Business model design and innovation

1. Management2.0: Competitive Advantage through Business Model Design & Innovation Guadalajara, June 2007 Alexander Osterwalder, PhD [email_address]

2. change is the process by which the future invades our lives -> Alvin Toffler

3. first of all: what are YOUR concerns? (buzz groups)

4. what are YOUR biggest issues and fears you face in strategic management today?

5. where do YOU see the largest opportunities to improve strategic management today?

6. your expectations for today?

7. what is innovation?

8. tell me about the most important innovations in your company

9. types of innovation?

10. technology innovation

11. process innovation

12. product & service innovation

13. business model innovation

14. four rings of innovation business model innovation product & service innovation process innovation technology innovation

15. which one of your examples qualify as business model innovation ?

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

17. Operating Margin Growth in Excess of Competitive Peers compound annual growth rate over five years [Source: IBM, CEOs are expanding the innovation horizon: important implications for CIOs]

18. Benefits Cited by Business Model Innovators percent of respondents [Source: IBM, Global CEO Study 2006]

19. some examples

20. NetJets: Fractional Ownership

21. Zopa.com: Peer-to-Peer lending

22. Bellum Concepts

23. why talk about business models?

24. how do you describe a business model?

25. without a common language

26. how do you communicate a business model?

28. Here CEOs 10° Managers 60° Here Staff 360° Ok

29. how do you implement a business model?

30. with outdated methods

31. how do you measure the success of a business model?

32. we don’t

33. how do you change a business model and innovate ?

34. we re-invent the wheel

35. what is a business model?

36. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS INFRASTRUCTURE CUSTOMER OFFER FINANCE a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams DISTRIBUTION CHANNELS [Osterwalder (2004) The Business Model Ontology] business model framework

37. case study

38. you become the new owner of a soccer club …

39. describe YOUR club’s business model

40. describing how a wealth management bank acquires its clients what value proposition do you offer, to which customer segments ?

41. VALUE PROPOSITION CUSTOMER SEGMENTS value proposition 1 value proposition 2 … target customer 1 target customer 2 … CUSTOMER OFFER what value proposition do you offer, to which customer segments? (model)

42. what value proposition do you offer, to which customer segments? (example) spectacular offensive football fans CUSTOMER OFFER advertising space & high visibility advertisers … …

44. how do you reach your customers ?

45. VALUE PROPOSITION COMMUNICATION & DISTRIBUTION CHANNELS value proposition 1 value proposition 2 … channel 1 channel 2 … OFFER how do you reach your customers? (model) CUSTOMER SEGMENTS target customer 1 target customer 2 … CUSTOMER

46. spectacular offensive football stadium & box office CUSTOMER OFFER how do you reach your customers? (example) club owned TV channel fans mobile phone TV advertising space & high visibility sales force advertisers

47. how do you build relationships?

48. VALUE PROPOSITION CUSTOMER RELATIONSHIP value proposition 1 value proposition 2 … mechanism 1 mechanism 2 … OFFER CUSTOMER SEGMENTS target customer 1 target customer 2 … CUSTOMER how do you build relationships with your customers? (model)

49. spectacular offensive football personalized website (ticketing) CUSTOMER OFFER team blog (RSS) fans … how do you build relationships with your customers? (example)

50. how do you earn your money with this business model?

51. VALUE PROPOSITION REVENUE STREAMS value proposition 1 value proposition 2 … revenue stream 1 revenue stream 2 … OFFER CUSTOMER SEGMENTS target customer 1 target customer 2 … FINANCE how do you earn your money with this business model? (model)

52. spectacular offensive football ticket sales FINANCE OFFER TV channel subscriber fees fans mobile phone TV subscriber fees advertising space & high visibility advertising revenues advertisers how do you earn your money with this business model? (example)

53. the business models place in a company

54. the business model’s place in the company BUSINESS MODEL ORGANIZATION STRATEGY TECHNOLOGY

55. external forces

56. 5 forces BUSINESS MODEL legal environment social environment competition customer needs technological change

57. the big picture (business model)

