  problem  they  are  trying  to  solve?   • What  job  can  customers  not  get  done?   • How  could  you  build  on  your  core  competencies  to  fulfill  these  needs  better  or  fulfill  different  needs  with  new  products?   • Why  are  noncustomers  not  using  your  offering?   • Which  elements  of  your  offerings  could  be  reduced,  raised,  created,  or  eliminated  so  as  to  fulfill  noncustomers’  needs?   • What  could  a  total  solution,  making  the  customers’  total  experience  more  worthwhile,  look  like?   • Could  the  customers  design  the  products  or  parts  of  it  themselves?   • Instead  of  traditional  market  research:  have  you  observed  the  customer,  talked  to  them  directly,  and  tried  the  product  yourself?     • What  trends  can  be  observed?   • How  will  they  change  customers’  priorities?   • What  offerings  do  alternative  industries  have?   • What  offerings  do  other  strategic  groups  have?   • What  do  companies  in  similar  or  even  completely  different  industries  or  countries  offer?   • What  would  less  profitable  customers  want?  How  could  their  needs  be  fulfilled  in  a  profitable  way?  Thus,  how  could  they  become  an  attractive   market  for  your  company?   • Is  consumption  constrained  by  any  factors,  which  might  be  reduced?   • What  do  customers  before,  during,  and  after  having  bought  your  product?   • Is  there  anything  more  you  could  offer  to  make  the  whole  experience  more  satisfying?   • Which  emotions  does  your  product  or  service  evoke?   • “Which  alternative  technologies  might  meet  the  customers’  requirements?  Which  rivals  are  pursuing  which  approach?   • What  are  the  two  or  three  key  parameters  that  influence  the  customers’  decision  to  buy?  How  do  these  relate  to  the  technical  performance  factors   or  design  parameters  of  each  alternative  technology?   • How  far  is  my  company  from  the  limits  of  each  alternative  technology?  Are  there  ways  to  circumvent  these  limits?   • Seek  feedback  and  advice  from  external  experts,  suppliers,  customers,  and  distributors.         Page  12  
  • 13. How  to  Identify  New  Products  or  Services?               Page  13  
  • 14.     single  product  or  service   ó   total  solution,  bundling     functional  appeal   ó   emotional  appeal  and         experiences       focus  on  product   ó   focus  on  function  fulfilled  and           the  job-­‐to-­‐be-­‐done     build  new  features   ó   raise,  reduced,  create,         eliminate  selectively             Page  14  
  • 15. REDEFINING  HOW  YOU  DO  BUSINESS   The  following  list  summarizes  again  essential  questions  when  it  comes  to  the  redefinition  of  the  business  model:   • How  do  you  reach  your  customers?   • How  easy  or  difficult  is  it  for  the  customer  to  find  and  buy  the  product?   • How  easy  is  it  to  do  business  and  interact  with  your  company?   • How  aligned  are  our  channels  and  processes  with  the  needs  of  the  customers?   • How  could  you  achieve  a  higher  degree  of  interaction  with  your  customers?   • What  would  be  more  fun  for  you  and  your  customers?   • How  could  you  improve  the  customer’s  total  buying  cycle  experience?   • How  could  you  reach  noncustomers?   • How  could  create  new  distribution  channels  and  innovative  points  of  presence?   • How  transparent  is  the  information  you  have  available  to  the  customers?  Do  they  have  access  to  vital  information,  which  could  enhance  their   experience?   • Is  your  price  affordable  by  the  mass  of  buyers?   • How  creatively  do  you  work  with  suppliers,  partners,  alliances?  How  could  you  work  with  them  in  such  a  way  that  it  creates  a  competitive   advantage?  Are  they  an  integrated  part  of  your  business  model?   • How  well  do  your  activities  fit  internally  and  externally?   • How  well  do  the  activities  reinforce  each  other?   • Could  you  redesign  core  processes  differently  to  improve  efficiency  and  effectiveness?   • What  is  the  most  expensive  part  of  your  existing  business?  How  could  decrease  this  cost?   • How  can  you  either  perform  additional  or  eliminate  unnecessary  steps  in  the  value  chain?   • Could  you  eliminate  certain  steps  in  your  value  chain  altogether?  Or  maybe  outsource  them?  Could  you  outsource  them  to  your  customers?  (Think   IKEA)   • What  is  the  best  organizational  structure  for  implementing  this  strategy?           Page  15  
