The Three BIG Patterns are: 1. CUSTOMER EXPERIENCE SHIFT eg Starbucks

The Three BIG Patterns are: 1. PLATFORM SHIFT eg Amazon

The Three BIG Patterns are: 1. BUSINESS MODEL SHIFT eg Zipcar, uber.

CHOOSING THE RIGHT APPROACH (Business Model / Platform / Customer Engagement) ? Use Business Model Innovation when : - Part of your business offering is over/under valued. Large group of potential customers cannot afford your offering. Not much variation in industry (in relation to business model). Assets in business can be restructured indifferent economic model. Internal business systems are strong on reliability, flexibility, value delivery. Profit model changes have benefit for customer and business.

CHOOSING THE RIGHT APPROACH (Business Model / Platform / Customer Engagement) ? Use Platform Innovation when : - Customers have to show considerable skill/ persistence to get problem solutions. A group with similar needs/ideas exists without a forum/hub for them to unite. Demand for a complex set of assets/capabilities exists – too difficult to meet. It is possible for businesses to combine and allow access to each others assets. It is possible to co-opt customers, competitors to ‘work for’ your business. There are ways to expand/extend/diversify current business offering.

CHOOSING THE RIGHT APPROACH (Business Model / Platform / Customer Engagement) ? Use Customer Engagement Innovation when : - Complaints about service and/or low customer expectations are ‘normal’. Many potential customers are not active in market due to poor service. Business models have punitive switching barriers, try to get customer ‘lock-in’. A different buying model/experience can be found (compared to existing). Engagement through values, sense of self, connections to community is possible. Excellence on one market can be transferred to another market.

CORE – change the known - one or two types involved – low risk and reward. - works best if the business is already a leader in that market – usually minor product improvements to existing range/same customer base. ADJACENT – change the boundaries – three of four types involved - higher risk and reward. - reframing offering to significantly shift customer expectations / value delivery. - Can bring years of advantage by ‘resetting’ market boundaries. eg Method – cleaners as ‘household fashion aesthetic’ TRANSFORMATIONAL - change the game – five or more types involved –high risk and reward. - market maker/ breaker affecting existing markets –may create new businesses. - big effect on customer and competitors. eg iTunes –digital music & movies sales.

CHOOSING THE RIGHT LEVEL OF INNOVATION AMBITION (Core /Adjacent /Transformational) ? Use Core innovation when :- Business is already strong in market with products leading growth. Competitors are focused on product performance – other possibilities exist. Market has not much innovation /excitement, and has high barriers to entry. Cash flow is important – short term gains needed. Assets & capabilities already in place to drive the innovation. Low risk tolerance or low innovation capability in business.

CHOOSING THE RIGHT LEVEL OF INNOVATION AMBITION (Core /Adjacent /Transformational) ? Use Adjacent innovation when :- Existing offerings not showing growth, due to strong competitive pressure. Competitors using one/two types of innovation outside product performance. Market is mature/declining – need to make changes or exit. Need significant returns on modest investment, but can allow time to develop. Ability to repurpose assets, further invest for flexibility etc exists. Business is ready for change (risk, opportunity, new markets etc)

CHOOSING THE RIGHT LEVEL OF INNOVATION AMBITION (Core /Adjacent /Transformational) ? Use Transformational innovation when :- Dramatic growth increase needed – need for fundamental changes understood. Competitors increasingly active – market structure change may overcome this. Market is mature/declining, low barriers to entry, boundaries blurring. Time for major change to happen exists, radical new growth needed. All existing assets and capabilities are up for review / redeployment / redundancy. Both business offering and market served may change completely.

INNOVATION Strategy is found by combining the approach : - Business Model Shift Platform shift Customer engagement Shift With the scale /size of innovation : - Core - ‘change the known’ Adjacent – ‘change the boundaries’ Transformational – ‘change the game’ and using innovation tactics – see handout.

IN GROUPS OF FOUR Recommend a strategy for ONE of a)A corner dairy in Auckland b)A video rental business c)A hotel in Queenstown