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Yoram (Jerry) Wind The Lauder Professor and Professor of Marke9ng
Director, SEI Center for Advanced Studies in Management
Academic Director, Wharton Fellows Program [email protected]
Presented to LINKS Jerry Wind, SEI Director Barry Libert, SEI Senior Fellow September 9. 2014
1 COPYRIGHT, OPENMATTERS, LLC
The material in this curriculum is the property of Wharton’s SEI Center and OpenMa<ers, LLC and shall not be reproduced and/or distributed without
our express authorizaDon
2 COPYRIGHT, OPENMATTERS, LLC
NOTICE
Our Agenda
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Sudhakar Gor9 Chief Digital Officer
Environmental Data Resources www.edrnet.com [email protected]
Luncheon Panelist
I. Key Challenges Facing the ParDcipants
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A. Advances in Science & Technology
C. Other Changes in the Business Environment
B. Emergence of the Empowered & Skep@cal Consumer
…And do your challenges include?
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A) Advances in science and technology, such as…
Social Networks
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The Cloud
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The Internet of things
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The Connected Home
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Wearable Technologies
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MIT Human Dynamics Lab starts publishing in 1990
Vigo – Human energy gauge
Nike+ FuelBand
Mobile Devices -‐ BYOD
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Ubiquitous Big Data and AnalyDcs
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ArDficial Intelligence
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Personalized Medicine (and Gene Therapy)
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Why Google is Involved in Deep Learning?
h_p://video.mit.edu/watch/why-‐google-‐is-‐inves9ng-‐in-‐deep-‐learning-‐14382/
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Converging on Communities: Let me be a part of it
Converging on Channels: I want to call, click and visit
Converging on Competitive Value: Give me more for my money
Converging on Choice: Give me tools to make better decisions
Converging on Customization and Personalization: Make it mine
Source: Wind and Mahajan, Convergence Marke9ng, Financial Times/Pren9ce Hall, 2001
B) The Empowered & SkepDcal Consumer
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and more skeptical than ever before.
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Empowered Stakeholders are Everywhere
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C). Other Changes in the Environment
The Chinese consumer’s growing might is dictating business choices for western brands . . .
The Global Landscape (especially China)
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Societal Challenges
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Gini Coefficient 0= perfect equality
100 = perfect inequality Most Recent
Emerging Economies Brazil 51.9 Russia 42.0 India 36.8 China 47.4 OECD Countries Japan 37.6 United Kingdom 40.0 United States 45.0 Singapore 47.8
Central Intelligence Agency. "Country Comparison: Distribu9on of Family Income -‐ Gini
Index," 2013.
Regulatory Changes
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CompeDDve Environment
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Opportunities
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Contagion & Risks
• 2008 Global Financial Crisis
• Chinese Toxic Milk Scandal
• Global Terrorism
www.ibm.com/ceostudy2012
Network Growth and Universality
Economic
Technological
Geopoli9cal
Societal
Source: World Economic Forum Global Risks 2014, Ninth Edition
Other Risks
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Environmental
ImplicaDons
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You have to challenge your exis9ng mental
model
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II. IdenDfy and Challenge Your Mental Models
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Let’s consider…
What just happened?
Robbery at Knifepoint Updated March 11, 2013 8:55am
..What are the mental models?
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Our beliefs, aitudes, feelings and behaviors are driven by our Mental Models, not reality.
The reality of the situa9on did not change, our mental model did!
What is a mental model?
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Mental model From Wikipedia, the free encyclopedia A mental model is an explana9on of someone’s thought process about how something works in the real world. It is a representa9on of the surrounding world, the rela9onships between its various parts and a person’s intui9ve percep9on about his or her own acts and their consequences. Mental models can help shape behavior and set an approach to solving problems (akin to a personal algorithm) and doing tasks.
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Inner City Alterna.ve Medicine
Roger Bannister breaks the 4 Minute Mile on May 6, 1954
Source: Gallup Daily, April 2014 h_p://www.gallup.com/poll/poli9cs.aspx
What are mental models?
What is common about all these brands?
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Napster
Samsung SGH-‐E760
$2000 Car
MIT’s Media Lab $100 laptop
All these breakthrough innovations challenged the mental models of their industries.
Sayaka Endoscope Capsule
Apple iPad
Microsoft Xbox 360 Kinect
Google Glasses
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Mental Models and leadership over the ages
Power
Emo9onal
Intellectual
Network
Techno
logy
Time
4 Examples of Mental and Leadership Models
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“Without changing our pa<ern of thought, we will not be able to solve the problems we created with our current pa<ern of thought.”
-‐ Albert Einstein
• Mental Models are cri.cal.
