Two Core Strategy Tools: The Business Model Canvas and the ...

TwoCoreStrategyTools:TheBusinessModelCanvasandthe5KeyQuestionsofStrategy

TopicOutline§ Slide3– StrategyandthePerformanceGap§ Slides4to42– TheCurrentBusinessModelCanvas§ Slides43to66– AnalysisoftheCurrentBusinessModel

– ExternalForces– 44to50– SWOTAnalysisandtheTOWSMatrix– 51to62– BlueOceanStrategyandtheERRCMatrix– 63to65

§ Slides67to75– TheFiveKeyQuestionsofStrategyDevelopment

§ Slide75/76– TheSummaryToolKit

Time

Out

com

e

StrategicGap = Diagnosis

Goal = Guiding Philosophy(Objective)

Current Path

TODAY

The Performance Gap

Coherent Actions = Scope &Advantage

Whatisourbusinessmodel?

OutlineofTopics§ TheBusinessModelCanvas

– DefinitionofBusinessModel– TheCanvas– VisualThinking– Ourdeliverable

§ ValuePropositionandCustomerSegments– TheValuePropositionCanvas– EmpathyMap

§ CustomerRelationshipsandChannels§ DevelopourValuePropositions:KeyResources,Activities

andPartnerships§ EconomicsoftheBusinessModel:RevenueStreamsand

CostStructure§ StrategyandtheCanvas

TheBusinessmodelcanvas

WhatisaBusinessModel?§ Abusinessmodeldescribestherationaleofhowanorganizationcreates,deliversandcapturesvalue

HowtheNineElementsRelate

http://www.slideshare.net/iasaglobal/case-study-value-of-it-strategy-in-hi-tech-industry

Garrett’sLawnMowingService

Aviewwiththeendinmind

Fromideatobusinessmodel--https://youtube.com/watch?v=wwShFsSFb-YVisualizingyourbusinessmodel--https://youtube.com/watch?v=wlKP-BaC0jAPrototypingbusinessmodels--https://youtube.com/watch?v=iA5MVUNkSkM

Ourcustomersegmentsandvaluepropositions

ValueProposition§ Createsvalueforacustomersegment

throughadistinct mixofelementscateringtothatsegmentsneeds.

§ Someexamples:– Newofferingmeetspreviouslyunknownneed– Improvingproduct/serviceperformance– Tailoringproducts/servicestospecificneeds– “GettingtheJobDone”– Design– Brand/Status– Price– CostReduction– RiskReduction– Accessibility– Convenience/Usability

CustomerSegments

§ Forwhomarewecreatingvalue?§ Whoareourmostimportantcustomers?§ Differenttypesofcustomersegments:

– Massmarket– Nichemarket– Segmented– Diversified– Multi-sidedplatforms(ormulti-sidedmarkets)

• Upstreamanddownstream• Internalandexternal

Rankthegainsyourproducts/servicescreateaccordingtoitsrelevancetoyourcustomers.Isitsubstantialorinsignificant?Foreachgainindicatehowoftenitoccurs.

Dothey…

Createsavingsthatmakeyourcustomerhappy?(e.g.intermsoftime,moneyandeffort)

Produceoutcomesyourcustomerexpectsorthatgobeyondtheirexpectations?(e.g.betterqualitylevel,moreofsomething,lessofsomething)

Makeyourcustomer’sjoborlifeeasier?(e.g.fasterlearningcurve,usability,accessibility,moreservices,lowercostofownership)

Createpositivesocialconsequencesthatyourcustomerdesires?(e.g.makes

themlookgood,producesanincreaseinpowerorstatus)

Dosomethingcustomersarelookingfore?(e.g.gooddesign,guarantee,specificormorefeatures)

Fulfillsomethingcustomersaredreamingabout?(e.g.helpbigachievements,producebigreliefs)

Producepositiveoutcomesmatchingyourcustomerssuccessandfailurecriteria?(e.g.betterperformance,lowercost)

Describehowyourproducts/servicescreatecustomergains.Howdotheycreatebenefitsyourcustomerexpects,desiresorwouldbesurprisedby,includingfunctionalutility,socialgains,positiveemotions,andcostsavings?

