What your strategy professors forgot to teach you

What your professors forgot to teach you in strategy & innovation m’gmt

CEMS Alumni Conference 2015 Dr. Patrick Stähler, fluidminds

Do we have

the right

units of

analysis for

strategy?

The company invented the digital camera in 1973 …

…was the partner of choice for Apple to enter the digital camera market

…but never understood that digital is not a product innovation but demands a whole new business model

Digital was not about the great quality of pictures that the traditional customer of Kodak loved Digital is different.

From keeping to sharing memories – Digital solves new jobs for customers

Customers discovered new uses, no sane person would have ever thought off

Too bad for Kodak that now even professional photographers love the quality of digital

1 We can only understand what we can see

Classical innovation & strategy frameworks can not explain reality anymore We need new boxes to think in

Would you invest

into this business?

„We will have sales of USD 100 Mio. With a margin that is much, much higher than today. To do so, we just need 30 employees and will have a market share of 80%.”

A little quiz

What is this?

10.000 mio. USD classified market vanished because of Craigslist‘s business model innovation

Craiglist 100 Mio. USD turnover (30 employees,

highly profitable but replaced a

substantially larger market)

10.000 Mio. USD decline in classifieds

2000-2008

Source: http://mediamemo.allthingsd.com/20090610/another-way-to-describe-the-newspaper-crisis-the-craigslist-boom/

You would have never invested as a traditional media house into Craiglist. You would not have cannibalized your traditional business.

What is this?

What is this?

Same thing, different perspective!

„What was one of the most successful aid programs for the developing world?“

*Actually, it has nothing to do with governmental aid or NGOs.

„Which innovation expanded the global market for mobile communication the most?*“

*After the invention of mobile telephony itself

Dr. Patrick Stähler | 18

Which innovation made this possible?

Prepaid

A small change in billing opened new markets in Africa, Asia, Latin America, Youths, etc..

„Wow, I have invented the future of advertising. We do not need any videos or pictures or even color anymore.

The future will be a text ad with maximal 95 characters.

It‘s brilliant, isn‘t it?

Would you have dared to say this?

§  Instead of looking at better products, Google Adwords brought back relevance to the ad industry

§  Google is blamed to be the killer of newspapers

§  Sales around 59 bn. USD (2014)

2 Beyond product and process innovation

Business Model Innovations are »strange« and will change the world we know

product/technology value

creates

X enables

business model

Technology or a new produt does not create value. It is the business model

3 Beyond product innovation

Your business model is decisive for value creation not a new technology

Your Head We can only think outside the boxes if we have new boxes.

4 Innovation can start anywhere

The business model gives you new boxes to think in and innovate in

„What is a

business model?“

The business model is the DNA of your business

Are you aware of your DNA?

The business model gives meaning to your employees and customers

4 key questions for a successful business:

What excites our customers?

Value Proposition

How do we create value for our customers?

Value Architecture

How do we earn money?

Revenue Model

Who is our team? What values do we pursue?

Team & Values

What industry are we in? Who are our competitors? “

„

In which industry are we in? “

„

Dr. Patrick Stähler | 33

That was the job the customer wanted to do. “

„

Customer job to be done We do not need a drilling machine, screws and dowels. We want to hang up a picture. That’s the job-to-be-done. Customers hire a product or service to get a job done. The products are a means to an end, not an end in themselves.

The value proposition creates the value for the customer, not the product!

Value Proposition The job-to-get-done is solution neutral. The job is to hang up a picture. Potential solution: §  The drilling machine, the

dowel and screws §  Hammer and nail §  Powerstrips® by Tesa

§  A friend with a drilling machine

It is of uttermost importance to understand the core job we solve for our customers

product/services happy customers

creates

X

value proposition

solves

delivered by

business model

The customer perspective: Technology does not create value. It is the value proposition the customer loves

customer problem

addressed by

Value Proposition

Customer •  Who is our

customer? •  What job do we

solve for them?