  • 16.   conventional  customer  interface   ó   (co-­‐creating)  experiences         easy  to  do  business  with     conventional  pricing   ó   strategic   pricing   of   the   masses     (either  to  cover  cost  or     (benchmarked   against   substitutes     benchmarked  against  competitors)     and  alternative  industries)     cost-­‐plus  thinking   ó   price-­‐minus  thinking         target  costs           integrate  activities   ó   network         (with   customers,   suppliers,   partners,         alliances)     low  fit  of  activities   ó   high  fit  of  activities                      (internally  and  externally)         (internally  and  externally)     focus  on  existing  assets   ó   start  anew,  or  use  existing         assets  in  a  new  way                   Page  16  
  • 17. V. EVALUATING  YOUR  BUSINESS  MODEL   HOW  INNOVATIVE  IS  YOUR  IDEA?   Assessment #1: Using the content dimension Dump it. It’s questions, does the idea have the No probably just potential to radically challenge the evolutionary. current industry logic? Yes Assessment #2: Draw the strategy canvas and strategic innovation profile. Do these pictures look like a radical No departure from competitors and offer true differentiation? Yes Assessment #3: Can you fine Does the idea pass the strategic No tune the experiments characteristics test? idea? Yes Assessment #4: Implement the experiment and gain Can you fine new insights. Is it accepted by the No tune the market? Does it offer superior value? idea? It is profitable? Yes Draw the final strategic innovation profile and strategy canvas, using feedback from stakeholders and implement.       Page  17  
  • 18. THE  BUSINESS  MODEL  SCORECARD   Area     Rating   Description   What  we   What  we   know...   assume...   Strategy   How  well  does  the  idea         fit  with  our  current   0   5   10   strategy?   What  is  the  strategic   q expanding  or  defending  a         purpose  of  the  idea?   current  business   q  building  a  new  one  that  has   already  been  identified   q laying  the  foundations  for   potential  new  businesses   Organization   Resources  &           Competencies   Which  do  we  need?   Which  do  exist   already?   Which  need  to  be   build?   Change  need           Change  readiness           Finance   Revenue  potential           Financial   (Qty  x  Price)   Implications   Cost  (fix  +  variable)           Unit  Margin  Target           Cash  Flow   Payoffs  in  the         Payback   q near  <1  yr   q medium  <3  yrs   q long  term  >  3  yrs   Net  Present  Value                     Page  18  
  • 19. Area     Rating   Description   What  we   What  we   know...   assume...   Innovation   How  innovative  is  the   WHO         Potential  for   new  model?   q Known  to  company  and   disruption   (Technology/Value   industry   Proposition,  Market,   q Known  to  industry,  new  to   Supply  Chain)   company   q New  for  company  and   industry   WHAT         q Known  to  company  and   industry   q Known  to  industry,  new  to   company   q New  for  company  and   industry   HOW         q Known  to  company  and   industry   q Known  to  industry,  new  to   company   q New  for  company  and   industry   Key  risk   Competition   low   mid   high         factors     Weaknesses             Threats             Expected  blocks  /           hurdels  to   implementation   Key  success   Strengths           factors     Opportunities                 Page  19  