Dothey…

Producesavings?(e.g.intermsoftime,moneyandeffort)

Makeyourcustomersfeelbetter?(e.g.killsfrustrations,annoyances,thingsthatgivethemaheadache)

Fixunderperformingsolutions?(e.g.newfeatures,betterperformance,betterquality)

Reducedifficultiesandchallengesforyourcustomers?(e.g.makethingseasier,helpingthemgetjobsdone,eliminateresistance)

Wipeoutnegativesocialconsequencesyourcustomerencountersorfears?(e.g.lossofface,power,trust,orstatus)

Describehowyourproducts/servicesalleviatecustomerpains.Howdotheyeliminateorreducenegativeemotions,undesiredcostsandsituations,andrisksyourcustomerexperiencesbefore,during,andaftergettingthejobdone?

Eliminaterisksyourcustomersfear?(e.g.financial,social,technicalrisks,orwhatcouldgowrong)

Helpyourcustomersbettersleepatnight?(e.g.helpbigissues,diminishconcerns,eliminateworries)

Reducecommoncustomermistakes?(e.g.usagemistakes)

Getridofadoptionbarriersforyourcustomersfromadoptingsolutions?(e.g.lowerornoupfrontinvestmentcosts,fasterlearningcurve,lessresistancetochange)

Rankthepainyourproducts/servicesaddressaccordingtotheirintensityforyourcustomers.Isitveryintenseorverylight?Foreachpainindicatehowoftenitoccurs.

Products&ServicesListalltheproductsandservicesyourvaluepropositionoffers.

Whichproducts/servicesdoyouofferthathelpyourcustomergeteitherafunction,socialoremotionaljobdone,orhelphim/hersatisfybasicneeds?

Whichancillaryproductsandserviceshelpyourcustomerperformtherolesof:

Buyer (e.g.productsandservicesthathelpcustomerscompareoffers,decide,buy,takedeliveryofaproduct/service)

Co-creator (e.g.products/servicesthathelpcustoemers co-designsolutions,otherwisecontributevaluetothesolution)

Transferrer (e.g.products/servicesthathelpcustomersdisposeofaproduct,transferittoothers,orresell).

Products/servicesmayeitherbetangible,digital,intangible,orfinancial.

Rankallproductsandservicesaccordingtotheirimportanttoyourcustomer.Aretheycrucialortrivialtoyourcustomer?

CustomerSegment:

Describethebenefitsyourcustomerexpects,desiresorwouldbesurprisedby.Thisincludesfunctionalutility,socialgains,positiveemotionsandcostsavings.

Describenegativeemotions,undesiredcostsandsituations,andrisksthatyourcustomerexperiencesorcouldexperiencebefore,duringandaftergettingthejobdone.

Rankeachgainaccordingtoyourcustomer.Isitsubstantial/significant?Foreachgainindicatehowoftenitoccurs.

Describewhataspecificcustomersegmentistryingto

getdone.Itcouldbethetaskstheyaretryingtoperformand

complete,theproblemstheyaretryingtosolve,ortheneedstheyaretryingtosatisfy.

Whatfunctionaljobsareyouhelpingthemgetdone? (performorcompleteaspecifictasks,

solveaspecificproblem)

Whatsocialjobsareyouhelpingthemgetdone? (tryingtolookgood,gainpower/status)

Whatemotionaljobsareyouhelpingthemgetdone?(esthetics,feelgood,security)

Whatbasicneedsareyouhelpingthemsatisfy?(shelter,communication,health)

Whatpositivesocialconsequencesdotheydesire?(makesthemlookgood,increasespower/status)

Describethejobsyourcustomeristryingtogetdoneintermsoftheroletheyareplaying:

Buyer (e.g.gainpower/status)Co-creator (feelgood,security)

Transferrer (products/servicesthathelpcustomersdisposeofa

product,transferittoothers,resell,etc.

Rankeachpainaccordingtotheintensityitrepresentsforyourcustomer.Isitveryintenseorverylight?Foreachpainindicatehowoftenitoccurs.

