Presentation provided at the Enterprise Connect WIIN workshop series titled Business Model Innovation > New Value. Questions regarding this presentation should be directed to Marcus Tarrant, Managing Director, Mission HQ at marcus.tarrant(AT)missionhq.com.au

1. Workshop: How to Create New Value in Your Business
Through Business Model Innovation
Prepared and Presented by
Marcus Tarrant
Managing Director
Mission HQ Pty. Ltd. ATF the Innovate Trust
Bryce Steele
Managing Director
Enterprise Accelerators

2. A thought Starter
The competition of today
is between business models,
not just products or solutions.
• FujiFilm Vs Kodak
• Skype Vs Telstra
• Mailchimp Vs Vertical
Response
• Toner Vs Printer
2

3. Enterprise Connect Introduction

4. Mission HQ Introduction

5. About Mission HQ Pty. Ltd.
Marcus Tarrant, BEc MEI
Past Roles
• Senior Consultant - Strategy at Deloitte Consulting
• Head of Professional Services – Offspring Ventures/ipernica
Current
• Managing Director Mission HQ
• Chargantt.com
• Business Planning HQ .com
• HyperQuestion.com
5

6. Enterprise Accelerators

7. Workshop Agenda
Agenda Item Time
Introduction 15 mins
About Innovation 30 Mins
What is a Business Model? 30 Mins
Does it apply to me? 5 Mins
Kodak/Fuji Film Case Study 10 Mins
Morning Tea 20 Mins
The Business Model Framework 30 Mins
Workshop Exercise – Ballast Blaster 45 Mins
Assessing Business Models 10 Mins
Implementing Business Model Innovation 5 Mins
How you could use Business Model Innovation in your organisation 5 Mins
Feedback Forms and Close 10 Mins
7

8. What is it all about?

9. There are three kinds of companies, those that make
new things happen, those that watch new things
happen, and those that wonder what happened
Anonymous
9

10. 10

11. 11

12. 12

13. 13

14. 14

15. 15

16. 16

17. 17

18. 18

19. 19

20. 20

21. 21

22. 22

23. 23

24. 24

25. 25

26. 26

27. 27

28. 28

29. 29

30. 30

31. 31

32. 32

33. 33

34. 34

35. 35

36. About Innovation
What is innovation and
how is it used?

37. So Who Cares About Innovation Anyhow?
37

38. Mini-Workshop – What is Innovation?
• How have you seen it applied in your organisation?
• Is it core to your business?
• What type of innovation have you done?
• Has it contributed value to your business?
• Can you identify a direct bottom line impact?
• What effect has it had on your customers and suppliers?
• What’s hard about doing innovation?
38

39. What is Innovation?
39

40. Forms of Innovation
• Radical
– significant change that simultaneously affects both the business
model and the technology of the company. If the radical innovation
also shifts an industry into another direction and brings out
fundamental changes to the competitive landscape, it can also be
called as disruptive innovation.
• Semi-Radical
– From a company’s perspective, semi-radical innovation
involves substantial change in either technology of an organization
or its business model- but not to both.
• Incremental
– The most prevalent form of innovation, receiving more than 80% of
a company’s total innovation investment. The goal is of course, to
get as much as possible from an already existing innovation without
making major changes in investment, or dislodging existing
products or services.
40

41. Types of Innovation
1. Product
2. Process
3. Business Model

42. 1. Product and Service Innovation
“the creation of new products and services or the
improvement of existing products to meet user needs”
• New product design
• New functionality
• Completely new products
• New ways of product delivery
• Product/Service Packaging
• Contract for service vs transactional sales
• Consumables vs the unit itself
• Customisation

43. 1. Product and Service Innovation
When to Apply Product and Service Innovation
• Differentiate
• Re-Position
• Market Entry
• Increase Margins
• Diversify into new markets
• To survive
“Product and service can be a means of executing on business model innovation.”
43

44. Example of Product/Service Innovation resulting
from business model innovation
44

45. 2. Process Innovation
“improving the sequencing of work routines
and information flow to achieve business
improvement.”
Results achieved through Process
Innovation
• Faster
• Cheaper
• More flexible
• Simpler
• Improved communication
• Greater levels of customisation

46. 2. Process Innovation
When and Why?
• Better meet customer needs
• Improve cost efficiency
• Enable greater organisational flexibility
• Enhanced consistency
• Improved delivery of “Brand Promise”
• Focus on “Core Business” – Process Outsourcing

47. An Example of Process Innovation
47

48. 3. Business Model Innovation
“a conceptual framework for identifying how company creates, delivers and
extracts value”
• Identifies a market segment and defines the
customer
• Articulates the value of the proposed offering
• Focuses on the key attributes of the offering"
• Defines the value chain to deliver that offering
• Creates a way to get paid
• Establishes a value network that is needed to
make the model self sustaining

