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Scott Hirsch, MIG [email protected] Be Like the Internet: Collaborative, Disruptive, Networked Scott Hirsch, Management Innovation Group ([email protected]) Web2.0 Expo - November 5, 2007

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Filled in for Lane Becker at the Berlin Web2.0 Expo and presented some of the research findings from a book I'm working on. Also, some frameworks for looking at innovative business model opportunitites.

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Page 1: Be Like the Internet

Scott Hirsch, MIG [email protected]

Be Like the Internet:Collaborative, Disruptive, Networked

Scott Hirsch, Management Innovation Group ([email protected])Web2.0 Expo - November 5, 2007

Page 2: Be Like the Internet

Scott Hirsch, MIG [email protected]

MIG is a strategy consultancy …here are some companies we’ve helped:

Page 3: Be Like the Internet

Scott Hirsch, MIG [email protected]

Page 4: Be Like the Internet

Scott Hirsch, MIG [email protected]

Page 5: Be Like the Internet

Scott Hirsch, MIG [email protected]

By changing the way you think about your …• development process• products/services• strategy• business model• management decisions• personal skills and leadership style

“We need to stop confusing web2.0 with AJAX,yellow fades, and social networks … it’s a wholenew way of thinking about business.”

--SixApart

Web2.0 Changes the Way You Think About Your Company

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Scott Hirsch, MIG [email protected]

The advertising model is something that we've looked at. Can I seean immediate application for the Wii, no. However, one of thethings that we are smart enough to say is "never say never." But itis clear that the Mii consumers love to create their Miis. They wouldlike more and more options to decorate their Miis.

We're going to address part of that with a channel called "CheckMe Out," where you'll be able to post your Miis and create Miis ofhistorical or popular figures and compare and vote on them. This isa recognition of a deep-seated need by consumers to drive a lot ofpersonalization with these Mii characters and we're looking to helpbring that to life in a way that makes sense.

Reggie Fils-AimeCOO, Nintendo

Web2.0 Innovators Are Always Re-framing

What word defines the Wii?

Page 7: Be Like the Internet

Scott Hirsch, MIG [email protected]

- from The Search by John Battelle

Web2.0 Innovators Are Always Re-framing

A conversation in early 2002

Page 8: Be Like the Internet

Scott Hirsch, MIG [email protected]

How?

By organizing the worldʼsinformation and making it

accessible and useful

Or?

By providing advertisers with the opportunity to delivermeasurable, cost-effective online advertising that is

relevant to the information displayed on any given page

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Scott Hirsch, MIG [email protected]

Find the Frame

Product

Process

CultureProcess

> Rapid prototyping> Willingness to change theparadigm> Commitment to servingadvertisers and consumers

> Fast executionOpen innovation - one dayper week for researchDarwinian prioritization> “Do no evil”

Products

> For consumers - search thatworks and snazzy new apps> For advertisers - access tomotivated customers> For content owners - freemoney

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Scott Hirsch, MIG [email protected]

What Weʼre Going to Do

9:30 - 9:45 Introduction and Start-Ups9:45 - 10:15 Learn About Each Other10:15 - 10:45 Bottom-Up Innovation10:45 - 11:00 Break11:00 - 11:45 Web2.0 Strategy and Business Models11:45 - 12:00 Leadership in a Web2.0 World12:00 - 12:15 Learning from Failure Experiences12:15 - 12:30 Putting It Into Practice

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Scott Hirsch, MIG [email protected]

Silicon Valley Before 2000• If I discover it, I will find a market for it.• If I launch it first, I will own it.• I can build the most important technology pieces

myself.• If I fail, I will move on to something else.• If I am successful, the best people will want to work for

me.

Web2.0 Shifts• Good Ideas are widely distributed today … there is no

monopoly on useful knowledge.• Innovation doesn’t happen within a single firm anymore.• Failure is an opportunity to learn and change.• Not all the smart people in the world work for us.