Whatdoesyourcustomerfindtoocostly?(e.g.intermsoftime,costandeffort)

Whatmakesyourcustomerfeelbad?(e.g.frustrations,annoyances,headaches)

Howarecurrentsolutionsunderperformingforyourcustomer? (e.g lackoffeatures,performance,malfunction)

Whatarethemaindifficultiesandchallengesyourcustomerencounters? (e.g.understandinghowthingswork,difficultiesgettingthingsdone,resistance)

Whatnegativesocialconsequencesdoesyourcustomerencounterorfear?(e.g.lossofface,power,trust,status)

Whatrisksdoesyourcustomerfear?(e.g.financial,social,technical)

Whatkeepsyourcustomerawakeatnight?(e.g.bigissues,concerns,worries)

Whatcommonmistakesdoesyourcustomermake?(e.g.usagemistakes)

Whatbarriersarekeepingyourcustomerfromadoptingsolutions? (e.g upfrontinvestment,learningcurve,resistancetochange)

Whichsavingswouldmakeyourcustomerhappy? (intermsoftime,moneyandeffort)

Whatoutcomesdoesyourcustomerexpectandwhatwouldgobeyondexpectations?(qualitylevel,more/lessofsomething)

Howdocurrentsolutionsdelightyourcustomer? (specificfeatures,performance,quality)

Whatwouldmakeyourcustomer’sjoborlifeeasier?(fasterlearningcurve,moreservices,lowercostofownership)

Whatpositivesocialconsequencesdoesyourcustomerdesire?(makesthemlookgood,increasespower/status)

Whatarecustomerslookingfor?(gooddesign,guarantees,specificormorefeatures)

Whatdocustomersdreamabout?(bigachievements/reliefs)

Howdoesyourcustomermeasuresuccess/failure?(performance,cost)

Whatwouldincreasethelikelihoodofadoptingasolution?(e.g.lowercost,lessinvestment,lowerrisk,betterquality,performance,design)

SmallGroupWork§ Identify3criticallyimportantcustomersegmentsforyourbusiness.§ Pickoneofyourcustomersegments(ideallythesegmentwhereyou

havethemostopportunitytogrow)– Usetheempathymaptosketchcriticalinsightsonthissegment

• Startbyidentifyingarepresentativepersonfromthesegmentanddescribetheirdemographics(age,experience,position,criticaljobfunctions/decisions,etc.)

• Developkeydescriptorsofeachoftheempathymapboxeswithacriticaleyetowardidentifyingpainsandgains

– Usethevaluepropositioncanvastosketchthefitbetweenthecustomerneedsandyourvalueproposition

• Usetheempathymaptoassistintherightsideofthecanvas• Focusonthemappingofyourofferingspainandgainsolutionstothepainsand

gainsofthecustomersegment.– Usethevaluepropositionstatementtosummarizeyourvalueproposition

forthissegment– transferthistoyourbusinessmodelcanvasinafewdescriptivewords

§ Repeatforothercustomersegments§ Timing:1hour

Thevaluepropositioncanvas--https://youtube.com/watch?v=ReM1uqmVfP0Understandingcustomers–https://youtube.com/watch?v=kAdbbsZolOw

Additionalresources

Customerrelationshipsanddeliverychannels?

Channels§ Howthecompanycommunicates

withandreachesitscustomersegmentstodeliveravalueproposition

§ ChannelTypes:– Own

• Direct– SalesForceandWebSales• Indirect– Ownstores

– Partner• Indirect– PartnerStores andWholesaler

§ ChannelPhases:§ Awareness§ Evaluation§ Purchase§ Delivery§ AfterSales

CustomerRelationships

§ Typeofrelationshipwitheachcustomersegmentdrivenby:customeracquisition,retention,andupselling.

§ Potentialtypesofrelationships:– Personalassistance– Dedicatedpersonalassistant– Self-service– Automatedservices– Communities– Co-creation

SmallGroupWork§ Foreachofyourcustomersegmentsidentifythechannelsthatyouusetodelivertheirvaluepropositionsidentifythemoststrategicallyimportantpurposesforusingthatchannel.

