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© 2012 Holcim Ltd
55 Business Models to Revolutionize your Business JIC, Brno, Dec 2nd 2014
© 2014 Holcim Ltd
Welcome
• 05/2013 – 10/ 2013: Senior Consultant BMI Lab AG• 02/2009 – 04/2013: Research assistant and PhD candidate, ITEM-HSG, Competence center business model innovation
• Numerous consulting projects, workshops and talks in the areaof business model innovation
• Internships in Europe and Asia (among others BASF, PwC, Nike)
Professional experience
Education • University of St.Gallen, PhD studies, 2009-2014 • University of Mannheim, Studies in business administration, 2003-2008• Stanford University, Center for Design Research, Visiting Researcher, 2012
Dr. Michaela Csik
• Since 11/2013 Innovation Manager at HolcimCurrentposition
Selected Publications
Frankenberger, K.; Weiblen T.; Csik, M.; Gassmann, O. (2013): The 4I-framework of business model innovation: a structured view on process phases and challenges. In: Int. J. Product Development, Vol. 18, Nr. 3/4, S. 249-273.Gassmann, O.; Frankenberger, K.; Csik, M.: Geschäftsmodelle entwickeln –55 innovative Konzepte mit dem St.Galler Business Model Navigator, München: Hanser, 2013. Gassmann, O.; Frankenberger, K.; Csik, M.: The Business Model Navigator –55 Models that Will Revolutionize Your Business, London: Pearson/Financial Times, 2014.
© 2014 Holcim Ltd
Why we are here today
3
New, powerful methodologyto systematically developinnovate business models
German version*: Bestseller with more than 4000 copiessold
«… a sensation.» Frankfurter Allgemeine
* Gassmann, Frankenberger und Csik (2013): Geschäftsmodelle entwickeln: 55 innovative Konzepte mit dem St. Galler Business Model Navigator, Hanser Verlag: München
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Quiz question: How to innovate a black sock?
4
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Blacksocks: SockscriptionTM
Founded in 1999 Idea: Receive 3, 4 or 6 deliveries per year
of the identical socks Each SockscriptionTM lasts 1 yearMore than 40,000 customers from 74
countries
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Quiz question: What is the main difference?
6
Business model innovation as a key driver of success
Price per kilogram
15 CHF
Traditional business model(sell coffee through retail)
Price per kilogram
80 CHF
Innovative business model
© 2014 Holcim Ltd
Business model innovation is a major source of competitive advantage which is superior to other forms of innovation
7
Business modelinnovation
Processinnovations
Product/serviceinnovation
1
2
3
4
5
6
-1
0
Percent compound annual growth rate over 5 years
Source: IBM (2006)
© 2014 Holcim Ltd
Business model innovation is a major source of competitive advantage which is superior to other forms of innovation
8
Under-performer (*)
Out-performer (*)
Inno
vatio
n pr
iorit
ies
in p
erce
nt(%
)
0
20
40
60
80
100 Product and serviceinnovation
Business modelinnovation
(*) CAGR Operating Margin
Processinnovation
Source: IBM (2006)
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“Business model innovation matters and it is a top priority of CEOs.”
Business model innovation is at the top of the management agenda
More than 50% of executives believe that in futurecompetition takes place not between products orservices, but between business models. Source: Economist Intelligence Unit (2005)
More than 60 % of executives believethat their business model will undergofundamental changes in the next 5 years. Source: IBM (2008)
Business model innovation matters and it is a top priority of CEOs.Source: IBM (2006)
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Evolution of Innovation Management: trend towards Open Innovation and Business Model Innovation
Business Models
Service / Process
Product / Technology
Lonely inventor Corporate Innovation
Open Innovation
Solutions
Era Source: adapted from O. Gassmann (HSG)
10
PAST
PRESENT
FUTURE
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Why is business model innovation crucial for a company’s success
11
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Business model innovation allows companies to stay in the game by adapting to changes in their environment
12
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Example of a failed business model – Kodak
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Example of a failed business model – Blockbuster
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Example of a failed business model – Brockhaus
© 2014 Holcim LtdSource: http://www.brianvellmure.com/wp-content/uploads/2012/05/6951344609_bae7a4977e_z.jpg
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Business model innovation allows companies to escape cutthroat competition by changing the rules of the game
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“The only way to beat the competition is to stop trying to beat the competition.”