The Demise of the Internally Focused System:

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Scott Hirsch, MIG [email protected]

About Business

Trends and Discontinuities in Silicon Valley - How Web2.0 Changed the Way We Think

Greatly Reduced Costs• Global talent pools• (Almost) anyone can start

a company• VCs become less

(ir)relevant

New Revenue Streams• Google Adsense makes

business out of hobby• Open platforms broaden

potential audiences

Customers as Partners• Customers lead the

conversation• Customers as developers

on open platforms

About Strategy

Emergent Business Models• Value first … business

model second• Experimentation over set

strategies• Openness is king

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Scott Hirsch, MIG [email protected]

• You don’t own your ideas

• You don’t want to own the infrastructure

• You certainly don’t own your customers

“Intellectual property is a vestige of dumb markets”

Some Provocative Points of View - This Sets Up Our First Activity

Page 14: Be Like the Internet

Scott Hirsch, MIG [email protected]

In the spirit of this being a global conference… that is focused on web2.0 …

Let’s model some collaborative problem solving viasocial networking

Instructions1. Take a moment to think about a challenge you are facing

today, it might be about …a) an innovation challengeb) a new product ideac) a sticky issue you are facing with a client

2. Make sure the problem is something you feel comfortablesharing with the group. If not, think of something else.

3. Write a short description of your issue … try your best tokeep it under three sentences.

Learning About (and from) Each Other

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Scott Hirsch, MIG [email protected]

Who Hates Networking?

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Scott Hirsch, MIG [email protected]

Be Like the Internet:Collaborative, Disruptive, Networked

Scott Hirsch, Management Innovation GroupWeb2.0 Expo - November 5, 2007

Bottom-Up Innovation

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Scott Hirsch, MIG [email protected]

Bottom-Up Innovation:A Personal Guide to Disrupting the World

Demystifying the Issue:- Too much high-level analysis and

“armchair quarterbacking”- Not enough personal stories from

real innovators- Too much emphasis on products,

not enough on process

Methodology:- Open inquiry with web2.0

innovators- Pull characteristics and qualities

of innovators- Ask for referrals for more

interviews

Proposal:- A “how-to” guide for innovation as told by web2.0

entrepreneurs and other market disruptors- Analysis and practical guidance for people at any

level or type of organization- Focus on analytic frameworks, as well as softer

skills of leadership and facilitation

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Scott Hirsch, MIG [email protected]

Passionate

Generally, what I’ve heard:

Persuasive

Flexible

Humble

are accepting of failure

Persistent (but not defensive)

Facilitative

have fluid conceptof “ownership”

embrace manypoints of view

Collaborative

don’t over-plantheir strategy

don’t over-commit to solutions

embracetransparency

value inspirationand production

Web2.0 Innovators are … and create cultures that ...

Page 19: Be Like the Internet

Scott Hirsch, MIG [email protected]

Passionate

Generally, what I heard:

Persuasive

Flexible

Humble share success & accept failure

Persistent (but not defensive)

Facilitative

have fluid conceptof idea ownership

embrace manypoints of view

Collaborative

are open to manyviewpoints/options

Commit to direction,not solutions

embracetransparency

value inspirationand production

Web2.0 Innovators are … and create cultures that … to manage ….

UncertaintyOpennessLeadershipManagementHiringStrategyCompetitionMarketingBiz DevelopmentProduct Development

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Scott Hirsch, MIG [email protected]

Strategy - Disruptive• Look at their business as a poker game, rather than a chess

game• Aim to be the most open, rather than the first mover• Look for directional alignment, rather than the “right” answer

Business Models - Networked• Focus on solving universal customer problems, rather than

technology solutions• Favor experimentation over rationalization• Focus on building platforms, rather than owning customers

Management - Collaborative• View opportunity cost as the scarce resource, rather than

people and time.• View themselves as facilitators, rather than managers• Constantly seek to reframe challenges, rather than validate

old points of view.

How Web2.0 Innovators Look at the World

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Scott Hirsch, MIG [email protected]

Web2.0 Innovators’ View of Strategy

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Scott Hirsch, MIG [email protected]

Chess• Plan several moves

ahead• No new information

needed• You know what you’ve

got and what youropponent has

• Decisions can be madewith a business case

Web2.0 Innovators’ View of Strategy

Poker• Pay to play … small ante

required to join• Pay for new information

each round• You discover what you’ve

got and can only guess atother players

• Business case is useless,you look at options

Web2.0 Innovators look at their businesslike a poker game, not a chess game

Adapted from Henry Chesborough, UC-Berkeley

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Scott Hirsch, MIG [email protected]

Web2.0 Innovators aim to be the most open,rather than the first mover.

