Business-Model-Innovation and business plan.ppt

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1. BUSINESS MODEL INNOVATION
Presented By…..
RadhaRani
M. S. RamaiahInstitute of Management

2. Business Innovation
Definition:
Businessinnovationinvolvesawidespectrumoforiginal
concepts,includingdevelopmentofnewwaysofdoing
business,newbusinessmodels,businessapplicationof
technologyandcommunications,newmanagement
techniques,environmentalefficiency,newformsof
stakeholderparticipation,telecommunication,transport
andfinance.

3. Business Innovation & Growth Strategies

4. Types of Innovation
Competence Enhancing Vs. Destroying Innovation:
Competenceenhancinginnovationbuildsonexisting
knowledge&skills.
Whetheraninnovationiscompetenceenhancingor
competencedestroyingdependsonwhoseperspective
isbeingtaken.
Aninnovationcanbecompetenceenhancingtoone
firm,whilecompetencedestroyingforanother.

5. Types of Innovation…
Architectural Innovation Vs. Component Innovation:
Architecturalinnovationisaninnovationthatchangesthe
overalldesignofasystemorthewayitscomponents
interactwitheachother.
Componentinnovationisaninnovationtooneormore
componentsthatdoesnotsignificantlyaffecttheoverall
configurationofthesystem.

6. Types of Innovation…
Radical Vs. Incremental:
Incrementalinnovationstaketheexistingproductorofferingand
makesmall-stepimprovementstotheoriginaltechnologyand
design.Incrementalimprovementsadduptoproduceagreatdeal
ofchanceinanofferingovertime.
Radicalinnovationscancreateanessentiallydifferentkindof
productorofferingwithanewcombinationoftypesofvalue
produced.Thenewproductsandserviceswouldrequire
customerstoradicallychangetherepastbehaviorwiththe
promiseofgainingequallydramaticallynewvalue.Theyare
disruptivetechnologiesthatpermitentireindustriesandmarkets
totransformorevendisappear.

7. Types of Innovation…
Technical vs. Social Innovations:
Innovationdoesnothavetobetechnicaldoesnot
indeedhavetobea“thing”altogether.
Management,thatisthe“usefulknowledge”that
enablesmanforthefirsttimetorenderproductive
peopleofdifferentskills&knowledgeworkingtogether
inan“organization”isaninnovationofthe19
th
century.

8. Business Model Innovation
BusinessModelInnovation(BMI)referstothe
creation,orreinvention,ofabusinessitself.
ABusinessModelInnovationresultsinanentirely
differenttypeofcompanythatcompetesnotonlyonthe
valuepropositionofitsofferings,butalignsitsprofit
formula,resourcesandprocessestoenhancethatvalue
proposition,capturenewmarketsegmentsandalienate
competitors.

9. Businessmodelinnovationrestsnotinthetechnology
orproductorservice,butinthebusinessmodelitself.
Businessmodelisabroad-strokepictureofhowan
innovativeconceptwillcreateeconomicvalueforthe
ultimateuser,forthefirmanditsshareholdersand
partners.
Itconsiderstheinfrastructurerequiredtomovethe
product/servicetothemarketinamannerthatitis
botheasyandconvenientforcustomersandprofitable
forthefirm.

10. Evolution of Business Model
Innovation (BMI) Theory
The BMI concept was explored by :
Clayton Christensen, a Professor at the
Harvard Business School
Mark Johnsonof Innosight, and
Henning Kagermannof SAP in their feature
article “Reinventing Your Business Model”
published in December 2008 Harvard Business
Review.

11. Role of BMI
BusinessModelInnovationisneededasoneofthe
coreelementsofasuccessfulmarketdisruption.
First,asimplifyingtechnologyisneededtosparkthe
disruption,anewbusinessmodelisthenneededto
maximizethereachofthetechnologyanda
comprehensivevaluenetworkmustfinallyevolveto
supportit.

12. Key Principles of BMI Theory
Accordingtotheirconstruct,abusinessmodel
consistsoffourinterlockingelementsthat,taken
together,createanddelivervalue.
Innovationcanoccurinoneormoreofthese
areassimultaneously:
CustomerValueProposition
ProfitFormula
KeyResources
KeyProcesses

13. Customer Value Proposition
Asuccessfulcompanyisonethathasfoundawayto
createvalueforcustomers—i.e.awaytohelpcustomers
getanimportantjobdone.Byjobwemeanafundamental
problem,inagivensituation,thatneedsasolution.
Thebestcustomervaluepropositionisanofferingthat
getsthatjob–andonlythatjob–doneperfectly.Thelower
thepriceoftheofferingandthebetterthematchbetween
theofferingandthejob,thegreatertheoverallvalue
generatedforthecustomer.
Themoreimportantthejobistothecustomer,thelower
thelevelofcustomersatisfactionwithcurrentoptions,and
thebetteryoursolutionisthanyourcompetitors’atgetting
thejobdone,thegreaterthevalueforyourcompany.

