Innovation Business Models PMI Heartland

Outcomes Learning Objectives Describe how organizations create, deliver and capture value Model how the value delivery process occurs in a service and/or product oriented business Analyze the innovation process and how innovation influences customer value proposition Design a reiterative process for analyzing value delivery and business sustainability

Innovation-Business Model The Connection Two Forms of Innovation Technical Innovation Products, Services, Process (Production) Administrative Innovation Relationships, People, Tasks, Policies Procedures (Organizational Setting) In both cases, outcomes is to improve efficiency and effectiveness for the end user

There are two types of Innovation Incremental innovations Focus on exploiting the potential-adding to or modifying to improve user experience Radical innovations Breakthrough products…nascent

Opportunity Opportunity has four key characteristics Attractive Durable Timely Anchored in a product, service or business that creates or adds value to the end user We find opportunities by observing trends, solving problems or finding gaps in the market place Why discuss this before looking at the Model…key to understand this to understand value….the customer value and the curiosity of the model in understanding business process

The Business Model Canvas

Business Model A business model describes the rationale of how an organization creates, delivers, and captures values. Business model shows how the company intends to make money.

Four Main Areas of Business Customers Offer Infrastructure Financial Viability

9 Building Blocks Customer Segment ( CS) Value Proposition ( VP) An organization serves one or several customers segments Value Proposition ( VP) It seeks to solve customer problems and satisfy customer needs with value propositions ( offers) Channels ( CH) Value propositions are delivered to customers through communications, distribution, and sales channels

9 Building Blocks ( cont.) Customer Relationships ( CR) Customer relationships are established and maintained with each customer segment Revenue Stream ( R$) Revenue streams result from value propositions successfully offered to customers Key Resources ( KR) Key resources are the assets required to offer and deliver the previously described elements

9 Building Blocks (cont.) Key Activities ( KA) By performing a number of key activities Key Partnerships ( KP) Some activities are outsourced and some resources are acquired from outside the enterprise Cost Structure ( C$) The business model elements result in the cost structure.

Smart Door Lock Model

Customer Segments Customer groups represent a separate segment if: Their needs require and justify a distinct offer They are reached through a different distribution channel They require different types of relationships They have substantially different profitability's They are willing to pay for different aspects of the offer

Different Types of Customer Segments Mass Market Niche Market Segmented Diversified Multi-Sided Platform ( multi-sided market) Micro Precision Products- Automotive, Medical and Watch industry Diversified are two Different bases- Amazon going from hard copy to online sales.

Value Propositions What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? Which Customers needs are we satisfying? What bundles of products and services are we offering to each customer segment?

Value Propositions Newness: Satisfying an entirely new set of needs that customers previously didn’t perceive because there was no similar offering Cell Phones Green Funds Performance: Improving a product or service. PC’s Automobile Customization: Tailoring products and needs to customer

Value Propositions “Getting the job done”—Rolls Royce Airline Engines Design: Fashion and Consumer Electronics Brand/Status: Rolex to underground brands Price: Nano, Tata, Cost Reduction: Salesforce Risk Reduction: Accessibility: Mutual Funds, NetJets Convenience/Usability: iTunes/iPods

Non Profit Model

Charting this part of your business Format https://www.youtube.com/watch?v=QoAOzMTLP5s Start today with Customer Segment/Value Proposition