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Beyond Process Innovation –
BMI (Business Model Innovation) Sung Kwon Kang, SAP Business Transformation Services
Seoul, July 2016
Customer
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 1 Customer
Agenda
Digital Economy and Digital Transformation
Business Model Innovation
SAP dBMI (digital BMI) Program
2 © 2016 SAP SE or an SAP affiliate company. All rights reserved.
Can we survive?
How to win digital?
How to become agile?
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 3 Customer
Digital economy: The next economic revolution
1850
Industrial
economy
2020
Digital
economy
1990
Internet
economy
IT
economy
1970
$0.36T
$12.10T
All figures are in Trillions; 1990 international dollars; Source: Department of Economics, UC Berkeley, BAIN 8 MacroTrends Brief.
$27.50T
$90.0T
Gross
world
product
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 4 Customer
Economic revolution and Digital Triangle
The 2010s:
Industry 4.0 &
Internet of Things
2015+:
Merge into core digitalization Things People
End of 90s:
Internet Economy
Companies start using SAP software for business
The 70s:
Transactions & Processes
Reimagine Business Model, Product, Process
Build the Digital Core
Digital Core
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 5 Customer
Société de Transport de Montréal
Hyper-connectivity is everywhere Innovators connecting people, devices and business
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 6 Customer
Digitalization brings a new wave of challenges & opportunities
1) Seeking Alpha, Increasing Churn Rate In The S&P 500, 2) McKinsey, Unlocking the potential of the Internet of Things, 3) MIT Sloan Management Review, Is Your Business Ready for a Digital Future? McKinsey & Company,
75% of companies in the S&P will be new in 11 years1
Annual IoT impact $4T to
$11 trillion in 2025.2
78% of employees want to work for a
digital leader3
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 7 Customer
Opportunities New technologies create new levers for competitive advantage
Reimagined digitized products integrating new services and commerce
Reimagined digitized processes procure, produce, supply using Industry 4.0 and Big Data
Reimagined business models and value networks such as the outcome based economy.
Challenges
The rate of change is ever increasing need new ways to manage the complexity
Digital Darwinism extinction of players through blurred competitive lines
Startups disrupt every industry
The empowered digital Customer is on center stage. the digital touchpoint is critical.
Technology dynamics Every company must be a technology company
The Digital Transformation offers opportunities and challenges
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 8 Customer
Roche Diabetes Care and SAP created a
mobile app based on the SAP HANA Cloud
Platform to enable doctors to follow health
stats from fitness trackers and blood tests of
their patients in real time.
Learn more here: https://www.youtube.com/watch?v=5uBopSYtfIc
Still has partnered with SAP to launch an
entirely new business model in the area of
logistics through full digitalization of forklifts –
starting Still’s evolution from a pure product to
a services company.
Learn more here: https://www.youtube.com/watch?v=xJ-1psHSTbI
Nespresso
revolutionizes the way
millions of people enjoy
espresso and uses SAP
Cloud for Sales solution
to extend its premium
coffee experience by
understanding and
engaging customers to
grow their loyal
international customer
base.
Learn more here: http://consumergoods.edgl.com/Libraries/C
GT_Media/PDFs/cgbtlc14_sap.pdf
Siemens has partnered SAP to deliver the
Siemens Cloud for Industry, helping Siemens’
customers to proactively optimize their
service processes and generate new revenue
streams by selling services instead of
products.
Learn more here: http://www.sap.com/asset/detail.2015-07-jul.siemens-hana-cloud-platform-iot-
ctv-mp4.html
WeissBeerger is making beer
smarter at the tap through sensors in beer
taps in bars across the globe to collect real-
time insights of beer serving activity and
analyzes the consumption patterns SAP
HANA platform.
Learn more here: http://www.sap.com/customer-testimonials/wholesale-
distribution/weissbeerger.html
SAP customers’ digitalization success stories
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 9 Customer
Digital Transformation is organisational change through the use of digital
technologies and innovative business models to improve business success
Innovation
Process of re-imagining a new
business model, a digitized product,
business process or work
Digital Technology
Leveraging Digital technologies to
deliver innovation
Innovation and Digital Technology are both required to generate value
What is Digital Transformation?
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 10 Customer
Agenda
Digital Economy and Digital Transformation
Business Model Innovation
SAP dBMI (digital BMI) Program
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 11 Customer
Business model innovation allows companies to stay in the game by adapting to changes in their environment
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 12 Customer
Why these strong companies suddenly disappeared
after successful business for decades?