  • 20. IS  IT  A  STRATEGIC  EXPERIMENT?   Ten  characteristics:   • They  require  departure  from  the  corporation's  proven  business  definition  as  well  as  its  assumptions  about  what  makes  a  business  successful  (i.e.,   they  require  forgetting).     • They  leverage  some  of  the  existing  assets  and  capabilities  of  the  corporation  (i.e.,  they  require  borrowing  –  they  are  not  simply  financial  investments   in  startups).     • They  are  not  simply  product-­‐line  extensions,  geographic  expansions,  or  technological  improvements  that  enhance  proven  businesses.     • They  target  emerging  and  poorly  defined  industries  created  by  non-­‐linear  shifts  in  the  industry  environment.   • They  are  launched  before  any  competitor  has  proved  itself,  and  when  there  is  no  clear  formula  for  making  a  profit.     • They  have  very  high  potential  for  revenue  growth  (for  example,  10x  over  3-­‐5  years).   • They  require  development  of  at  least  some  new  knowledge  and  capabilities.   • They  are  led  by  general  managers  who  face  multiple  dimensions  of  uncertainty  across  multiple  functions.  Potential  customers  are  often  mere   possibilities.  Value  propositions  are  often  just  guesses,  because  customers  themselves  have  yet  to  figure  out  exactly  what  they  want.  The  value  chain   and  underlying  technologies  for  delivering  the  new  products  or  services  are  often  unproven.     • They  are  expected  to  remain  unprofitable  for  several  quarters  or  more.  They  are  too  expensive  to  repeat.   • It  can  remain  difficult  to  know  whether  the  experiment  is  succeeding  or  failing  for  several  quarters.  Feedback  is  delayed  and  ambiguous.       Source:  Govindarajan,  V.  and  C.  Trimble  (2005b).  "Organizational  DNA  for  Strategic  Innovation."  California  Management  Review  47(3)  Spring:  47-­‐76.             Page  20  
  • 21. VI. DESCRIBING  YOUR  ENVIRONMENT   Sensing  and  seizing  opportunities.  The  main  purpose  of  describing  the  environment  is  to  sense  opportunities  that  can  then  be  seized  through  entirely  new   business  models  or  the  reinvention  of  existing  ones.   The  need  for  inventing  new  business  models  or  for  reinventing  existing  ones  can  arise  from  internal  and  external  sources.  Internally  the  goal  of  organic   growth   can   be   one   of   these   sources   for   example.   Another   source   could   be   a   new   technology   that   needs   to   be   brought   to   market   with   a   new   business   model.   External  pressure  like  increased  competition,  new  entrants,  or  shifting  customer  needs  can  make  it  necessary  to  think  about  new  business  models  as  well.     This  section  deals  with  describing  these  external  trends  and  pressures  that  might  require  new  business  models,  but  might  also  offer  new  opportunities   that  can  be  seized  with  the  help  of  a  new  business  model.  The  aim  is  not  to  find  an  answer  to  all  of  these  trends  and  environmental  factors.  The  list  is   meant   to   provide   inspiration   for   areas   to   look   into.   Focus   on   those   that   you   think   have   the   biggest   impact   on   your   business,   be   it   as   a   threat   or   an   opportunity.   Here’s  an  overview  of  external  forces  to  think  about.   Key  Trends   Macro-­‐Economic  Forces   Industry  Forces   Market  Forces   • Regulatory   • Global  market  conditions   • Suppliers   • Market  attractiveness   • Technological   • Capital  markets   • Stakeholders   • Market  share   • Social   • Economic  infrastructure   • Competitors   • Market  segments   • Cultural   • Commodities  and  other   • New  entrants   • Needs  and  demand   • Socio-­‐Economic   resources   • Substitute  products  and   • Market  issues   • Demographic   • …   services   • Switching  costs   • …   • …   • …             Page  21  
  • 22. VII. FURTHER  READING   Sniukas,  M.  (2010)  „Reshaping  Strategy  –  The  Content,  Context  and  Process  of  Strategic  Innovation“  VDM  Verlag.    First  chapter  available  for  download  at   www.sniukas.com     VIII. REFERENCES   Davenport,  T.  H.,  M.  Leibold  and  S.  Voelpel  (2006).  Strategic  Management  in  the  Innovation  Economy.  Publicis  Wiley.   Osterwalder,  A.  (2009).  Business  Model  Generation  –  A  Handbook  for  Visionaries,  Game  Changers,  and  Challengers.  Self  Published     Lindgardt  Z.,  M.  Reeves,  G.  Stalk,  and  M.S.  Deimler  (2009)  “Business  Model  Innovation:  When  the  Game  Gets  Tough,  Change  the  Game.”  Boston   Consulting  Group  report.   Magretta,  J.  (2002).  "Why  Business  Models  Matter."  Harvard  Business  Review  80(5)  May:  86-­‐92.       Page  22