Closed platform

Web2.0 Innovators’ View of Strategy

Open platform

High external awareness

Low external awareness

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Scott Hirsch, MIG [email protected]

Web2.0 Innovators’ View of Business Models

Page 25: Be Like the Internet

Scott Hirsch, MIG [email protected]

Web2.0 Innovators focus on solving universal problems,rather than technology solutions.

Web2.0 Innovators’ View of Business Models

“We knew that our focus was on collaboration -- not wikis -- andJoe had been talking about the long-tail of applications, so westarted taking a broader view of the business … Googlewouldn’t have acquired us if it weren’t for that shift in mindset.”

-- Ken Norton

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Scott Hirsch, MIG [email protected]

“Only time will tell whether Google has succeeded in building anevolutionary advantage. But consider: Since it's founding, it hasrepeatedly morphed its business model. Google 1.0 was a searchengine that crawled the Web but generated little revenue; which ledto Google 2.0, a company that sold its search capacity toAOL/Netscape, Yahoo and other major portals; which gave way toGoogle 3.0, an Internet contrarian that rejected banner ads andinstead sold simple text ads linked to search results; which spawnedGoogle 4.0, an increasingly global entity that found a way to insertrelevant ads into any and all Web content, dramatically enlargingthe online ad business; which mutated into Google 5.0, aninnovation factory that produces a torrent of new Web-basedservices, including Gmail, Google Desktop, and Google Base. Morethan likely, 6.0 is around the corner.”

- Gary Hamel, Wall Street Journal “Management A la Google” 04/26/06

Web2.0 Innovators’ View of Business Models

Web2.0 Innovators favor experimentation over rationalization.

Page 27: Be Like the Internet

Scott Hirsch, MIG [email protected]

Web2.0 Innovators’ View of Management

Page 28: Be Like the Internet

Scott Hirsch, MIG [email protected]

Web2.0 Innovators’ View of Management

Web2.0 Innovators believe opportunity cost is the scarce resource,not people, time, or money.

Top-Down ManagementExample: Yahoo! PBmemo

Scarce Resources:• People (engineers)• Time and moneyBottlenecks:• Getting management support• Big “P” PoliticsDecision Models:• Pre-Rationalization process• Business cases

Fear of false positives

Bottom-Up ManagementExample: Google 80/20 rule

Scarce Resources:• Servers, opportunity to test• Opportunity costBottlenecks:• Getting peer support• Little “p” politicsDecision Models:• Darwinian “natural selection”• Strategic options

Fear of false negatives

Page 29: Be Like the Internet

Scott Hirsch, MIG [email protected]

Web2.0 Innovators’ View of Management

Web2.0 Innovators view themselves as facilitators rather than managers,and encourage smart divergence over quick convergence.

SeniorLeadershipGathers /GenerateIdeas

Fund

Tyranny of thebusiness case

Traditional Rationalized ViewManagement Decides

Generate,Nurture,Promote,Reward ->ideas

Triage,experiment,critique,prioritize,group,abahdon,filter & sort

Adopt

Narrowing throughexperimentation providesbetter data and more criteriathan a business case.

Web2.0 and the Beta ViewManagement Facilitates

Page 30: Be Like the Internet

Scott Hirsch, MIG [email protected]

Strategy - Disruptive• Look at their business as a poker game, rather than a chess

game• Aim to be the most open, rather than the first mover• Look for directional alignment, rather than the “right” answer

Business Models - Networked• Focus on solving universal customer problems, rather than

technology solutions• Favor experimentation over rationalization• Focus on building platforms, rather than owning customers

Management - Collaborative• View opportunity cost as the scarce resource, rather than

people and time.• View themselves as facilitators, rather than managers• Constantly seek to reframe challenges, rather than validate

old points of view.

How Web2.0 Innovators Look at the World

Web2.0 is about more than AJAX, yellow fade, and social networks

Page 31: Be Like the Internet

Scott Hirsch, MIG [email protected]

BREAK

Page 32: Be Like the Internet

Scott Hirsch, MIG [email protected]

Be Like the Internet:Collaborative, Disruptive, Networked

Scott Hirsch, Management Innovation GroupWeb2.0 Expo - November 5, 2007

Uncovering Strategies and Business Models

Page 33: Be Like the Internet

Scott Hirsch, MIG [email protected]

What is a business model?

