Management2.0

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Slide 1: Management2.0: Competitive Advantage through Business Model Design & Innovation Guadalajara, June 2007 Alexander Osterwalder, PhD alex@arvetica.com Slide 2: change is the process by which the future invades our lives -> Alvin Toffler Slide 3: first of all: what are YOUR concerns? (buzz groups) Slide 4: what are YOUR biggest issues and fears you face in strategic management today? Slide 5: where do YOU see the largest opportunities to improve strategic management today? Slide 6: your expectations for today? Slide 7: what is innovation? Slide 8: tell me about the most important innovations in your company Slide 9: types of innovation? Slide 10: technology innovation Slide 11: process innovation Slide 12: product & service innovation Slide 13: business model innovation Slide 14: four rings of innovation business model innovation product & service innovation process innovation technology innovation Slide 15: which one of your examples qualify as business model innovation? Slide 16: “B u si e ss m o d e l i n o va ti n m a tte rs” a n d i n n o t is a top priority of CEOs Slide 17: Operating Margin Growth in Excess of Competitive Peers compound annual growth rate over five years [Source: IBM, CEOs are expanding the innovation horizon: important implications for CIOs] Slide 18: Benefits Cited by Business Model Innovators percent of respondents [Source: IBM, Global CEO Study 2006] Slide 19: some examples Slide 20: NetJets: Fractional Ownership Slide 21: Zopa.com: Peer-to-Peer lending Slide 22: Bellum Concepts Slide 23: why talk about business models? Slide 24: how do you describe a business model? Slide 25: without a common language Slide 26: how do you communicate a business model? Slide 27: 1% Strategy 18% Text • 12% • Text Development plan • Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Cras in tortor. Sed posuere erat. Maecenas pulvinar nulla eu magna. 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Aenean non justo nec magna lobortis volutpat. through inappropriate means Words Slide 28: Here Ok Here CEOs 10° Managers 60° Staff 360° Slide 29: how do you implement a business model? Slide 30: with outdated methods Slide 31: how do you measure the success of a business model? Slide 32: w e d on ’ t Slide 33: how do you change a business model and innovate? Slide 34: we re-invent the wheel Slide 35: what is a business model? Slide 36: business model framework INFRASTRUCTURE OFFER CUSTOMER CORE CAPABILITIES PARTNER NETWORK ACTIVITY CONFIGURATION VALUE PROPOSITION CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS CUSTOMER SEGMENTS COST STRUCTURE FINANCE REVENUE STREAMS a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams [Osterwalder (2004) The Business Model Ontology] Slide 37: case study Slide 38: you become the new owner of a soccer cl b … u Slide 39: describe YOUR cl b ’ b u si ess us n model Slide 40: what value proposition do you offer, to which customer segments? describing how a wealth management bank acquires its clients Slide 41: what value proposition do you offer, to which customer segments? (model) OFFER VALUE PROPOSITION value proposition 1 value proposition 2 … CUSTOMER CUSTOMER SEGMENTS target customer 1 target customer 2 … Slide 42: what value proposition do you offer, to which customer segments? (example) OFFER spectacular offensive football advertising space & high visibility CUSTOMER fans advertisers … … Slide 44: how do you reach your customers? Slide 45: how do you reach your customers? (model) OFFER VALUE PROPOSITION value proposition 1 value proposition 2 … CUSTOMER COMMUNICATION & DISTRIBUTION CHANNELS channel 1 channel 2 … CUSTOMER SEGMENTS target customer 1 target customer 2 … Slide 46: how do you reach your customers? (example) OFFER CUSTOMER stadium & box office spectacular offensive football club owned TV channel mobile phone TV advertising space & high visibility fans sales force advertisers Slide 47: how do you build relationships? Slide 48: how do you build relationships with your customers? (model) OFFER VALUE PROPOSITION value proposition 1 value proposition 2 … CUSTOMER CUSTOMER RELATIONSHIP mechanism 1 mechanism 2 … CUSTOMER SEGMENTS target customer 1 target customer 2 … Slide 49: how do you build relationships with your customers? (example) OFFER CUSTOMER personalized website (ticketing) spectacular offensive football team