Business Modeling Starter KitTurning ideas into value and innovation

Presentation by Prof. Dr. Henning Breuer and María del Mar Agudelo, M.A.May 8th, 2014Technische Universität BerlinFakultät für Wirtschaft und Management

/ INTRODUCTION

From the Latin innovare: “To renew or to change,”

innovation, further than a buzz word, is a decisive

competitive factor in our knowledge based economy.

A large variety of business model definitions, their

components and how-to approaches have been

proposed in the last decade in order to turn ideas

into innovation. However, such complexity called

for a simplified reference model which, in contrast

to the existing ones, emanates from a value-driven

perspective.

That simplified reference model is the Business

Modeling Starter Kit, an out-of-the-box workshop that

empowers entrepreneurial teams to generate new

value-based and customer-focused business models

with the different stakeholders in mind.

Why the Starter Kit was created?

As an answer to recurring requests by innovation teams

to conduct business modeling workshops this Do-it-

Yourself approach was chosen.

What is the purpose of the Starter Kit?

Empowering innovation teams, small business (idea)

owners and students to develop business models based

on real customer needs and relevant value propositions.

The advanced version is now in English language. It also

allows to tackle "wicked problems" such as renewal of

energy business.

Status Quo of the Starter Kit

For more information, see: Breuer, H. & Lüdeke-Freund, F. (2014). Normative Innovation for Sustainable Business Models in Value Networks [Proceedings of XXV ISPIM Innovation Conference. Dublin]. Manuscript in preparation.

// THE ELEMENTS OF THE STARTER KIT

Handbook

Playground

Components

Value proposition

It refers to the values a company

provides to its customers and society.

What makes your service or product

unique? Why should customers take

notice of it? Think of the existential

values behind such a proposition...

Stakeholder Segments

Descriptions of the most relevant

individuals or specific groups for your

business. They could be positively or

negatively affected by your business.

Touchpoints

Customers encounter new products

and services along seven touchpoints:

(1) Becoming aware of an offering, (2)

collecting information, (3) acquiring the

chosen product, (4) starting up usage

to develop routines and preferences, (5)

using the product, (6) altering it and

(7) disposing or renewing it.

Distribution

Distribution channels describe, from a

company viewpoint, how the product

gets to the customer (e.g. mobile

or partner stores; agents, retailers,

wholesalers).

Revenue Model

Think about possible combinations

of income sources and price models.

Several revenue models may be

combined.

Partners

These are those alliances you

consider for your business within

the innovation processes. Select

your partner with caution: avoid

one-sided dependencies and

carefully consider which capabilities

you require inhouse, what can be

done through partners.

Cost Structure

The cost-drivers of the model’s

initial costs and their development.

When going back to the stakeholder

segments, consider how to reduce

external costs and values lost through

your activities in order to create a

sustainable business.

More components

When modeling with the Starter Kit you

may consider which components are the

most important for you. If professional

communication is at the core of your

business, you will consider branding and

a corporate vision. If you deal with legal

rights, legalities will be a component to

discuss.

Describe the value and benefit your proposal generates and who will profit or be affected.

What have you got to offer the customer ?

– Give a brief summary of the consumer’s needs: Which consumer problem can your proposal solve?– Which customer ideals and wishes are you addressing with your proposal?

– Describe how the customer will experience the benefit of your product or service.

– What would they tell their friends about the benefits of your product or service?– What are you promising your customer? How will you achieve it and why in such a way?

– What kind of developments could your proposal trigger on the part of the customer?

VALUEPROPOSITION

FACILITATION CARDS

Facilitation Cards

Instructions

These are the instructions and questions,

which will guide you through the workshop.

Task

This is an overall description of the

working step in question.

The color code and symbol on the card

indicate the corresponding section on the

playground.

Case Cards

NEWSFOOTBALL JERSEY ADVERTISING

Since the 60s, soccer clubs have been accepting jersey sponsorship from businesses. For major clubs, it was soon followed by touchline adver-tising, and subsequently by additional advertising rights in newer media formats such as television, newscasts and social media platforms. Spon-sored presentation games have now become part of pre-season preparations.

CASE

TipEach card displays a clue as to which

component it belongs to. Designating

a card to a particular component must

not always be obvious. Discussion

counts.

> How can you reestab-lish and strengthen trust among your customers? > How do you proceed from the initial transac-tion stage to enduring sustainable customer relations?

Bottlenecks in the supply chain are causing signifi-cant delays in the delivery of your product. Custom-ers are complaining and orders are in decline.

CHALLENGEOI

Challenger Cards

Tip

Challenger cards marked with I

(conceptual ideas) help you to

develop a new business model,

whereas challenger cards marked

O (optimization) help you to

optimize and examine your

business closely.