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Scott Hirsch, MIG [email protected]

Guess thecompany?

Page 35: Be Like the Internet

Scott Hirsch, MIG [email protected]

DangerʼsSidekick

Can anyone think of a web2.0 version of this?

Page 36: Be Like the Internet

Scott Hirsch, MIG [email protected]

Generic Business ModelsWhich are Web2.0?

• Per item and “all you can eat”• Razors and blades• Free trial, followed by subscription• Free, advertising supported

• Any non-web2.0 examples?• Recruit your friends and save money• Market maker, aggregator, switchboard

• Ebay, Amazon• Turn cost centers into profit centers

• Ryan Air• Hotels (phone, TV, minibar)• Apple

Page 37: Be Like the Internet

Scott Hirsch, MIG [email protected]

We shape ourbuildings, andthereafter they

shape us.

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Scott Hirsch, MIG [email protected]

We shape ourbuildings business

models, and thereafterthey shape us.

Page 39: Be Like the Internet

Scott Hirsch, MIG [email protected]

Why do businessmodels matter?

technology companies succeed bykeeping switching costs high,selling version upgrades(think microsoft)Growth -> increase the installbase, while keeping attrition lowCustomer acquisition costs arehigh (unless you have a monopoly)$/user is largely fixed

Because switching cost is high,products only need to be “goodenough”

Customers aremotivated by:

availability of other ISPs

unwillingness to switch

loyalty to AOL “software”and content

ISP service

Customers Revenue and CostsProducts

Software services for mycomputer

Page 40: Be Like the Internet

Scott Hirsch, MIG [email protected]

Why do businessmodels matter?

Media companies succeed byconnecting customers with usefulcontent/services (think craigslist);monetizing more customerinteractions (think adsense)Growth -> many levers: increasevisits, pageviews, CPM, long-tailand mass marketsCustomer acquisition costs are low$/user is variable

Products need to work well --innovations can be used to hooknew customers

Customers aremotivated by:

the value of the AOLnetwork of content andservicesloyalty to AOL “hooks”(products that uniquelycombine content andservices)relative value of the AOLexperience

Monetizable content

Customers Revenue and CostsProducts

Software services for me

Page 41: Be Like the Internet

Scott Hirsch, MIG [email protected]

-B2B-B2C

How would you describeeCommerce businessmodels? -Content provider

-Direct to consumer -Full service provider -Intermediary- Shared infrastructure- Value net integrator -Virtual community - Whole of enterprise

-Brokerage (e.g., buyer aggregator,auctions, search agent, marketplace)

- Advertising (e.g., portals, free model,attention marketing, bargain discounter)

-Infomediary (e.g. registration)

-Merchant (e.g., virtual store)

- Manufacturer (i.e., disintermediation)

- Affiliate (i.e.,click-through purchase)

- Community (e.g., knowledgenetworks)

-Subscription

- Utility (i.e., pay as you go)

- Focused distributor (e-tailers,market-places, aggregators,infomediaries) - Portal (horizontal, vertical, affinity) - Producer (manufacturer, infoservices)- Infrastructure (ISP, hardware,software)

Page 42: Be Like the Internet

Scott Hirsch, MIG [email protected]

The Frame of Your Business Model Matters… A LOT!

Page 43: Be Like the Internet

Scott Hirsch, MIG [email protected]

Make & Sell

Strategic Lenses• Forecasting• Planning

The Strategic Continuum

Sense & Respond

Strategic Lenses• Learning• Adaptation

Web2.0 is more like a taxi than a bus.

Page 44: Be Like the Internet

Scott Hirsch, MIG [email protected]

Make & Sell• Offer to the Market• Knowledge Embedded

in Things• Mass-production• Focus on Efficiency• Profit from Margin and

Scale

The Strategic Continuum

Sense & Respond• Respond to the Market• Knowledge Embedded in

People/Process• Customization• Focus on Flexibility• Profit from Return and

Scope

Is your company a taxi or a bus.

