55 Business Models to Revolutionize your Business by Michaela Csik

2. © 2014 Holcim Ltd Welcome • 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) Professional experience 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 Dr. Michaela Csik • Since 11/2013 Innovation Manager at HolcimCurrent position Selected Publications Frankenberger, K.; Weiblen T.; Csik, M.; Gassmann, O. (2013): The 4I- framework 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. 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.

3. © 2014 Holcim Ltd Why we are here today 3  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

5. © 2014 Holcim Ltd 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

6. © 2014 Holcim Ltd Quiz question: What is the main difference? 6 Business model innovation as a key driver of success Price per kilogram 15 CHF Traditional business model (sell coffee through retail) Price per kilogram 80 CHF Innovative business model

7. © 2014 Holcim Ltd Business model innovation is a major source of competitive advantage which is superior to other forms of innovation 7 Business model innovation Process innovations Product/service innovation 1 2 3 4 5 6 -1 0 Percent compound annual growth rate over 5 years Source: IBM (2006)

8. © 2014 Holcim Ltd Business model innovation is a major source of competitive advantage which is superior to other forms of innovation 8 Under- performer (*) Out- performer (*) Innovationpriorities inpercent(%) 0 20 40 60 80 100 Product and service innovation Business model innovation (*) CAGR Operating Margin Process innovation Source: IBM (2006)

9. © 2014 Holcim Ltd 9 “Business model innovation matters and it is a top priority of CEOs.” Business model innovation is at the top of the management agenda 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) More than 60 % of executives believe that their business model will undergo fundamental changes in the next 5 years. Source: IBM (2008) Business model innovation matters and it is a top priority of CEOs. Source: IBM (2006)

10. © 2014 Holcim Ltd Evolution of Innovation Management: trend towards Open Innovation and Business Model Innovation Business Models Service / Process Product / Technology Lonely inventor Corporate Innovation Open Innovation Solutions Era Source: adapted from O. Gassmann (HSG) 10 PAST PRESENT FUTURE

17. © 2014 Holcim Ltd Business model innovation allows companies to escape cutthroat competition by changing the rules of the game 17 “The only way to beat the competition is to stop trying to beat the competition.” Source: Kim/Mauborgne (2005)

18. © 2014 Holcim Ltd Business model innovation allows companies to escape from cutthroat competition 18 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

19. © 2014 Holcim Ltd Business model innovation allows companies to escape from cutthroat competition 19 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

20. © 2014 Holcim Ltd Business model innovation allows companies to escape from cutthroat competition 20 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

21. © 2014 Holcim Ltd The competitive advantage of business model innovation is more sustainable as compared to other forms of innovation1TSRpremium(%) Product and process innovation Business model innovation 5 years Source: Business Week / BCG Innovation Survey, 2008; BCG Value Science analysis 1 Total shareholder return (TSR) premium is defined as the percentage by which innovators' average total shareholder return exceeded that of their industry peers 10 8 6 4 2 0 1.7 8.5 6.0 0.1 3 years + 5.9 + 6.8 21 5 years

23. © 2014 Holcim Ltd Business model innovation plays a key role in capturing the value of product or technology innovation 23 Product / Technology Innovation Value Business Model Innovation + = X Traditional business model

24. © 2014 Holcim Ltd 24 Product / Technology Innovation Value Business Model Innovation • Increase in revenues from 30 million to 2.5 billion USD (1972) • Monthly leasing for 95 USD (including 2000 copies) + = • Cost of machine: 30 000 USD  no market Business model innovation plays a key role in capturing the value of product or technology innovation - Example Xerox • Xerography technology Modell 914

25. © 2014 Holcim Ltd Business model innovation plays a key role in capturing the value of product or technology innovation - Example Apple 25 Product / Technology Innovation Value Business Model Innovation + MP3 • 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 displayed. =

26. © 2014 Holcim Ltd Business model innovation plays a key role in capturing the value of product or technology innovation - Example Nespresso 26 Product / Technology Innovation Value Business Model Innovation • Patent in 1976 • Turnover 3.2 billion CHF in 2010 • Over 10 million Nespresso club members + = “Trial-and-Error” - sell capsules in retail stores - restaurant market

27. © 2014 Holcim Ltd Examples of successful business model innovators that were able to capture the value of new technologies 27 Genetics Internet / Data mining GPS Voice over IP Digital photography Internet Cloud computing 3-D printer mp3

31. © 2014 Holcim Ltd One explanation is a lack of systematic tools to develop innovative business models No tools Strategy tools 60 0 20 40 60 80 100 Source: Frankenberger et al., (2013), International Journal of Product Development Brainstorming techniques Which methods and tools are used to develop business model ideas? In percent 20 20 «There are multiple tools and methods to come up with new product ideas but nothing to support idea generation for business models» «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»

32. © 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 Analyze Extract Define a theoretical framework of how to describe a BM/BMI Analyze more than 350 business model innovations from the last 50 years Extract the patterns responsible for successful business model innovations

33. © 2014 Holcim Ltd The magic triangle: Definition of a business model What is offered to the customer? How is the value proposition created and delivered to the customer? Who is the target customer segment? Why is the business profitable? 33 A business model is a blueprint of how a company creates and captures value.

