The Invincible Company

The Invincible Company
Insights into The Invincible Company @AlexOsterwalder @YPigneur #4 Resilient
Map your business,   idea, or innovation strategyzer.com Gain Creators Pain Relievers Pains Gains Products & Services Customer Job(s) The Value Proposition Canvas Value Proposition Customer Segment strategyzer.comThe makers of Business Model Generation and Strategyzer Copyright Business Model Foundry AG Map your product   and service TEST BUSINESS DESIGN D ecid e D ecid e D ecid e D ecid e Ide Assess H Experiment rn hypothesize experiment learn ideate business prototype assess decide Test and de-risk business ideas strategyzer.com/invincible Written by Alex Osterwalder Yves Pigneur Fred Etiemble Alan Smith Designed by Chris White Trish Papadakos You’re holding a guide to the world’s best business models. Use it to inspire your own portfolio of new ideas and reinventions. Design a culture of innovation and transformation to become… This book integrates with Business Model Generation, Value Proposition Design, & Testing Business Ideas International Bestsellers 40+ Languages Series The Invincib e Company The Culture Map Outcomes Beta Behaviours Enablers/Blockers copyright: Strategyzer AG & Dave Gray, 2015 The makers of Business Model Generation and Strategyzer dave gray: davegrayinfo.com strategyzer.com A Change Management Tool Designed by: Date: Iteration:Designed for: Manage your BM portfolio & create an innovation culture
1. Constantly Reinvent itself  2. Compete on Superior   Business Models  3. Transcend   Industry Boundaries The Invincible Company
NEW TOOLS IN THE INVINCIBLE COMPANY Culture MapPortfolio Map EXPLOIT EXPLORE Death & Disruption Risk Return Exploit rn siness idea mpany if it uccessful. Return How lucrative a business area is for the company. Death & Disruption Risk Exploit 1 3 nnovation Risk he risk that a (convincing) usiness idea is going to fail. isk is high when there is little vidence beyond slides and preadsheets to support the uccess chances of an idea. Risk ecreases with the amount of vidence that supports the desir- bility, feasibility, viability, and daptability of a business idea. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business. Business Model Patterns different invent patterns t new ventures and anies can apply to build etitive business models. pattern so that you can a reference library. ration o highlight a pattern outline the company’s del—just show how ular pattern to build e business model. business model might atterns. Each pattern has two or more different flavors. These are variations of a particular pattern to help you understand different ways to apply the pattern in question. Legen – Gree – Busin Patte – Case Illust – Patte Build – Optio Build – Origi Mod – Othe Mod
1. Portfolio Management 2. Competing on Business Model Patterns 3. Establishing an Innovation Culture AGENDA
1 Portfolio Management
High uncertainty Low uncertainty THE EXPLORE/EXPLOIT CONTINUUM
D ecide Decide Ide idea business SEARCH GROW High uncertainty Low uncertainty THE EXPLORE/EXPLOIT CONTINUUM AMBIDEXTROUS
Death & Disruption Risk Innovation Risk ExpectedReturn Return - - + + Exploit Portfolio Explore Portfolio THE EXPLORE/EXPLOIT CONTINUUM The Portfolio Map SEARCH GROW SEARCH (INVENT) GROW (IMPROVE)
Exploit Portfolio
Illustration — Logitech
The leading cloud peripheral player [...] A place where I could be a big fish in a small pond. “ - Bracken Darrell, CEO of Logitech
Return + ExpectedReturn Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruption Ris The risk that a business is going to die or get disrupte Risk is high when a busines is either emerging and still vulnerable, or when a busin is under threat of disruption from technology, competitio regulatory changes, or othe trends. Risk decreases with Return How lucrative a business area is for the company. Death & Disruption Risk Death & Disruption Risk Return Exploit Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the rea - +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% CREATIVITY & +10% CREATIVITY & PRODUCTIVITY $1’323B The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M VIDEO $1’323B The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M SMART +10% GAMING $648M +32% -10% MUSIC $507M +42% The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com VIDEO $259M SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $259M SMART $50M -44% CREATIVITY & PRODUCTIVITY $1’323B +10% GAMING $648M VIDEO $259M SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323M GAMING $648M VIDEO $259M SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323M GAMING $648M The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com CREATIVITY & PRODUCTIVITY $1’323M The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M SMART $50M -44% The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B CREATIVITY & The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M The Business Model Canvas Revenue Streams Channels Customer SegmentsValue PropositionsKey ActivitiesKey Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version:Designed for: designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M +42% VIDEO $1’323B SMART $50M -44% +10% CREATIVITY & PRODUCTIVITY $1’323B GAMING $648M +32% -10% MUSIC $507M SMART $50M -44% Improve A B Acquire A A A A Divest
