This document discusses business model innovation. It begins with a quote about change and the future. The document then provides examples of business model innovations such as NetJets' fractional ownership model and Zopa.com's peer-to-peer lending. Finally, it discusses why talking about business models is important and how a common business model language can help communicate business models.
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]
27. 1% 18%
Strategy
300%
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Text
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blandit. Curabitur augue est, suscipit sed, egestas sit amet, vehicula vitae, tellus. Maecenas nec metus vel nisi interdum pellentesque.
Development plan
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12%
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Words
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through inappropriate
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dignissim sodales. Aenean non justo nec magna lobortis volutpat.
means
36. business model framework
INFRASTRUCTURE OFFER CUSTOMER
PARTNER CUSTOMER
NETWORK RELATIONSHIPS
CORE VALUE CUSTOMER
CAPABILITIES PROPOSITION SEGMENTS
ACTIVITY DISTRIBUTION
CONFIGURATION CHANNELS
COST FINANCE REVENUE
STRUCTURE STREAMS
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
[Osterwalder (2004) The Business Model Ontology]
40. what value proposition do you offer,
to which customer segments?
describing how a wealth management bank acquires its clients
41. what value proposition do you offer,
to which customer segments?
(model)
OFFER CUSTOMER
VALUE CUSTOMER
PROPOSITION SEGMENTS
value proposition 1 target customer 1
value proposition 2 target customer 2
… …
42. what value proposition do you offer,
to which customer segments?
(example)
OFFER CUSTOMER
spectacular
fans
offensive football
advertising space &
advertisers
high visibility
… …
45. how do you reach your customers?
(model)
OFFER CUSTOMER
COMMUNICATION
VALUE CUSTOMER
& DISTRIBUTION
PROPOSITION SEGMENTS
CHANNELS
value proposition 1 channel 1 target customer 1
value proposition 2 channel 2 target customer 2
… … …
46. how do you reach your customers?
(example)
OFFER CUSTOMER
stadium & box office
spectacular club owned TV
fans
offensive football channel
mobile phone TV
advertising space &
sales force advertisers
high visibility
48. how do you build
relationships with your
customers? (model)
OFFER CUSTOMER
VALUE CUSTOMER CUSTOMER
PROPOSITION RELATIONSHIP SEGMENTS
value proposition 1 mechanism 1 target customer 1
value proposition 2 mechanism 2 target customer 2
… … …
49. how do you build
relationships with your
customers? (example)
OFFER CUSTOMER
personalized website
(ticketing)
spectacular
team blog (RSS) fans
offensive football
…
50. how do you earn your money
with this business model?
51. how do you earn your money
with this business model?
(model)
OFFER FINANCE
VALUE REVENUE CUSTOMER
PROPOSITION STREAMS SEGMENTS
value proposition 1 revenue stream 1 target customer 1
value proposition 2 revenue stream 2 target customer 2
… … …
52. how do you earn your money
with this business model?
(example)
OFFER FINANCE
ticket sales
spectacular TV channel
fans
offensive football subscriber fees
mobile phone TV
subscriber fees
advertising space &
advertising revenues advertisers
high visibility
83. customer
partners relationships
product
selection
content selling stuff mass
Amazon.com
management on the Web customer
distribution
warehousing Web2.0
Amazon S3 Internet API
& distribution companies
product
search
A9 product e-commerce
data services Internet
search sites
Amazon.com
data grid
selling stuff
IT infra
data storage
fees
marketing
search engine
revenues
93. various starting points / depending on
context
PARTNER CUSTOMER
NETWORK RELATIONSHIPS
CORE VALUE CUSTOMER
CAPABILITIES PROPOSITION SEGMENTS
ACTIVITY DISTRIBUTION
CONFIGURATION CHANNELS
COST REVENUE
STRUCTURE STREAMS
[Osterwalder (2004) The Business Model Ontology]
100. Project Estimated KPI Target
Area
name workload (measure) level
10
Project V1
Value man/days
Proposition 120
Project V2
man/days
Distribution 38
Project C1
Channels man/days
…
101. 8. select the right teams and
people
-> make responsible
102. Project Estimated KPI Target
Area leader
name workload (measure) level
10
Project V1 Mr. Jan
Value man/days
Proposition 120
Project V2 Ms. Tee
man/days
Distribution 38
Project C1
Channels man/days
…
106. > market boundaries are
not given
> they are reconstructed
by the actions & beliefs
of industry players
107. RED OCEAN BLUE OCEAN
• compete in existing markets • create uncontested markets
• beat the competition • make competition irrelevant
• explore existing demand • create & capture new demand
• make the value/cost trad-off • break value/cost trad-off
• align with differentiation OR • align with differentiation
low cost AND low cost
109. working definition value
proposition
• a customer value proposition gives an overall view of a
company's bundle of products, services and client
advice.