blog (RSS) … fans Slide 50: how do you earn your money with this business model? Slide 51: how do you earn your money with this business model? (model) OFFER VALUE PROPOSITION value proposition 1 value proposition 2 … REVENUE STREAMS FINANCE CUSTOMER SEGMENTS target customer 1 target customer 2 … revenue stream 1 revenue stream 2 … Slide 52: how do you earn your money with this business model? (example) OFFER FINANCE ticket sales spectacular offensive football TV channel subscriber fees mobile phone TV subscriber fees advertising space & high visibility advertising revenues advertisers fans Slide 53: the business models place in a company Slide 54: STRATEGY BUSINESS MODEL ORGANIZATION TECHNOLOGY th e b u si ess m od els p l n ’ ace i th e com p an y n Slide 55: external forces Slide 56: 5 forces customer needs technological change BUSINESS MODEL legal environment social environment competition Slide 57: the big picture (business model) Slide 58: the big picture Partner Network • food & beverages • ticketing services • promoters • ad placement • telecom operator • TV operator •… Customer Relationship • personalized web profile • newsletter • team blog (RSS) • VIP events with team •… Core Capability • play attractive & win games • brand management • video images • channel management Activity Configuration • team management • event management • venue management • ticketing • VIP relationship management • video crew •… Value Proposition • attractive soccer • 360º event (match, dining, shopping) • exclusive VIP lounges • merchandising • renting out stadium •… Distribution Channel • stadium • POS networks • club website (+online TV) • club cable TV channel • mobile phone TV channel •… Target Customer • fans (families, etc.) • fan groups • companies • event/concert organizers • advertisers •… Cost Structure • team & maintenance • infrastructure management • marketing • video Revenue Model • Ticket fees & season tickets • online TV subscription revenues • revenue sharing cable & mobile phone TV • renting out stadium for events • advertising revenues • merchandising revenues Slide 59: value creates revenues Partner Network • food & beverages • ticketing services • promoters • ad placement • telecom operator • TV operator •… Customer Relationship • personalized web profile • newsletter • team blog (RSS) • VIP events with team •… Core Capability • play attractive & win games • brand management • video images • channel management Activity Configuration • team management • event management • venue management • ticketing • VIP relationship management • video crew •… Value Proposition • attractive soccer • 360º event (match, dining, shopping) • exclusive VIP lounges • merchandising • renting out stadium •… Distribution Channel • stadium • POS networks • club website (+online TV) • club cable TV channel • mobile phone TV channel •… Target Customer • fans (families, etc.) • fan groups • companies • event/concert organizers • advertisers •… Cost Structure • team & maintenance • infrastructure management • marketing • video Revenue Model • Ticket fees & season tickets • online TV subscription revenues • revenue sharing cable & mobile phone TV • renting out stadium for events • advertising revenues • merchandising revenues Slide 60: creating value requires infrastructure Partner Network • food & beverages • ticketing services • promoters • ad placement • telecom operator • TV operator •… Customer Relationship • personalized web profile • newsletter • team blog (RSS) • VIP events with team •… Core Capability • play attractive & win games • brand management • video images • channel management Activity Configuration • team management • event management • venue management • ticketing • VIP relationship management • video crew •… Value Proposition • attractive soccer • 360º event (match, dining, shopping) • exclusive VIP lounges • merchandising • renting out stadium •… Distribution Channel • stadium • POS networks • club website (+online TV) • club cable TV channel • mobile phone TV channel •… Target Customer • fans (families, etc.) • fan groups • companies • event/concert organizers • advertisers •… Cost Structure • team & maintenance • infrastructure management • marketing • video Revenue Model • Ticket fees & season tickets • online TV subscription revenues • revenue sharing cable & mobile phone TV • renting out stadium for events • advertising revenues • merchandising