Source: Kim/Mauborgne (2005)
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Business model innovation allows companies to escape fromcutthroat competition
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Traditional business model: High level of service Main airports Hub-and-spoke system
Business model innovation: No frills approach Secondary airports Point-to-point system
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Business model innovation allows companies to escape fromcutthroat competition
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Traditional business model: 100 % outsourced production (Asia) Focus on branding/marketing Design cycles 2-3 months
Business model innovation: More than 60 per cent of production
in Spain, Portugal and other nearby countries (Morocco,Turkey)
Weekly changing collections
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Business model innovation allows companies to escape fromcutthroat competition
20
Traditional business model: Sold through subscription or at
kiosk High-class quality articles
Business model innovation: Ad-financed Newspaper (free) Self-services Low quality articles
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The competitive advantage of business model innovation is more sustainable as compared to other forms of innovation
1 TS
R p
rem
ium
(%)
Product andprocess innovation
Business modelinnovation
5 years
Source: Business Week / BCG Innovation Survey, 2008; BCG Value Science analysis
1 Total shareholder return (TSR) premium is defined as the percentage by which innovators' average total shareholder return exceeded that of their industry peers
10
8
6
4
2
0
1.7
8.5
6.0
0.1
3 years
+ 5.9
+ 6.8
21
5 years
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Business model innovation allows to capture the value oftechnology or product innovation
22
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Business model innovation plays a key role in capturing the value of product or technology innovation
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Product / Technology Innovation Value
Business Model Innovation
+ =
X
Traditional business model
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Product / TechnologyInnovation Value
Business Model Innovation
• Increase in revenues from 30 million to 2.5 billion USD (1972)
• Monthly leasing for 95 USD (including 2000 copies)
+ =
• Cost of machine:30 000 USD no market
Business model innovation plays a key role in capturing the value of product or technology innovation - Example Xerox
• Xerography technology Modell 914
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Business model innovation plays a key role in capturing the value of product or technology innovation - Example Apple
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Product / Technology Innovation Value
Business Model Innovation
+ MP3
• 10 billion USD revenueafter 3 years
• Market capitalizationfrom 2.6 billion USD(2002) to 33 billionUSD (2007)
This image cannot currently be displayed.
=
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Business model innovation plays a key role in capturing the value of product or technology innovation - Example Nespresso
26
Product / Technology Innovation Value
Business Model Innovation
• Patent in 1976• Turnover 3.2 billion
CHF in 2010 • Over 10 million
Nespresso club members
+ =
“Trial-and-Error”- sell capsules in retail stores - restaurant market
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Examples of successful business model innovators thatwere able to capture the value of new technologies
27
Genetics
Internet / Data mining
GPS
Voice over IP
Digital photography
Internet
Cloud computing
3-D printer
mp3
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How can business models be innovated in a systematic way
28
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Even though there is clear evidence that an innovative business model is one of the major key driver of success…
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…companies still put a major emphasis on the development of new product offerings
30
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One explanation is a lack of systematic tools to developinnovative business models
No tools Strategytools
60
0
20
40
60
80
100
Source: Frankenberger et al., (2013), International Journal of Product Development
Brainstorming techniques
Which methods and tools are used to developbusiness model ideas?In percent
20 20
«There are multiple tools andmethods to come up with newproduct ideas but nothing tosupport idea generation forbusiness models»
«Business model innovationis more like a coincidenceand connot be initiatedsytematically»
«The real innovative business model ideas canonly be developed by thecreative genius»
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The goal was to develop a construction methodologyfor business model innovation
Research Question: Are there any recipes that can be used by companies to systematicallygenerate innovative business model ideas?
Approach:
Define Analyze Extract
Define a theoreticalframework of how todescribe a BM/BMI
Analyze more than 350 business model innovations from the
last 50 years
Extract the patternsresponsible for
successful business model innovations
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The magic triangle: Definition of a business model
What is offered to the customer?
How is the value proposition created and delivered to the customer? Who is the target
customer segment?
Why is the business profitable?
33
A business model is a blueprint of how a company creates and captures value.
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Definition of a business model innovation
A business model innovation introduces a new logic of how a company creates and captures value by changing multiple
dimensions of a business model.
Change in the What, Who, How and/or Why
Business model Business model innovation
34
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Business Model Innovation ExampleNespresso
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Old: Coffee powder (commodity) New: Coffee capsules and machinesto produce high-end quality espresso
Old: Retail shops(e.g. supermarket) New: Direct selling approach
Old: Mass marketNew: High-end households, Office markets
Old: Retail marginNew: Coffee machine is sold at production costs, main revenues: Capsules
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Business Model Innovation ExampleDell
36
Old: Pre-configured computer New: Mass customized computer
Old: Built-to-stock/ Selling through retail network New: Built-to-order production/ Direct selling
Old: Private users, companiesNew: -
Old: Retail margin High inventory costs Positive cash conversion cycle Component prices as main cost driverNew: Skip retail margin Lower inventory costs Negative cash conversion cycle Lower component prices
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Business Model Innovation ExampleSkype
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Old: Calls are costly, especially international New: Free VOIP based video calling / cheap calls to phones (SkypeOut)
Old: Maintenance of owntelecommunication infrastructureNew: No own infrastructure, mainly software development
Old: Charge for each phone callNew: 90 % of Skype users subscribe to the free version / 10 % of Skype use SkypeOut
Old: Mass market New: Mass market (especially global web +smartphone users )
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Business Model Innovation Example20 Minuten
38
Free dailynewspaper
• Predominentlyoutsourced production
• Self-service
• Commuters (18-49 years) • Advertisers
• Financed by advertising
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5 years of intensive research–
detailed analysis of all major successful businessmodel innovators in the last 50 years
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Result: 90 percent of business model innovation is a recombination of 55 business model patterns
Business Model Innovation Map
Source: Gassmann, Frankenberger, Csik (2013)
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Business model pattern «Razor and Blade»
AppleiPod/iTunes (*) (2003)
Amazon Kindle(2007)
BetterPlace (2007)
Nestlé Nespresso(1986)
Nestlé Special.T(2010)
NestléBabyNes(2012)
Gillette (1904)
Hewlett-Packard(1984)
Standard OilCompany(1880)
The basic product is cheap, or given away free. The consumables that are needed to use or operate it, on the other hand, are expensive and sold at high margins.