Value •  What value do we

create for our customers? What value do we create for our partners?

What excites our customer?

Value architecture

Offer •  What is our offer?

Distribution & Communication Channels

•  How do we reach our customers?

•  How do we communicate with our customers?

How do we create the value?

Value Chain •  What activities do

we have to do to produce our offer?

•  How does our value chain look like?

Partner •  What partners do

we need?

Core Capabilities •  What are the core

capabilities we need?

Revenue Model

Cost Structure •  Cost structure is

defined by your value architecture.

Revenue Sources •  With what do we

earn money?

How do we earn money?

Team & Values

Team •  Who is our team? •  What

competencies do we have in our team?

Values •  What values do we

life in our team? •  How do we

interact with each other and with customers?

Who is on our team? What values do we live?

CustomersWho are our customers?What job do we solve for our customers?

Customer BenefitWhat benefit do we create for our customers?What benefit do we create for our partners?

O!erWhat is our o!er?

Value ChainWhat are our value creating steps?What is our value chain?

Core CapabilitiesWhat are the core capabilities we need?

Distribution & Communication ChannelsHow do we reach our customers?How do we communicate with our customers?

PartnerWhich partners do we need?

Questions for a Successful Business Model

Cost StructureCost structure is defined by the value architecture.

Revenue SourcesWith what do we earn money?

TeamWho is on our team?What competencies do we have on the team?

ValuesWhat values do we pursue?How do we interact with each other and the customers?

Revenue Model

Team & Values

Value PropositionValue Architecture

All building blocks of a business model are a starting point for innovation, even your Team & Values

§  All components of a business model are starting points for innovation

§  Value Innovation

§  Architectural Innovation

§  Revenue Model Innovation

§  Cultural Innovation §  At the end, all business model

innovation must create more value to the customers

Starting points of business model innovation

Customers

Customer Benefit

O!er

Value Chain

Core Capabilities

Distribution & Communication Channels

Partner

Business Model:

Cost Structure Revenue Sources

Team Values

Revenue Model

Team & Values

Value PropositionValue Architecture

Your goal as a business model innovator: Be different from your competitors and being loved for what you do by your customers

Uber is more than a Taxi app. It wants to revolutionize how people move. It wants to disrupt the taxi & people moving industry

AirBnB opened a whole new segment of offers to the individualistic traveler of today

5 Analysis of the past is not enough

We need a different strategic planning process for disruptive innovation Start with customer insights not current markets

Point of View

We do not plan the result of the process but the process to discover the future strategy

1

Customer Insight

3

Ideate 2

Understand 4

Design

5

Decide & Prototype

6

Build & Learn

1

Customer Insight -  Observe your customers

What job is not yet or badly solved?

-  How does the Customer Experience Cycle look like?

-  On what customer insights is your idea based?

-  validate customer insight

2

Understand & Unlearn -  understand the current

solutions and their strength & weakness

-  understand how the potential customer thinks and decides

-  understand the market & market mechanism

3

Ideate Develop as many ideas as possible in the area of -  customers/ value

proposition -  value architecture -  revenue model

4

Design -  decide for three or four

options -  design the business

models for the options -  check the

interdependencies in the business models

-  work on the uniqueness (positioning)

-  optimize the building blocks

5

Decide & Prototype -  decide for the best

model to go for -  build prototype -  test prototype with

customers -  write business case -  decide again or work on

different option

6

Build & Learn -  execute business model -  learn continuously from

customer feedback and control KPIs

-  adjust and refine continuously the business model

Unsolved job-to-be-done What is the biggest problem with socks?

Always start with the jobs-to-be done and insights

JUST DO IT.�

More Information on http://blog.business-model-innovation.com

Dr. oec. Patrick Stähler fluidminds GmbH Kreuzstrasse 2 CH-8008 Zürich Patrick.Staehler@fluidminds.ch www.fluidminds.ch blog.business-model-innovation.com @business_inno