revenues Slide 61: infrastructure generates costs Partner Network • food & beverages • ticketing services • promoters • ad placement • telecom operator • TV operator •… Customer Relationship • personalized web profile • newsletter • team blog (RSS) • VIP events with team •… Core Capability • play attractive & win games • brand management • video images • channel management Activity Configuration • team management • event management • venue management • ticketing • VIP relationship management • video crew •… Value Proposition • attractive soccer • 360º event (match, dining, shopping) • exclusive VIP lounges • merchandising • renting out stadium •… Distribution Channel • stadium • POS networks • club website (+online TV) • club cable TV channel • mobile phone TV channel •… Target Customer • fans (families, etc.) • fan groups • companies • event/concert organizers • advertisers •… Cost Structure • team & maintenance • infrastructure management • marketing • video Revenue Model • Ticket fees & season tickets • online TV subscription revenues • revenue sharing cable & mobile phone TV • renting out stadium for events • advertising revenues • merchandising revenues Slide 62: the profit zone Partner Network • food & beverages • ticketing services • promoters • ad placement • telecom operator • TV operator •… Customer Relationship • personalized web profile • newsletter • team blog (RSS) • VIP events with team •… Core Capability • play attractive & win games • brand management • video images • channel management Activity Configuration • team management • event management • venue management • ticketing • VIP relationship management • video crew •… Value Proposition • attractive soccer • 360º event (match, dining, shopping) • exclusive VIP lounges • merchandising • renting out stadium •… Distribution Channel • stadium • POS networks • club website (+online TV) • club cable TV channel • mobile phone TV channel •… Target Customer • fans (families, etc.) • fan groups • companies • event/concert organizers • advertisers •… Cost Structure • team & maintenance • infrastructure management • marketing • video Revenue Model • Ticket fees & season tickets • online TV subscription revenues • revenue sharing cable & mobile phone TV • renting out stadium for events • advertising revenues • merchandising revenues < Slide 63: the process of designing innovative business models Slide 64: the focus of the business model innovator & designer Slide 65: user-centered Slide 66: CORE CAPABILITIES PARTNER NETWORK ACTIVITY CONFIGURATION VALUE PROPOSITION CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS Slide 67: Nokia: Jan Chipchase Slide 68: creativity & exploration Slide 69: Googleplex Slide 70: 70:20:10 Slide 71: API Slide 72: CORE CAPABILITIES PARTNER NETWORK ACTIVITY CONFIGURATION VALUE PROPOSITION CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS Slide 73: continuous innovation Slide 74: interdisciplinary approach Slide 75: Grameen Phone Bangladesh Slide 76: Grameen Bank telecom operators customer relationships micro-credit village telephony mobile telephony activity configuration source of revenue phone ladies villager Grameen Bank (billing) phone ladies billing telecom infrastructure mobile phone revenues Slide 77: holistic design Slide 78: Apple iTunes & iPod Slide 79: content producers lifestyle brand hardware suppliers hardware & softw. dev. e-commerce prod. & softw. design iPod brand management iBook hardware distribution content distribution Apple stores dealer network “h i h -e n d ” g consumer multimedia rights mgmt multimedia downloads iTunes content hardware revenues cost structure multimedia revenues Slide 80: strategic fit Slide 81: the Amazon.com you know Slide 82: Amazon Simple Storage Services (S3) Slide 83: partners customer relationships product selection content management warehousing & distribution selling stuff on the Web Amazon.com mass customer distribution Amazon S3 Internet API product search Amazon.com data grid Web2.0 companies e-commerce sites data services A9 product search Internet selling stuff IT infra data storage fees marketing search engine revenues Slide 84: the business m od el s tool ox er’ b Slide 85: co-creation Slide 86: ideation Slide 87: visualization Slide 88: prototyping Slide 89: the design process Slide 90: 1. identify interdisciplinary stakeholders -> set-up team Slide 91: do you have to get the IT team out of their