§ Foreachofyourcustomersegmentsidentifytheprimarytypesofrelationshipsyouseektodevelop.

§ Timing:1hour

ResourcesActivities,andrelationships

KeyResources§ Whatkeyresourcesdoourvaluepropositions

require?Ourdistributionchannels?Customerrelationships?Revenuestreams?

§ Resourcesinclude:– Physical– Intellectual– Human– Financial

§ ThereGeneralBusinessTypes:– ProductDriven– reliesmostoftenonintellectualandhumanresources.– ScopeDriven– reliesonintellectualresourcesabouttargetcustomers,an

establishedsetofprocessandinsomecasesinfrastructure.– InfrastructureDriven– leverageinfrastructureandfinancialresourcesaskey

differentiators§ Watchout – makesureyourlistofresourcesisstrategic– thatis,arethey

trulyessentialtothebusinessessuccessanddoyouhavetoownthemforthemtobeessential?

KeyActivities§ Themostimportantthingswemustdotomakeour

businessmodelwork– R&D– Newproductresearch,Newproductdevelopment,

Existingproductupdates,QualityChecks,Innovation– Production– Selectionofproductanddesign,Selectionofproductionprocess,

Selectingproductioncapacity,productionplanning,productioncontrol,Qualityandcostcontrol,Inventorycontrol,Maintenanceandreplacementofmachines.

– Marketing– strategy,marketresearch,productdevelopment,communications,salessupport,events.

– Sales&CustomerService– Developingrelationships,Handlingproblems,Acquiringnewcustomers,assistinginsales,trackingorders,follow-upservices

§ AnExampleofaConsumerProductProducerthatmanufacturesandsellstheproducton-line.– ValePropositions– productlastslongersavingcustomermoney;provides

performanceimprovementovercompetitors;easiertousebecauseitismachinewashable;easytostorepackaging

– Activities– controlofproductionandmanufacturing,managingwebsite,onlineorders,anddistributionoftheproduct;creatingabrandstrategy,marketingandpromotionoftheproduct,productandpackagedesign.

KeyPartnerships§ Thenetworkofsuppliersandpartnersthat

makethebusinessmodelwork– StrategicAlliances– Co-opetition– JointVentures– Buyer/Supplier

§ Motivationsforpartnerships:– Optimizationandeconomyofscale– Reductionofriskanduncertainty– Acquisitionofparticularresourcesandactivities

§ KeyQuestions:– Whichpartnershipsarecriticaltoourbusiness?– Whoareourcriticalsuppliers?– Whichofoursuppliers/partnersaresourcingourkeyresources?– Whattypeofpartnershipswouldsuitourneeds?– Whatisthebestcluster/supplychainwhereweshouldbelocated?

SmallGroupWork§ ThinkcriticallyabouttheRESOURCESthatyourbusinessmodelrequirestodeliverthevaluepropositionsyouhaveidentified.Identifythetop3to4resourcesyoumusthavetobesuccessful.Beasspecificaspossibleabouttheresourcesandavoidgenericresourcenames.

§ ThinkcriticallyabouttheACTIVITIESthatyourbusinessmodelrequirestodeliverthevaluepropositionsyouhaveidentified.Identifythetop4to4activitiesyoumusthavetobesuccessful.Beasspecificaspossibleabouttheresourcesandavoidgenericresourcenames.

§ Identifythe2to5moststrategiccriticalpartnershipsthatallowyoutobesuccessfulinyourbusinessmodel.

§ Timing:1hour

Theeconomicsofthebusinessmodel

RevenueStreams§ Thecashgeneratedfromeachcustomer

segmentthroughtransactionrevenueand/orrecurringrevenue.– Assetsale– Usagefee– Subscriptionfee– Lending/Renting/Leasing

§ PricingMechanisms– FixedMenu– Listprice,productfeaturedependent,customersegment

dependent,volumedependent– DynamicPricing– Negotiation,yieldmanagement,real-time-market,auctions

§ KeyQuestions– Whatbenefitsarecustomerscurrentlypayingfor?– Howaretheypayingforthesebenefits?– Whatmodeofpaymentwouldbepreferabletothem?– Whatpercentageofthetotalrevenuedoeseachrevenuestreamrepresent?– Whatbenefitswillencouragecustomertopaymore?

