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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: “Business model innovation matters” and it 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
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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Slide 30: with outdated methods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: we don’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 club …
Slide 39: describe YOUR club’s business 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 sales force advertisers fans
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 ticket sales spectacular offensive football TV channel subscriber fees mobile phone TV subscriber fees advertising space & high visibility advertising revenues advertisers fans FINANCE
Slide 53: the business models place in a company
Slide 54: STRATEGY
BUSINESS MODEL
ORGANIZATION TECHNOLOGY
the business model’s place in the company
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
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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 mobile telephony billing activity configuration
village telephony source of revenue
phone ladies Grameen Bank (billing)
villager
phone ladies
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 multimedia rights mgmt content
prod. & softw. design brand management hardware distribution content distribution
iPod
Apple stores dealer network iTunes “high-end” consumer
iBook multimedia downloads
cost structure
hardware revenues 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 distribution product search Amazon.com data grid
content management warehousing & distribution data services
selling stuff on the Web Amazon S3 A9 product search
Amazon.com
mass customer Web2.0 companies e-commerce sites
Internet API
Internet
selling stuff IT infra data storage fees marketing search engine revenues
Slide 84: the business modeler’s toolbox
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 Project C1
Estimated workload 10 man/days 120 man/days 38 man/days
Value Proposition
Distribution Channels
…
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 Project C1
Estimated workload 10 man/days 120 man/days 38 man/days
KPI (measure)
Target level
leader Mr. Jan Ms. Tee
Value Proposition
Distribution Channels
…
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 trad-off • 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 console’s offer?
(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 bank’s performance
3 - medium
1 - low
ib ttr a
e ut
1 ib ttr a
e ut
2 ib ttr a
e ut
3 ib ttr a
e ut
4 ib ttr a
e ut
5
[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
“geology prize” 500’000 $US mining research DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS
exploiting mines
CUSTOMER SEGMENTS
low costs through open exploration
REVENUE STREAMS
Goldcorp publicly shared all of its geological data and offered US$ 500’000 in prizes for determining where they might find the next 6 million ounces of gold
Slide 125: from copyright to creative commons
Slide 126: Skype
“eBay” 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
“import” young 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
business process outsourcing “up-side down” in India
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 131: CORE CAPABILITIES
PARTNER NETWORK ACTIVITY CONFIGURATION
VALUE PROPOSITION
CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS
CUSTOMER SEGMENTS
COST STRUCTURE
REVENUE STREAMS
sodi platforms
Slide 132: NetJets
CORE CAPABILITIES
PARTNER NETWORK ACTIVITY CONFIGURATION
VALUE PROPOSITION
CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS
CUSTOMER SEGMENTS
COST STRUCTURE
REVENUE STREAMS
Slide 133: CORE CAPABILITIES
PARTNER NETWORK ACTIVITY CONFIGURATION
VALUE PROPOSITION
CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS
CUSTOMER SEGMENTS
COST STRUCTURE
REVENUE STREAMS
house for all seasons
Slide 134: WISE
CORE CAPABILITIES
PARTNER NETWORK ACTIVITY CONFIGURATION
VALUE PROPOSITION
CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS
CUSTOMER SEGMENTS
COST STRUCTURE
REVENUE STREAMS
Slide 135: Blyk
CORE CAPABILITIES
PARTNER NETWORK ACTIVITY CONFIGURATION
VALUE PROPOSITION
CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS
CUSTOMER SEGMENTS
COST STRUCTURE
REVENUE STREAMS
Slide 137: myfootballclub
CORE CAPABILITIES
PARTNER NETWORK ACTIVITY CONFIGURATION
VALUE PROPOSITION
CUSTOMER RELATIONSHIPS DISTRIBUTION CHANNELS
CUSTOMER SEGMENTS
COST STRUCTURE
REVENUE STREAMS
Slide 139: Alexander Osterwalder, PhD alex@arvetica.com
www.arvetica.com
Slide 140: all photos from Flickr under a creative commons license authors indicated in comment page of ppt
Slide 141: 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.
we operationalize
we manage change
we build knowledge
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 connect
Slide 142: annexes
Slide 143: annex I business model template
Slide 144: 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 145: describing a company’s business model
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
describes the customers a company wants to offer value to
VALUE PROPOSITION
VALUE CONFIGURATION
describes the arrangement of activities and resources
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
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 146: describing a company’s offer
OFFER VALUE PROPOSITION
value proposition 1 value proposition 2 …
Slide 147: 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 148: 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 149: 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 150: 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 151: describing what capabilities are required
INFRASTRUCTURE CORE CAPABILITIES OFFER VALUE PROPOSITION
core capability 1 core capability 2 …
value proposition 1 value proposition 2 …
Slide 152: 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 153: 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 154: 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 155: annex ii other
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