• it is the sum of the total benefits a customer is
promised to receive in return for a payment (or other
value transfer)
110. group warm-up
what are the 5 most
important competitive
attributes that
characterize a game
console’s offer?
(e.g. price, performance, design)
attribute 1
attribute 2 e.g. performance
e.g. price
111. 5 attributes
1
2
1. most important attribute
2. second most important
3. …
3 4. …
4 -
-
114. draw a value proposition
5 - high
bank’s performance
3 - medium
1 - low
1 2 3 4 5
ut
e te te ut
e
ut
e
ib ibu ibu rib rib
attr attr attr at
t
at
t
[Kim & Mauborgne (2002) Charting Your Company's Future]
123. Goldcorp
“geology prize” CUSTOMER
500’000 $US RELATIONSHIPS
exploiting CUSTOMER
mining
mines SEGMENTS
DISTRIBUTION
research
CHANNELS
low costs through REVENUE
open exploration STREAMS
Goldcorp publicly shared all of its geological data and
offered US$ 500’000 in prizes for determining where they
might find the next 6 million ounces of gold
126. Skyp
e
“eBay” website
deliver voice & free VoIP & value global
video quality added services (non segmented)
software
internet
development
software large scale
development low margin
free voice-over-IP VoIP telephony &
value-added services
127. 1291 Cityhomes low-cost hotel/rental in New York City
young
curious
Swiss
CUSTOMER
RELATIONSHIPS
apartment
owners
keep down
low cost
costs renting out DISTRIBUTION the cost
accommodation
rooms CHANNELS sensible
New York
find demand
low cost rents
128. Tecnovate
“import” young
curious CUSTOMER
Europeans to RELATIONSHIPS
India to work
low-cost multi-
keep down ACTIVITY lingual call DISTRIBUTION European
costs CONFIGURATION center CHANNELS corporations
outsourcing
REVENUE
low cost
STREAMS
business process outsourcing “up-side down” in India
129. Netflix
independent
profile
films
large movie (niche) movies specialized
database over the clientele
ACTIVITY Internet
Web
CONFIGURATION
COST REVENUE
STRUCTURE STREAMS
online movie rental (with large niche movie database)
134. all photos from Flickr
under a creative commons license
authors indicated in comment page of ppt
135. Nobody knows your business environment better than
yourself. We co-design your strategic vision by building
we co-create
on your knowledge. Through group thinking we find the
right answers to the right questions together
Having a great vision is not sufficient - implementation
counts. We help you reconcile long term views with short
we operationalize
term actions. We make strategy everyone's job by
translating it into pragmatic and prioritized projects.
Change does not happen accidentally it has to be
managed. We help you align strategy, people and
we manage change
processes with respect to your organizational culture and
values.
When you stop learning, you stop competing. We scan the
knowledge universe for you, across disciplines and
we build knowledge
industries. We transfer the best methods, tools and
theory in business to your organization.
Specific problems require specific skills that you do not
necessarily dispose of in-house. Through our
we connect
interdisciplinary network we connect you with leading
domain experts.