What?
How?
Who?
Why?
(*) reverse ‘Razor and Blade’
Source: ITEM-HSG
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Business model pattern «Freemium»
Dropbox(2007)
LinkedIn(2003)
Skype (2003)
SurveyMonkey(1998)
Spotify(2006)
What?
How?
Who?
Why?
Hotmail (1996)
The basic version of an offering is given away for free in the hope of eventually persuading the customers to pay for the premium version.
Source: ITEM-HSG
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Business model pattern «Peer-to-Peer»
Couchsurfing (2003)
TaskRabbit(2008)
Zopa(2005)
eBay (1995)
Airbnb(2008)
What?
How?
Who?
Why?
RelayRides(2010)
This model is based on a cooperation that specializes in mediating between individuals belonging to an homogeneous group. It is often abbreviated as P2P.
Source: ITEM-HSG
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Business model pattern «Self-Service»
Accor (1985)
IKEA(1956)
BackWerk(2001)
What?
How?
Who?
Why?
McDonald’s (1948)
MobilityCarsharing (1997 )
A part of the value creation is delivered to the customer in exchange for a lower price of the service or product. This is particularly suited for process steps that add relatively low perceived value for the customer, but cause high costs.
Source: ITEM-HSG
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Business model pattern «Subscription»
Dollar Shave Club (2012)
blacksocks(1999)
Salesforce(1999)
Premiere (1990)
Jamba(2004)
What?
How?
Who?
Why?
The customer pays a regular fee, typically on a monthly or an annual basis, in order to gain access to a product or service.
Source: ITEM-HSG
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The power of creative imitation
46
What does …
… mean for your business?
Razor and Blade FreemiumPeer-to-Peer Self-ServiceSubscription
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Pattern cards as a practical tool to generate innovative business model ideas
Source: ITEM-HSG
© 2014 Holcim Ltd
Pattern cards as a practical tool to generate innovative business model ideas
Pattern title
Example of business model innovations using the pattern
Pattern content
Pattern elements
Source: ITEM-HSG
© 2014 Holcim Ltd
Workshop: Business Model Pattern Cards
Preparation Each company / participant receives six pattern cards
Task1. Develop a rule-breaking business model innovation ideas:
Go through the cards one after the other Force yourself to develop 5 ideas per card even if you think
this does not fit Cluster those ideas into groups Decide on the best idea
2. Detail the selected idea by concretizing all dimensions of the magic triangle: “who, what, how, why”
3. Come up with a name for your innovation and prepare an elevator pitch to attract investors (5min).
Source: ITEM-HSG
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The Business Model Navigator: A systematic approachfor developing innovative business models
I d e a s e l e c t i o n
Initiation
Analyse the ecosystem
Ideation
Adapt the patterns
Integration
Detail the business
model
Implement-ation
Realize the plan
Players Change Drivers
Test
Adapt
Learning through trial and
error
Market introduction
Iteration
Iteration
Iteration
What?
How?Why?
Who?
Old Business Model
Internal consistency
External consistency
Similarity Principle
Confrontation Principle
What?
How?Why?
Who?
Old Business Model
What?
How?Why?
Who?
New Business Model
Design Realization
55 Patterns
Source: ITEM-HSG
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Where you can buy the book and pattern cards
Book (English): http://www.mypearsonstore.com/bookstore/business-model-navigator-55-models-that-will-revolutionise-9781292065816?xid=PSED
http://www.amazon.com/Business-Model-Navigator-Models-Revolutionise/dp/1292065818/ref=sr_1_1?s=books&ie=UTF8&qid=1417705500&sr=1-1&keywords=the+business+model+navigator
Book (German): http://www.amazon.de/Gesch%C3%A4ftsmodelle-entwickeln-innovative-Konzepte-Navigator/dp/3446435670/ref=sr_1_1?s=books&ie=UTF8&qid=1417705204&sr=1-1&keywords=The+Business+Model+Navigator
Pattern Cards: www.bmi-lab.ch (Note: webshop currently offline due to shortness of supply)
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For further information visit www.bmi-lab.ch or contact medirectly: [email protected]
© 2014 Holcim Ltd 53
