succeeding in business model innovation
TRANSCRIPT
© 2021 Innosight Consulting, LLC and/or its affiliates
Business Model InnovationF O R R E S I L I E N C E
B U S I N E S S M O D E L I N N O V A T I O N W E B I N A R S E R I E S • M A Y 2 5 , 2 0 2 1
Mark W. JohnsonCo-Founder
& Senior [email protected]
Erika J. MeldrimHead of Business
© 2021 Innosight Consulting, LLC and/or its affiliates 1
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For your reference during today’s webinar
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The Lockheed Martin Skunk Works Hybrid Airship
3
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Companies struggle to achieve innovation success
4Source: https://hbr.org/2016/09/know-your-customers-jobs-to-be-done
Companies have more data
on customers than ever…Yet, successful innovation rates
remain dismally low
84%of global executives reported that
innovation was extremely
important to their growth strategies
94%said that they were dissatisfied with
their organization’s innovation
performance
© 2021 Innosight Consulting, LLC and/or its affiliates
Interactive Activity: What are the greatest obstacles
to business model innovation within your organization??
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DiscussionTopics
► WHAT IS A BUSINESS MODEL?
► CIRCUMSTANCES FOR BUSINESS MODEL CHANGE
►PROCESS FOR DESIGNING AND DEVELOPING
A NEW BUSINESS MODEL
© 2021 Innosight Consulting, LLC and/or its affiliates
DiscussionTopics
► WHAT IS A BUSINESS MODEL?
► CIRCUMSTANCES FOR BUSINESS MODEL CHANGE
►PROCESS FOR DESIGNING AND DEVELOPING
A NEW BUSINESS MODEL
© 2021 Innosight Consulting, LLC and/or its affiliates
The key elements of a business model
Profit Formula
and Core Mission
Customer Value
Proposition
Key
Processes
Key
Resources
9
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A business model is an interdependent system
10
Profit Formula
and Core Mission
Customer Value
Proposition
Key
Processes
Key
Resources
CUSTOMER VALUE PROPOSITIONOffering that helps customers more effectively,
reliably, conveniently, or affordably satisfy a job
to be done at a given price
DELIVERY MODELKey resources and processes
that enable delivery of the
CVP in a sustainable,
repeatable, scalable and
manageable way
PROFIT FORMULAEconomic blueprint that
defines how the company will
create value for itself and its
shareholders
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The customer value proposition has three elements
11
Profit Formula
and Core Mission
Key
Processes
Key
Resources
Customer Value
Proposition
Access
• How do customers learn about
the offering?
• How do customers get the offering?
Payment scheme
• How do customers pay for the offering?
• How often do customers purchase the
offering?
Offering
• What are you offering?
• Who is your customer?
• What jobs to be done are being
addressed?
© 2021 Innosight Consulting, LLC and/or its affiliates
The profit formula is defined by four elements
12
Key
Processes
Key
Resources
Customer Value
Proposition
Profit Formula
and Core Mission
Cost structure
• How are costs allocated?
Unit margin
• What sort of margins should each
transaction net to achieve desired profit
levels?
Resource velocity
• How quickly do resources need to be used
to support target volume?
Revenue model
• How do we plan to make money?
© 2021 Innosight Consulting, LLC and/or its affiliates
The delivery model consists of resources and processes
13
Customer Value
Proposition
Profit Formula
and Core Mission
Key
Processes
Key
Resources
Processes
• Design
• Product development
• Sourcing
• Manufacturing
• Hiring
• Training
• IT
Resources
• People
• Technology
• Equipment
• Information
• Channels
• Partnerships
• Brand
© 2021 Innosight Consulting, LLC and/or its affiliates 14
Profit Formula
and Core Mission
Customer Value
Proposition
Key
Processes
Key
Resources
Solution to cardiac disease
made accessible through
new channels and affordable
through product innovation
and third-party financing
Reduced margins at higher
volumes through increased
resource velocity and concurrent
reduction in full-cost structure
Processes
• Depth of experience making and marketing
pacemakers worldwide
Resources
• Strong relationships with the
Indian medical community
• Partnerships with third-party financiers
Medtronic “Healthy Heart for All” Business Model
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DiscussionTopics
► WHAT IS A BUSINESS MODEL?