Explore Portfolio
EXPLOIT EXPLORE SEARCH Design / Test nd Process of ign Post-search Evolve The heart of Value Proposition Design is about applying Tools to the m essy Search for value propositions that custom ers want and then keeping them aligned with what custom ers want in Post-search. Value Proposition Design shows you how to use the Value Proposition Canvas to Design and Test great value propositions in an iterative search for what custom ers want. Value proposition design is a never-ending process in which you need to Evolve your value proposition(s) constantly to keep it relevant to custom ers. Manage the m essy and nonlinear process of value proposition design and reduce risk by system atically applying adequate tools and processes. Progress Desig n Squig gle adapted from Dam ien Newm an, Central STRATEGYZER.COM /VPD /INTRO XIII EXPLORE Innovation Journey ExpectedReturn + ExpectedReturn Innovation Risk Death & Disruption Risk Return Exploit Explore 1 3 Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk decreases with the amount of evidence that supports the desir- ability, feasibility, viability, and adaptability of a business idea. Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business. Return How lucrative a business area is for the company. - Innovation Risk Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk decreases with the amount of evidence that supports the desir- ability, feasibility, viability, and adaptability of a business idea. eturn a business idea he company if it be successful. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business. Return How lucrative a business area is for the company. Innovation Risk
EXPLOIT EXPLORE 12 1Design Design the Team p. 2 0 7 Shape the Idea p. 2 0 7 TEST DESIGN Ideate Prototype Assess Learn D ecide Hypothesize Experiment Discovery Increase Expected Return Reduce Innovation Risk Ideate Prototype Assess Hypothesize ExperimentLearn EXPLORE Design and Test
EXPLORE EXPLOITExpectedReturn + ExpectedReturn Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk decreases with the amount of evidence that supports the desir- ability, feasibility, viability, and adaptability of a business idea. Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business Return How lucrative a business area is for the company. - Death & Disruption Risk Return Exploit Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the ness area Innovation Risk A Ideate A B Pivot A Retire A Persevere Transfer A A EXPLORE Actions
“Failure can be the beginning of something beautiful - Ayse Birsel Seck, designer & innovator
Question for You   How many $100k innovation projects does it take to produce a mega success?
EXPLORE projects EXPLOITExpectedReturn + ExpectedReturn Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk decreases with the amount of evidence that supports the desir- ability, feasibility, viability, and adaptability of a business idea. Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business Return How lucrative a business area is for the company. - Death & Disruption Risk Return Exploit Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the ness area Innovation Risk 250 66% failures 1 Mega Success Funnel somewhat successful33% ? EXPLORE
5.9% 2.5% 1.1% 0.4% 25.3% 64.8% Return Distribution in U.S. Venture Capital (2004 - 2013) Source: Correlation Ventures (data from VentureSource and other) 0 - 1.0x 1.0 - 5.0x 5.0 - 10.0x 10.0 - 20.0x 20.0 - 50.0x 50.0x + Return Groupings 70% 60% 50% 40% 30% 20% 10% 0% %ofFinancings 6 out of 10 investments lose money 4 out of 1000 are home runs 3 out of 10 makes some money STARTUPs
Illustration — Bosch
The Bosch Accelerator Program has allowed Bosch to implement a fast, structured, and capital-efficient process for validating business models at scale and has led to the establishment of a Bosch-wide innovation portfolio DR. UWE KIRSCHNER VP Business Model Innovation, Bosch Management Consulting “ Accelerator Program
EXPLOIT EXPLORE ExpectedReturn + ExpectedReturn Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk decreases with the amount of evidence that supports the desir- ability, feasibility, viability, and adaptability of a business idea. Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business Return How lucrative a business area is for the company. - Death & Disruption Risk Return Exploit Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the ness area Innovation Risk Accelerator Program PHASE 1 200 teams (3 months, €120’000) PHASE 2 60 teams (€300’000) 70% fail 75% fail 15 businesses EXPLORE Bosch You can’t pick the winner without investing   in the losers!!!
