Business Model Innovation
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BUSINESS MODEL INNOVATION Marcus Linder 2014-09-30 Marcus Linder 1
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Just an overview of the business model concept, customer development, organizing for corporate business model innovation, business eco-system challenges, and a few ideas of research opportunities. I presented this during lunch at my office to introduce the more technically oriented researchers to the general topic. The presentation was, although fast paced, quite appreciated.
Transcript of Business Model Innovation
Marcus Linder 1
BUSINESS MODEL INNOVATION
Marcus Linder
2014-09-30
www.viktoria.se
TOPICS TODAY
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
Marcus Linder
Sorry, limited time for questions today.
BUT – I work here.
THE BUSINESS MODEL
CONCEPT
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
www.viktoria.se
”BUSINESS MODEL” IN BOOKS
Src: google ngramsMarcus Linder
www.viktoria.se
”BUSINESS MODEL” AT GOOGLE SCHOLAR
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 20140
5000
10000
15000
20000
25000
30000
35000
"Business model" @ Google Scholar
Search date: 2014-09-10
Marcus Linder
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”BUSINESS MODEL” GOOGLE WEB SEARCH
Src: google trends
2005 2013
Marcus Linder
2009
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MANY TRIED TO OWN THE CONCEPT…
Harvard: Johnson & Christensen 2008(≈820)
Wharton: Amit & Zott 2001(≈3100)
UC Berkley: Chesbrough & Rosenbloom 2002(≈2000)
Bain/Harvard: Magretta 2002(≈1700)
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…and the winner is…
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The conceptual logic of how a business creates, delivers and captures economic value [from customers]
Business model:
Marcus Linder
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THE BUSINESS MODEL CANVAS
• Language for internal communication – avoid misunderstandings
• Template to remember relevant business guesses to work through
• Emotional help to focus on ”what we don’t know” – rather than what we have data on
Marcus Linder
www.viktoria.se
EVOLUTION OF THE BUSINESS MODEL CANVAS…
Src: Osterwalder, A. (2004). The Business Model Ontology-a proposition in a design science approach. PhD, Universite de Lausanne.
Marcus Linder
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EVOLUTION OF THE BUSINESS MODEL CANVAS…
Osterwalder 2008 Marcus Linder
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Today’s dominant incarnation
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BUSINESS MODELS AS VALUE NETWORKS OR PLATFORMS
Focal firm’s business model
Partners Channels & customers
”We are developing a business model in which 22 firms work together to revolutionize home entertainment/international shipping/book reading/etc….”Marcus Linder
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”BUSINESS MODELS” AS REVENUE MODELS
”They use a razor and blade business model.”
”They use a freemium business model.”
Marcus Linder
SEARCH VS EXECUTION
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
www.viktoria.se
TWO PARTS TO A FIRM
The ”performance engine”• Highly optimized ”machine” doing
product development and operations – known goal and better/more/cheaper
The ”business model innovation project”• Resource consuming group trying
to learn under considerable uncertainty – finding new goal
Marcus Linder
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PERFORMANCE ENGINE
• Role: Pays all the bills• Goal: Excellence in
execution of verified business model
• Learning: often immense• Type of learning:
optimization of known parameters
Marcus Linder
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YOU MUST NOT HURT THE PERFORMANCE ENGINE!
It pays the bills – and ALWAYS wins internal power/political
struggles
www.viktoria.se
BUSINESS MODEL INNOVATION PROJECT• Role: Temporary organization to create new/extend
performance engine. Consume today to maybe create
tomorrow.
• Goal: Design and verification of business hypotheses
• Learning: Core task!
• Type of learning: Finding parameters to be optimized
Deals på restauranger, träning, resor, shopping, skönhet och merMarcus Linder
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PERFORMANCE ENGINE STRENGTHS
Well established processes (e.g.
NPD) are usually…
…but are typically inflexible to deal
with:
Realiable
High quality output
More efficient!
Sign. market
uncertainty
Rapid project
scope changes
Marcus Linder
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AGAIN: YOU MUST NOT HURT THE PERFORMANCE ENGINE!