49. 3. Business Model Innovation
When and Why?
• Underpin the business planning process
• Provide an absolutely IDEAL starting point for the
creation of a financial model.
• Create a deeper understanding of you plans with
collaborators, partners and suppliers
• Provide a clear picture of a planned business to
investors or internal stakeholders
• Develop business cases for market entry
• Optimise the value obtainable for a given business
concept
• Assist in evaluating alignment with organisational
strategy

50. The context of Innovation
Innovation Program
Product
Business and Service
Model Innovation
Innovation
Process
Innovation
50

51. Bringing the elements together
Traditional Innovation
Product
and Service
Innovation
Process
Innovation
51

52. What To Do When
Strategy Operational
Domain Domain
Product
Business and Service
Model Innovation
Innovation
Process
Innovation
52

53. So where does business model innovation fit
exactly?
• Business Model Renovation
[BMR] is presented as the
highest level of a strategy for
managing change that usually
cannot be handled by
continuous improvement and re-
engineering methods or
organizational restructuring
(Kovacic, 2001).
53

54. Return on Investment for Business Model
Innovation (BMI)
• Boston Consulting Group
Innovation Research
– BMI delivered returns that
were more sustainable,
even after 10 years
– BMI innovators continued
to outperform product and
process innovators
– BMI earned innovators a 4
times greater return on
investment than product or
process
54

55. What is a business model?

56. White-Board Discussion
• What is a business model
– Characteristics of a business model
– Relevance to my organisation
– Have you heard the term before?
– What do people mean when they talk about a business model?
56

57. White-Board Discussion – Word Cloud
57

58. Business Model Definition
A business model describes the rationale of how
an organization creates, delivers, and captures
value (economic, social, or other forms of value).
The process of business model construction is part of business strategy.
58

59. The context of the business model
what are intangible assets?
Strategy Business Financial
Model Implications
(Value)
Operating Environment

60. How often should you renovate
your business model?
Business Model Renovation Lifecycle
6 Months
50-100
Years
1900 2020
60

61. Why is Business Model Innovation Relevant Today?
• Business Model innovation is
particularly valuable in times
of instability
– Provides a mechanism to
break out of intense
competition
– Address disruptive
environmental changes
• Regulatory
• Exchange rates and cost
structure
• New technologies
• Customer capabilities and or
expectations
61

62. Does it apply to me?

63. Does Business Model Innovation Apply to Me?
• Manufacturing
• Services
• Retail
• Mining Need
• Engineering Sustainable
• Infrastructure
Revenue to
• Finance
• Online
Survive
• Not for profit
• Government Agencies
63

64. For how long will you be able to keep charging
what you are for what you do?
• Exchange Rate – Aust Red Wine Example
• Rise of Asia
• Disruptive technology
• New products and services
• New ways of doing business
• New delivery systems
• Virtualisation
• Freemium
• International Barriers in Communications
• Customer problem evolution
• Service Automation
• ...even the Ipod! Nano 4gb 2007 - $364 Today $149
64

65. Discussion on Kodak/Fuji Film Case Study

66. Discussion Points
• Digital photography's impact on the Kodak Business
Model
• Who invented digital photography?
• What was the Kodak business model?
• What should the Kodak business model take into
account?
• How did Fuji Film handle the same issues differently?
• Does the business model support the same skills and
number of resources?
• Does having a great business model today mean that
you will also have one in the future?
66

67. Morning Tea – 20 Minute Break

68. The Business Model Framework

69. The business model Framework
1. Value Proposition – What are you offering?
2. Capabilities/Resources – What skills and capacity do
you require?
3. Partnership – Who do you need to work with?
4. Activities – What will you do?
5. Costs – What are your significant costs likely to be?
6. Relationship – What formal and informal relationships
are required
7. Channel – What are our channels to market?
8. Revenues – What will our customers pay for?
9. Customers – Who are our customers?
69

70. Traditional business model Matrix
70

71. High Level Business Model Framework
Innocatalyst™
Customer Value
Financial
Delivery
External
71

72. InnoCatalyst™
Business Model Framework
Capabilities Customer Value Revenue
Value
Who
Proposition
Financial
Purchaser
Delivery
Activities User Costs
Influencer
Partner
External
Channels to Market Relationships Partnerships
72

73. A real world example – 4-5 Items
73

74. 1. The Value Proposition
• Value can occur at any of the following stages of the
customer engagement and deliver process.
Evaluation
Process
Value Co-
Creation
Purchase
Process
Set-up/
Installation
Use/
Operation
Complement
.product/
services
Maintenanc
e & After
sales Ending Value
and Value
Transfer
74

75. Mapping out your value proposition
Evaluation Value Co- Purchase Set-up/ Use/ Complem. Maint./ Ending/
Process Creation Process Installation Operation products after sales Value
transfer
Increasing
customer
productivity
Simplicity for
customer
Convenience
for customer
Reducing
Customer
Risk
Impact on
Customer’s
Image
-75-

