Business Modeling in innovation - the missing link to customer value!?
Prof. Bengt Järrehult, SCA & LU at Campdigital by Sigma
1
”De som vinner i längden är inte de som är snabbast, effektivast eller billigast. Vinnarna finns i stället bland dem som ser innovation och kontinuerliga genombrott som en naturlig del av verksamheten” Håkan Karlsson
2
Managing your Innovation Portfolio , Harvard Business review May 22, 2012
Products & Services
Improve existing
Crea
te &
targ
et n
ew
Develop new Add adjacent
Mar
kets
& C
usto
mer
s
Serv
e ex
istin
g En
ter a
djac
ent
Upgrades/Core Optimizing existing
products for existing customers
Next Generation/Adjacent Expanding from existing
business into “new to the company” business
Breakthroughs/Transformational Developing new products and services and/or aiming for markets that don’t
yet exist
3
Managing your Innovation Portfolio , Harvard Business review May 22, 2012
Products & Services
Improve existing
Crea
te &
targ
et n
ew
Develop new Add adjacent
Mar
kets
& C
usto
mer
s
Serv
e ex
istin
g En
ter a
djac
ent
4
Is it real? Can we win? Is it worth doing? , Professor George Day at Wharton School, , Harvard Business review December, 2007
5-25%
25-40%
40-55%
50-60%
60-75%
Products & Services
Improve existing
Crea
te &
targ
et n
ew
Develop new Add adjacent
Mar
kets
& C
usto
mer
s
Serv
e ex
istin
g En
ter a
djac
ent
5
Managing your Innovation Portfolio , Harvard Business review May 22, 2012
Products & Services
Improve existing
Crea
te &
targ
et n
ew
Develop new Add adjacent
Mar
kets
& C
usto
mer
s
Serv
e ex
istin
g En
ter a
djac
ent
6
Good Lead Innovator
-general biz
45%
30%
25%
A diversified industrials company
Managing your Innovation Portfolio , Harvard Business review May 22, 2012 + RTEC on Portfolio Management, 2008
70%
20%
10%
A leading consumer goods
company
80%
18%
2%
A midstream technology company
45%
40%
15%
This is the optimal balance for short term rewards…
10%
Good Lead Innovator
- general biz
20%
70%
…whereas long term rewards come as this!
7
Breakthroughs (Genombrott)
New generations
Upgrades
Good Fast Follower
- general biz
”De som vinner i längden är inte de som är snabbast, effektivast eller billigast. Vinnarna finns i stället bland dem som ser innovation och kontinuerliga genombrott som en naturlig del av verksamheten” Håkan Karlsson
8
9
Breakthroughs (Genombrott)
Next generations
Upgrades 1st shipment
to customers
FEASIBILITY DEVELOPMENT LAUNCH CAPABILITY PRE- CONCEPT
Gate2
Gate3
Gate4
Gate 5
Gate1
Robert C. Cooper, Stagegate Inc. + SCA Innovation Funnel 9
Steven Gary Blank (“The entrepreneurs’ guide to start-ups”) + HBR May 2013, Page 54
Breakthroughs (Genombrott)
Next generations
Upgrades
Customer Discovery
Customer Validation
Company Building
Customer Creation
10
SCA’s two “Stone plates” from its Innovation Framework 11
Breakthroughs (Genombrott)
Next generations
Upgrades
12 SCA 2013, Linear and iterative ways of working
13
14
BusinessModelGeneration.com
My sweat problem
deprives me of joy in life
BusinessModelGeneration.com
Fitting auxiliaries to my clothes
15
BusinessModelGeneration.com
BusinessModelGeneration.com
My sweat problem
deprives me of joy in life
Fitting auxiliaries to my clothes
16
My sweat problem
deprives me of joy in life
Fitting auxiliaries to my clothes
Sweat pads with dating
success guarantee
A reliable product I trust
do perform
17 BusinessModelGeneration.com
BusinessModelGeneration.com
My sweat problem
deprives me of joy in life
Fitting auxiliaries to my clothes
A reliable product I trust
do perform
Sweat pads with dating