63. the process of designing innovative business models

64. the focus of the business model innovator & designer

65. user-centered

66. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

67. Nokia: Jan Chipchase

68. creativity & exploration

69. Googleplex

70. 70:20: 10

71. API

72. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

73. continuous innovation

74. interdisciplinary approach

75. Grameen Phone Bangladesh

76. village telephony telecom infrastructure customer relationships villager activity configuration micro-credit Grameen Bank mobile phone revenues source of revenue mobile telephony billing telecom operators Grameen Bank (billing) phone ladies phone ladies

77. holistic design

78. Apple iTunes & iPod

79. iPod cost structure lifestyle brand “ high-end” consumer prod. & softw. design hardware & softw. dev. hardware revenues iTunes multimedia downloads e-commerce multimedia rights mgmt iBook content producers Apple stores dealer network multimedia revenues hardware suppliers brand management hardware distribution content distribution content

80. strategic fit

81. the Amazon.com you know

82. Amazon Simple Storage Services (S3)

83. selling stuff on the Web IT infra customer relationships mass customer data services Amazon.com data grid partners selling stuff Amazon S3 Amazon.com Internet API Web2.0 companies warehousing & distribution distribution content management product selection A9 product search data storage fees product search search engine revenues e-commerce sites Internet marketing

84. the business modeler’s toolbox

85. co-creation

86. ideation

87. visualization

88. prototyping

89. the design process

90. 1. identify interdisciplinary stakeholders -> set-up team

91. do you have to get the IT team out of their cubicles?

92. 2. understand (business) environment –> frame problem

93. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS [Osterwalder (2004) The Business Model Ontology] various starting points / depending on context

94. 3. suspend reality -> ideate

95. 4. bring back reality -> prototype

96. 5. chose suitable design -> decide

97. 6. sketch out projects & workload -> draw implementation plan

98. … 38 man/days Project C1 Distribution Channels 120 man/days Project V2 10 man/days Project V1 Value Proposition Estimated workload Project name Area

99. 7. outline key indicators to follow -> choose measures

100. … 38 man/days Project C1 Distribution Channels 120 man/days Project V2 10 man/days Project V1 Value Proposition Target level KPI (measure) Estimated workload Project name Area

101. 8. select the right teams and people -> make responsible

102. … 38 man/days Project C1 Distribution Channels Ms. Tee 120 man/days Project V2 Mr. Jan 10 man/days Project V1 Value Proposition leader Target level KPI (measure) Estimated workload Project name Area

103. 9. execute the plan -> manage implementation & change

104. 10. evaluate, learn and redesign -> manage improvement

105. designing blue oceans

106. > market boundaries are not given > they are reconstructed by the actions & beliefs of industry players

108. differentiate your value proposition

110. what are the 5 most important competitive attributes that characterize a game console’s offer? (e.g. price, performance, design) attribute 2 e.g. price attribute 1 e.g. performance group warm-up

114. attribute 1 attribute 2 attribute 3 attribute 5 1 - low 5 - high 3 - medium bank’s performance [Kim & Mauborgne (2002) Charting Your Company's Future] draw a value proposition attribute 4

115. live Excel

117. eliminate raise reduce create

120. strong & valuable approach, but limited view

121. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

122. examples

123. Goldcorp mining low costs through open exploration CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS exploiting mines “ geology prize” 500’000 $US REVENUE STREAMS DISTRIBUTION CHANNELS Goldcorp publicly shared all of its geological data and offered US$ 500’000 in prizes for determining where they might find the next 6 million ounces of gold research

125. from copyright to creative commons

126. Skype free VoIP & value added services software development website global (non segmented) deliver voice & video quality “ eBay” large scale low margin internet software development free voice-over-IP VoIP telephony & value-added services

127. 1291 Cityhomes low cost accommodation New York low cost CUSTOMER RELATIONSHIPS the cost sensible renting out rooms keep down costs apartment owners rents DISTRIBUTION CHANNELS find demand young curious Swiss low-cost hotel/rental in New York City

128. Tecnovate low-cost multi-lingual call center outsourcing low cost CUSTOMER RELATIONSHIPS European corporations ACTIVITY CONFIGURATION keep down costs “ import” young curious Europeans to India to work REVENUE STREAMS DISTRIBUTION CHANNELS business process outsourcing “up-side down” in India