2 Competing on Business Model Patterns
‣A repeatable configuration of different business model building blocks to strengthen an organization’s overall business model Business Model Pattern particular pattern to help you understand different ways to apply the pattern in question. – Business Model Pattern – Case Illustration – Pattern Building Blocks – Optional Pattern Building Blocks – Original Business Model Blocks – Other Business Model Blocks
Exploit Pattern Libraries Shift Patterns Invent Patterns Explore
Invent Patterns
EXPLOITExpectedReturn + ExpectedReturn Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk decreases with the amount of evidence that supports the desir- ability, feasibility, viability, and adaptability of a business idea. Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business Return How lucrative a business area is for the company. - Death & Disruption Risk Return Exploit Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the ness area Innovation Risk Business   Design SEARCH (INVENT) INVENT Explore Portfolio
Pattern New Business Model INVENT Invent Patterns Business Models Canvas
Backstage Disruption • Resource Castles • Activity Differentiators • Scalers Profit Formula Disruption • Revenue Differentiators • Cost Differentiators • Margin Masters Frontstage Disruption • Market Explorers • Channel Kings • Gravity Creators 226 Shift Pattern Library EPICENTERS Invent Patterns Library
Question for You   What do these three business models have in common ?
They created a competitive advantage with key resources that are difficult or impossible for competitors to copy Resource Castles
RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE rce s etitive th key t are possible TRIGGER QUESTION Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams Resource   Castles Build Moats
Illustration — Dyson
- James Dyson,   inventor & founder of Dyson “The key to success is failure… Success is made of 99 percent failure.
RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE PREMIUM CONSUMER APPLIANCES High-end mass market Research & development R&D Costs 100 million machines as of 2017 Premium Price Intellectual proprietary & patents $700 Vs $40 Resource   Castles IP Castle Build Moats Key Partners Key activities Value Proposition Customer SegmentCustomer Relationship Key Resources Channels Cost Structure Revenue Streams 6x more investment in R&D than competitors, on average.³⁸ Dyson's R&D Investment Average Competitor Investment
TRIGGER QUESTION How could we make difficult-to- copy resources a key pillar of our business model? ASSESSMENT QUESTION FOR LEADERS Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? Resource   Castles Build Moats RESOURCE COST VP THAT DEPENDS ON PROTECTED RESOURCE HARD TO COPY RESOURCE Resource Castles Build Moats Build a competitive advantage with key resources that are difficult or impossible to copy by competitors. TRIGGER QUESTION How could we make difficult-to-copy resources a key pillar of our business model? Our key resources are significantly inferior to Our key resources can’t easily be copied or emulated for the next couple of years and Assesment Question Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +3+2+20-1-2-3
SCORING Questions for Leaders
Frontstage Market Explorers: How large and attractive is the untapped market potential we are going after? +10−1−2 +3+2−3 Channel Kings: Do we have large- scale and, ideally, direct access to our end-customer? +10−1−2 +3+2−3 Gravity Creators: How easy or difficult is it for our customers to leave or switch to another company? +10−1−2 +3+2−3 Backstage Resource Castles: Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +10−1−2 +3+2−3 Activity Differentiators: Do we create significant value for customers because we perform and configure activities in disruptively innovative ways? +10−1−2 +3+2−3 Scalers: How rapidly and how easily can we grow our business model without substantial additional resources and activities (e.g., building infrastructure, finding talent)? +10−1−2 +3+2−3 Profit Formula Revenue Differentiators: Do we use strong revenue streams and pricing mechanisms to monetize value creation for customers? +10−1−2 +3+2−3 Cost Differentiators: Is our