success guarantee
18
BusinessModelGeneration.com 19
Sweat pads with dating
success guarantee
Fashion shop sales minus 30%
Advertising in Amelia
19
20
BusinessModelGeneration.com 21
Monthly deliveries
Sweat pads with dating
success guarantee
Fashion shop sales B2B
Advertising in Amelia
21
Customer segments: Revenues year 3: Costs year 3:Place your Post-Its here Total # customers Actual year 3 Place your Post-Its here Scroll down % of Cust. Revenue 1 Total Costs segm. 1 Total Costs segm. 2
0 - Please scroll 0% €0 €0 €0Make your own notes Scroll down % of Cust. Revenue 2 Make your own notes Make your own notes
Please scroll 0% €0Scroll down % of Cust. Revenue 3
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Total # customers Actual year 3 Scroll down % of Cust. Revenue 1 Scroll down Scroll down Scroll down Scroll down
0 - Please scroll 0% €0 Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollScroll down % of Cust. Revenue 2 Costs 1 Fixed costs Var.costs Costs 1 Fixed costs Var.costs
Make your own notes Please scroll 0% €0 €0 €0 €0.00 €0 €0 €0.00Scroll down % of Cust. Revenue 3 Scroll down Scroll down Scroll down Scroll down
Please scroll 0% €0 Production Annual costs Please scroll Please scroll Annual costs Please scrollScroll down % of Cust. Revenue 4 Costs 2 Fixed costs Var.costs Costs 2 Fixed costs Var.costs
Please scroll 0% €0 €0 €0 €0.00 €0 €0 €0.00
Scroll down Scroll down Scroll down Scroll down
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Comments Comments €0 €0 €0.00 €0 €0 €0.00This is … Scroll down Scroll down Scroll down Scroll down
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€0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Fill in Fill in Please scroll Annual costs Please scroll Please scroll Annual costs Please scroll0% Year 1 0% Costs 5 Fixed costs Var.costs Costs 5 Fixed costs Var.costs0% Year 2 0% €0 €0 €0.00 €0 €0 €0.000% Year 3 0% Scroll down Scroll down Scroll down Scroll down
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0 0 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
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€0 €0 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 8 Fixed costs Var.costs Costs 8 Fixed costs Var.costs
€0.00 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
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0% 0% €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
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€0 €0 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 11 Fixed costs Var.costs Costs 11 Fixed costs Var.costs
€0.00 €0.00 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 12 Fixed costs Var.costs Costs 12 Fixed costs Var.costs
0 0 €0 €0 €0.00 €0 €0 €0.00
Number of Units used /customer, year
Fixed price/customer,year [€]
Average sales price per unit [€]
Number of visits/customer, year
Rebate given to retailer per unit [%]
Fixed commission fee/customer, year [€]
Variable commission fee/unit [€]
Market share [%]
Notes
Notes
Extraordinary annual side-effect revenue
This is …
Comments
€0€0€0€1€1€1
Costs Customer 1
€0€0€0€1€1€1
Costs Customer 2
€0€0€0€1€1€1
Revenues Cust. 1
€0€0€0€1€1€1
Revenues Cust. 2
Do you have any extraordinary side
effects on the revenue stemmingfrom your Value
Proposition
Copyright: Bengt Järrehult, SCA
€0
€0
€0
€1
€1
€1
1 2 3
Costs
Revenues
Year
€0
€0
€0
€1
€1
€1
1 2 3
Costs
Revenues
Year
Customer segments: Revenues year 3: Costs year 3:Place your Post-Its here Total # consumers Actual year 3 Place your Post-Its here Scroll down % of Cust. Revenue 1 Total Costs segm. 1 Total Costs segm. 2
