Breaking the Chains

From Value chains to value system innovationLecturer: drs. Ir. J.R. Helmus

Part 1:Value chain thinking

Part 2:Value systems with issues

Part 3: Breaking the chains of value eco systems

Objectives for this lectureAfter this lecture you will be able to:

Map value systems in a pluriform way

Understand problematic value systems

Know about several ways to force breakthroughs

• have basic knowledge about value chains• know about modelling techniques• have basic knowledge of innovation management• have basic knowledge of cash flows and economics• are open minded and willing to learn

I Assume you

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Part 1:

Value chain thinking

Courtesy to Value Chain Partnerships for a Sustainable Agriculture

Extinct value chains

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10

We are the top management team of Philips Healthcare

We have invented a coocklemelooky

And we need to setup the value chain

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What Factors would you take into account?

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Let’s use the Philips method

by prof dr. Elke den Ouden

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Four aspects should be mapped in the Value network

Money

Goods & Services

Information

Intangibles

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The value chain flow model

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The value chain flow model

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One aspect is missing in this method

Size determines

the power of the

stakeholder&

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One aspect is missing in this method

Size determines

the power of the

stakeholder&

Mapping power and Effect of stakeholders

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Needs Barriers

What kind of decision maker is your stakeholder?

What ‘s inside the mind of a stakeholder

Barriers for stakeholders to overcomeWhat keeps potential customers from making the decision to buy an

electric vehicle?

There are three types of barriers that must be overcome before taking difficult decisions:• Functional barriers

• Price, functionalities, effort, risk • Emotional barriers

• fear of taking risk, failing, •Social Barriers

• how people see you • Attitude of others to you

Information pointed at the barriers is required to convince your stakeholders

Always care about the metrics your stakeholders cares about

Filling in your persona in a serious way gives you real insights

Carefully think about the difference between the decision making unit and the stakeholder you are dealing with.

Your Audience

(e.g. Production manager)

His Audience (stockholders)

Your message to your stakeholders could be part of a broader message to a broader audience.

The Real DMU

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Part 2:

Value systems with issues

The risk that a stakeholder is

exposed to within the value system

compared to others

The ownership of product/services /

information and the moment of

ownership transfer

The unbalanced value system of pears

Farmer Pear Cooling storage wholesale Super market Customer

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Clients Innovation PartnersKnowledge parntners

What is the state of culticavation of fruits in the NL in 2020?

Open innovation in the agri sector in the Netherlands

Value system of agriculture

Due to the power of the supermarket the farmer is suppresed in its position in the value system

Farmer remains owner of his fruits till – and is exposed to risk 0- till the moment of sales a supermarket. Only at that moment the supermarket pays the farmer for each single piece of fruit

The key player is the bottleneck in

the value system. He

determines what passes upstream to the customer

Deeper analysis of value systemType Farmer Pear Cooling storage wholesale Super

marketCustomer

Goods / service

Money

Information

Intangibles

Power

influence

risk

ownership

The cockiness of the farmers – particularly not willing to cooperate – appeared to be reason that the supermarket was able to develop its power in the value system.

The supermarket simply asks a quote to all farmers and picks the best.

Information streams within the value system are optimized in favor of the supermarket

The news value system is known for

its issues

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What technologies will influence the value system in future?What is the future of newspapers

Which innovations for which actors will be beneficial for them?Open innovation session with all actors within the value system

Value systems suit excellently with co-creation sessions for they are an incentive for discussion.

Raw sketch of the Value system of the newspaper industry

Informati

on

g

atherin

g Info. e

nrichment

source

sobse

rvers

Inf. selecti

on

Newspap

er

Pro

duction

thus in

f

fixa

tion

Inf. dist

ribution

Inf. consu

mption

Key findings of our research

Transforming value system:Position of key player no longer sustainable due to new technologies that enable information consumers to skip positions in the value system.

Information enrichment is now performed by information consumers as well

Information is old as soon as it is fixated and printed, whilst new technologies enable consumers to continuously gain new information in the value system.

