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Business model innovation
- 1. Inspiration from business model classics Kimmo Koivisto CEO, Tellyo
- 2. Who is this Kimmo Koivisto? Today • Tellyo Co-founder and CEO • Teho-Opisto Co-founder and board member Before • Vectia Management consultant • Nokia Research strategy • Helsinki university of Technology
- 3. Tellyo converts 2nd screen to a smart TV remote for spontaneous discovery, interaction and sharing @TellyoTV
- 5. Who is this Kimmo Koivisto? Today • Tellyo Co-founder and CEO • Teho-Opisto Co-founder and board member Before • Vectia Management consultant • Nokia Research strategy • Helsinki university of Technology
- 6. Agenda • What is business model • Why business model matters • Classic cases for inspiration
- 7. Agenda • What is business model • Why business model matters • Classic cases for inspiration
- 9. ”A business model describes the rationale of how an organization creates, delivers, and captures value”
- 11. Agenda • What is business model • Why business model matters • Classic cases for inspiration
- 12. Business model innovators outperform traditional innovators
- 13. Startups are about inventing radical business models Incumbents fail because of: 1) CEOs don't really want a new business model 2) Product is king. Nothing else matters 3) Cannibalization is off the table 4) ROI hurdles are too aggressive for fledgling models 5) Rogues and renegades get no respect
- 14. Agenda • What is business model • Why business model matters • Classic cases for inspiration
- 16. Where to look for innovative business models? Earnings logic Business model innovation directions
- 17. Earnings logic: Case JC Decaux
- 18. Where to look for innovative business models? Earnings logic Low cost Business model innovation directions
- 19. Low cost: Case Ryanair
- 20. Low cost: Case Ryanair
- 21. Where to look for innovative business models? Earnings logic Low cost As a service Business model innovation directions
- 22. As a service: Case Hilti Traditional Hilti Fleet Business Management High-quality tools Customer value Tools when needed and proposition with service guarantee Low margins, high Increased cost of capital inventory turnover Profit but higher margins, montly payments One-time investment + Predictable hard-to-predict service fees Procurement continuous cost Small batches of tools to Management-level sales of individual contractors Sales long-term service contracts Manufacturing & Inventory, replacement Distribution Processes and service process management R&D, low-cost manufacturing Resources Warehousing & IT Sources: Johnson et al. (2008) www.hilti.com
- 23. Where to look for innovative business models? Earnings logic Low cost As a service Standardization Business model innovation directions
- 24. Standardization: Case Minute Clinic
- 25. Where to look for innovative business models? Earnings logic Low cost As a service Co-creation Standardization Business model innovation directions
- 26. Co-creation: Case Threadless Leveraging the Love • All products are designed, rated and marketed by community members • Engages creators, critics, joiners and spectators • Valuable return on time spent • No advertising, no professional designers, no retail distribution, no salespeople – low overhead, high margins
- 27. Where to look for innovative business models? Earnings logic Low cost As a service Co-creation Standardization Business model innovation directions Long tail
- 28. Long tail: Case Amazon An example of a power law graph showing popularity ranking Head Hit items, the few that dominate Sales Long tail Non-hit items, unique items in relatively low quantities Products Demand shifts towards niches with high availability of choice and when there is large population and negligible distribution and stocking costs Reference: Anderson, C. (2006). The Long Tail: Why the Future of Business is Selling Less of More
- 29. Where to look for innovative business models? Earnings logic Low cost As a service Co-creation Standardization Business model innovation directions Long tail Network effect
- 30. Network effect: Case Bell telephone Potential calls between phones 1 10 n
- 31. Network effect: Case personalized publications Readers, who are the most price Content creation (# shared sensitive, are subsidized to drive More readymade content articles) is stimulated to add demand available for publications. platform value CONTENT READERS CREATORS Increased demand for the created content The integrator facilitates the Higher demand lowers prices and process and captures part of the allows variety on printed media created value INTEGRATOR PRINT SHOPS Wider reach and Higher subsidizing more granular targeting increases demand Advertisers are charged as their demand grows more strongly in response to growth in the user side Established practices increase ADVERTISERS ad sales
- 32. Where to look for innovative business models? Earnings logic Low cost As a service Co-creation Standardization Business model innovation directions Long tail Network effect
- 33. Key take aways Startups are about innovating radical business models Take lessons from other industries All elements of the model must fit together
- 34. Thank you Lets get in touch kimmo@tellyo.com
Editor's Notes
- 1) CEOs don't really want a new business model.The most obvious reason companies fail at business model innovation is because CEOs and their senior leadership teams don't want to explore new business models. They are content with the current one and want everyone in the organization focused on how to improve its performance. The clearest indication that a company and its leaders aren't interested in business model innovation is when any discussion about emerging business models and disruptive technology is viewed and treated solely as a competitive threat.2) Product is king. Nothing else matters. The lines are blurring between product and service. Business models that are exclusively focused on products are vulnerable to being disrupted by models that blend both product and service to significantly change the value proposition. Think iPod. Apple didn't bring the first mp3 player to the market. It changed the way we experienced music by delivering on a value proposition that bundled product (iPod) and service (iTunes). Industrial era thinking and NAICS industry codes reinforce the habit of characterizing a business model as being either product or service focused, but this is a false choice constraining business model innovation. Sometimes a proud product heritage can get in the way.3) Cannibalization is off the table. Part of the thinking by line executives in most organizations goes like this: "the last thing we want to do is risk any of our current business. It's hard enough being at war with the competition in a battle for market share. Why would we want to compete against ourselves?" These sentiments tend to be voiced whenever new business model ideas threaten to cannibalize existing sales. When executives look at new opportunities they see them through the lens of the current business model and view them as competing with the current way the organization creates, delivers, and captures value. Organizations fail at business model innovation because they blindly take cannibalization off the table even if a new business model may have significant upside potential.4) ROI hurdles are too aggressive for fledgling models.There's no easier way to prevent business model innovation than to assess potential new models using the same economics and financial metrics as projects to improve the performance of the current business model. Financial metrics utilized to assess alternative projects to improve the current business model reflect the cost structure and required returns to sustain and grow in the context of today's model. New business models are likely to have very different economics and must be assessed in that context. Most new business models will be dismissed out of hand if judged by the economics and constrained by the ROI requirements of the current model. Organizations fail at business model innovation because they apply the wrong financial lens in assessing the attractiveness and feasibility of new business models.5) Rogues and renegades get no respect. Many organizations fail at business model innovation because they shoot their renegades. Or, if they don't shoot them, they wear them down until they leave. Business model innovators go against the corporate grain. They see entirely new ways to create, deliver, and capture value. If those that are tasked with sustaining and growing today's business models are allowed to reject those with the perspective and insight to help design the next one, business model innovation efforts will fail. Organizations must learn to celebrate and support people within the organization who are willing to challenge the status quo, to bring totally different perspectives on delivering value to the table, and to take experimental risks to explore new models.