cost structure conventional or disruptive? +10−1−2 +3+2−3 Margin Monsters: Do we have strong margins from low costs and high prices? +10−1−2 +3+2−3 Assessment Questions for Leaders Frontstage Market Explorers: How large and attractive is the untapped market potential we are going after? +10−1−2 +3+2−3 Channel Kings: Do we have large- scale and, ideally, direct access to our end-customer? +10−1−2 +3+2−3 Gravity Creators: How easy or difficult is it for our customers to leave or switch to another company? +10−1−2 +3+2−3 Backstage Resource Castles: Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +10−1−2 +3+2−3 Activity Differentiators: Do we create significant value for customers because we perform and configure activities in disruptively innovative ways? +10−1−2 +3+2−3 Scalers: How rapidly and how easily can we grow our business model without substantial additional resources and activities (e.g., building infrastructure, finding talent)? +10−1−2 +3+2−3 Profit Formula Revenue Differentiators: Do we use strong revenue streams and pricing mechanisms to monetize value creation for customers? +10−1−2 +3+2−3 Cost Differentiators: Is our cost structure conventional or disruptive? +10−1−2 +3+2−3 Margin Monsters: Do we have strong margins from low costs and high prices? +10−1−2 +3+2−3 Assessment Questions for Leaders Frontstage Market Explorers: How large and attractive is the untapped market potential we are going after? +10−1−2 +3+2−3 Channel Kings: Do we have large- scale and, ideally, direct access to our end-customer? +10−1−2 +3+2−3 Gravity Creators: How easy or difficult is it for our customers to leave or switch to another company? +10−1−2 +3+2−3 Backstage Resource Castles: Do we own key resources that are difficult or impossible to copy and which give us a significant competitive advantage? +10−1−2 +3+2−3 Activity Differentiators: Do we create significant value for customers because we perform and configure activities in disruptively innovative ways? +10−1−2 +3+2−3 Scalers: How rapidly and how easily can we grow our business model without substantial additional resources and activities (e.g., building infrastructure, finding talent)? +10−1−2 +3+2−3 Profit Formula Revenue Differentiators: Do we use strong revenue streams and pricing mechanisms to monetize value creation for customers? +10−1−2 +3+2−3 Cost Differentiators: Is our cost structure conventional or disruptive? +10−1−2 +3+2−3 Margin Monsters: Do we have strong margins from low costs and high prices? +10−1−2 +3+2−3 Assessment Questions for Leaders Backstage Disruption Profit Formula Disruption Frontstage Disruption attern Library Value Proposition Shifts p. XXX From Product to Recurring Service p. XXX From Low-Tech to High-Tech p. XXX From Sales to Platform Frontstage Driven Shifts p. XXX From Niche Market to Mass Market p. XXX From B2B to B2(B2)C p. XXX From Low Touch to High Touch Profit Formu Driven Shifts p. XXX From High C p. XXX From Transa to Recurring p. XXX From Conve to Contraria Backstage Driven Shifts p. XXX From Dedicated Resources to Multi-Usage Resources p. XXX From Asset Heavy to Asset Light p. XXX From Closed to Open (Innovation) ASSESSMENT Questions for Leaders
Shift Patterns
EXPLORE Return + xpectedReturn Death & Disruption Risk Return Exploit Explore Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little Expected Return How lucrative a business idea could be for the company if it turned out to be successful. Death & Disruptio The risk that a busines going to die or get disr Risk is high when a bu is either emerging and vulnerable, or when a is under threat of disru from technology, comp Return How lucrative a business area is for the company. Death & Disruption Risk Death & Disruption Risk Return Exploit Innovation Risk The risk that a (convincing) business idea is going to fail. Risk is high when there is little evidence beyond slides and spreadsheets to support the success chances of an idea. Risk Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business. ess area - A B Improve GROW (IMPROVE) IMPROVE Exploit Portfolio
Shift Pattern New Business Model Original Business Model IMPROVE Shift Patterns