• invented the first digital camera
• went bankruptcy in 2012
• because stuck to film camera
All these giant companies didn’t innovated their business model to
effectively cope with changing business environment
• was major manufacturer in home
appliances and display market
• went in bankrupt crisis from 2012
and acquired by Foxconn in 2016
• because stayed in their insular
R&D system
• was No.1 video rental chain in US
• went bankruptcy in 2011 and was
acquired by Dish Network in 2012
• because collapsed by VOD
service
• Was No.1 in cellphone market
• sold the mobile division to
Microsoft in 2013, and resold to
Foxconn in 2016
• because didn’t catch the change
of market paradigm to smartphone
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 13 Customer
Business model innovation is the most effective way to
competitive and sustainable Business
(Source: Business Week / BCG Innovation Survey, 2008, BCG Value Science analysis)
Business model innovation is a major source of competitive advantage which
is superior to other forms of innovation
(Source: IBM, 2006, Business Model Innovation – The New Route to Competitive Advantage)
The competitive advantage of business model innovation is more sustainable
as compared to other forms of innovation
Operating Margin Growth
of innovations
Sustainability of Business Model Innovation
on Performance
Opera
ting M
arg
in
Gro
wth
(%)
*Total shareholder return (TSR) premium: % by which innovators' average total shareholder return
exceeded that of their industry peers
TSR premium
over industry peers,
median performance
(%)
Business Model
Innovation
Process
innovations Product/service
innovation
Percent compound annual growth rate over 5 years
6
5
4
3
2
1
0
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 14 Customer
Source: Kim/Mauborgne (2005)
“The only way to beat the competition is to stop trying to beat
the competition.”
Business model innovation allows companies to escape cutthroat
competition by changing the rules of the game
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 15 Customer
Technology Adoption Curve
Maturity
Connect
Transform
Reimagine Value-add for
Company
tap into the network of
connected things, people,
transactions
automate the business to
achieve operational excellence
empower new business
models, value-added
products and services
Business Model
as one of agendas
Technology adoption curve
All Begin from
Business Model
A special focus should be on business models, that require the integration of enterprise data
: Business Model Matters
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 16 Customer
Leaders are Emerging from Nowhere Industry Boundaries are Blurring. Embedded software is changing everything.
Aware but Unsure 90% of CEOs believe the digital economy will impact their industry, but but only
25% have a plan in place, less than 15% are executing on a digital strategy.
It’s not about you, it’s about your customers Customers expect a new type of experience –one that is frictionless, where
commerce is seamless, and where technology is invisible –one that makes their
lives easier.
Early Adopters are Winning Early adopters are achieving +9% revenue creation, +26% impact to profitability,
and +12% market valuation.*
Digital business models are disruptive.
The rules have changed.
Siemens is not just an industrial powerhouse,
they are a software company connecting
their industrial assets in the cloud
Uber is not just another taxi company, it is
transforming into an “urban logistics”
company
Facebook is not just a social network, it is
the largest media company even though it
doesn’t create content
Under Armour is not just selling shirts and
shoes, they are connecting 170 million people
on a digital health platform
The rules have changed Digital business models are disruptive
Source: * MIT Sloan and CapGemini, 2013,
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 17 Customer
Business
Models
Service /
Process
Product /
Technology
Lonely inventor Corporate
Innovation Open Innovation
Solutions
Era
Source: adapted from O. Gassmann (HSG)
PAST
PRESENT
FUTURE
Evolution of Innovation Management: trend towards
Open Innovation and Business Model Innovation
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 18 Customer
Agenda
Digital Economy and Digital Transformation
Business Model Innovation
SAP dBMI (digital BMI) Program
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 19 Customer
History of Business Transformation program
Large Korean Customers are also joining in Transformation Academy Program to enhance internal capabilities
and Digital Technology and Design Thinking Topics are added to new Academy Program
DIT
Academy
BT Academy (2011) DIT Academy (New)
2012 2013 2015 2014
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 20 Customer
1. Value Realization
2. Cost Control
3. Organizational Change
4. Risk Mitigation
5. Program Management
1. Digital Strategy
2. Target Business &
IT Architecture
3. Processes
4. Organization &
Governance
TRANSFORMATION
Digital Transformation Execution
1. Re-imagine customer business models
2. Holistic approach, not point solution
3. Proven method with credible external
references
4. Business conversation
5. Repeatable and scalable
Reimagined business models
Low fidelity prototypes
Technology enablers identified
High level value proposition
Digital Business Model Innovation
Program
SAP BTS End to End Digital Transformation Method to guide customers to reimagine business models
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 21 Customer
Business Model Innovation plays a key role in Digital Transformation
Product / Process
Innovation Value
Business Model
Innovation
Traditional
Business Model
X
+ =
Old Competition
New gaming rule
New Environment Capturing new value
of technologies
Specialty in
Digital Technology
Systematic Methodology
for Business Model Innovation
Empathy of customer /
Creativeness Enabler
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 22 Customer
No tools Strategy
tools
60
0
20
40
60
80
100
Source: Frankenberger et al., (2013), International Journal of Product Development
Brainstorming
techniques
Which methods and tools are used to develop
business model ideas?