The Key Points
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III. InnovaDve Business Models
Business Models
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Different ages, different Business Models
Industrial revolution -‐ 1800
Services revolution -‐ 1975
Information revolution -‐ 1990
Network revolution -‐ 2010
Tech
nology
Time 40
Example of Business Models scaling
exponential
algebraic growth
arithmetic growth
geometric growth
Time
Gro
wth
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Business Models scale differently based on technology
Network Facilitators
Technology Facilitators
Service Facilitators
Asset Facilitators
make many, sell many
make one, sell many
hire one, sell one
make one, sell one
zero marginal cost
low marginal cost
medium marginal cost
high marginal cost
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Four Business Models and their revenue MulDpliers
4 Network Technology
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1 Services Assets
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Digital divide
Examples of companies
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Credit card companies Stock exchanges Social Networks
Biotech Software
Pharmaceutical
Retails Industrials
Manufacturing
Consultants Financial Services Insurance
4 Network Technology
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1 Services Assets
2 Digital divide
Why “8” type Business Models are criDcal
Networks
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Services Assets
Technology
8 Business that are 8’s scale using other people’s money, intelligence and relationships, creating less need for capital and more future opportunity for open innovation in a flat world
Digital divide
EXERCISE: What type of business model are you?
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IV. The PracDDoner’s PerspecDves
Sudhakar Gor@ Chief Digital Officer
Environmental Data Resources www.edrnet.com
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V. Transform Your Business Model
What Can You Do to Benefit from Networks?
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?
Networks are all around us NETWORK CATEGORY POSSIBLE VALUE PROVIDED
Customers • Increased loyalty/brand awareness • Data assets about customer profile or ac9vity • Marke9ng or product ideas
Employees • New product and marke9ng ideas • Opera9onal improvements • Expert support – both internal and external
Suppliers and Partners • Improved market/compe9tor awareness • More efficient rela9onships • New sales and marke9ng channels
Investors • Sugges9ons to improve valua9on • Market awareness • Crowd funding solu9ons – e.g. new sources
Communi9es (geographic, business, etc.)
• Source new employees • Understand local poli9cs/news as it affects company • Advocacy and support
• Customers
• Employees
• Suppliers • Distributors
• Partners
• Investors • Communi9es
• Other
Which Networks Do You have?
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Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Not Effective at all
Extremely Effective 1 2 3 4 5 6 7 8 9 10
Select a network to develop. Look for one that is large, ac9ve, underserved, and poten9ally aware of your company
Create incen9ves for par9cipants to add content, share their knowledge, capabili9es and assets with others
Seed the network with content, informa9on, and products and orchestrate its interac9ons to drive engagement
Build technology plaporm to connect the network and create an eco system. Begin small and experiment
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4 3
2
4 steps to building your network
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Case study: Nike+
Select a network: runners who want to log runs
Create incen9ves to par9cipate: ability share runs with social groups (pride and recogni9on)
Seed the network with content: mo9va9on and training advice
Connect the network: Wireless devices, apps, and integra9on with Facebook
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4 3
2
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Case study: AT&T
Select a network: employees
Create incen9ves to par9cipate: Recogni9on of peers, face9me with leaders
Seed the network: ask managers and leaders to par9cipate
Connect the network: Online plaporm to propose and vote on ideas
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4 3
2
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Case study: Nest thermostat
Select a network: high-‐end thermostat users
Create incen9ves to par9cipate: Improved energy efficiency through big data analysis
Seed the network: begin with public data about temperatures and energy uses
Connect the network: Internet networked devices
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4 3
2
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Portfolio of assets
Create A network that can add value
to your existing business
Add To an existing network so it
can create more value
Revise An existing network based
on its potential
Eliminate Investments in a network that are not productive
Network 1
Network 2
Network 3
Network 4
Use CARE to reallocate capital to Networks
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EXERCISE: Create a new network asset
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Select a network to develop. Look for one that is large, ac9ve, underserved, and aware of your company
Create incen9ves for par9cipants
to begin adding content themselves. Incen9ves could be recogni9on or shared revenus
Seed the network with content, informa9on, and products in order to grow awareness and membership.
Use a technological solu9on to connect the network. Begin with something inexpensive and quick to implement.
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4 3
2
Discuss the following steps for a high poten9al network
Portfolio of business
assets
Create A network that can add value
to your existing business
Add To an existing network so it
can create more value
Revise An existing network based
on its potential
Eliminate Investments in a network that are not productive
Network 1
Network 2
Network 3
Network 4
EXERCISE: Use CARE to reallocate your capital
Market not responding
Need different content
Engaged customer group
Add new geography
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Remember: Networks can be added to your firm
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Assets
Services
Technology
Networks
… it is not all or nothing!
Where can you begin experimenDng
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1.
2.
3.
4.
5.
6.
7.
VI. ReflecDons and AcDon Plans
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Our Agenda
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Key takeaway
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“To break a mental model [and therefore business model] is harder than spliCng the atom.” Albert Einstein
Business Models and Mental Models are linked to value
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Mental Model
Business Model
What leadership… • Believes is important • Has developed their own skills • Gives 9me and a_en9on • Measures and reports
How a company… • Spends and makes money • Hires people and develops skills • Uses and leverages technologies • Engages with customers
Drives
• Enterprise value • Revenue growth • Profitability
Value and performance
Determines
Next Steps…
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Yoram (Jerry) Wind The Lauder Professor and Professor of Marke9ng
Director, SEI Center for Advanced Studies in Management
Academic Director, Wharton Fellows Program [email protected]
Presented to LINKS Jerry Wind, SEI Director Barry Libert, SEI Senior Fellow September 9. 2014
67 COPYRIGHT, OPENMATTERS, LLC
