Picture this:
10:00 am Monday morning on a foggy November day in Vienna. Large conference room. About 50 managers waiting for me to open the conference and expecting (probably) the usual welcome blablabla. Instead I went on stage and hit the play button on my iPod. What music you’re wondering? Nine Inch Nails, “Terrible Lie”.
Can you imagine their faces? I sure had their attention thereafter! I had their attention after this.
Of course I explained myself, illustrating what NIN has to do with business model innovation.The conference was a showcase for a large group event we developed to develop ideas for new business models.
The event has a three step process: [continue reading…]
Tagged as:
Action,
Business Model Innovation,
Strategic Innovation,
Workshop
BCG’s latest innovation report identified the following 8 capabilities to be most critical when it comes to being innovative:
- Developing a deep understanding of customers and their preferences
- Partnering effectively with suppliers and others for new ideas
- Ensuring executive-level sponsorship of projects
- Enforcing timelines and milestones
- Earmarking sufficient funds for innovation projects
- Moving quickly from idea generation to initial market entry
- Balancing risks, time frames, and returns across an entire portfolio of projects
- Fostering a corporate culture that promotes innovation.
Apart from customer knowledge and executive sponsorship, which most companies see as their strengths, all other 6 capabilities are seen as weaknesses.
Tagged as:
Innovation
Business Model Innovation is en vogue. Looking at the dedicated websites and publications, both academic and practical, one quickly realises that most authors focus on developing frameworks for describing business models. My hypothesis is that as businesses get more complex, the need for relatively simple models to describe them increases. Which might explain both, managers’ and consultants’ interest in the topic.
These frameworks all try to break a business down to a manageable number of building blocks. Some can do with 4 such blocks (e.g. Johnson) others have 9 (e.g. Osterwalder) or 10 (e.g. de Mey and de Ridder).
Basically the business model describes how the pieces of your business fit together. It explains how value is created and delivered to the costumer at an appropriate cost and how the company generates revenues from doing so.
No matter what framework you prefer (and at the end of the day they are all variations of the same thing, i.e. a business), I think that the building blocks can be put into 3 categories:
- Who’s your customer?
- What are you offering your customer?
- How are you doing this?
Let’s have a closer look into each of these questions and try to identify the core elements of each category and how you can describe your business along the 3 dimensions.
Who’s your customer?
Who are your customers and what are their needs? A relatively simple question one might think. A core element is this category are the different segments, regions, etc. you serve. Typical choices include mass market, niche markets, any kind of segmentation e.g. high-end, middle or low end. Or you can be diversified and serve unrelated segments. Who are your buyers?
What are you offering?
What’s your value proposition? What are you offering your customers in terms of products, services, solutions and experiences? How do you bundle the products and services? What’s your core offering? What kind of supporting products, services and solutions are you offering along the core? Which of your value propositions address which customer segments and which specific needs? How convenient and easy to use are your products and services?
How are you doing this?
How refers as much to how do organise yourself to produce your value proposition, as to how do you reach the customer.
How do you organise yourself? What are the key activities, resources (tangible and intangible, brand, people, technology, information,…), core competencies, assets? Are you doing everything yourself or do you rely on a network of partners? Who are your main partners?
How do you reach the customer? Which channels are you using? What stages of the buyer experience do you address with these channels? What’s the relationship you have? What’s your image and reputation?
How you answer these questions also defines your cost base and revenue streams, thus your margins and ultimately the profit your business will make (what Johnson calls “the profit formula”).
I suggest you start by explaining your business along these dimensions. In the coming weeks I’ll post some ideas on how to reinvent your business along these 3 dimensions. So stay tuned…
Tagged as:
Business Model Innovation,
Strategic Innovation
What are the objectives of your innovation efforts? When talking to executives about innovation or innovation initiatives I very often experience that the objectives are not clear.
To focus the discussion and make objectives clearer, I developed an innovation map featuring 4 prototypical innovation types.
Using the map not only helps to focus the discussion, but also serves as an evaluation tool to see whether innovation efforts are in line with the desired outcomes.
Use the map and tell me how it worked for you. Have a look at The Innovation Map on slideshare.
