How to give your business model a successful makeover

INNOVATIONDAY 2011

CONFIDENTIAL

How to give your business model a successful make-over

Using a new business model

can make your products and

services more successful. It

can help to escape the

endless competition trap by

approaching markets in a

surprisingly new way.

Innovation can be every part

of business model if you are

ready to change the

traditional practice.

Zane Smilga

Verhaert – Innovation Consultant

zane.smilga@verhaert.com

INNOVATIONDAY 2011

INNOVATIONDAY 2011

…What if voice calls were free?

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…What if I could have less staff, but more service?

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What is a business model?

VALUE PROPOSITION: what are we offering and to whom?1. Target segments: which customers do we

serve? Which of their needs do we address?2. Product and service offering: What are we

offering to customers to satisfy their needs?3. Revenue model: How are we compensated

for our offering?

OPERATING MODEL: how do we profitably deliver our offering? 4. Value chain: How are we configured to

deliver on customer demand? What do we do in-house? What do we outsource?

5. Cost model: How do we configure our assets and costs to deliver our value proposition profitably?

6. Organization: How do we deploy and develop our people to sustain and enhance our competitive advantage?

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Business model innovationas an answer to business complexity

Today`s business environment – highly complex, uncertain and volatile

“78% of Benelux CEO`s anticipate even greater complexity in the next 5 years; only 57% believe they have ability to manage it” /IBM, research, 2010/

Incremental changes are no longer sufficient

Business model can offer a totally different innovation approach

Operating margin growth in excess of competitive peers (compound annual growth rate over five years)

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Success of a business model change

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Failure of a business model change

“Nokia stops free music service in 27 countries” /January, 2011/

2008

The whole system of business model is critical to succeed!

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Ericsson, Nokia Siemens Networks, Alcatel-Lucent, and Huawei may end up

running three-quarters of the networks on this planet

Impact of business model changes on industry

Telecom outsourcing

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businesscomplexity

challenge

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10 rules

for successful

business makeover

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rule 1

Think system!

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Business model as a system

Osterwalder

INNOVATIONDAY 2011 Slide 14

rule 2

Consider your environment

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Environmental analysis

COMPETITION

VALUE CHAIN & STAKEHOLDERS:

CUSTOMERS

MARKET DEVELOPMENT

INNOVATIONDAY 2011 Slide 16

rule 3

Challenge every cell of your business model!

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Different entry points

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rule 4

Use triggers & industry examples

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search and explore genes, their personal characteristics, such as lactose intolerance, athletic ability, and food preferences;

compare their profiles to family and friends; and discover their genetic roots, as well as gain insights into their ancestry, genealogy, and inherited traits.

Business model example

INNOVATIONDAY 2011 Slide 20

Long tail Business

model

Open source

Business model

Freemium business

model

Multi sided business

model

OpenBusinessmodel

Bait & hookbusiness model

Emerging marketbusiness model

Experiencebasedbusiness model

Types of business models

Unfinished productsbusiness model

Mass Custom-ization business model

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Patterns of a business modelBait & hook business model

Value proposition:1) Free or low cost

basic/platform2) Follow up items &

servicesResources:brand

Revenues:Repeated of follow up purchases compensate the initial free or low cost offer and generate profit

Activities: Delivery of follow up services and products

Osterwalder

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rule 5

Generate multiple business model options …

for a better choice

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Many alternatives…generate a better base for choice

• What do you want to change in your current business model? What do you want to achieve with these changes?

• What different business models can you think of?

• What are their strengths and weaknesses of each of them?

• Which one to choose?

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rule 6Envision the future scenarios

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Future scenario exploration

Imagine your customers in the future….

Imagine the trends and industry in

future…

Airbus, 2011

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rule 7

Visualize!

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Business people need to become designers/Roger

Martin/

Business model visualization

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rule 8Check & test your assumptions

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Guesses

Hypothesis & assumptions

TestingTest your hypothesis and assumptions together with customers, suppliers, industry etc.

Identify assumptions behind each idea of the new business model; formulate hypothesis and questions that need to be verified

Guessing, building hypothesis & testing

Make rough guesses based on logics and experience and build your first drafts of business models DRAFT BUSINESS

MODEL

HYPOTHESIS

TEST PLAN

Based on Osterwalder

INNOVATIONDAY 2011 Slide 30

rule 9

Consider your implementa-tion options

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Implementation planning

Business case: market data, cost and revenue calculations, PL, financial scenarios

Financial simulations: business finance calculations, alternative options

Organizational design1. Role design2. Product & service design3. Finance design4. Organizational design

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rule 10Be ready for the change!

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Innovative products might fail with traditional business models

….be aware what change you need to bring in the company….

?

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Business model design & new product design process

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What are the key steps for designing a business model?

• Assessment & analysis

• Ideation

• Designing

• Selecting

• Prototyping

• Testing

• Development (detailed)

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What architecture - platform & components - is necessary?

channels

partnershipsactivities

cost structure

resources

customers

Revenue structure

value proposition

Visual from Osterwalder

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What are the key values / features that will make the company profitable?

social media

platform

crowdsourcing/ co-creation

diversified revenue streams: leasing, renting,

buying

new value proposition

Visual from Osterwalder

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When the game is tough, change the game!!/BCG/

http://www.vasculitis.nl

INNOVATIONDAY 2011

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helps companies and governments to innovate. We design products and systems for organizations looking for new ways to provide value for their customers. We are a leading integrated product innovation center; creating technology platforms, developing new products and business in parallel, hence facilitating new-growth strategies for our clients.