129. Netflix (niche) movies over the Internet COST STRUCTURE profile specialized clientele ACTIVITY CONFIGURATION large movie database independent films REVENUE STREAMS Web online movie rental (with large niche movie database)

130. from bloated head to the long tail

131. sodi platforms VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

132. NetJets VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

133. house for all seasons VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

134. WISE VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

135. Blyk VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

137. myfootballclub VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS ACTIVITY CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS DISTRIBUTION CHANNELS

139. Alexander Osterwalder, PhD [email_address] www.arvetica.com

140. all photos from Flickr under a creative commons license authors indicated in comment page of ppt

141. When you stop learning, you stop competing. We scan the knowledge universe for you, across disciplines and industries. We transfer the best methods, tools and theory in business to your organization. we build knowledge Change does not happen accidentally it has to be managed. We help you align strategy, people and processes with respect to your organizational culture and values. we manage change Specific problems require specific skills that you do not necessarily dispose of in-house. Through our interdisciplinary network we connect you with leading domain experts. we connect Having a great vision is not sufficient - implementation counts. We help you reconcile long term views with short term actions. We make strategy everyone's job by translating it into pragmatic and prioritized projects. we operationalize Nobody knows your business environment better than yourself. We co-design your strategic vision by building on your knowledge. Through group thinking we find the right answers to the right questions together we co-create

142. annexes

143. annex I business model template

144. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIP TARGET CUSTOMER DISTRIBUTION CHANNEL VALUE CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS INFRASTRUCTURE CUSTOMER OFFER FINANCE a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams

145. VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIP TARGET CUSTOMER DISTRIBUTION CHANNEL VALUE CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS gives an overall view of a company's bundle of products and services portrays the network of cooperative agreements with other companies describes the channels to communicate and get in touch with customers describes the arrangement of activities and resources explains the relationships a company establishes with its customers sums up the monetary consequences to run a business model describes the revenue streams through which money is earned describes the customers a company wants to offer value to outlines the capabilities required to run a company's business model INFRASTRUCTURE CUSTOMER OFFER FINANCE describing a company’s business model

146. VALUE PROPOSITION value proposition 1 value proposition 2 … OFFER describing a company’s offer

147. VALUE PROPOSITION TARGET CUSTOMER value proposition 1 value proposition 2 … target customer 1 target customer 2 … CUSTOMER OFFER describing who a company offers value to

148. VALUE PROPOSITION TARGET CUSTOMER DISTRIBUTION CHANNEL value proposition 1 value proposition 2 … distribution channel 1 distribution channel 2 … target customer 1 target customer 2 … CUSTOMER OFFER describing how a company reaches its customers

149. VALUE PROPOSITION TARGET CUSTOMER CUSTOMER RELATIONSHIP value proposition 1 value proposition 2 … relationship type 1 relationship type 2 … target customer 1 target customer 2 … CUSTOMER OFFER describing the relationships a company builds

150. TARGET CUSTOMER REVENUE STREAM revenue stream 1 revenue stream 2 … target customer 1 target customer 2 … FINANCE VALUE PROPOSITION value proposition 1 value proposition 2 … OFFER CUSTOMER describing how a company makes money

151. CORE CAPABILITIES VALUE PROPOSITION core capability 1 core capability 2 … value proposition 1 value proposition 2 … OFFER INFRASTRUCTURE describing what capabilities are required

152. describing what activities are required VALUE PROPOSITION VALUE CONFIGURATION CORE CAPABILITIES value proposition 1 value proposition 2 … core capability 1 core capability 2 … activity 1 activity 2 … INFRASTRUCTURE OFFER

153. describing the partners that leverage the business model VALUE PROPOSITION PARTNER NETWORK CORE CAPABILITIES value proposition 1 value proposition 2 … core capability 1 core capability 2 … partner 1 partner 2 … INFRASTRUCTURE OFFER

154. VALUE PROPOSITION COST STRUCTURE cost account 1 cost account 2 … value proposition 1 value proposition 2 … FINANCE INFRASTRUCTURE OFFER describing the costs of a business model CORE CAPABILITIES core capability 1 core capability 2 …

155. annex ii other