Page 45: Be Like the Internet

Scott Hirsch, MIG [email protected]

Business Model Lock-In +the Innovatorʼs Dilemma

Concrete

Abstract

Analysis Synthesis

Observations:Confirmation Bias

Leads Us to See WhatWe Know

Frameworks: WeIdentify the

Problems That FitIn Our Definition of

the Industry

Imperatives: We FallBack on the Value

Propositions That FitOur Solutions

Solutions: WeCreate Incremental

Improvements to theWrong Problems

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Scott Hirsch, MIG [email protected]

Example from Telecoms

Concrete

Abstract

Analysis Synthesis

Observations:Customers Get

Frustrated When TheyCan’t Make Calls

Frameworks:Reliability of theNetwork is Key

(.99999 availability)

Imperatives: Invest inPOTS Redundancy to

Ensure Uptime

Solutions: Fiber OpticCables and High

Throughput Switches

Page 47: Be Like the Internet

Scott Hirsch, MIG [email protected]

Other Examples

“I think there is a world marketfor maybe five computers.”- IBM Chairman Tom Watson

“The Americans have need of thetelephone, but we do not. We haveplenty of messenger boys.” - British Post Office

Commissioner Sir William Preece

"While theoretically andtechnically television may be

feasible, commercially andfinancially it is an impossibility."

- TV inventor Lee DeForest

“So we went to Atari and said, 'Hey,we've got this amazing thing, even builtwith some of your parts, and what doyou think about funding us? Or we'llgive it to you. We just want to do it. Payour salary, we'll come work for you.'And they said, 'No.' So then we went toHewlett-Packard, and they said, 'Hey,we don't need you. You haven't gotthrough college yet.”. - Apple Founder Steve Jobs

Page 48: Be Like the Internet

Scott Hirsch, MIG [email protected]

Innovating on Business Models“…the key to sustained success is business model innovation.”

- Harvard Business Schoolʼs Clay Christensen

Who do we serve?

What do we provide?How do we provide it?

How do wemake money?

How do we differentiate &sustain advantage?

Page 49: Be Like the Internet

Scott Hirsch, MIG [email protected]

Developing Business Models

Who do we serve?What do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

Page 50: Be Like the Internet

Scott Hirsch, MIG [email protected]

Developing Business Models

Who do we serve?What do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

How do wedifferentiate &sustainadvantage?

Page 51: Be Like the Internet

Scott Hirsch, MIG [email protected]

Marketing innovationsWhat do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

Serving differentpeople,servingthem differently

Page 52: Be Like the Internet

Scott Hirsch, MIG [email protected]

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Targeting Different Customers

Page 53: Be Like the Internet

Scott Hirsch, MIG [email protected]

Channel Innovations

Who do we serve?What do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

Getting productsto customersdifferently

Page 54: Be Like the Internet

Scott Hirsch, MIG [email protected]

Cement is a commodity … need to differentiate the businessmodel. Major builders and distributors touch only part ofthe national market for cement.

“Platforms” explore major opportunity arenas:How to serve very poor customersHow to deliver “solutions” (rather than cement)How to address the needs of small vendors

Platform Innovation at

1. KEEP THE AIMINGPOINTS FRESH.

2. TIME BOUND THECHALLENGES.

3. MOVE ON TO THENEXT.

Opening Up Whole New Markets

Page 55: Be Like the Internet

Scott Hirsch, MIG [email protected]

New Product Innovations

Who do we serve?What do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

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Scott Hirsch, MIG [email protected]

New Product Categories

Page 57: Be Like the Internet

Scott Hirsch, MIG [email protected]

Customer Experience Innovations

Who do we serve?What do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

Page 58: Be Like the Internet

Scott Hirsch, MIG [email protected]

Can flying actually be fun again?

Can Target make it easierto take your medicine?

Finding new approachesfor known needs

Page 59: Be Like the Internet

Scott Hirsch, MIG [email protected]

Finance innovations

Who do we serve?What do weprovide?

How do we provide it?

How do we make money?

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

PRODUCT/SERVICE

COSTSTRUCTURE

REVENUESTREAMS

Getting paid bydifferentpeople or indifferent ways

Page 60: Be Like the Internet

Scott Hirsch, MIG [email protected]

Innovations in coststructures

Dell pioneered a J-I-Tproduction system thatallowed them to pay forcomponents after theircustomers had already paidDell.

Skype uses openinternet standardsand freeinfrastructure tooffer free and low-cost calls to itscustomers.