cubicles? Slide 92: 2. understand (business) environment – > frame problem Slide 93: various starting points / depending on context CORE CAPABILITIES PARTNER NETWORK ACTIVITY CONFIGURATION VALUE PROPOSITION CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS [Osterwalder (2004) The Business Model Ontology] Slide 94: 3. suspend reality -> ideate Slide 95: 4. bring back reality -> prototype Slide 96: 5. chose suitable design -> decide Slide 97: 6. sketch out projects & workload -> draw implementation plan Slide 98: Area Project name Project V1 Project V2 Estimated workload 10 man/days 120 man/days 38 man/days Value Proposition Distribution Channels Project C1 … Slide 99: 7. outline key indicators to follow -> choose measures Slide 100: Area Project name Project V1 Project V2 Estimated workload 10 man/days 120 man/days 38 man/days KPI (measure) Target level Value Proposition Distribution Channels Project C1 … Slide 101: 8. select the right teams and people -> make responsible Slide 102: Area Project name Project V1 Project V2 Estimated workload 10 man/days 120 man/days 38 man/days KPI (measure) Target level leader Mr. Jan Ms. Tee Value Proposition Distribution Channels Project C1 … Slide 103: 9. execute the plan -> manage implementation & change Slide 104: 10. evaluate, learn and redesign -> manage improvement Slide 105: designing blue oceans Slide 106: > market boundaries are not given > they are reconstructed by the actions & beliefs of industry players Slide 107: RED OCEAN • compete in existing markets • beat the competition • explore existing demand • make the value/cost tradoff • align with differentiation OR low cost BLUE OCEAN • create uncontested markets • make competition irrelevant • create & capture new demand • break value/cost trad-off • align with differentiation AND low cost Slide 108: differentiate your value proposition Slide 109: working definition value proposition • a customer value proposition gives an overall view of a company's bundle of products, services and client advice. • it is the sum of the total benefits a customer is promised to receive in return for a payment (or other value transfer) Slide 110: group warm-up what are the 5 most important competitive attributes that characterize a game con sol s offer? e’ (e.g. price, performance, design) attribute 2 e.g. price attribute 1 e.g. performance Slide 111: 5 attributes 1 2 1. most important attribute 2. second most important 3. … 4. … - 3 4 Slide 112: 1. … 2. … 3. … 4. … 5. … Slide 114: draw a value proposition 5 - high s b an k’ p erform an ce 3 - medium 1 - low [Kim & Mauborgne (2002) Charting Your Company's Future] Slide 115: live Excel Slide 117: eliminate raise reduce create Slide 120: strong & valuable approach, but limited view Slide 121: CORE CAPABILITIES PARTNER NETWORK ACTIVITY CONFIGURATION VALUE PROPOSITION CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS Slide 122: examples Slide 123: Goldcorp “g eo l g y p rize” o 500’ 000 $U S mining research DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS exploiting mines CUSTOMER SEGMENTS low costs through open exploration REVENUE STREAMS Goldcorp publicly shared all of its geological data and o ffe re d U S $ 5 0 0 ’ 0 0 i p ri s fo r d e te rm i i g w h e re 0 n ze nn they might find the next 6 million ounces of gold Slide 125: from copyright to creative commons Slide 126: Skype “eB ay” deliver voice & video quality free VoIP & value added services website global (non segmented) internet software development software development large scale low margin free voice-over-IP VoIP telephony & value-added services Slide 127: 1291 Cityhomes young curious Swiss apartment owners low-cost hotel/rental in New York City CUSTOMER RELATIONSHIPS keep down costs find demand renting out rooms low cost accommodation New York DISTRIBUTION CHANNELS the cost sensible low cost rents Slide 128: Tecnovate “im p o rt” yo u n g curious Europeans to India to work CUSTOMER RELATIONSHIPS keep down costs ACTIVITY CONFIGURATION low-cost multilingual call center outsourcing DISTRIBUTION CHANNELS European corporations low cost REVENUE STREAMS b u si e ss p ro ce ss o u tso u rci g “u p -si e d o w n ” i In d i n n d n a Slide 129: Netflix large movie database independent films ACTIVITY CONFIGURATION (niche) movies over the Internet profile specialized clientele Web COST STRUCTURE REVENUE STREAMS online movie rental (with large niche movie