20 20
«There are multiple tools and
methods to come up with new
product ideas but nothing to
support idea generation for
business models»
«Business model innovation
is more like a coincidence
and connot be initiated
sytematically»
«The real innovative
business model ideas can
only be developed by the
creative genius»
Lack of systematic tools to develop innovative business models
In percent
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 23 Customer
Design Thinking as mindset
Desirability Needs
Viability Business Model
Feasibility Technology
Optimal
Solution
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 24 Customer
SAP dBMI Framework & Toolkits Globally proven methods as foundation for this program
Digital Transformation Landscape/
Technology Radar for IoT
Business Modeling Canvas
CUSTOMER JOURNEY
TOUCHPOINTS
ACTIONS
MINDSET
MINDSET
ACTIO
NS
TOUCHPOINTS
• 55+7 business model patterns
Business Model Pattern Library IoT Sensor & Cloud Demo
InnovationMatrix
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 25 Customer
How can business models be innovated in a systematic way?
We can creatively imitate and recombine the successful business model
innovations by using business model patterns
More than 350 Business models
within 50 years
55+7 Patterns for
successful model innovation
Creative Imitation
the Power of
Recombination
90% of business Model
Innovation is a recombination
of the Patterns
“You don’t need to
Reinvent the Wheel”
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 26 Customer
55 + 7 Business Model Patterns:
Rank based on potential value to be derived from Internet of Things
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 27 Customer
Pattern Name, Pattern Description
Example companies
Affected Business
Model component
Value
Proposition
Value
Chain
Revenue
Model
What?
Why? How?
Who?
Impact / Significance of New Digital
Technology, IoT
Impact / Significance of
Traditional IT functions
Business Model Pattern Card
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 28 Customer
Creative Recombination of Business Model Patterns
Iterative approach for new business model ideation considering the role of
digital technology(IoT, Cloud, Big data, etc.) and traditional IT
Value
Proposition
Value
Chain
Revenue
Model
What?
Why? How?
Who?
Business Model Components
Developed in collaboration with
Business Model Pattern Library
Recombination
Role of Digital
Technology(IoT..)
Role of
IT
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 29 Customer
dBMI Method – Key Steps
Ecosystem Context Discovery
Digital Economy Overview
Innovation Matrix
Opportunities Threats
Value Proposition
Empathy
Ideation
Business Model
Pilot IoT device
Experience
Ideas using
digital tech.
Deep Understanding
of Targeted Customer
Customer Pains/Gains
Pain relievers/
Gain Creators
Digital Business
Model Patterns
Best Practices
Digital Constraints
Prototype,
Test,
Feedback
Sales Pitch
Design Challenge
Idea Sketch
Customer & Value
New Model design
Hypothesis
Improvement
Requirements
Specific Customer
Definition
Improvement
Requirements
Improvement
Requirements
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 30 Customer
Digital BMI Workshop Agenda (5 days)
Day 1
Discovery
Day 2
Empathy to
Value
Day 3
Business
Model
Day 4
Digital
Challenges
Day 5
Prototype
Sales
Introduction
Discovery of Business
context
Digital Economy
Overview & Digital
Trends
Innovation Matrix
Business Model Patterns
Library
Destroy Your
Own Business
Make a startup
Define Customer Segment
Interview with
customer (role play)
Empathy map,
Customer Journey
Touch & Feel Demos
Idea Sketch &
Value Proposition
Design
1st Prototyping
- Story board
NUF Test
Value Proposition to
Business Model
Business Cases from
Business Model
Pattern
New Model Design
Disruptive Digital
Business Models
Design constraints
in digital
Better Business
Model & Value
proposition
Simulate Business Model
Hypothesis Test &
Feedback
Evaluation & Question
Sales Pitch & Voting
Thank you!
Sung Kwon Kang
Senior Business Consultant
SAP Business Transformation Services
M: +82 10 2338-3238
Nam Ho Lee
Head of BTS Korea
SAP Business Transformation Services
M: +82 10 8923-6423