138. INFRASTRUCTURE OFFER CUSTOMER
PARTNER CUSTOMER
NETWORK RELATIONSHIP
CORE VALUE TARGET
CAPABILITIES PROPOSITION CUSTOMER
VALUE DISTRIBUTION
CONFIGURATION CHANNEL
COST FINANCE REVENUE
STRUCTURE STREAMS
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
139. describing a company’s business model
INFRASTRUCTURE PARTNER CUSTOMER CUSTOMER
NETWORK RELATIONSHIP
OFFER
CORE TARGET
portrays the network of explains the
CAPABILITIES cooperative relationships a
CUSTOMER
agreements with other VALUE company establishes
companies with its customers
outlines the capabilities PROPOSITION
describes the
required to run a
customers a company
company's business
wants to offer value to
model DISTRIBUTION
VALUE gives an overall view of
CONFIGURATION a company's bundle of CHANNEL
products and services
describes the channels
describes the to communicate and
arrangement of get in touch with
activities and resources customers
sums up the monetary describes the revenue
consequences to run a COST FINANCE REVENUE streams through which
business model STRUCTURE STREAMS money is earned
140. describing a company’s offer
OFFER
VALUE
PROPOSITION
value proposition 1
value proposition 2
…
141. describing who a company offers value to
OFFER CUSTOMER
VALUE TARGET
PROPOSITION CUSTOMER
value proposition 1 target customer 1
value proposition 2 target customer 2
… …
142. describing how a company reaches its customers
OFFER CUSTOMER
VALUE DISTRIBUTION TARGET
PROPOSITION CHANNEL CUSTOMER
value proposition 1 distribution channel 1 target customer 1
value proposition 2 distribution channel 2 target customer 2
… … …
143. describing the relationships a company builds
OFFER CUSTOMER
VALUE CUSTOMER TARGET
PROPOSITION RELATIONSHIP CUSTOMER
value proposition 1 relationship type 1 target customer 1
value proposition 2 relationship type 2 target customer 2
… … …
144. describing how a company makes money
OFFER FINANCE CUSTOMER
VALUE REVENUE TARGET
PROPOSITION STREAM CUSTOMER
value proposition 1 revenue stream 1 target customer 1
value proposition 2 revenue stream 2 target customer 2
… … …
145. describing what capabilities are required
INFRASTRUCTURE OFFER
CORE VALUE
CAPABILITIES PROPOSITION
core capability 1 value proposition 1
core capability 2 value proposition 2
… …
146. describing what activities are required
INFRASTRUCTURE OFFER
CORE VALUE VALUE
CAPABILITIES CONFIGURATION PROPOSITION
core capability 1 activity 1 value proposition 1
core capability 2 activity 2 value proposition 2
… … …
147. describing the partners that leverage the business model
INFRASTRUCTURE OFFER
CORE PARTNER VALUE
CAPABILITIES NETWORK PROPOSITION
core capability 1 partner 1 value proposition 1
core capability 2 partner 2 value proposition 2
… … …
148. describing the costs of a business model
INFRASTRUCTURE FINANCE OFFER
CORE COST VALUE
CAPABILITIES STRUCTURE PROPOSITION
core capability 1 cost account 1 value proposition 1
core capability 2 cost account 2 value proposition 2
… … …
http://www.flickr.com/photos/dnevill/141809815/ CC Attribution-NoDerivs License Dan Nevill
people will go into buzz groups to get to know each other and to discuss issues, fears, hopes and opportunities they face in strategic management today
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The ATLAS detector under construction, Nov 2006 http://www.flickr.com/photos/giustino/307903073/ CC Attribution License Justin Clements
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In order to be able to innovate you must deeply understand your (potential) customers. This means understanding not only them, but also their lives, context and environment. There is a new trend in companies to hire ethnographers and anthropologists.
LIFT presentation on Literacy, Communication & Design http://www.janchipchase.com/blog/archives/2007/02/00.html
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http://www.flickr.com/photos/pathfinderlinden/214523588/ Pathfinder Linden CC Attribution License
In order to be able to innovate you must deeply understand your (potential) customers. This means understanding not only them, but also their lives, context and environment. There is a new trend in companies to hire ethnographers and anthropologists.
http://www.denismartin.ch/Plats/Plat-2.htm Restaurant Denis Martin Le shampoing d'eau de mer aux st.Jacques et Wasabi
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http://www.flickr.com/photos/69875617@N00/3425464/ CC Attribution-ShareAlike License John Seb Barber Amazon S3 Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer. Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL. Pricing is cheaper than anything else I’ve seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects - meaning a lot of the front end services I’ve previously profiled will be much better off moving their entire back end to S3.