226 Shift Pattern Library Value Proposition Sh p. XXX From Product Recurring Ser p. XXX From Low-Tec p. XXX From Sales to Frontstage Driven Shifts p. XXX From Niche M to Mass Mark p. XXX From B2B to B p. XXX From Low Tou to High Touch Backstage Driven Shift • From Dedicated to Multi-Usage • From Asset Heavy to Asset Light • From Closed to Open (innovation) Profit Formula Driven Shift • From High Cost to Low Cost • From Transactional to recurring revenue • From Conventional to Contrarian Frontstage Driven Shift • From Niche to Mass Market • From B2B to B2(B2)C • From Low to High Touch Value Proposition Shift • From Product to Service • From Low-Tech to High-Tech • From Sales to Platform EPICENTERS Shift Pattern Library
From Product to Recurring Service SALES CHANNEL PRODUCT- RELATED COST PRODUCT- RELATED ACTIVITIES ∗ PRODUCT CUSTOMER SEGMENT SALES PRODUCT- RELATED RESOURCES Original product business model Recurring service pattern CUSTOMER SEGMENT Original product business model CUSTOMER SEGMENT Recurring service pattern 231 is the shift from manufacturing (and/or buying) and selling products toward providing a recurring service. Selling products on a transactional basis requires a continuous effort for every sale and it is often unpredictable. Recurring services require upfront customer acquisition costs that lead to recurring revenues. Revenues become more predictable and grow exponentially, because you build on top of a continuously growing base of customers. predictable revenues by providing a recurring service, rather than selling a product? Upfront acquisition costs per customer might be higher, but revenues become more predictable and the lifetime value of customers often increases. Product and/or technology innovation can often provide the foundation for new services. EXAMPLE HILTI to Recurring Service COST OF SERVICE SERVICE DELIVERY CHANNELS GET CUSTOMER TO USE SERVICE UPFRONT CUSTOMER ACQUISITION COST RECURRING REVENUE CUSTOMER SEGMENT ∗ SERVICE SERVICE PROVISIONING SERVICE RESOURCES STRATEGIC REFLECTION How might we grow recurring and predictable revenues by providing a recurring service, rather than selling a product?
[sources: Mark W. Johnson, photo: Hilti.com] Illustration — HILTI Hilti shifted from selling high quality tools to selling tool fleet management services
“The big benefit of recurring service revenues helped us to stabilize our business during the financial crisis, a time when most contractors wouldn’t purchase new equipment - Christoph Loos, CEO of Hilti
From Product to Recurring Service 2000 2003 Sales force Customer acquisition costs Tool manufacturing & distribution High quality tools Builders Transactional Transactional tool sales 1 From Product to Recurring Service and Revenues Managers of building companies have a lot more to worry about than just buying tools. Hilti recognizes that in 2000 and starts offering to track, repair, replace, and upgrade the whole tool fleet for their clients. This increases their productivity by ensuring they always have the right tools, properly maintained and reliable at all times. Hilti allows customers to lease the tools through a monthly subscription rather than paying for them upfront – enabling predictability of costs for building company managers and recurring revenues for Hilti. 2 From Product-Related Activities to Service Provisioning Hilti evolves its key activities from its core of manufacturing and sales to fleet management activities that enable tool tracking, repairing, replacement, and upgrading. 3 From Sales Channel to Service Delivery Channels Hilti retrains its sales force to speak to execu- tives rather than project managers, and about logistics and efficiency rather than tools. It adds new online service channels to the tradi- tional sales channel, raising awareness about the service, helping fleet customers access their inventory online, and enabling them to access Hilti easily in case of a problem with their tools. 4 From a Product to a Service Cost Structure Hilti’s cost structure adapts to this new service orientation with new fleet management costs. To date, this shift has added over CHF1 billion worth of receivable volume to Hilti’s balance sheet. Even customer acquisition costs (CAC) increase, due to the longer sales and contract- ing process with building company managers. The CAC, however, is now a one-time cost, leading to recurring revenues and opportuni- ties for additional revenues with the long-term relationship. 