14. Profit Formula
Theprofitformulaistheblueprintthatdefineshow
thecompanycreatesvalueforitself.
Itconsistsofthefollowing:
Revenuemodel Price×Volume
Coststructure Assets;directandindirectcosts;
andamodelofhow,andwhether,scaleaffectscosts
Marginmodel Howmuchdoeseachtransaction
needtonettocoverthecoststructureanddelivertarget
profits?
ResourcevelocityHowmuchrevenuedoweneedto
generateperdollarofassetsandperdollaroffixedcosts,
andhowquickly?

15. Key Resources
Thekeyresources(orassets)arethepeople,
technology,products,facilities,equipmentand
brandrequiredtodeliverthevalueproposition
tothetargetedcustomer.
Thefocushereisonthekeyelementsthat
createvalueforthecustomerandcompany,and
thewaythoseelementsinteract.
Everycompanyalsohasgenericresourcesthat
donotcreatecompetitivedifferentiation.

16. Key Processes
Successfulcompanieshaveoperationaland
managerialprocessesthatallowthemtodeliver
valueinawaytheycansuccessfullyrepeatand
increaseinscale.
Thesemayincludesuchrecurrenttasksas
training,development, manufacturing,
budgeting,planning,salesandservice.
Keyprocessesalsoincludeacompany’srules,
metricsandnorms.

17. Business Model Innovation Cycle

18. 1. Environmental Framing
Thefirststeptobusinessmodelinnovationis
buildingamulti-disciplinary“businessmodel
innovationteam”withpeoplefrombusiness,
process,technology,customersegments,Design,
R&D,HR...
Gettheteamtounderstandthebusinessmodel
environment(Social,Legal,Competitiveand
TechnologicalLandscape).Thenframethebusiness
modeldesignspace.

19. 2. Business Model Innovation
Withinthisdesignspacetheteamcanstartgeneratingdifferent
businessmodelprototypes.OneexamplecanbeaMetamodel
with9businessmodelbuildingblocksthatcanhelpdescribe
businessmodels.
Thiscanserveasabasisforiterativebusinessmodeldesign
thinkingandinnovation.
Theteamandanumberofdesignatedexecutivescanthen
selectoneorseveralofthebusinessmodelprototypesfor
implementationandtesting.
Ifseveralbusinessmodelsareselectedthisiscalleda
businessmodelportfoliothatcanbelikeinthefinancial
world(portfoliomanagementwithrisks,returnsand
investments...)

20. 3. Organizational Designs
Basedonthebusinessmodelportfoliothecompany
shouldreflectonhowtobesttranslatethemodelsinto
businessunitsandbusinessprocesses,calledas
organizationaldesign.
TheunderlyingInformationSystemsaredesignedto
supporttheimplementationoftheselectedbusiness
models(e.g.e-businesssystems,balancedscorecards,
datamining,etc.)
Thentherightpeoplehavetobebroughtinto
implementthedesign,thebusinessprocessesandthe
supportingtechnologies.

21. 4. Business Model Implementation
BusinessModel Implementationinvolves
transformingmodels(businessmodel,organizational
model,processmodel,informationsystemsmodel)
intoreality.
Aftersecuringtheexternal(e.g.venturecapital)or
internal(e.g.budgets)financialfundingthebusiness
hastobebuiltandrun.
Theprocessdoesn'tendhere!Businessmodel
innovationisacontinuousanditerativeprocessthat
endswithabusinessmodel(portfolio)evaluationand
re-startswiththeframingofthechangingbusiness
environment-evenforsuccessfulbusinessmodels...

22. Types of Business Model Innovation
Threemaintypesofbusinessmodelinnovations,
whichcanbeusedaloneorincombination:
Industry Models
Revenue Models
Enterprise Models

24. Allthreetypes(orcombinations)ofbusiness
modelinnovationcanleadtosuccessfulfinancial
results.
Thereisnosignificantvariationinfinancial
performanceacrossthedifferenttypesofbusiness
modelinnovation.
Withasoundstrategyandstrongexecution,any
ofthepathscanleadtosuccess.
Thebestbusinessmodelinnovationstrategies
provideastrongfitbetweenthecompetitive
landscapeforaparticularindustryandthe
organization'sstrengths,shortcomingsand
characteristicssuchasageandsize.