Amazon S3 Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer. Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL. Pricing is cheaper than anything else I’ve seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects - meaning a lot of the front end services I’ve previously profiled will be much better off moving their entire back end to S3.
http://www.flickr.com/photos/framesniper/153464496/ CC Attribution-NoDerivs License Jeff Ryan
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value innovation is at the centre of the concept of “Blue Ocean Strategy” which combine cost and differentiation W. Chan Kim is The BCG Chair Professor of Strategy and International Management at INSEAD. He was a professor at the University of Michigan Business School. He has served as a board member as well as an advisor for a number of multinational corporations in Europe, the U.S. and Pacific Asia. He is an advisory member for the European Union and a Fellow of the World Economic Forum...... Full Bio Renée Mauborgne is The INSEAD Distinguished Fellow and a Professor of Strategy and Management at INSEAD, France. Mauborgne is a fellow of the World Economic Forum. Her Harvard Business Review articles, co-authored with W. Chan Kim, are worldwide bestsellers and have sold over half a million reprints. Their Value Innovation and Fair Process articles were selected as among the best classic articles ever published in Harvard Business Review .......
W. Chan Kim is The BCG Chair Professor of Strategy and International Management at INSEAD. He was a professor at the University of Michigan Business School. He has served as a board member as well as an advisor for a number of multinational corporations in Europe, the U.S. and Pacific Asia. He is an advisory member for the European Union and a Fellow of the World Economic Forum...... Full Bio Renée Mauborgne is The INSEAD Distinguished Fellow and a Professor of Strategy and Management at INSEAD, France. Mauborgne is a fellow of the World Economic Forum. Her Harvard Business Review articles, co-authored with W. Chan Kim, are worldwide bestsellers and have sold over half a million reprints. Their Value Innovation and Fair Process articles were selected as among the best classic articles ever published in Harvard Business Review .......
http://www.flickr.com/photos/shutr/505866600/ CC Attribution License Lucy
In order to be able to innovate you must deeply understand your (potential) customers. This means understanding not only them, but also their lives, context and environment. There is a new trend in companies to hire ethnographers and anthropologists.
Toronto, Ontario's Goldcorp Inc. launched the Internet gold rush… http://www.innovation.gc.ca/gol/innovation/stories.nsf/veng/ss01056e.htm http://www.businessweek.com/innovate/content/feb2007/id20070201_774736_page_2.htm http://www.fastcompany.com/magazine/59/mcewen.html By the mid-1990s, Rob McEwen, Chairman and CEO of Toronto's Goldcorp Inc., was convinced that there was more gold to be found in his company's Red Lake Mine, despite expert opinions to the contrary. Located near Balmertown, Ontario, the mine had been in production since 1948, but was a small, costly and capital-starved operation with a very uncertain future. For Red Lake Mine to survive, big changes were required. Therefore in February 1995, Goldcorp launched a US$7-million exploration program, the most aggressive in its history. Forty-five days later, Goldcorp's geologists made a significant gold discovery at the bottom of the Red Lake Mine and shattered the accepted geological model for the area. Over the next three years, Goldcorp's exploration efforts continued to meet with success. The discovery revealed a deposit that was large enough to be economically mined, despite the fact that the price of gold had fallen to a 20-year low.For McEwen, the big questions were: "How big is this deposit?" and "How long will it take to find out?" To answer these questions, Goldcorp's geologists held a two-day brainstorming session. The open sharing of ideas focussed the exploration efforts. Greatly encouraged by the positive results, McEwen wanted to engage a larger community of experts in a much greater brainstorming session: the "Goldcorp Challenge."For this competition, Goldcorp publicly shared all of its geological data from the past 52 years and offered US$500 000 in prizes for determining where they might find the next 6 million ounces of gold at the Red Lake Mine, regardless of whether gold was found. "I wanted to tap into the intellectual capital of the mining industry and focus it with laser-like precision on our Red Lake Mine," says McEwen. "In this way, I could speed up exploration and improve the odds of discovery."Entry forms were made available via the Internet, with on-line virtual prospecting seen as the fastest and most cost-effective way to run the competition. A CD-ROM package was sent to applicants to allow them access to a valuable proprietary on-line geological database, as well as software to analyse and depict the data graphically in two and three