2 3 4 1 Service-focused sales & marketing Fleet management Tool fleet management Construction company managers Monthly service revenue Fleet management infrastructure Inventory of tools Online Fleet management costs Long-term contracts Sales force Customer acquisition costs Tool manufacturing & distribution High quality tools BuildersTransactional Transactional tool sales From the original product model... …to new recurring service model Recurring service pattern From Product to Recurring Services SHIFT PATTERN
Illustration — Ørsted Multiple Shift Patterns From oil/gas/coal   to green energy
- Henrik Poulsen, CEO of Ørsted “We must dramatically accelerate the transformation of the world's energy systems from fossil fuels to renewables to help protect our planet for future generations https://orsted.com/en/media/newsroom/news/2019/01/orsted-is-the-worlds-most-sustainable-energy-company
From Dedicated   to Multi Usage Resource From Transactional to Recurring Revenues Oil/gas/coal- fired plant operations Government CapEx Oil/gas/coal- fired plant Commodity-based pricing (variable) Oil/gas/ coal-fired plants Oil/gas/ coal-based energy Sales force Energy distribution Offshore know-how Energy consumers (residential and commercial) Energy distributors Multiple Shift   Patterns Energy distribution CapEx Salesforce Reduced cost due to government subsidies Renewable energy (wind farms) V alue-based relationship (sustainability) Energy consumers (residential and commercial) Energy distributors Offshore know-how Wind farms Wind farm operations Wind farm production and operations Wind turbine manufacturers G overnment Higher prices (green energy premium)Fixed pricing for renewable energy From Low-Tech to High-Tech From oil/gas/coal   to green energy
3 Establishing an Innovation Culture
‣find the right idea ‣execute the plan ‣check the results ‣avoid failure ‣predict the future   based on the past Innovation is complicated in companies because they often believe that:
EXPLOIT Death & Disruption Risk - Return + EXPLORE Innovation Risk - ExpectedReturn + INVENT/IMPROVE The Portfolio Map ‣ find the right idea ‣ execute the plan ‣ check the results ‣ avoid failure ‣ predict the future   based on the past ?
Your exploitation culture cherishes the management, systematic improvement, and growth of existing business Your exploration culture cultivates the creation, discovery, validation, and acceleration of new ideas that are foreign to an organization Cultivate Explore and Exploit Under One Roof
The Culture Map
“If you want to understand a culture, you need to map it. - Dave Gray, author and entrepreneur
The Culture Map Outcomes Beta Behaviours Enablers/Blockers copyright: Strategyzer AG & Dave Gray, 2015 The makers of Business Model Generation and Strategyzer dave gray: davegrayinfo.com strategyzer.com A Change Management Tool Designed by: Date: Iteration:Designed for: What enables and blocks us from our goals? What behaviors will allow us to achieve our desired outcomes? What are our desired outcomes? DEFINITION The Culture Map policies, processes, reward systems, rituals, …
“Cultivate corporate culture like a garden” What you want to “harvest” from a garden (fruits) Elements that allow a garden   to flourish (water, fertilizer) The heart of your culture The Culture Map Outcomes The concrete positive or negative quences resulting from people’s Behaviors How do individual and teams ac themselves within the company? they do or say? How do they inte What patterns do you notice? Enablers/Blockers The levers that lead to positive o behaviors inside your company. “If you want to understand culture, you need to map it.” DEFINITION The Culture Map Together with Dave Gray, Strategyzer developed the Culture Map as a tool to design better- performing companies. The Culture Map is a practical, simple, and visual tool to understand, design, test, and manage the corporate culture you want to bring to fruition in your organization. In this book we use the Culture Map to map and design an innovation culture.
