55 Business Models To Revolutionize Your Business [PDF]

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55 Business Models to Revolutionize your Business JIC, Brno, Dec 2nd 2014



© 2012 Holcim Ltd



Welcome Current position



• Since 11/2013 Innovation Manager at Holcim



Professional experience



• 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 area of business model innovation • Internships in Europe and Asia (among others BASF, PwC, Nike)



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



Selected Publications



Frankenberger, K.; Weiblen T.; Csik, M.; Gassmann, O. (2013): The 4Iframework 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.



Dr. Michaela Csik



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



 New, powerful methodology to systematically develop innovate business models  German version*: Bestseller with more than 4000 copies sold  «… a sensation.» Frankfurter Allgemeine * Gassmann, Frankenberger und Csik (2013): Geschäftsmodelle entwickeln: 55 innovative Konzepte mit dem St. Galler Business Model Navigator, Hanser Verlag: München © 2014 Holcim Ltd



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Quiz question: How to innovate a black sock?



© 2014 Holcim Ltd



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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 year  More than 40,000 customers from 74 countries © 2014 Holcim Ltd



Quiz question: What is the main difference?



Price per kilogram



Price per kilogram



15 CHF



80 CHF



Traditional business model (sell coffee through retail)



Innovative business model



Business model innovation as a key driver of success



© 2014 Holcim Ltd



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Business model innovation is a major source of competitive advantage which is superior to other forms of innovation Percent compound annual growth rate over 5 years 6 5 4 3 2 1 0 -1



Product/service innovation



Process innovations



Business model innovation



Source: IBM (2006)



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Business model innovation is a major source of competitive advantage which is superior to other forms of innovation



100



Product and service innovation



Innovation priorities in percent (%)



80



Process innovation



60



Business model innovation



40 20 0



Underperformer (*)



Outperformer (*)



(*) CAGR Operating Margin



Source: IBM (2006)



© 2014 Holcim Ltd



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Business model innovation is at the top of the management agenda



“Business model innovation matters and it is a top priority of CEOs.”



More than 50% of executives believe that in future competition takes place not between products or services, but between business models. Source: Economist Intelligence Unit (2005)



Business model innovation matters and it is a top priority of CEOs. Source: IBM (2006)



More than 60 % of executives believe that their business model will undergo fundamental changes in the next 5 years. Source: IBM (2008)



© 2014 Holcim Ltd



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Evolution of Innovation Management: trend towards Open Innovation and Business Model Innovation Solutions Business Models



FUTURE



Service / Process



Product / Technology



PRESENT



PAST



Lonely inventor



Corporate Innovation



Open Innovation



Era



Source: adapted from O. Gassmann (HSG) © 2014 Holcim Ltd



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Why is business model innovation crucial for a company’s success © 2014 Holcim Ltd



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Business model innovation allows companies to stay in the game by adapting to changes in their environment



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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 Ltd



Source: http://www.brianvellmure.com/wp-content/uploads/2012/05/6951344609_bae7a4977e_z.jpg



© 2014 Holcim Ltd



Business model innovation allows companies to escape cutthroat competition by changing the rules of the game



Source: Kim/Mauborgne (2005)



“The only way to beat the competition is to stop trying to beat the competition.” © 2014 Holcim Ltd



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Business model innovation allows companies to escape from cutthroat competition



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 © 2014 Holcim Ltd



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Business model innovation allows companies to escape from cutthroat competition



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 © 2014 Holcim Ltd



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Business model innovation allows companies to escape from cutthroat competition



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 © 2014 Holcim Ltd



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The competitive advantage of business model innovation is more sustainable as compared to other forms of innovation Product and process innovation



+ 6.8 10



1 TSR



premium (%)



8.5 8



Business model innovation



+ 5.9 6.0



6 4



2



1.7 5 years0.1



0 3 years



5 years



1 Total



shareholder return (TSR) premium is defined as the percentage by which innovators' average total shareholder return exceeded that of their industry peers



Source: Business Week / BCG Innovation Survey, 2008; BCG Value Science analysis



© 2014 Holcim Ltd



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Business model innovation allows to capture the value of technology or product innovation