dimensions.Goldcorp's open source code approach to exploration was unprecedented in the worldwide mining industry, where confidentiality and secrecy about reserves and exploration data are the norm. Goldcorp's transparency exposed it to possible industry criticism or rejection of its geological methodology and calculations, and could also have prompted a takeover bid. McEwen, however, believed that the benefits of sharing data — the rapid acquisition of knowledge — would outweigh the risks. The Goldcorp Challenge proved to be a resounding success, attracting 475 000 hits to the Web site and 1400 entries from individuals, corporations, domestic and foreign government geological agencies and universities from 50 countries. The exploration proposals that Goldcorp received identified 110 drilling targets, 50 percent of which were new prospects. The winning entry was a collaboration by two rival groups from Australia: Fractal Graphics, in West Perth, and Taylor Wall and Associates, in Queensland, who had developed a powerful three-dimensional graphic depiction of the mine. Mark O'Dea (Canada) took second place, while George Langstaff (U.S.) and Alexander Yakubchuk (Russia) tied for third.So far, Goldcorp has struck gold on four of the top five targets generated by this process. Today, Goldcorp's Red Lake Mine is considered the richest gold mine in the world with a reserve grade (concentration of gold) of 2.1 ounces per ton of rock. It produces gold at a cost of $60 per ounce, which makes it one of the five lowest-cost gold producers in the world. McEwen notes, "The winners were able to analyse a large, complex database in a short period of time and generate targets without ever visiting the property. It's clear that this process is part of the future."In September 2000, Business Week magazine named Goldcorp one of the 50 most innovative companies on the Web. In February 2002, Fast Company magazine named Goldcorp one of its "Fast 50: Champions of Innovation" based on a worldwide survey of its readers. In March 2002, BHP Billiton of London, England, the world's largest mining company, announced at the Prospectors and Developers Association of Canada conference that it had employed the "Goldcorp principle" to accelerate its own exploration effort.
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http://www.ahouseforallseasons.com/ Rocksure Property has launched an aspirational new investment and lifestyle vehicle, The Rocksure Property Alpha Fund, which provides investors with the opportunity to own a share in six exclusive properties located in some of the most glamorous locations in the world. The “House for All Seasons”, portfolio will consist of six exclusive properties, worth an average of £800,000 each. The innovation behind this portfolio is that through a commitment of £159,000, up to 36 investors gain access to the properties for an average of four rent-free weeks every year over the fund’s seven year lifecycle as well as benefiting, as owners, from gains accrued through the properties’ appreciation , which will be returned to investors at the end of the fund’s life. The six locations that have been identified are: Buzios in Brazil; Phuket in Thailand; Marrakech in Morocco; The Algarve coast in Portugal; Breckenridge, Colorado and New York City. This range of locations ensures that all tastes are catered for and provides investors with a variety of holiday options, from the year-round sunshine of Thailand and Morocco to the world-class skiing and snowboarding terrain of Colorado, which they can enjoy themselves, make available to friends and family or rent out to provide an income. Each of the properties is to be bought outright by the fund and, with no gearing to affect costs, all but a fraction of subscription funds will go directly into purchasing the properties and their furnishings. Running costs of the properties, including cook/housekeepers, maids, gardeners and pool cleaners, are covered from two sources, an annual management and maintenance contribution paid to the fund by each unit holder (£1,500 in 2007/8) and the net proceeds of renting a proportion of the available weeks. Around £2.5 million has already been raised by the fund, which is expected to have its first closing during January. The fund will have a life of seven years (plus six months for the acquisition and six months for the disposal of the properties) after which the capital and appreciation will be returned to shareholders. Strutt & Parker Real Estate Financial Services will be promoting the fund in the UK. David Rogers, of Rocksure, told WealthBriefing : "A House for All Seasons has been designed to give high net worth investors the best of both the investment and luxury travel worlds by combining competitive returns with a unique lifestyle offer. The fully staffed properties handpicked for the fund will answer the needs of the most demanding travellers. We have carefully selected their location in exclusive holiday hotspots, with each investor benefiting from an average of four rent-free weeks each year at their choice of properties."