Electric Vehicles and innovation

http://www.sissolarventures.com/EV_Electric_Vehicle.php

Value system of electric vehicles from the perspective of the charging station

Network administrator

Measurement responsible

Data responsible

Energy producer

customer

supplier

provider

Owner charging station

I

H

B

C

D1

D2

G

A

F

TNM

Source:TNOCourtesy to student’s research TC. Gouw & J. Meijer

Cash flows within the value system• Private (buy a charging station)

Courtesy to student’s research TC. Gouw & J. Meijer

• Private (lease a charging station)

Results of financial modelling

Results cashflow calculation and simulation

Results:- The total value system looses

money up to 2024 - The provider - key player – is not

profitable, because of the risks, periodic fees for costs

- To make exploitation profitable a subscription fee of at least €52 is necessary

Courtesy to student’s research TC. Gouw & J. Meijer

The key player within this value system is

the weakest link

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Which Extinct car is this?

The Mazda RX-7 is a sports car produced by the Japanese automaker Mazda from 1978 to 2002. The original RX-7 featured a 1146 cc twin-

rotor Wankel rotary engine and a front-midship, rear-wheel drive layout.

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Which Extinct car is this?

The Mazda RX-7 is a sports car produced by the Japanese automaker Mazda from 1978 to 2002. The original RX-7 featured a 1146 cc twin-

rotor Wankel rotary engine and a front-midship, rear-wheel drive layout.

What actions were required at wich actors in the value system to implement the Wankel motor succesfully??

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Mazda should have trained car mechanics how to repair wankel motors and arrange

spare parts

But they didn’t….

48Cicada Innovation 2012

General practitioner

District Nurse / Home Care

ContentMonitoringcocreationcommunicationfinance

Fragile elderly

Family care

?

Product-service Innovation for Elderly project 2012

Value system of the Dutch Healthcare sector

Point 1 no care neededPoint 2 minor care required

Point 3 intensive care programs for elderly

Value system of the Dutch Healthcare sectorConclusions 1: As soon as more than simple care for elderly is required, the case value system gets needlessly complex. At first the general practitioner is first vocal point for clients, but as soon as care becomes even a little more intensive, the value system’s complexity increases. Conclusions 2: Key player in the value system are health insurance companies who are more and more a decision making unit, although their function is originally delegated from the Dutch government.

Conclusions 3: Real innovation in healthcare systems is restrained for (positive) cash flows are required for several sources (client, insurance, governement, family) and cash flows are often not supported when particularly when Nature of the innovation is prevention

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Part 3:

Breaking the chains of value eco systems

#1 Why pay for COGS when other partners are willing to pay?

HowIn traditional business thinking it is often the company who produces that pays the bills for the Costs of Goods Sold (COGs). Some companies are able to let the COGS be paid for them. Even better to gain more money from embedding certain suppliers than the total amount of COGs

Questions-Which component suppliers are picked by clients?-Are there any aftersales possibilities for your product and which stakeholders gain benefit from these aftersales?

-Which stakeholders within the value chain gain benefit from endorsement branding?

Examples:- Dell

How is that possible???

Dell makes profit on sales even before a product is sold

Microsoft® Office Starter 2010

#2 money is not the determing factor in 2.0 busines models

How In tradidional busiensses transactions are based on cash flows. Goods or services are to be paid for, but have you ever considered other means than goods or services? You could sell influence, presence or information as well.

Questions-Which stakeholders gain benefit form having influcence in decision making?

-Which stakeholders gain benefit from sponsoring?

Examples:- Google adds- interest groups willing to pay for decisions in their favour (nature conservation, fauna protection)

Which stakeholders have stakes other than money?

Lets assume we place a light bulb near a park….

HowBeing present as a company in a certain area could mean that other companies flourish by your presence. Think about large factories being offshored. This induces employment and a new value system in the country being offshored to.

Questions:-Which organisations profit from your presence? -What would happen to them if you would suddnely not exist?

-How well do you exploit your partners in the ecosystem?

-Which crosslinks are made in your ecosystem?-Where are the boundaries of the ecosystem you are part of?