500 50 Retailer sales 100% €2,193,750 €257,101 €3,399,567Make your own notes Scroll down % of Cust. Revenue 2 Make your own notes Make your own notes
Please scroll 0% €0Scroll down % of Cust. Revenue 3
Please scroll 0% €0Scroll down % of Cust. Revenue 3
Please scroll 0% €0 Place your Post-Its here Place your Post-Its here
Total # consumers Actual year 3 Scroll down % of Cust. Revenue 1 Scroll down Scroll down Scroll down Scroll down
700,000 42,000 eCommerce 100% €5,292,000 Legal & Brand Annual costs Cost/unit Transport Annual costs Please scrollScroll down % of Cust. Revenue 2 Costs 1 Fixed costs Var.costs Costs 1 Fixed costs Var.costs
Make your own notes Please scroll 0% €0 €187,500 €0 €0.05 €250,000 €250,000 €0.04Scroll down % of Cust. Revenue 3 Scroll down Scroll down Scroll down Scroll down
Please scroll 0% €0 Other Annual costs No var. costs Please scroll Annual costs No var. costsScroll down % of Cust. Revenue 4 Costs 2 Fixed costs Var.costs Costs 2 Fixed costs Var.costs
Please scroll 0% €0 €2,000 €2,000 €0.00 €15,567 €15,567 €0.00
Scroll down Scroll down Scroll down Scroll down
Fill in Fill in Legal & Brand Annual costs Cost/unit Please scroll Annual costs No var. costs€0 €0 Costs 3 Fixed costs Var.costs Costs 3 Fixed costs Var.costs
Comments Comments €20,000 €20,000 €0.00 €0 €0 €0.00This is … Scroll down Scroll down Scroll down Scroll down
Production Annual costs Cost/unit Other Annual costs Cost/unitCosts 4 Fixed costs Var.costs Costs 4 Fixed costs Var.costs
€2,562,500 €2,000,000 €0.15 €351,200 €200,000 €0.02Scroll down Scroll down Scroll down Scroll down
Fill in Fill in Legal & Brand Annual costs No var. costs Other Annual costs Please scroll2% Year 1 1% Costs 5 Fixed costs Var.costs Costs 5 Fixed costs Var.costs6% Year 2 3% €101 €20,000 €0.00 €0 €0 €0.00
10% Year 3 6% Scroll down Scroll down Scroll down Scroll down
Legal & Brand Annual costs No var. costs Other Annual costs No var. costsFill in Fill in Costs 6 Fixed costs Var.costs Costs 6 Fixed costs Var.costs
75000 180 €0 €5,000 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Transport Annual costs Cost/unit Legal & Brand Annual costs Please scrollFill in Fill in Costs 7 Fixed costs Var.costs Costs 7 Fixed costs Var.costs
€0 €0 €37,500 €0 €0.01 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Personnel Annual costs Cost/visit Production Annual costs Cost/unitFill in Fill in Costs 8 Fixed costs Var.costs Costs 8 Fixed costs Var.costs
€0.90 €0.70 €10,000 €0 €100.00 €3,134,000 €2,000,000 €0.15Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 9 Fixed costs Var.costs Costs 9 Fixed costs Var.costs
35% 0% €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 10 Fixed costs Var.costs Costs 10 Fixed costs Var.costs
€0 €0 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 11 Fixed costs Var.costs Costs 11 Fixed costs Var.costs
€0.00 €0.00 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down
Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollFill in Fill in Costs 12 Fixed costs Var.costs Costs 12 Fixed costs Var.costs
2 0 €0 €0 €0.00 €0 €0 €0.00
Number of Units used /customer, year
Fixed price/customer,year [€]
Average sales price per unit [€]
Number of visits/customer, year
Rebate given to retailer per unit [%]
Fixed commission fee/customer, year [€]
Variable commission fee/unit [€]
Market share [%]
Notes
Notes
Extraordinary annual side-effect revenue
This is …
Comments
€0€500,000
€1,000,000€1,500,000€2,000,000€2,500,000€3,000,000
Lega
l &…
Lega
l &…
Lega
l &…
Tran
spor
tPl