Page 61: Be Like the Internet

Scott Hirsch, MIG [email protected]

Innovations in whererevenue comes from

Trilogy createscustomized softwarethat helps its customerssolve business problemsand gets paid as apercentage of costsavings or new revenuecreated.

Page 62: Be Like the Internet

Scott Hirsch, MIG [email protected]

Hybrid innovations: newrevenue, new sales channels

Enterprise: Focus on offeringshort-term replacement vehiclespaid for by insurance companies

Page 63: Be Like the Internet

Scott Hirsch, MIG [email protected]

Innovative combinations:new cost structures, newcustomers, new partners

Radically reducing costs opens upnew target customer possibilities

vs.

Page 64: Be Like the Internet

Scott Hirsch, MIG [email protected]

Hybrid innovations: newcustomer experiences, newproducts, new services, newcapabilities

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Business Model(Netflix in 1999)

Who do we serve?

What value do we provide?

How do we provide it?

How do we make money?

How are we differentiated?

Page 66: Be Like the Internet

Scott Hirsch, MIG [email protected]

Activity: Prototyping Business Models

How do we provide it?- Partner network:- Distribution channel:- Core capability:

What do we provide (key attribute in the value proposition)?- Product/service- Value proposition

Who Is the consumer / market segment?- Target customer- Customer relationship

How do we make money?-Revenue streams:-Cost structure

How do wedifferentiate& sustainadvantage?

Page 67: Be Like the Internet

Scott Hirsch, MIG [email protected]

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

The Innovation Cycle Applied toBusiness Models

Page 68: Be Like the Internet

Scott Hirsch, MIG [email protected]

The Innovation Cycle Applied toBusiness Models

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Describe thebusiness model

Page 69: Be Like the Internet

Scott Hirsch, MIG [email protected]

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Find thewhitespace

The Innovation Cycle Applied toBusiness Models

Page 70: Be Like the Internet

Scott Hirsch, MIG [email protected]

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Describe the newvalue combination

The Innovation Cycle Applied toBusiness Models

Page 71: Be Like the Internet

Scott Hirsch, MIG [email protected]

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Think through go-to-market strategy

The Innovation Cycle Applied toBusiness Models

Page 72: Be Like the Internet

Scott Hirsch, MIG [email protected]

Moving from Customer to Business

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Find thestory

Page 73: Be Like the Internet

Scott Hirsch, MIG [email protected]

Moving from Todayʼs Story to Tomorrowʼs

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Tell anewstory

Page 74: Be Like the Internet

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Telling a New Story

What Weʼre Going to Do …- First step was to take an analytic look at the existing

story.- Now weʼre going to stretch to be a little more creative

to tell a new story- Show you a framework for thinking about business

models through innovation lenses.- Weʼre going to practice using these lenses

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Scott Hirsch, MIG [email protected]

Innovation LensesFinding Opportunity

Customer Needs Business Models

Trends &Discontinuities

UnleveragedAssets

IndustryOrthodoxies

Latent &Unmet Needs

Innovations Products Services Markets Partners Channels Management

Page 76: Be Like the Internet

Scott Hirsch, MIG [email protected]

Innovation LensesOpportunities Derived from Customer Needs

Customer Needs

Trends &Discontinuities

Latent &Unmet Needs

Innovations Products Services Markets Partners Channels Management

Trends & DiscontinuitiesWhatʼs happening in themarket? What emergingtechnological, social, oreconomic changes mightimpact your competitiveenvironment?

Latent & Unmet NeedsLooking at your currentcustomers or target market,what needs are not beingaddressed?

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Scott Hirsch, MIG [email protected]

Innovation LensesFinding Opportunity

Business Models

UnleveragedAssets

IndustryOrthodoxiesInnovations

Products Services Markets Partners Channels Management

Industry OrthodoxiesWhat does the industry takefor granted about how tomake money? Can youimagine alternatives?

Unleveraged AssetsWhat assets do you have thatdisruptors donʼt? Are theybeing used?

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Finding new channelsSame benefits as MS Office, but viathe Web rather than installed software.

Industry Orthodoxies- people value security- don’t trust online storage- MS owns this market

Trends & Discontinuities- software as a service- ubiquitous connectivity

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Customer Service and Experience

Unmet Needs people want F2F support people want education

Industry Orthodoxies retail is a reseller industry there is no profit in retail

Trends & Discontinuities people are willing to pay

extra for service Ipod halo effect is real

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New customers, new distribution,new value configuration

37Signals’ Basecamp project management tools targetend-users as buyers, rather than corporate IT buyers.