► CIRCUMSTANCES FOR BUSINESS MODEL CHANGE
►PROCESS FOR DESIGNING AND DEVELOPING
A NEW BUSINESS MODEL
© 2021 Innosight Consulting, LLC and/or its affiliates
Circumstances for Business Model Change
A B
TRANSFORMATION A
Reposition TodayTRANSFORMATION B
Create Tomorrow
16
Compete on Convenience
Compete on “Affordability”
Compete in Non-traditional Markets
Create New Markets
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The Hilti Fleet Management Solution
18
Subscription-based, comprehensive tool fleet management service offered to contractors
to increase on site productivity
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Hilti: Business model innovation
19
Traditional Power Tool Company Tool Fleet Management Services
Power tools and accessoriesFleet management to improve
on-site productivity
Low margin,
high inventory turnover
Subscription model covering
asset-heavy balance sheet
Retail distributionDirect Sales, Contract
Management, IT Systems
Profit Formula
and Core Mission
Customer Value
Proposition
Key
Processes
Key
Resources
© 2021 Innosight Consulting, LLC and/or its affiliates
Disruptive innovation in defense – enabling access and affordability
21
Google Earth
ROVER Handheld
Low Cost UAVs
SUGV T-X Program
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Real “affordable innovation” means business model change
22Note: Image reprinted with permission of Harvard Business Review
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Competing in Non-traditional Markets /
Creating New Markets
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The Lockheed Martin Skunk Works Hybrid Airship
24
© 2021 Innosight Consulting, LLC and/or its affiliates
Lockheed Martin Hybrid EnterprisesCommercial opportunities called for a new business model
25
Aeronautics Hybrid Airship
• Government customer
• Competing on superior performance
• Sustaining/derivatives improvement
• Commercial customer
• Convenient, cost-effective access with
limited or no infrastructure
• Direct delivery of goods
• Government accounting • Commercial accounting
• Large-scale complex programs
• Cutting-edge engineering and manufacturing
• Program management
• RFP management
• Commercial logistics
• Capital investment
• Sales and marketing teams
• Small, focused team
• SCM
Profit Formula
and Core Mission
Customer Value
Proposition
Key
Processes
Key
Resources
© 2021 Innosight Consulting, LLC and/or its affiliates 26
Digital transformation enables companies to extractand create value across three areas
C U ST OMERS
I T I NF RAST RU C T U RE
AREA 2 [Customer Experience]
DIGITIZE EXTERNAL STAKEHOLDER INTERFACESCreate better end-to-end stakeholder experiences
through connectivity, data and automation
AREA 3 [Revenue Focus]
DISCOVER & SCALE DIGITAL BUSINESSES
1. Act as a Producer by offering digital
products or services
2. Act as a Platform through a marketplace
that facilitates the exchange of value
AREA 1 [Cost Focus]
DIGITIZE CORE PROCESSES Lower costs and increase efficiencies by capturing data and
automating processes
D A T A
© 2021 Innosight Consulting, LLC and/or its affiliates
DiscussionTopics
► WHAT IS A BUSINESS MODEL?
► CIRCUMSTANCES FOR BUSINESS MODEL CHANGE
►PROCESS FOR DESIGNING AND DEVELOPING
A NEW BUSINESS MODEL
© 2021 Innosight Consulting, LLC and/or its affiliates
Interactive Poll: Do you have a defined process for
developing new business models in your organization??
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BMI
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Process for transformational innovation
30
JOBS TO BE DONE
What are the
important, unsatisfied
jobs to be done?
BUSINESS MODEL
DESIGN
How can we design the
business model to
address these jobs?
TEST & LEARN
How can we efficiently
test and validate our
assumptions?
© 2021 Innosight Consulting, LLC and/or its affiliates 31
“People don’t want to
buy a quarter-inch
drill, they want a
quarter-inch hole!”
- Ted Levitt
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Consider functional, emotional, and social jobs to be done
EMOTIONAL
Describes how the
consumer feels or
wants to feel
“Feel like I have a
private driver”
FUNCTIONAL
Describes how the
consumer achieves a
functional goal
“Get from where I am
to where I want to go”
SOCIAL
Describes how the
consumer wants to be
perceived by others
“Show that I’m part of
the digital generation”
© 2021 Innosight Consulting, LLC and/or its affiliates
Integrating the right business model behind the job
Profit Formula
and Core Mission
Customer Value
Proposition
Key
Processes
Key
Resources
33
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Business Model Canvas
34
CUSTOMER VALUE PROPOSITION (CVP) OPERATING MODEL
PROBLEM or JOBS
FORMULATED AS A POV
CUSTOMER/CONSUMER
CIRCUMSTANCE
CUSTOMER ATTRIBUTES SOLUTION KEY RESOURCES
CHANNELS
KEY PROCESSES
COMPETITION AND
BARRIERS
PAYMENT STRUCTURE
PROFIT FORMULA
REVENUE STREAMS AND ADOPTION COST STRUCTURE
RISKS AND ASSUMPTIONS
© 2021 Innosight Consulting, LLC and/or its affiliates 35
OFFERING LEVERSWhat is the consumer buying?
Product Service
Standard Customized
Branded Unbranded
Use Anywhere Centralized Use
Consumable Durable
Individual Bundled
Physical Virtual
Value Premium
ACCESS LEVERSWhere do consumers access it?
PAYMENT LEVERSHow do consumers obtain it?
On-Demand Planned
Pick-Up Delivery
No Support Heavy Support
Known Channel New Channel
Frequent Use Infrequent Use
Mass Appeal Niche Appeal
All at Once Installments
Pay to Own Pay to Access
Regular Ad-Hoc
Upfront After Use
Consider the business model ‘levers’ you can pull
© 2021 Innosight Consulting, LLC and/or its affiliates
Business Model InnovationF O R R E S I L I E N C E
T H A N K Y O U F O R J O I N I N G & S T A Y T U N E D F O R T H E N E X T B M I W E B I N A R I N T H E S E R I E S
Mark W. JohnsonCo-Founder
& Senior [email protected]
Erika J. MeldrimHead of Business