ease
scro
llPl
ease
scro
ll
Costs Customer 1
€0€500,000
€1,000,000€1,500,000€2,000,000€2,500,000€3,000,000€3,500,000
Tran
spor
tPl
ease
scro
llO
ther
Lega
l &…
Plea
se sc
roll
Plea
se sc
roll
Costs Customer 2
€0€500,000
€1,000,000€1,500,000€2,000,000€2,500,000
Reta
iler s
ales
Plea
se sc
roll
Plea
se sc
roll
Plea
se sc
roll
Side
effe
cts
Revenues Cust. 1
€0€1,000,000€2,000,000€3,000,000€4,000,000€5,000,000€6,000,000
eCom
mer
cePl
ease
scro
llPl
ease
scro
llPl
ease
scro
llSi
de e
ffect
s
Revenues Cust. 2
Do you have any extraordinary side
effects on the revenue stemmingfrom your Value
Proposition
Copyright: Bengt Järrehult, SCA
€0
€500,000
€1,000,000
€1,500,000
€2,000,000
€2,500,000
€3,000,000
1 2 3
Costs
Revenues
Year
€0
€1,000,000
€2,000,000
€3,000,000
€4,000,000
€5,000,000
€6,000,000
1 2 3
Costs
Revenues
Year
Monthly deliveries
Advertising in Amelia
22
Monthly deliveries
Fashion shop salesB2B
Advertising in Amelia
#Act.Cust.50
#Act.Cust.42,000
Revenue tot€438,750
€1,316,250
€2,193,750
Revenue tot€882,000
€2,646,000
€5,292,000
Costs tot€2,201,520
€2,510,561
€257,101
Costs tot€2,679,767
€3,108,167
€3,399,567
€0€500,000
€1,000,000€1,500,000€2,000,000€2,500,000€3,000,000
Lega
l &…
Oth
erLe
gal &
…Pr
oduc
tion
Lega
l &…
Lega
l &…
Tran
spor
tPe
rson
nel
Plea
se…
Plea
se…
Plea
se…
Costs year 3 for customer 1
€0€1,000,000€2,000,000€3,000,000€4,000,000
Tran
spor
tPl
ease
…Pl
ease
…O
ther
Oth
erO
ther
Lega
l &…
Prod
uctio
nPl
ease
…Pl
ease
…Pl
ease
…
Costs year 3 for customer 2
€0€500,000
€1,000,000€1,500,000€2,000,000€2,500,000
Revenues year 3 for customer 1
€0
€2,000,000
€4,000,000
€6,000,000
Revenues year 3 for customer 2
€0
€500,000
€1,000,000
€1,500,000
€2,000,000
€2,500,000
€3,000,000
1 2 3Year
Customer1
€0
€1,000,000
€2,000,000
€3,000,000
€4,000,000
€5,000,000
€6,000,000
1 2 3Year
Customer 2
-100%
-50%
0%
50%
1 2 3Year
Profit [%]
€0
€2,000,000
€4,000,000
€6,000,000
€8,000,000
1 2 3Year
Both customers
23
Lead Customers
24 Geoffrey A. Moore (“Crossing the Chasm”)
Company Building
Customer Discovery
Customer Validation
Customer Creation
The Chasm
Lead Customers 1. Find the customer’s
gains & pains 2. Find the gain creators
& pain relievers = Offer 3. Find many different
BMs 4. Test them by asking
customers, iterate
Steven Gary Blank (“The entrepreneurs’ guide to start-ups”) 25
Company Building
Customer Discovery
Customer Validation
Customer Creation
Pers
ever
ing
The Chasm
Acceleration Lead
Customers
Pivoting
1. Set the “final” Business Model
2. Get first sales to Lead Customer/Early adopter
3. If negative - pivot 4. If positive - persevere
Steven Gary Blank (“The entrepreneurs’ guide to start-ups”) 26
Company Building
Customer Discovery
Customer Validation
Customer Creation
The Chasm
1. Cross the Chasm the big Early Majority
2. Position the value proposition
3. Launch the value proposition large scale
4. Create demand for non-customers
Steven Gary Blank (“The entrepreneurs’ guide to start-ups”) 27
Company Building
Customer Discovery
Customer Validation
Customer Creation
The Chasm
1. Reach out for the Late Majority & Laggards
2. Review mission/culture 3. Review organization
- venture in the existing company or in a new?
4. Focus on efficiency
28 Steven Gary Blank (“The entrepreneurs’ guide to start-ups”)
Company Building
Customer Discovery
Customer Validation
Customer Creation
Company Building
Customer Discovery
Customer Validation
Customer Creation
Company Building
Customer Discovery
Customer Validation
Customer Creation
Company Building
Customer Discovery
Customer Validation
Customer Creation
29
30