Thanks to Vincente Centelles for translating the map into Spanish.
Tagged as:
Innovation,
Management Innovation,
Strategic Innovation
Here’s a self assessment from “Innovation to the Core” by Peter Skarzynski and Rowan Gibson.
Do you have a core set of people, distributed throughout the business, trained in the tools, processes and protocols of business concept innovation?
Have you built a systematic process for continually generating and managing novel strategic insights, and for sharing them companywide?
Are you using all the available means to improve the quantity and the quality of new ideas – from inside, outside and across your organization?
Are you systematically innovating across all the components of your business model, or are your company’s innovation efforts primarily focused on products and technologies?
Are you using the right evaluative criteria at every stage of the opportunity development process, or are some potentially valuable ideas being killed off prematurely?
Are your innovators generating ideas that are sufficiently radical to deliver breakthrough performance, and is your company stimulating and encouraging them to do so?
Have you designed an “innovation architecture” that gives strategic coherence and consistency to your opportunity portfolio?
Have you built mechanisms for rapidly reallocating resources behind new opportunities, along with a robust innovation pipeline for managing and commercializing those opportunities?
Is your innovation pipeline capable of managing growth opportunities with very different timescales and risk profiles?
Are you dynamically balancing the supply of innovation ideas and the demand for innovation ideas inside your company?
Are you using a comprehensive set of metrics to measure innovation performance – including inputs, throughputs, and outputs – and are you linking it to management compensation?
Have you put the necessary systems, structures and processes in place to make innovation a self-sustaining enterprise capability and a tangible core value?
Tagged as:
Innovation
While Starbucks and Burger King have been suffering this year, global sales have been increasing for seven months in a row at McDonald’s.
How exactly is the McCafé a strategic, business model innovation?
Let’s have a look at the definition of Strategic Innovation (for more see this post). Strategic Innovation is about:
- new business models (including a new value chain architecture), or
- new markets (either by creating new ones or reshaping existing ones), or
- increased value for both the customer and the company
or a combination of these three.
Let’s start with the new market: McCafé not only represents a new market for McDonald’s, but looking at the customers of McCafés, one can see that they tap on new customers as well. First people who would not go to a McDonald’s can be seen in restaurants now. For example parents who might just have gone in because their kids wouldn’t stop begging, now enjoy a coffee along a piece of cake, while the youngsters are having a BigMac.
And the youngsters tend to stay longer in the restaurants as well, having a latte after the McMeal. McCafés are a blend between Starbucks and a regular McDonald’s, with a cozier atmosphere than the regular McDonald’s store. At the same time the coffee is cheaper than at Starbucks. So McDonald’s is tapping into a market who can not afford, or is not willing to afford, a Starbucks coffee.
With the new design of McCafés they can still enjoy a little bit of 3rd place compared to a Burger King for example, which clearly respresents increased value for the customer and McDonald’s at the same time, as it is profiting not only from the increased sales, but also the “better” image it is gaining among new and existing customer groups.
As for the new business model: the new store layout with combined restaurants and McCafés, or the new stand alone McCafés, are a new way of delivering value to the customers. The new layout and atmosphere invite people to linger in the shop for an extended period of time (like at Starbucks), instead of just hoping in for a quick bite (like you do at any regular fast food restaurant).
Furthermore the McCafé concept enables McDonald’s to use it’s existing assets in a new way and thus create new revenues from these assets.
How can you use existing assets to create new value for existing customers or create a new market altogether?
Read more at the Financial Times.
Tagged as:
Business Model Innovation,
mcdonald's,
Strategic Innovation
I saw two concerts last week: Xavier Naidoo and Söhne Mannheims. In case you are familiar with German music you see the connection. For those who are not, let me explain.
Xavier Naidoo is a solo artist, well known in Germany and Söhne Mannheims is kind of a boy group, being lead by Xavier Naidoo as well. So far nothing special.
This year they went on tour. Together. Meaning there are 2 concerts in each city, one night Xavier alone, and the other night together with Söhne Mannheims. While it is not uncommon to play for more than 1 night in a city in the US or the UK, it is fairly uncommon in German speaking Europe. Most cities are just not larger enough for 2 shows (unless you’re AC/DC).