76. Evaluation Process
• Simplify a
customer’s
evaluation process
• Example: ISELECT
-76-

77. Value Co-Creation
• Through various
technological advances
the integration and
participation of the
customer in the value
creation process is
increasingly possible.
• Together with the
knowledge and
networks of customers
additional value can be
created and facilitated.
• Examples: Ebay &
Amazon
-77-

78. Purchasing Process
• Customers highly
value an efficient,
simple and convenient
purchase process.
Example: Creative
Mobile Technologies
back-seat swipe and
entertainment for Taxi
Cabs
-78-

79. Set-Up/Installation
• In some cases set-up
or installation is
necessary. The
simplification of this
process is of enormous
value to the customer.
• Example: Dick Smith:
Mobile Techxphert
Services
-79-

80. Use/Operation
• In many cases most of
the value in a value
proposition comes from
the use or operation of
an actual product or
service. However, to
differentiate themselves
companies try to create
value beyond a simple
product or service.
• Salesforce is carefully
creating additional
value by offering
continuous updating
"behind the scenes"
and providing easy
access to
complementary
products by third party
vendors.
-80-

81. Maintenance & aftersales support
• Value is often created during the maintenance
and after-sales phase. This can be either by
offering high quality service or by offering a
value proposition that minimizes the need for
maintenance & after-sales.
• Example: The attractiveness of salesforce.com’s
value proposition essentially comes from the
fact that the hosted software model (application
service provider - ASP) minimizes the need of
software maintenance by the customer.
-81-

82. Ending and value transfer
• In many cases once a customer does not need a product or service
anymore he has to terminate the service or dispose of the product.
Example: BMW Recycling Programme
-82-

83. 2. Capabilities/Resources
• What physical assets does our business model require?
– Factory
– Machinery
– Etc.
• Intellectual Assets
– Trademarks (licensed or owned)
– Patents
– Processes
– Systems
• Human Resources
– Skills
– Team structures
• Financial
– Access to finance
83

84. 3. Partnerships
• Describes the network of suppliers and partners that will
make the business model work
– Joint Ventures
– Strategic Alliances
– License agreements
– Service agreements
– Outsourcing arrangements
84 © Mission HQ Pty. Ltd. All Rights Reserved

85. 4. Activities
• The activities outline the most important things that the
organisation will do.
– Production
– Problem Solving
– Platform management
– License management
85

86. 5. Costs
• Outlines the primary areas of cost under the business
model
– Fixed Costs
– Variable Costs
– Economies of scale
– Key cost ratchet points
86

87. 6. Relationships
• What relationships other than partnerships may be
required.
– Affiliations (E.g. affiliated companies)
– Government Agencies (E.g. CSIRO)
– Brand cross licensing (E.g. Australian Made)
– Embedded licensing (E.g. Intel Inside, Windows 7)
– Accreditations (E.g. CPA)
87

88. 7. Channels to Market
• What channels to market will the model employ?
88 © Mission HQ Pty. Ltd. All Rights Reserved

89. 8. Revenue
• What element of our value proposition will our
customers actually pay for?
– Asset Sales
– Usage fees
– Subscription
– Advertising revenue
– Renting or leasing
– Licensing
– Financing
89

90. 9. Customers
• The different groups of people or organisations that the
organisation hopes to reach and serve.
• Forms of Segmentation:
– Geographic
– Demographic - Gender, age, income, housing type, and
education level are common demographic variables
– Channel
– Media
– Price
90

91. The Power of Constraints
To be To Have
– Biggest – More market share
– Best – Profitable customers
– Fastest growing – Greater access to capital
– Most profitable – More business relationships
– Most flexible – Greater revenue
To Create
– New products/services
– New markets
Innovation
91 Catalyst™
Seminar

92. Workshop Exercise: Ballast Blaster

93. Workshop – Ballast Blaster
• We have a new technology that we
are seeking to build a new business
model for.
• What is it?
– An ultrasonic device that removes
microbes from the ballast water
carried on ships.
– Can be mounted either ship-side or
shore-side
– It is more effective than other
approaches to microbe removal
93

94. Ballast Blaster Rules and Constraints
• Workshop Rules
– Each table must appoint a team leader
– All ideas are worthy of consideration
– Write down your ideas on the post-it notes
– Add them to the model
– Use only the constraint your table is provided
– Work together as a team
– Develop a holistic, logically consistent model
– You may be asked to present your model
• Constraints – You will be allocated one only!
1. Largest 5 Year Exit
2. Fastest to Market
3. Minimum Start-Up Cost
94