Value Proposition

Stakeholder Segments

Touchpoints

Distribution

Revenue Model

Capabilities

Partners

Cost Structure

UX Berlin Innovation ConsultingTitle

Date

Evaluation

Ref inementsheet for Business Modeling

www.uxberlin.com // This sheet is adapted from the Business Model Canvas (BusinessModelGeneration.com)

Refinement

Sheets

/// HOW TO PROCEED

4

31

2

Place the playground on the table.

Place the Case Cards on the playground.

Place the Challenger Cards on the playground.

Place the Facilitator Cards

on the playground.

Setting-up the workshop

• It is the place to write the basic initial idea, vision and

scope to sum up your project (e.g. your plan to provide

sustainable services in Germany).

•The case cards help you to learn how existing business

models can be mapped onto the ideapool.

GROUND ING0

1 DEMAND

This brainstorming exercise gets right to the core of

your business idea. Read the questions on the facilitator

cards and describe what you have to offer to your

customers and why it would appeal to their wishes and

needs.

2 I NTERACT ION

By analyzing touchpoints as focal points of value

creation and experience, you will explore how to

communicate and deliver the value proposition to the

customer. You will also discover what kind of return to

expect. Keep track of all your ideas in the ideapool.

PERFORMANCE 3

This exercise addresses the business and human

capabilities and resources required to fulfill your

value proposition and perform the necessary services.

Consider which partners could help you and elaborate

upon the resulting cost structure. Once again, the

facilitator cards will provide the key questions to deal

with during this exercise.

4 MODEL I NG

Time to harvest your ideas! Compile the most promising

ideas onto a refinement sheet. Each sheet will represent

a distinct business model. Question the proposed

business model in depth. Each challenger card will

confront you with a different scenario, which may

prompt you to rethink your business strategy. Choose

only cards that are relevant to you.

NEXT STEPS5

In the sector “open issues” collect sticky notes with

critical questions that crop up during the course of

the workshop but cannot be discussed immediately.

Dealing with these questions is one of a series of further

steps. You will find follow-up activities on the facilitator

cards.

Idea Pool

Get to know the various aspects of business models based on examples.

The goal of this exercise is to gain a better understanding of the individual components and their interaction. There’s no such thing as a wrong answer. Discussion among your team is the important factor!

Procedure:

1. Take a stack of the example cards and divide them out among your team. Each participant reads out one example card at a time to the rest of the team.

2. Discuss each card with the entire team and think together strategically about which section of the idea pool would be most suitable for the card.

3. Discuss the example as a whole: Try to grasp an under-standing of the interrelation between the individual components.

4. As soon as you’re finished with the warm-up exercise, remove all the example cards from the idea pool and move on to the next step, “Demand”.

Describe the value and benefit your proposal generates and who will profit from it .

Which groups of people will benefit from the value you’re creating ?

– Describe your target group: Who will use your service or product?

– Who are the potential pilot users or early adopters?

– How do your customers live and work?

– Which values and attitudes do they have?

– What’s important in their lives? What excites them?

– How many potential customer segments are there?

– Which private customers and which business customers do you wish to reach?

Explain how you will fulfill your value proposition for the customer and what you expect in return from the customer.

How will your product enter the world of the customer?

How will the customer come into contact with it?

How will the customer navigate from one touchpoint to the next?

– Where will the customer encounter your offer? How can you make such encounters a unique experience for the customer?

– How will customers become aware of your products or services?

– How can they get informed?

– How can they acquire your service or product?

– Why and how will they use it for the first time?

– How will they use it in their everyday lives?

– How can they modify it and how can they dispose of it?

– How can you offer your customer support in navigating through the touchpoints?

– How can you encourage long-term loyalty for your offer?

Think about the skills and resources you need to perform everything you’ve de-veloped up to now .

Who are your most important business partners and suppli-ers?

– Identify all the organizations and individuals whose tech-nology or resources you’re reliant on in order to develop and market your offer. Describe your current business re-lationship with these partners. Which dependencies exist ?

– How can you identify and reach potential business part-ners? How can you convince them of the advantages of a co-operation?

– Which types of co-operations with potential competitors could make sense?

Consider the risks involved. Describe your competitive strategy and the opportuni-ties for growth.

Draw up your business idea

This exercise will challenge you to question and re-think some aspects of the business model you have just sketched out. Each challenger card illustrates a scenario that will help you to adjust your business model in response to common market dynamics.

Cards marked with “O” (Optimization) will help you refine your ideas with the use of scenarios

Cards marked with “I” (Ideation) will help you generate new ideas

Procedure :

1. Choose scenarios, which are relevant to your business model. You can skip the rest.

2. Choose a card, read the scenario out loud and discuss the outlined challenge with your team. What are the solutions proposed for your business model?

3. Develop your business model further in relation to the scenarios outlined. Work on all the various components of the idea pool simultaneously.

4. Think about how your enterprise can grow in the course of time and how best to protect it against potential competi-tors in the market place.