© 2014 Holcim Ltd



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Business model innovation plays a key role in capturing the value of product or technology innovation



Traditional business model Product / Technology Innovation



X



Value



=



+ Business Model Innovation



© 2014 Holcim Ltd



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Business model innovation plays a key role in capturing the value of product or technology innovation - Example Xerox



•



Product / Technology Innovation



Cost of machine: 30 000 USD  no market



Value



=



+ Business Model Innovation



•



Xerography technology Modell 914



•



•



Increase in revenues from 30 million to 2.5 billion USD (1972)



Monthly leasing for 95 USD (including 2000 copies)



© 2014 Holcim Ltd



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Business model innovation plays a key role in capturing the value of product or technology innovation - Example Apple



Product / Technology Innovation



Value



=



+ MP3



Business Model Innovation



• •



10 billion USD revenue after 3 years Market capitalization from 2.6 billion USD (2002) to 33 billion USD (2007)



This image cannot currently be display ed.



© 2014 Holcim Ltd



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Business model innovation plays a key role in capturing the value of product or technology innovation - Example Nespresso



“Trial-and-Error” - sell capsules in retail stores - restaurant market



Product / Technology Innovation •



Patent in 1976



Value



=



+ Business Model Innovation



• •



Turnover 3.2 billion CHF in 2010 Over 10 million Nespresso club members



© 2014 Holcim Ltd



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Examples of successful business model innovators that were able to capture the value of new technologies



Internet / Data mining



Voice over IP



3-D printer



Cloud computing



Genetics



GPS Internet Digital photography mp3 © 2014 Holcim Ltd



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How can business models be innovated in a systematic way



© 2014 Holcim Ltd



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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



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One explanation is a lack of systematic tools to develop innovative business models «There are multiple tools and methods to come up with new product ideas but nothing to support idea generation for business models»



Which methods and tools are used to develop business model ideas? In percent 100 80



«Business model innovation is more like a coincidence and connot be initiated sytematically»



«The real innovative business model ideas can only be developed by the creative genius»



60 60 40 20



20 0



No tools



Strategy tools



20



Brainstorming techniques



Source: Frankenberger et al., (2013), International Journal of Product Development



© 2014 Holcim Ltd



The goal was to develop a construction methodology for business model innovation Research Question: Are there any recipes that can be used by companies to systematically generate innovative business model ideas? Approach: Define Define a theoretical framework of how to describe a BM/BMI



Analyze Analyze more than 350 business model innovations from the last 50 years



Extract Extract the patterns responsible for successful business model innovations



© 2014 Holcim Ltd



The magic triangle: Definition of a business model What is offered to the customer?



Why is the business profitable? Who is the target customer segment?



How is the value proposition created and delivered to the customer?



A business model is a blueprint of how a company creates and captures value. © 2014 Holcim Ltd



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Definition of a business model innovation



Change in the What, Who, How and/or Why



Business model



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. © 2014 Holcim Ltd



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Business Model Innovation Example Nespresso Old: Coffee powder (commodity) New: Coffee capsules and machines to produce high-end quality espresso



Old: Retail margin New: Coffee machine is sold at production costs, main revenues: Capsules



Old: Retail shops (e.g. supermarket) New: Direct selling approach



Old: Mass market New: High-end households, Office markets © 2014 Holcim Ltd



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Business Model Innovation Example Dell Old: Pre-configured computer New: Mass customized computer



Old: Retail margin High inventory costs Positive cash conversion cycle Component prices as main cost driver New: Skip retail margin Lower inventory costs Negative cash conversion cycle Lower component prices



Old: Built-to-stock/ Selling through retail network New: Built-to-order production/ Direct selling



Old: Private users, companies New: -



© 2014 Holcim Ltd



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Business Model Innovation Example Skype Old: Calls are costly, especially international New: Free VOIP based video calling / cheap calls to phones (SkypeOut)



Old: Maintenance of own telecommunication infrastructure New: No own infrastructure, mainly software development



Old: Charge for each phone call New: 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 )



© 2014 Holcim Ltd



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Business Model Innovation Example 20 Minuten Free daily newspaper



• Predominently outsourced production • Self-service



• Financed by advertising



• Commuters (18-49 years) • Advertisers © 2014 Holcim Ltd



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5 years of intensive research– detailed analysis of all major successful business model innovators in the last 50 years



© 2014 Holcim Ltd



Result: 90 percent of business model innovation is a recombination of 55 business model patterns



Business Model Innovation Map Source: Gassmann, Frankenberger, Csik (2013) © 2014 Holcim Ltd



Business model pattern «Razor and Blade» What?