Examples- Sillicon Valley ecosystem-Outsourced university mess

#3Build an ecosystem around your service and let others pay for it

Cash Flows of RyanAir

• Cash flow• influence• Data flow• Goods • presence• Sponsoring

Cash Flows of RyanAir

• Cash flow• influence• Data flow• Goods • presence• Sponsoring

It is not the customer who pays for the ticket, it is the ecosysem (taxi, hotel, catering,

airport etc)

HowThe cradle to cradle principle is well known in most sectors. Have you ever thought about the value of your products and services being regarded by you as waste? In a flat world there is always someone eager for you waste.

Questions:-Which side products are produced in your company?

- Is there any leakage of value in your company?-What are you now selling for free to your customers?

Examples-Factories in chemical industry are often connected and use each others output

#4Your waste is someone's gold

HowData is the new currency in our future world. Imagine that within a few years everything you can imagine will be stored on servers. Data is big Big Data. Even your products/services generate date (that is most probably currently not stored). Have you ever thought about the possibilities of your data?

Questions:-What knowledge do you have on certain subjects that your suppliers would like to have?

-What kind of data is created by your products?- Is there anything you would like to know about your products that you would pay for?

- If you would have an endless amount of endless types of sensors, where would you put then?

Examples-The batteries of electric vehicles subject of large data gathering. The long term stamina and product improvements based on usage data are of high value.

#5data is the new currency

Question: What kind of data generated by the Car2Go product service system would be valuable for what kind of

stakeholders?

HowValues chains tend to be linear, which was something from the past. With current technology it is often possible just to skip parts of the value system. The thought experiment of skipping them could be a source for innovation.

Questions:-Which parts of your value system are essential? -What would happen if you eliminate certain actors in the value system?

-Are there new technologies available that enable new routes in the value system?

- would it be possible to swap certain actors in the value system?

Examples- social media and being connected everywhere enables digital businesses

- Think about the new Albert iPhone app that enables customers to buy groceries on an iPhone

-The news sector is an example. Imagine what would happen if newspapers are printed in the supermarket

#6Skip parts of the current value system

What if you would print the lastest version of your favorite newspaper in the supermarket?

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+Even better, the newspaper could be adjusted to :-your news preferences -the daily news you have already consumed - Requested background information on news

HowPeople tend to think in patterns they already know. We have always done it this way, is an often used argument against change. Well, remind yourself that the pattern that got you into trouble will never be the pattern that gets you out of it.

Questions:- ask the five Why why why why why? - What do you see if you look at completely other businesses? Are there things within the value system they do different ?

-Ask someone new and totally blunt in your sector for his vision on your value system.

Examples-Why is it that in shopping centers first all shops need to be supplied with goods and then the goods are taken back home. That is 2x unnecessary transport of goods - Why

#7 Think different

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No problem can be solved from the same level of consciousness that created it.

Why is it that shopping goods are bought in shops?

First All shops in the Amsterdam center are provided with goods by trucks. This causes traffic within the city center on quiet times. The shops need to have stockrooms. And after suppling, the trucks drive back to the wharehouse.

And thenCustomers come to shops buy goods and need to take them back home. Assuming the customers live outside the city center, the goods never needed to be in the city center

Why notHave empty shops where you can buy products and as soon as you buy goods, they are transported from warehouses to customers home

HowFixed patterns limit the space you have to innovate. These patterns form a blind spot in finding solutions. Open innovation gives you the opportunity to work with partners from completely different sectors to work together so you can relax. Surprising solutions

Questions-What patterns and assumptions are valid in your business?At what rate are these patterns based?You call once a totally different industry, how these life patterns that you accept as truth in this industry and what patterns are formed there?

Examples:-The government is slowBankers are just out on economic profitIn a non-profit sector will earn badA newspaper daily and always appears on paper

#7 break through fixed patterns about your business

To:transport is never necessary

From: Without transport there is no supply

To:All transport is done by…

From: Transport is always done by trucks, boats, airplanes

4-6-2013

Jurjen Helmus@JRHelmusJ.R.Helmus@hva.nl0645464751