25. Becauseofitsprevalenceasasuccessful
innovationstrategy,EnterpriseModel
Innovation,emphasizingcollaborationand
partnerships,shouldbeakeyconsiderationfor
executivesastheyrespondtochange.

26. Financial Crisis -An Opportunity for
Business Model Innovation?
Businessmodelinnovationisdifficulttoachievebecause:
Itaffectssomanypartsofanorganization
Itneedsthebuy-inofsomanydifferentpeople.
Itrequirestherightorganizationalstructures&senseof
urgencytomakeithappen.
Alltheseconditionsareeasiertoachieveduringan
economicdownturn.
Peopleresistchangemuchlesswhenthesurvivaloftheir
companyandultimatelytheirjobsareatstake.
Mostpeopleresistchangeingoodtimes.
Thisisthebestopportunityacompanywillgettoposition
itselfforthefutureofbusinessmodelinnovation.

27. Characteristics of an organization that
wants BMI
Its board explicitly gives the management the
mandate to continuously examine business model
innovation.
It extensively works with multidisciplinary teams
across "departments" and across hierarchies.
Ithasmechanismsthatallowinnovativebusiness
modelideastobeevaluatedbypeersduringafirst
phase,ratherthan"justbymanagers”.

28. Cont…
Itinvolvesthecustomerintheprocessofbusiness
modelinnovation.
Itmaintainsaportfolioofinnovativebusinessmodels
thatmayevencannibalizetheexistingbusiness
model.
Ithastherightphysicalspaceinplacetoallow
multidisciplinarybusinessmodelprojectteamsto
flourish.Inotherwords,ithasproject/warrooms
dedicatedtoaprojectduringit'sentiredurationand
withlotsofwhiteboardsandwallstopostvisuals.

29. Five strategic circumstances fueling Business
Model Innovation
1.Theopportunitytoaddresstheneedsoflargegroupsof
potentialcustomerswhoareshutoutofamarketentirely
becauseexistingsolutionsaretooexpensiveorcomplicatedfor
them.Thisincludestheopportunitytodemocratizeproductsin
emergingmarkets(orreachthebottomofthepyramid).
2.Theopportunitytoleverageabrand-newtechnology,wrapping
therightbusinessmodelarounditortheopportunitytoleverage
atestedtechnologyinawholenewmarket.

30. Cont…
3.Theopportunitytobringajob-to-be-donefocustoamarketing-
drivenindustry.Suchindustriestendtomakeofferingsinto
commodities.Butajobsfocusallowscompaniestoredefinethe
industryprofitformula.
4.Theneedtofendofflow-enddisruptors.IfTata’s1Lakh
($2300)Nanoissuccessful,itwillthreatenotherautomobile
makers.
5.Theneedtorespondtoashiftingbasisofcompetition.
Inevitably,whatdefinesanacceptablesolutioninamarketwill
changeovertime,leadingcoremarketsegmentstocommoditize.

31. ExamplesofBMIwherethebusiness
modelisthecorevalueproposition
Tata–Tata Nano1 Lakh($2300) city car
Apple–iTunes Store + iPod
WalMart–Discount retailing
Hilti–Power tools leasing/subscription
FedEx–Guaranteed overnight delivery
Southwest–Low-cost regional air travel

32. CurrentSuccess-Itpreventscompaniesfrom
askingthemselveshowtheirbusinessmodelcould
bereplaced.
RiskAvoidance-Peopleareoftenunwillingto
takerisksonapersonallevel,butalsoasan
organization.Itiseasiertostickwiththestatus
quo.
OrganizationalStructures-Becausetheyare
notdesignedfornewbusinessmodelstoemerge.
Theysustainthestatusquo.
Obstacles to Business Model Innovation

33. Obstacles to BMI…
Lackofcustomerunderstanding-Ofcourse
organizationsunderstandtheircustomers,but
notgoodenoughtodesignnewbusinessmodels
thataddresstheiremergingneeds.
Requiredsizeofinnovations-Inbig
companiesapotentialnewbusinessmodelmust
immediatelydemonstrateanopportunityof
millionsofadditionalrevenue.