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.



Standard Oil Company (1880)



Gillette (1904)



HewlettPackard (1984)



Nestlé Nespresso (1986)



Apple iPod/iTunes (*) (2003)



Amazon Kindle (2007)



Who?



Why?



Better Place (2007)



How?



Nestlé Special.T (2010)



Nestlé BabyNes (2012)



Source: ITEM-HSG (*) reverse ‘Razor and Blade’



© 2014 Holcim Ltd



Business model pattern «Freemium» What?



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.



Who?



Why?



Hotmail (1996)



SurveyMonkey (1998)



LinkedIn Skype (2003) (2003)



Spotify (2006)



How?



Dropbox (2007)



Source: ITEM-HSG © 2014 Holcim Ltd



Business model pattern «Peer-to-Peer»



What?



This model is based on a cooperation that specializes in mediating between individuals belonging to an homogeneous group. It is often abbreviated as P2P.



eBay (1995)



Couchsurfing (2003)



Zopa (2005)



Who?



Why?



Airbnb (2008)



How?



TaskRabbit (2008)



RelayRides (2010)



Source: ITEM-HSG © 2014 Holcim Ltd



Business model pattern «Self-Service»



What?



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.



McDonald’s (1948)



IKEA (1956)



Accor (1985)



Mobility Carsharing (1997 )



Who?



Why?



How?



BackWerk (2001)



Source: ITEM-HSG © 2014 Holcim Ltd



Business model pattern «Subscription» What?



The customer pays a regular fee, typically on a monthly or an annual basis, in order to gain access to a product or service.



Premiere (1990)



blacksocks (1999)



Salesforce (1999)



Who?



Why?



Jamba (2004)



How?



Dollar Shave Club (2012)



Source: ITEM-HSG © 2014 Holcim Ltd



The power of creative imitation



What does …



Razor and Blade Subscription Self-Service Peer-to-Peer Freemium … mean for your business?



© 2014 Holcim Ltd



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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 Task 1.



2.



3.



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 Detail the selected idea by concretizing all dimensions of the magic triangle: “who, what, how, why” Come up with a name for your innovation and prepare an elevator pitch to attract investors (5min). Source: ITEM-HSG © 2014 Holcim Ltd



The Business Model Navigator: A systematic approach for developing innovative business models Design



Realization



What?



Initiation Analyse the ecosystem



Players



Implementation Change Drivers



Who? Why?



Realize the plan



How? Old Business Model



Iteration



Ideation



Test



What? Similarity Principle



Iteration



Who?



Adapt the patterns



Confrontation Principle Why?



How? Old Business Model



55 Patterns



Integration Detail the business model



Adapt



Idea selection



Iteration



Learning through trial and error



What?



Internal consistency



External consistency



Who? Why?



How? New Business Model



Market introduction



Source: ITEM-HSG © 2014 Holcim Ltd



Where you can buy the book and pattern cards Book (English): http://www.mypearsonstore.com/bookstore/business-model-navigator-55-modelsthat-will-revolutionise-9781292065816?xid=PSED http://www.amazon.com/Business-Model-Navigator-ModelsRevolutionise/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-KonzepteNavigator/dp/3446435670/ref=sr_1_1?s=books&ie=UTF8&qid=1417705204&sr=11&keywords=The+Business+Model+Navigator Pattern Cards: www.bmi-lab.ch (Note: webshop currently offline due to shortness of supply)



© 2014 Holcim Ltd



For further information visit www.bmi-lab.ch or contact me directly: [email protected]



© 2014 Holcim Ltd



© 2014 Holcim Ltd



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