§ Licensing§ Brokeragefees§ Advertising

CostStructure§ Allcostsincurredtooperateourbusinessmodel§ Twobasictypesofbusinessmodels

– Cost-driven-- Value-driven

§ Coststructurecharacteristics– Fixed-- Variable– Economiesofscale-- Economiesofscope

§ KeyQuestionstoAsk:– Whatarethefundamentalcostsderivedfromthebusinessmodel?– Whichkeyresourcesrepresentasignificantexpensetothebusiness?– Whatkeyactivitiesrepresentasignificantexpensetothebusiness?– Howdoyourkeyactivitiesdrivecosts?– Aretheactivitiesyouhaveidentifiedmatchedtovaluepropositions?– Isthebusinessmorevaluesdrivenorcostdriven?– Ifyouexploredifferentchangesinthebusinessmodeltocostsswitchfromfixedtovariable?

SmallGroupWork§ Identifythecriticalrevenuestreamsforyourbusiness.Bespecificaboutthetypesofrevenuesandtheproportionoftheoverallrevenuestreamstheyrepresentintermsofcustomersegments/products.Identifythelevelofvolatilityaroundthevarioussourcesofrevenue.Inaddition,considerthefivekeystrategicquestionsofrevenuestreams.

§ Identifythecriticaloperatingcostsforyourbusiness.Bespecificaboutthetypesofcosts.Identifythestageofproductionwherethecostoccurs.Whatproportionoftheoverallcostdoeseachcostrepresent?Inaddition,considerthesevenkeystrategicquestionsofcoststructure.

§ Timing1hour

STRATEGICANALYSISOFOURBUSINESSMODEL

FactorsImpactingourBusinessModel

Howarechangingforcesaffectingourbusinessmodel?

SWOTAnalysisofthe9Blocks

EvaluatingtheBusinessModel:StrengthsandWeaknesses

EvaluatingtheBusinessModel:Threats

EvaluatingtheBusinessModel:Opportunities

ConfrontationMatrix

BlueOceanStrategyandtheCanvas

TheERRCMatrix

VALUE

COSTS

ECCRandtheCanvas-- Wii

StrategyIstheAnswertoFiveQuestions

Howwillwewin?

Whatmanagementsystemsdoweneed?

Whatisourwinning

aspiration?

Whatcapabilitiesmustwehave?

Wherewillweplay?

Lafley,A.G.andR.L.Marin.PlayingtoWin:HowStrategyReallyWorks.HarvardBusinessReviewPress,Boston,Massachusetts,2013.

DefineOurStrategicProblem

67

Whatisourmostpressingissue?Let’sconsider:§Theindustrysegment weplayin§Ourindustrystructure§Ourchannelcustomers§Ourendcustomers§Ourcurrentcapabilities§Ourcosts§Ourcompetition

WhatIsOurWinningAspiration?Awinningaspirationisafuture-orientedstatementabouttheguidingpurposeoftheorganization:§ Whatdoesourorganizationexisttodo?§ Whatdoeswinningmeanforus?

68

WhereWillWePlay?

Thischoicedefinestheplayingfieldonwhichwechoosetocompete:§ Customersegment§ Distributionchannel§ Productorservice§ Geography§ Stageofproduction

ItisalsoaboutwhereNOT toplay.

69

WherewillwePlay?

§ Whoareourcorecustomers?– Describeyourcorecustomersinonesentence?– Whatischangingforthesecustomersthatweneedtoknow?

§ Throughwhatchannelsdo/shouldweservethesecustomers?§ Whatproducts/servicesdo/shouldweoffer?§ Inwhatgeographiesdo/shouldweoffertheseproducts/services?§ Inwhatstagesofproductiondo/shouldwecompete?§ Wherealongthevaluechaindo/shouldweparticipate?§ Areweupstreamordownstreamcomparedtocompetitors?§ Arewebroadacrossthevaluechainornarrowinonepart?

