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Presentation for Business Development Forum 2012
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Business Model Innovation
Morten Hejlesen, May 24 2012
Business Development Forum
Mail: [email protected]
Phone: 4138 0012
2
A challenging test of your observation skills…
3
Through single-minded focus on rigid measurement and data, we will
only be able to imagine the future as an extrapolation of the past
25 May 2012 3
”The potential market for
wireless phones could be
900.000 phones by 2000”
McKinsey & Company, 1980
”If I had asked people what
they wanted, they would
have said faster horses.”
Henry Ford, 1923
4
Close the growth gap through exploiting the core and exploring
adjacencies as well as transformational growth options
Source: Kim & Mauborgne (2004): Value Innovation, HBR
86%
62%
14%
14%
38%
86%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Market launches Total revenues Total profits
Incremental innovation Radical innovation
70%
10%
20%
20%
10%
70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Allocation of resources Total returns
Core growth Adjacent growth Transformational growth
Risk-taking and big bets are rewarded... ...but only when balancing your innovation efforts
Source: Nagji & Tuff (2012): Managing Your Innovation Portfolio
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The prerequisite for sustained high performance is the capability to
continuously identify and develop new opportunities
Source: David Teece (2009)
Sensing
Seizing
Transforming
Analytical systems and individual
capacities to learn and to sense,
filter, shape and calibrate
opportunities.
Enterprise structures, procedures,
processes and incentives for
seizing opportunities
Continuous alignment and
realignment of specific tangible
and intangible assets through
strategic agility
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A challenging Innovation Intent pushed Grundfos to move beyond
conventional wisdom and to explore new paths to growth
7
Danish pumps on an African adventure makes clean
drinking water a sustainable business opportunity
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Rethink the scope of innovation to move beyond new product
development and to seize sustainable competitive advantage
”Strategic fit among many
activities is fundamental not only
to competitive advantage but also
to the sustainability of that
advantage. Positions built on
systems of activities are far more
sustainable than those build on
individual activities.”
Micheal Porter, 1996, What is Strategy?
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Innovation must be informed by a deep dive into multiple knowledge
perspectives and exploring all business model components
Value proposition
Customer
relationships
Customer
segments
Channels
Partner network
Key processes
Key resources
Revenue streams Cost drivers
Internal perspective Value perspective External perspective
Financial perspective
Ca
pa
bil
ity:
Ca
pa
bili
tie
s a
nd
re
so
urc
es
Cu
sto
mers
: Users
and m
ark
ets
Context: Trends and technologies
Competitors: Industry structure and value chain
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Leverage innovation across all the components of the business
model to explore and exploit new growth options
Expand the market Create new market
Rethink existing
market
Disrupt existing
market
Cu
sto
me
rs
Business model change
Incremental Radical
Exis
ting
N
ew
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Exploring the business model offers a range of growth opportunities
• Improve performance along
‘traditional attributes’ to target the
‘high end’ or rethink the value
proposition to turn products into
solutions
• Competition: Existing
incumbents
• Risks: Existing incumbents
Rethink existing market
• Develop ‘good enough’ solutions
for the ‘low end’ of overserviced
customers or create a new niché
• Competition: Existing
incumbents
• Risks: Existing incumbents or
niché strategy fails
Disrupt existing market
• Target non-consumers through
low performance along ‘traditional
attributes’ and rethinking all
components of the business
model
• Competition: Non-consumption
• Risks: Market adoption
Create new market
• Rethink industry segmentation
variables, geographic focus or
dominant logics of the industry to
create new market
• Competition: Existing
incumbents and non-consumption
• Risks: Existing incumbents and
market adoption
Expand the market
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The Segway was intended to revolutionize human transportation - but
turned out to be an excellent case of failing and learning slowly
“I would stake my reputation, my money and my time on the fact that 10 years from now, this will be the way many people in many places get around. If all we end up with are a few billion-dollar niche markets, that would be a disappointment. It’s not like our goal was just to put the golf-cart industry out of business”
Dean Kamen, CEO and Founder, Segway
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To reduce risk, we need to accelerate and strengthen learning in the
early phases of the innovation process
Time
Knowledge
Significance
of decision
Level
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Development of new business models is based on an iterative front
end innovation process and a comprehensive toolbox
Discover Collect data and knowledge
Develop Test and feedback
Design Create ideas and solutions
Direct Generate insights
Abstract
Real
Analysis Synthesis
Define
Frame the challenge
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A shared set of working principles for cross-functional and
multidisciplinary business model innovation teams
Foster co-creation & collaboration
Work creatively & knowledge-based
Be iterative & learning-oriented
Assume a prototyping & high touch mindset
Stretch goals & challenge conventions
Apply lean development principles
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Discovery Driven Innovation is about investing a little to learn a lot -
in orden to get to ’plan B’
No business plan survives first contact with
customers - so search for a business model
17
An innovation is fundamentally a set of “untested hypotheses” that
should be implemented assumption-based and learning-oriented
Assumption N
Assumption N-1
Assumption …
Assumption 3
Assumption 2
Assumption 1
Adjustment
Adjustment
Adjustment
Adjustment
Adjustment
Exit 1
Exit 2
Rapid prototyping and
customer co-creation
Pilots and in-market
learning launches
Evolutionary entry and
expansion strategies
Risk reducing exit
strategies
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Leadership
& organisation
People
& skills
Processes
& tools
Culture
& values
Build a disciplined innovation engine into your organisation to
support innovation on all levels and across all business areas
Leaders and organisational structures aligned around a
shared innovation intent and innovation strategy
Collaborative, open and
explorative culture supported by
incentives that reward innovation
and new ideas
A critical mass of people across the organisation proficient in
innovation approaches and tools
Portfolio and project processes that
facilitate innovation supported by
tools and efficient work practices
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Hypotheses about the high performance corporate business
development units of the future
1. Must drive the creation of a company-wide innovation intent and establish firm resource
allocation structures that balance core, adjacent and transformational innovation
2. Should develop strong competences for integrative thinking combining both traditional
analytical tools and innovation tools based on intuitive ways of thinking
3. Be a driving force in all transformational innovation initiatives across business units that
require unique business development skills and high risk tolerance
4. Act as innovation leaders on all levels in order to facilitate cross-functional collaboration
and to unleash the potential of innovating across all business model components
5. Build capabilities for spotting opportunities across the operating units and become designers
of ‘smart experiments’ to test and learn fast about growth opportunities
20
Industry does not matter when it comes to performance
– even the most obscure industries can be insanely profitable...
21
Inspiration for your work on creating new business models and turbo-
charging innovation in your organisation