Exploration Culture
INNOVATION CULTURE Designing an Exploration Culture
what kind of behavior does an innovation culture require? Outcomes Behaviors Enablers / Blockers Team Behavior eas based on evidence ot their opinions or . Risk and uncertainty atically measured and heap and quick experi- ime and costs increase ence and decreasing accumulate skills over nd learn and grow from ct. Culture Map: Innovation Culture Blockers Leadership Support Organizational Design Innovation Practice Leaders provide guidance for innovation Eagerness to invent and pioneer Innovators & executors collaborate Ideas cho- sen based on evidence People grow inno skills over sev- eral projectsCEO spends 40%+ time on innovation Innovation funnel reviewed every quarter Start with cheap experiments People choose innovation as a career path Systematic measurement of risk reduction Inno & growth integral part of strategy Resilient to change and disruption Company assets leveraged for future growth New growth engines Retention and leverage of innovation talent Reduced innovation risk Higher return on R&D Inno on agenda of important meetings Nobody gets fired for experimenting INNOVATION CULTURE Behaviors Eagerness to invent and pioneer People choose innovation as a career path Systematic measurement of risk reduction
what kind of behavior does an innovation culture require? which outcomes do we expect from an innovation culture? Outcomes Behaviors Enablers / Blockers Team Behavior eas based on evidence ot their opinions or . Risk and uncertainty atically measured and heap and quick experi- ime and costs increase ence and decreasing accumulate skills over nd learn and grow from ct. Culture Map: Innovation Culture Blockers Leadership Support Organizational Design Innovation Practice Leaders provide guidance for innovation Eagerness to invent and pioneer Innovators & executors collaborate Ideas cho- sen based on evidence People grow inno skills over sev- eral projectsCEO spends 40%+ time on innovation Innovation funnel reviewed every quarter Start with cheap experiments People choose innovation as a career path Systematic measurement of risk reduction Inno & growth integral part of strategy Resilient to change and disruption Company assets leveraged for future growth New growth engines Retention and leverage of innovation talent Reduced innovation risk Higher return on R&D Inno on agenda of important meetings Nobody gets fired for experimenting INNOVATION CULTURE Outcomes Resilient to change and disruption Retention and leverage of innovation talents Reduced innovation risk
what blocks the development of a Lean Startup culture today? Outcomes Behaviors Enablers / Blockers Practice ession in itself, just like or operations. You don’t ight, but with experience g a substantial team heir sole job description nization from develop- novation practice. Just r operations, innovation sses, key performance d culture. Leaders provide guidance for innovation Inno & growth integral part of strategy Reduced innovation risk Company assets leveraged for future growth New growth engines Retention and leverage of innovation talent Resilient to change and disruption Higher return on R&D Eagerness to invent and pioneer Innovators & executors collaborate Ideas cho- sen based on evidence Inno on agenda of important meetings People grow inno skills over sev- eral projectsCEO spends 40%+ time on innovation Innovation funnel reviewed every quarter Nobody gets fired for experimenting Start with cheap experiments People choose innovation as a career path Systematic measurement of risk reduction Locked into current business model Innovationis seen as a black box General fear of failure Innovation lacks power Rewards systemgeared toward execution Short-term/ quarterly focus of leadership Lack of skills, knowledge, and experience Lack of innovation strategy Linear processes Execution KPIs Lack of access to customers The highest paid person selects ideas Bureaucracy slowing down innovation Culture Map: Innovation Culture Blockers INNOVATION CULTURE Blockers X Short term/ Quarterly focus of leadership X Rewards systemgeared toward execution X Execution KPIs
what enables the development of an innovation culture? INNOVATION CULTURE Enablers Outcomes Behaviors Enablers / Blockers sign Power: the status that tion and teams working within the organization. e: the access that growth s to resources and business and the part- ng businesses build with entives: a dedicated at differs from manage- ns and is tailored n around growth and e the application and f-the art innovation con- at are practiced across ons. ment: dedicated innova- d metrics that measure k and uncertainty from usiness. ent: the existence of tion skills and experience zation, from professional o existing business units. Resource allocation Portfolio Management Strategic Guidance Bridge to the core Rewards and incentives Legitimacy and power Skills development Process management Innovation tools Organizational  Design Leadership  Support Innovation  Practice Bridge to the core Legitimacy and power
INNOVATION CULTURE Leadership Support Resource allocation Portfolio management Strategic guidance Strategic Guidance Resource Allocation Portfolio Management
INNOVATION CULTURE Organizational Design Legitimacy and Power Bridge to the Core Rewards and Incentives Bridge to the core Rewards and incentives Legitimacy and power
Question for You   How much time does your CEO personally spend on innovation every week ?
0-10%67% 10-25%16% 25-50%10% > 50%7% How much time does your CEO personally spend on innovation every week ? Is it possible to have ambidextrous CEOs ?