database) Slide 130: from bloated head to the long tail Slide 133: Alexander Osterwalder, PhD alex@arvetica.com www.arvetica.com Slide 134: all photos from Flickr under a creative commons license authors indicated in comment page of ppt Slide 135: we co-create Nobody knows your business environment better than yourself. We co-design your strategic vision by building on your knowledge. Through group thinking we find the right answers to the right questions together Having a great vision is not sufficient - implementation counts. We help you reconcile long term views with short term actions. We make strategy everyone's job by translating it into pragmatic and prioritized projects. Change does not happen accidentally it has to be managed. We help you align strategy, people and processes with respect to your organizational culture and values. When you stop learning, you stop competing. We scan the knowledge universe for you, across disciplines and industries. We transfer the best methods, tools and theory in business to your organization. Specific problems require specific skills that you do not necessarily dispose of in-house. Through our interdisciplinary network we connect you with leading domain experts. we operationalize we manage change we build knowledge we connect Slide 136: annexes Slide 137: annex I business model template Slide 138: INFRASTRUCTURE CORE CAPABILITIES PARTNER NETWORK OFFER VALUE PROPOSITION CUSTOMER RELATIONSHIP CUSTOMER TARGET CUSTOMER VALUE CONFIGURATION DISTRIBUTION CHANNEL COST STRUCTURE FINANCE REVENUE STREAMS a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams Slide 139: d e scri i g a co m p a n y’ b u si e ss m o d e l bn s n INFRASTRUCTURE CORE CAPABILITIES outlines the capabilities required to run a company's business model PARTNER NETWORK OFFER portrays the network of cooperative agreements with other companies CUSTOMER RELATIONSHIP explains the relationships a company establishes with its customers CUSTOMER TARGET CUSTOMER VALUE PROPOSITION VALUE CONFIGURATION gives an overall view of a company's bundle of products and services DISTRIBUTION CHANNEL describes the channels to communicate and get in touch with customers describes the customers a company wants to offer value to describes the arrangement of activities and resources sums up the monetary consequences to run a business model COST STRUCTURE FINANCE REVENUE STREAMS describes the revenue streams through which money is earned Slide 140: d e scri i g a co m p a n y’ o ffe r bn s OFFER VALUE PROPOSITION value proposition 1 value proposition 2 … Slide 141: describing who a company offers value to OFFER VALUE PROPOSITION CUSTOMER TARGET CUSTOMER value proposition 1 value proposition 2 … target customer 1 target customer 2 … Slide 142: describing how a company reaches its customers OFFER VALUE PROPOSITION CUSTOMER DISTRIBUTION CHANNEL TARGET CUSTOMER value proposition 1 value proposition 2 … distribution channel 1 distribution channel 2 … target customer 1 target customer 2 … Slide 143: describing the relationships a company builds OFFER VALUE PROPOSITION CUSTOMER CUSTOMER RELATIONSHIP TARGET CUSTOMER value proposition 1 value proposition 2 … relationship type 1 relationship type 2 … target customer 1 target customer 2 … Slide 144: describing how a company makes money OFFER VALUE PROPOSITION FINANCE REVENUE STREAM CUSTOMER TARGET CUSTOMER value proposition 1 value proposition 2 … revenue stream 1 revenue stream 2 … target customer 1 target customer 2 … Slide 145: describing what capabilities are required INFRASTRUCTURE CORE CAPABILITIES OFFER VALUE PROPOSITION core capability 1 core capability 2 … value proposition 1 value proposition 2 … Slide 146: describing what activities are required INFRASTRUCTURE CORE CAPABILITIES VALUE CONFIGURATION OFFER VALUE PROPOSITION core capability 1 core capability 2 … activity 1 activity 2 … value proposition 1 value proposition 2 … Slide 147: describing the partners that leverage the business model INFRASTRUCTURE CORE CAPABILITIES PARTNER NETWORK OFFER VALUE PROPOSITION core capability 1 core capability 2 … partner 1 partner 2 … value proposition 1 value proposition 2 … Slide 148: describing the costs of a business model INFRASTRUCTURE CORE CAPABILITIES FINANCE COST STRUCTURE OFFER VALUE PROPOSITION core capability 1 core capability 2 … cost account 1 cost account 2 … value proposition 1 value proposition 2 … Slide 149: annex ii other