This combination has several implications:
Value added for the artists: 2 concerts in 1 town increase revenues, while at the same time decreasing costs. The stage was exactly the same, and some of the band members performed on both nights. Performing 2 shows in the same city probably also takes out some of the hassle of being on tour.
Value added for the customers: some of the cost saving were passed on to customers through a special “combi” ticket at about 75% of buying 2 single tickets. This is besides that fact of course that you get to see 2 performances. Which in itself was considered pretty cool by some people.
Additional revenue streams: Besides the usual merchandising you would expect, one could buy the concert (that special concert from that night in Vienna) on a USB stick right after the show. It was actually a bit misleading: you bought the USB stick which had a code for downloading the concert the next day, but hey…it’s cool anyway. This is not only additional revenue for the artist, I think it’s also increased value for the fans. At least for those who wanted to pay the additional 20.- Euro. Of course this option was offered on both nights. I could imagine such a service being expanded: what about a video of the show? A package containing the album + the live show? Video + CD + live show? Etc. As concert revenues have not to be shared with the record label, I wonder if that’s also the case for the sale of these USB sticks.
As the music industry is fighting for making up the loss of CD sales, I guess we will see more innovations in the future.
Tagged as:
Business Model Innovation,
Music Industry
It has been quiet around Robbie Williams for a long time. But now he’s back! And he does so with a strategic innovation.
On October 20, he will perform a European tour…with a single concert. His opening of the BBC Electric Proms will be shown in nearly 200 cinemas across Europe, followed by screenings in Australia and South Africa in November.
This broadcast has major implications on the business model. It’s a (1) new channel to reach the customer, (2) a new way of generating additional revenue from fans, but also from a new type of customer, (3) namely cinemas, which so far have been an untapped market for the music industry. This new channel might maybe compensate for a part of the decline in CD sales. Cinemas not doing so well either, might welcome this new market as well.
More at http://www.robbiewilliams.com/electricproms
Additional thoughts (November 08 2009):
- additional revenue streams for Robbie Williams through the sales of additional tickets in the cinemas.
- new customer segment: people that enjoy live music, but would not go to a stadium.
- additional revenue for the cinemas through a new type of offering. Potentially also a new customer segment for the cinemas and a new revenue stream.
Note to US readers: Robbie Williams is not really known in the US, but in Europe he’s the kind of artist filling stadiums with 50000 people.
Tagged as:
Music Industry,
Strategic Innovation
Strategy as practiced by companies today has many flaws.
“Reshaping Strategy: The Content, Context and Process of Strategic Innovation” synthesises the current debate into a comprehensive framework, allowing companies to address the issues involved from different angles and view points.
It offers a new perspective, new tools and ideas on how to address strategic issues for enabling new growth by developing fresh answers to the classic questions in strategy: what business are you in? who is your customer? and how to organize to fulfill customers’ needs?
The paper is structured into three main parts:
Part 1 gives an overview of the current literature on the content and process of strategic management in general, followed by criticism in regard to the content, process, and tools used today.
Part 2 gives a definition, as well as a detailed description of the content, process and context of strategic innovation. Furthermore is offers tools for assessing the innovativeness of strategies and a framework for thinking through the various issues involved in strategic innovation.
Part 3 focuses on managerial implications, and is followed by a summary, and suggestions for further reasearch.
Each chapter contains not only practical advice on how to develop innovative strategies, but offers summaries, along with trigger questions to gain new insights and help challenge managers’ and companies’ mental models.
The complete guide can be downloaded here.
Note: Although the paper is about 2 years old, I think it still offers a pretty comprehensive overview and interesting view on strategic innovation and business model innovation. I’ve been contacted recently by people who told me they used the framework to get the discussion started and build a common understanding. Let me know how you use it.
I’ll post new ideas around my framework in the weeks to come on this blog. I’m thinking about putting a series together on “Reinventing your business”. Let me know whether this is of interest. Update: start here for the series.
Tagged as:
Blue Ocean Strategy,
Business Model Innovation,
Strategic Innovation,
Strategy
