1. Creative Inquiry Talk Guest Speaker Session October 19 th, 2015 Guest Speaker Session October 19 th, 2015

2. 2 Why Business Models Matter? “business model” vs. “strategy” Who customers are & how to make $$ by providing value vs. how you’ll beat competitors by being different BM = absolute (no competitors) vs. Strategy = being different Models pass when both tests clarify how the business’s various elements fit together

3. 3 Why Business Models Matter? BMs: metaphors & analogies –mathematical formula –“riskless business” –writing a new story –managerial equivalent to the scientific method –because BMs tell a good story, it gets everyone in the organization aligned… BMs without a Strategy  “too many fledgling firms rushed to market with identical business models and no strategies to differentiate themselves” BMs with a Strategy  “his model was the same as Kmart, but his strategy was unique”

4. 4 Breakthrough, game-changing products or services rarely emerge from established businesses That’s because a radically new product/service usually needs a new business model How to transcend this problem: –Understand your existing model at a granular level in order to reinvent it  “BMs often look unattractive to internal & external stakeholders – at the outset” –Come up with a great way to help people get an important job done  “took a good technology and wrapped it in a great BM” Reinventing Business Models No more than 10% of innovation investment at global firms is focused on developing new business models

5. 5 Business Models: Two Frameworks Why Business Models Matter: 1.Narrative Test: via an unmet need or selling in innovative ways 2.Numbers Test: P&L must add up Reinventing Your Business Model 1. Customer Value Proposition (CVP): “Job to be done” 2. Profit Formula: revenue, cost structure, margin model, resource velocity 3. Key Resources: intangible vs. tangible 4. Key Processes: processes, rules, and norms

6. 6 Customer Value Proposition (CVP) Creating value for customers by identifying important “jobs” Target customer Job to be done Offering Profit Formula Revenue model = P x V Cost structure  key assets, direct & indirect costs, scale Margin model  net @ transaction level Resource velocity  resource burn rate Four Elements: 1)Customer Value Proposition (CVP) 2)Profit Formula 3)Key Resources 4)Key Processes (Johson, Christensen, & Kagermann, 2008) Key Resources Human capital Technology / equipment Knowledge & information Channels Alliances / strategic partners Branding Key Processes Processes (e.g. design, product development, etc.) Rules & metrics (e.g. lead times, etc.) Norms (e.g. approach to customers and channels) Business Model Coordinated method for delivering what customers want, how they want it, in a profitable way Reinventing Business Models

7. 7 Reinventing considerations… –A “job”  fundamental problem in a given situation that needs a solution –Most important attribute of CVP is precision… –Biggest risk with CVP  neglect of focus on one job, dilute their efforts –Selling a BM is “to persuade (often) existing customers to buy a program instead of a product…” –Rules, norms, and metrics may not be fully envisioned until after the new product / service is road tested…

8. 8 Current Business Model Current model may be revolutionary in a new market Old model will do when CVP is met with: w/ current profit formula using most, if not all, of current resources / processes using same core metrics, rules, and norms Example  P&G with the Swiffer No Business is Bullet-proof  Firms must continually seek “fit” New vs. Old Business Model 1) Customer “shut out” (e.g. Tata’s Nano) 2) New technology / business model (Apple & MP3 players) 3) Job-to-be-done focus, where one does not exist (FedEx) 4) Fend off low-end disrupters (Bloom going “upmarket”) 5) Shifting when global competition intensifies (Hilti) New Business Model