95. Creating an Ideal Model for Ballast Blaster
News Flash!
New information has come to light regarding Ballast Blaster.
ISO standard 100434 has just been ratified requiring all ballast
water purified by 2014 to a purity of 99.58%
The founders have just completed a $16m Capital Raising,
however the venture capitalist that has backed the project
needs to exit in 3 years rather than the usual 5.
He has also demanded that the founders re-locate to Fiji so
that he can keep an eye on them from his mansion just out of
Nadi.
The directors reluctantly agreed.
He has requested the founders re-cut their Business Model
prior to the first tranche being paid.
His core objective is to build value in the business very rapidly.
95

96. Assessing Business Models

97. An Sample Business Model Evaluation Framework
Level of Investment Required 200k 20m
Time to revenue Short Long
R&D spend to achieve development Low High
Access to technical expertise Low High
Level of risk Low High
Organisation's Profile if successful Low High
Financial return if successful Low High
97

98. One Model is not enough!
98

99. Implementing Business Model Innovation

100. The Business Model Implementation Hexagon
Structure Process
Skills
Business Information
Model
Technology Culture
100 © Mission HQ Pty. Ltd. All Rights Reserved

101. Use Business Model Innovation To
– Underpin the business planning process
– Provide an absolutely IDEAL starting point for the creation of a
financial model.
– Create a deeper understanding of you plans with collaborators,
partners and suppliers
– Provide a clear picture of a planned business to investors or
internal stakeholders
– Develop business cases for market entry
– Optimise the value obtainable for a given business concept
– Assist in evaluating alignment with organisational strategy
101

102. Pivoting Your Business Model
• The pivot can be applied to any element of the business model,
without changing the underlying vision. Here are some of the
most common pivot elements that Eric and others have noted:
• Customer problem pivot. Use essentially the same product to solve a different problem
for the same customer segment. Starbucks famously did this pivot when they went from
selling coffee beans and espresso makers to brewing drinks in-house.
• Market segment pivot. This means you take your existing product and use it to solve a
similar problem for a different set of customers.
• Technology pivot. Engineers always fight to take advantage of what they have built so
far. So the most obvious pivot for them is to repurpose the technology platform.
• Product feature pivot. Here especially, you need to pay close attention to what real
customers are doing, rather than your projections of what they should do.
• Revenue model pivot. One pivot is to change your focus from a premium price,
customized solution, to a low price commoditized solution.
• Sales channel pivot. Leverages existing sales channels.
• Product versus services pivot. Sometimes products are too different or too complex to
be sold effectively to the customer with the problem. Now is the time for bundling support
services.
• Major competitor pivot. What do you do when a major new player or competitor jumps
into your space?
102

103. Key Questions to Consider
• What compromises does our current business model force our customers to make?
• Why are nonusers or defectors dissatisfied with our offering?
• Do we offer customers a better value proposition than that of our competition?
• What alternative models are gaining share at the edges of our industry?
• If we were an industry outsider, what would we do to take advantage of the gaps or
weaknesses in our business model?
• Do we have a plan for identifying potential business models, implementing them, and
embedding Business model capabilities within the organisation?
• What do we need to change in our organisation and operations to implement a new
business model?
• What information would we need to make a commitment to a new business model?
• How urgent is the perceived need for a change in our organisation?
103

104. Discussion: How this could be applied in your company?

105. Services, Process and Special Event Pricing

106. Products and Services
• Business Model Renovation Service
– Ensure you create new value in your business with this unique
service offering
– 30% Event Discount for first 5 customers only – must book first
month within 48hrs of the event.
• Business Planning HQ
– Totally revolutionary business planning tool that puts the Business
Model at the heart of the business planning process.
– Create a 40pg Business Plan, Slide Deck and Business Overview
document in as little as 4 hours.
– 20% Discount for first 5 customers only – must book within 48
hours of event
• Chartgantt
– Excel based gantt chart and project planning solution built by
Mission HQ for NASA
– 20% Discount
106

107. Questions

108. Feedback forms

109. More Events
Please recommend to colleagues in the following areas, or
come again yourself!
Geelong – Thursday 8th March
Dandenong – Tuesday 20th March
Bendigo – Thursday 22nd March
Cross Venue – Best Business Model Prize
109

110. Event Materials and Networking
We have a linkedin Group (Invitation Only).
All materials and links will be posted in this group. We will
send out a link following the event so please join up.
110

111. Summary / Wrap-Up

112. Some Ideas
• Perhaps you already have a great business model buried
inside your business – pull it out, polish it up and put all
your resources into it.
• Start with current or desired capability of your
organisation and assess this against market
requirements. If there is a fit – design around this.
112

113. Contact Details
Marcus Tarrant
Managing Director
Mission HQ Pty. Ltd. ATF the Innovate Trust
Marcus.tarrant@missionhq.com.au
+61 3 9005 9710
www.missionhq.com.au
113 © Mission HQ Pty. Ltd. All Rights Reserved