Analyze your current state of progress and plan out the next steps.

Assess the maturity levels of your ideas

At the end of the session, you should have collected enough ideas on all components to develop at least one business mod-el. Should you have come up with several models, choose one, which you’d like to work on immediately. You’ve probably already recognized which component offers the better options and which has accumulated the greater amount of good ideas, and which one you should take a closer look at. Evaluate the maturity levels of your ideas for each component individually.

1. The ideas are worded in a relatively vague manner or you’re uncertain whether you’ve taken all possible alternatives suf-ficiently into account. With the aid of research and in-depth creative exercises, you can put your ideas into concrete terms.

2. The ideas are straightforward and worded clearly und you’re certain you’ve taken all the relevant options into consideration. Describe how you plan to implement your ideas and analyze the assumptions contained.

3. The ideas are so well defined that they can be implemented in operational measures straight away and the assumptions contained are verifiable.

Decide for each component which team member will take over the responsibility for the next steps. Helpful follow-up activities can be found in the second part of the user manual.

We wish you the best of success!

//// NEXT STEPS

After the business modeling workshop

Time to:

1. Communicate your ideas with an elevator pitch.

2. Collect feedback from different stakeholders.

3. Elaborate upon and evaluate the risks and

assumptions with respect to the implementation of

your business model.

1. The elevator pitch

What

Describe your business in about three sentences very

much to the point. Make it understood in less than

thirty seconds.

Why

The elevator pitch will help you to focus on the

essentials and to convince potential stakeholders or

investors. It also helps you to spread the word.

How

Try different versions of your pitch with friends,

colleagues and business partners. Do they get a clear

and sufficient understanding? Ask them to explain

your business model to a third party.

Four steps to proceed

1.1 Attract

Start with an interesting statement, quote or

observation to draw your audience attention. Explain

why they should care.

1.2 Distinguish

Explain why your company and proposition are unique

and deserve immediate attention.

1.3 Engage

Engage your audience by asking open question and

sharing a dramatic story.

1.4 Call to action

The pitch ends with a request for a meeting or phone

call. Which response do you want your contact to

complete?

Tip

Consider the most important aspects of your

business: the value you provide and problem

you solve, the market, your revenue model and

competitive advantage, and your unique capabilities.

2. Feedback

What

Collect feedback to your business ideas from

unprejudiced people.

Why

Asking strangers will tell you even more about

the strengths and weaknesses of your idea. Even

though none of these answers will be representative,

challenging your ideas from multiple perspectives

helps to protect you from unpleasant surprises later

on.

How

•Render your idea in tangible ways (brief description,

illustrations and storyboards, films or prototypes).

•Ask your audience open questions; ask them about

their impressions of your idea: what they like about

it, what they do not like and in which situations they

would be interested in your proposition.

•Speak your customer’s language; keep your

questions as simple and as short as possible.

A brief explanation contains:

•The value or problem you address with your idea.

•Your unique or superior solution to this problem.

•How the solution can be provided.

3. Five E

“Learning is the way from great ideas to practice.” The

Five E Framework for Lean Venturing describes the

elaboration and implementation of business models as

a learning process that startups and new business units

need to go through.

This process may be organized by learning objectives

on five levels of maturity —exploration, elaboration,

evaluation, experiments, evolution— and backed up

with scaffolding tools and methods.

Exploration

Explore potential business models

using the Business Modeling Starter

Kit. Conduct several modeling

sessions with different participants

and some time in between sessions.

Elaboration

Desk research, creative exercises and

design thinking methods allow you

to consider the full range of options

for each component and to select and

quantify the most promising ones.

Evaluation

Interpret your ideas as assumptions

and evaluate each of them through

expert and customer development

interviews. Refine them according

to the feedback and analyze the

inherent risks.

Experiments

Some critical issues have to be tested

empirically —e.g. the willingness-to-

pay of potential customers—. Design

a sprint plan of investigation in such a

way that you learn about the reasons

why your assumptions are confirmed

or rejected.

Evolution

Your own ideals and normative vision,

as well as alternative future scenarios

and hints from diverse stakeholders,

provide insights on how to run your

business in a sustainable manner.

Specify and differentiate the assumptions within your

business model, evaluate them with experts and clients

in a test market environment.

///// NEXT STEPS

Only iterative experimentation can overcome barriers

and take advantage of the potential and value of

alternative business models. For more information

about this topic, visit: www.uxberlin.com

THANK YOU!

The information used for this presentation is extracted from the Business Modeling Starter Kit’s handbook and the

article: “Lean Venturing: Learning to Create New Business through Exploration, Elaboration,

Evaluation, Experimentation, and Evolution,” written by Prof. Dr. Henning Breuer for the International Journal of

Innovation Management, Vol. 17, No. 3 (June 2013)*.

* Download it for free from: http://www.worldscientific.com/doi/abs/10.1142/S1363919613400136