Unmet Needs Enterprise solutions

overshot needs of users Industry Orthodoxies IT Manager won’t allow it Business customers

won’t buy it

Trends & Discontinuities Software as service Corporate rebellion

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What data do youhave access to thatcan be repurposed tohelp customers buyfrom you more often?

Power of Customer Data Unleveraged Assets• Customer browse and

purchase histories• Capability to determine

likelihood to buy

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Moving from Todayʼs Story to Tomorrowʼs

Concrete

Abstract

Analysis Synthesis

Observations(Context)

Frameworks(Insight)

Imperatives(Ideas)

Solutions(Artifacts)

Tell anewstory

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Innovation Lenses(Netflix in 1999)

Unmet Needs- I hate paying late fees- I want a bigger selection

Trends/Discontinuities- Demise of VHS- Rise of DVD players

Industry Orthodoxies- People want to see the box- You need retail space to carry inventory

Unleveraged Assets- Customer data

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Innovation Lenses(Netflix in 2007)

Unmet Needs• I can’t get the darn video

onto my ipod

Trends/Discontinuities• More and more interest in watching video anywhere and anytime

Industry Orthodoxies• Digital Rights Management cannot be overcome

Unleveraged Assets- Online relationships, huge selection- Database of customer preferences, recommendations

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Exercise: Telling a new storyFirst, do some brainstorming around the innovation lenses:- Latent/Unmet Needs

What insights do you have about how customers behave?- Trends and Discontinuities

What trends can you get ahead of the cure on?- Industry Orthodoxies:

How can you challenge the current beliefs about your market?- Unleveraged Assets:

What assets do you have that others donʼt … or donʼt use?

Some challenge questions to get you thinking:How would we make money if we gave the product away?What assets are we not leveraging? Include intangibles!(relationships, data, etc.)If you were a start up with the same assets what would you doto disrupt this market

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Prototyping Business Models

Who is in our value chain?

What do we provide (key attribute in the value proposition)?

Who Is the consumer / market segment?

How do we make money?How do wedifferentiate& sustainadvantage?

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Innovation LensesFinding Opportunity

Customer Needs Business Models

Trends &Discontinuities

UnleveragedAssets

IndustryOrthodoxies

Latent &Unmet Needs

Innovations Products Services Markets Partners Channels Management

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Key Takeaways:

• The way you frame your business model reallymatters … Are you a bus company or a taxicompany?

• Frames help you understand your business model… look for patterns

• Frames change when you look forward … breakyour current frame to look at the future

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Be Like the Internet:Collaborative, Disruptive, Networked

Scott Hirsch, Management Innovation GroupWeb2.0 Expo - November 5, 2007

Learning from a Failure ExperienceActivity in Teams of Two

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Where You Are Now

Learning from Experiences:How People Make Decisions

context

opportunity

problem

solution Where You Want To Be

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• People think much more objectively and criticallyabout failures

In analyzing past successes, people are naturallysusceptible to “self-attribution bias”

• Those who don’t learn from history are doomed torepeat it.

• That which doesn’t kill you, makes you stronger

Why A Failure Experience?

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Innovation Mindset:Finding Opportunity In Failure

context

opportunity

problem

solutionHow would you handle the

situation differently,knowing what you know

now?

What is the context of thefailure experience? Who

were the key playersinvolved?

What were the barriersyou encountered? Focus

on interpersonal andsystemic barriers.

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1. Cast aside your biases, listen & observe• Let them tell their story• Listen for emotion

2. Note any contradictions• Inconsistencies beg additional questions• Check for clarity

3. Listen for the personal story• Challenge perceptions for normal• Note sources of pride and frustration

4. Distinguish between needs and solutions• Needs open up possibilities• Solutions constrain them

5. Look beyond the obvious• Watch for workarounds• Great insight is in the nuances

Five Things to Remember When Doing Inquiry:

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• What did you learn in your interview?

Were you able to frame the problem?

Were you able to reframe and find the opportunity?

Discussion and Questions …

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Thank you!Scott Hirsch

Management Innovation [email protected]