34. © 2014 Holcim Ltd Definition of a 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. Change in the What, Who, How and/or Why Business model Business model innovation 34

35. © 2014 Holcim Ltd Business Model Innovation Example Nespresso 35 Old: Coffee powder (commodity) New: Coffee capsules and machines to produce high-end quality espresso Old: Retail shops (e.g. supermarket) New: Direct selling approach Old: Mass market New: High-end households, Office markets Old: Retail margin New: Coffee machine is sold at production costs, main revenues: Capsules

36. © 2014 Holcim Ltd Business Model Innovation Example Dell 36 Old: Pre-configured computer New: Mass customized computer Old: Built-to-stock/ Selling through retail network New: Built-to-order production/ Direct selling Old: Private users, companies New: - 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

37. © 2014 Holcim Ltd Business Model Innovation Example Skype 37 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 )

38. © 2014 Holcim Ltd Business Model Innovation Example 20 Minuten 38 Free daily newspaper • Predominently outsourced production • Self-service • Commuters (18-49 years) • Advertisers • Financed by advertising

41. © 2014 Holcim Ltd Business model pattern «Razor and Blade» Apple iPod/iTunes (*) (2003) Amazon Kindle (2007) Better Place (2007) Nestlé Nespresso (1986) Nestlé Special.T (2010) Nestlé BabyNes (2012) Gillette (1904) Hewlett- Packard (1984) Standard Oil Company (1880) 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. What? How? Who? Why? (*) reverse ‘Razor and Blade’ Source: ITEM-HSG

42. © 2014 Holcim Ltd Business model pattern «Freemium» Dropbox (2007) LinkedIn (2003) Skype (2003) SurveyMonkey (1998) Spotify (2006) What? How? Who? Why? Hotmail (1996) 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. Source: ITEM-HSG

43. © 2014 Holcim Ltd Business model pattern «Peer-to-Peer» Couchsurfing (2003) TaskRabbit (2008) Zopa (2005) eBay (1995) Airbnb (2008) What? How? Who? Why? RelayRides (2010) This model is based on a cooperation that specializes in mediating between individuals belonging to an homogeneous group. It is often abbreviated as P2P. Source: ITEM-HSG

44. © 2014 Holcim Ltd Business model pattern «Self-Service» Accor (1985) IKEA (1956) BackWerk (2001) What? How? Who? Why? McDonald’s (1948) Mobility Carsharing (1997 ) 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. Source: ITEM-HSG

45. © 2014 Holcim Ltd Business model pattern «Subscription» Dollar Shave Club (2012) blacksocks (1999) Salesforce (1999) Premiere (1990) Jamba (2004) What? How? Who? Why? The customer pays a regular fee, typically on a monthly or an annual basis, in order to gain access to a product or service. Source: ITEM-HSG

48. © 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

49. © 2014 Holcim Ltd Workshop: Business Model Pattern Cards Preparation  Each company / participant receives six pattern cards Task 1. 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 2. Detail the selected idea by concretizing all dimensions of the magic triangle: “who, what, how, why” 3. Come up with a name for your innovation and prepare an elevator pitch to attract investors (5min). Source: ITEM-HSG

50. © 2014 Holcim Ltd The Business Model Navigator: A systematic approach for developing innovative business models I d e a s e l e c t i o n Initiation Analyse the ecosystem Ideation Adapt the patterns Integration Detail the business model Implement- ation Realize the plan Players Change Drivers Test Adapt Learning through trial and error Market introduction Iteration Iteration Iteration What? How?Why? Who? Old Business Model Internal consistency External consistency Similarity Principle Confrontation Principle What? How?Why? Who? Old Business Model What? How?Why? Who? New Business Model Design Realization 55 Patterns Source: ITEM-HSG

51. © 2014 Holcim Ltd Where you can buy the book and pattern cards Book (English): http://www.mypearsonstore.com/bookstore/business-model-navigator-55-models- that-will-revolutionise-9781292065816?xid=PSED http://www.amazon.com/Business-Model-Navigator-Models- Revolutionise/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-Konzepte- Navigator/dp/3446435670/ref=sr_1_1?s=books&ie=UTF8&qid=1417705204&sr=1- 1&keywords=The+Business+Model+Navigator Pattern Cards: www.bmi-lab.ch (Note: webshop currently offline due to shortness of supply)

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