Legitimacy, Power   and Bridge to the Core EXPLOITEXPLORE ORGANIZATIONAL DESIGN Org Chart Chief Entrepreneur CEO
INNOVATION CULTURE Innovation Practice Innovation Tools Process Management Skills Development Skills development Process management Innovation tools
Portfolio   Guidance Innovation Tools Corporate   Identity   Triangle Portfolio   Map Culture   Map Innovation Metrics Test Card Learning Card Learning CardTest Card Business Environment Map Business Model Canvas Value Proposition Canvas
SCORING Innovation Culture Readiness
BEGINNER We have little to no experience with this topic We have some experience INTERMEDIATE We regularly work this way, but not systematically We frequently work this way WORLD CLASS Our practice is used as a case study for others to learn from Leadership Support Strategic Guidance Leadership does not provide explicit strategic guidance for innovation There is some strategic guidance for innovation but not everybody in the company knows it Leadership provides strategic innovation guidance at important meetings and everybody knows it Resource Allocation Resources for innovation are bootstrapped or on an ad-hoc project basis Resources for innovation are available, but they are not substantial and not protected Resources for innovation are institutionalized and leaders commit at least 50% of their time to innovation Portfolio Management Leadership is mainly focused on improving the core business We make some investments to explore the future and new business models, but it's not systematic Leadership is eager to pioneer and invests in a large innovation pipeline of small bets of which the best get follow-up investments Organizational Design Legitimacy and Power Innovation projects are skunk work and outside official channels Innovation is officially in the org chart, but lacks power and influence Innovation is at the very top of the org chart and has power and influence Bridge to the Core Innovation teams have limited or no access to customers, resources, and skills of the core business The core business and innovation teams collaborate, but there are conflicts There are clear policies that help innovation teams and the core business collaborate as equal partners Rewards and Incentives Innovation does not have a dedicated incentive system that differs from the core business We have some incentives in place to encourage innovation and reward it differently from execution Innovation has a dedicated incentive system that rewards experimentation and new value creation Innovation Practice Innovation Tools We do not use business model, lean startup, or design thinking tools for innovation Business model, lean startup, or design thinking tools are used in pockets of the organization Business model, lean startup, or design thinking tools are widely adopted and mastered Process Management Our processes are linear and requiredetailed business plans with financial projections We occasionally use iterative processes and systematic business experiments to test business ideas Our processes are optimized for innovation and we systematically measure the reduction of risk in new ideas Innovation Skills We don’t hire for innovation skills and experience and don’t develop them We occasionally hire experienced innovation talent and train some specialized staff in innovation We hire and develop world class innovation talent with extensive experience across the organization 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3 3 5 5 5 5 5 5 5 5 5 2 2 2 2 2 2 2 2 2 4 4 4 4 4 4 4 4 4 ASSESSMENT Innovation Culture Readiness
NEW TOOLS IN THE INVINCIBLE COMPANY Culture MapPortfolio Map EXPLOIT EXPLORE Death & Disruption Risk Return Exploit rn siness idea mpany if it uccessful. Return How lucrative a business area is for the company. Death & Disruption Risk Exploit 1 3 nnovation Risk he risk that a (convincing) usiness idea is going to fail. isk is high when there is little vidence beyond slides and preadsheets to support the uccess chances of an idea. Risk ecreases with the amount of vidence that supports the desir- bility, feasibility, viability, and daptability of a business idea. Death & Disruption Risk The risk that a business is going to die or get disrupted. Risk is high when a business is either emerging and still vulnerable, or when a business is under threat of disruption from technology, competition, regulatory changes, or other trends. Risk decreases with the moats protecting your business. Business Model Patterns different invent patterns t new ventures and anies can apply to build etitive business models. pattern so that you can a reference library. ration o highlight a pattern outline the company’s del—just show how ular pattern to build e business model. business model might atterns. Each pattern has two or more different flavors. These are variations of a particular pattern to help you understand different ways to apply the pattern in question. Legen – Gree – Busin Patte – Case Illust – Patte Build – Optio Build – Origi Mod – Othe Mod

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