HowWillWeWin?

Thischoiceisabouthow wewillwinontheplayingfieldwe’vechosen.Whatisourcompetitiveadvantage?

71

Howwillwewin?

§ Whydocustomerschooseusoverthecompetition?

§ Dowecompeteonlowcostordifferentiation?§ Whatisourcompetitiveadvantage?Howisitlinkedtoourwhere-to-playchoice?Howisitlinkedtoourwinningaspiration?

CustomerNeedsandCompetitorDeliveryMatter

WhichCapabilitiesMustWeHave?

74

Capabilitiesaretheactivitiesthatenableourorganizationtobringthewhere-to-playandhow-to-winchoicestolife.§ Whatarewereallygreatatdoing?§ Whatactivitiesarecriticaltobringingourwhere-to-playandhow-to-winchoicesto

life?

WhatManagementSystemsDoWeNeed?Managementsystemsaretheprocesses,structures,andrulesthatbuildourcapabilitiesandthatreinforceandmeasureourorganization’sstrategicchoices.

• Whatsystemsbuildourcapabilitiesandreinforceourchoices?

• Howdowemeasurethesuccessofourstrategy?

Summary:StrategyandtheCanvasMarketforcesKeytrends

IndustryforcesMacroeconomicforces

SWOTAnalysisofCurrentBusinessModel

Confrontation/TOWSMatrix

ExternalForcesKeyTrends

MacroeconomicForcesMarketForcesIndustryForces

BlueOceanAnalysis

ERRCMatrix

SmallGroupWork:assessingyourbusinessmodel

§ Completeyourbusinessmodelcanvas§ Identify3-4criticalexternalfactorsineachoftheexternalcategoriesthatwillimpactyourbusinessoverthenext3to5years:– Marketforces,Keytrends,Industryforces,Macroeconomicforces

§ UsetheSWOTanalysisassessmenttooltoassesstheelementsofyourcurrentbusinessmodel

§ Basedonyourassessment,usetheconfrontationmatrixandtheERRCmatrixtoidentifypotentialchangestoyourcurrentbusinessmodel

Consideringoutsideforcesandstresstestingthebusinessmodel

Navigatingthebusinessenvironment--https://youtube.com/watch?v=7O36YBn9x_4Provingyourbusinessmodel--https://www.youtube.com/watch?v=-2gd_vhNYT4

PREPARINGFORTHEOPENFORUMPRESENTATIONS

Concurrentsessionsharing

§ Wewillpresenteachteamcanvasin30-minuteconcurrentsessions.Willrepeattheconcurrentsessions3times.Each30minutesessionwillhave15minutesofpresentationand15minutesofQ&A

§ YourCanvasisyourpresentationmedia.Youcanuseotherpropsifyouwishbutspaceandtimearequitelimited.

§ Twopeopleinyourgroupwillpresentyourcanvasatonetime.Allofyouwillhavetheopportunitytopresent.

§ WhenyouarenotpresentingyoushouldattendanotherteamspresentationandinteractintheQ&A.

§ Tellingyourstory--https://youtube.com/watch?v=SshglHDKQCc

§ Timing:90minutestotal

Resources§ Fromideatobusinessmodel--

https://www.youtube.com/watch?v=wwShFsSFb-Y§ Visualizingyourbusinessmodel--

https://www.youtube.com/watch?v=wlKP-BaC0jA§ Prototypingbusinessmodels--

https://www.youtube.com/watch?v=iA5MVUNkSkM§ Navigatingthebusinessenvironment--

https://www.youtube.com/watch?v=7O36YBn9x_4§ Provingyourbusinessmodel--

https://www.youtube.com/watch?v=-2gd_vhNYT4§ Tellingyourstory--

https://www.youtube.com/watch?v=SshglHDKQCc§ Thevaluepropositioncanvas--

https://www.youtube.com/watch?v=ReM1uqmVfP0§ Understandingcustomers–

https://www.youtube.com/watch?v=kAdbbsZolOw