It will eat your project for breakfast, if push comes to shove
SYSTEMATIC SEARCH
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
Marcus Linder 27
WHAT I WAS TAUGHT IN SCHOOL…
EXECUTE VS SEARCH
(Slide stolen from Henrik Berglund)Marcus Linder
(Slide stolen from Henrik Berglund)Marcus Linder
(Slide stolen from Henrik Berglund)Marcus Linder
1. Find a great idea.2. (Do great market research)3. Launch at great scale4. Find out you forgot one key question5. Go home…
Marcus Linder
(Slide stolen from Henrik Berglund)Marcus Linder
There is a better way!
Marcus Linder
Marcus Linder
BASIC IDEA
State business model
hypotheses• (not specs, don’t
build)
Prioritize hypotheses to
test• (identifiy ”deal
killers”)
Test hypotheses• on market (low fidelity prototypes,
possibly incremental dev.)
Iterate as needed,
• otherwise realize idea (”build”)
Marcus Linder
www.viktoria.se
BUSINESS MODEL CANVAS
• Language for internal communication – avoid misunderstandings
• Template to remember relevant business guesses to work through
• Emotional help to focus on ”what we don’t know” – rather than what we have data on
Marcus Linder
www.viktoria.se
Guess!Guess!
Guess!
Guess!
Guess!
Guess!
Guess!
Guess!
Guess!
STARTING POINT:
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Validated hypothesis
GOAL:
Validated hypothesis
Validated hypothesis
Validated hypothesis
Validated hypothesisValidated
hypothesis
Validated hypothesis
Validated hypothesis
Validated hypothesis
Marcus Linder
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3 LAYERED BUSINESS MODEL
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DATA COLLECTION PHILOSOPHY
A bias towards conversations
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WHY BIAS TOWARDS CONVERSATIONS?You don’t know precisely what and whom to ask• You can keep going even if you guessed wrong, less wasted effort
(data) compared to surveys
Guess-to-guess cycle time is a determinant of success• Tight cycles (testing few hyp) more cost effective than large
(testing many)• Surveys are so cumbersome that you may get only one or two
“large” shots!
Conversations good at creating “insight”• Help you understand WHY a stakeholder thinks this or that way
• Surprisingly powerful for (analytical) generalization• Increases chances of avoiding local optima and find global (less
local) optimaMarcus Linder
www.viktoria.se
EMOTION = IMPORTANCE!
Use a script – but be flexible!
Try to get a conversation going!
If customers show passion – follow them there and drill down!
Marcus Linder
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LOW FIDELITY PROTOTYPES
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PRODUCT-MARKET FIT
Value proposition Customer needs
http://businessmodelalchemist.com/blog/2012/08/achieve-product-market-fit-with-our-brand-new-value-proposition-designer.html
Converse about this BEFORE you
introduce your idea
When you present your idea, be most suspicious of ”yeah, that seems real nice”-type answers.
(A prior need-based conversation helps with perspective.)
Marcus Linder
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LOW FIDELITY PROTOTYPES TO AVOID FALSE NEGATIVES
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EMOTION = IMPORTANCE
(As a first approximation)
Marcus Linder 53
PAYMENT = VALIDATION
(Later, but before building it properly)
ECO-SYSTEMS
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
www.viktoria.se
HOW TO SUCCEED AT INNOVATION
Customer insight
Operational excellence
Marcus Linder
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Plenty of good market research end customer insight
On time, on spec. operational excellence
Got large OEMs on board from start channel insight
In Dec 2007, announced ”no further development” of PAX
Launched in 1998
Missed: complementor insight – there was no carrot or stick for thousands of repair shops to quickly acquire tools and training.
Marcus Linder
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HOW TO SUCCEED AT INNOVATION
Customer insight
Operational excellence
Value network operational excellence
Value network insight
Marcus Linder
RESEARCH PROJECTS
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
www.viktoria.se
ROLES & IN-KIND
• Serious Business Model Validation ≈ 500-2000 hours
• Too expensive to run completely by researchers!• (And wont work anyways…)
Creating New Business is Hard Work!
• Risk reduction focus facilitates motivation• Profit focus facilitates motivation
Excellent in-kind task
Marcus Linder
www.viktoria.se
RESEARCH OPPORTUNITIES
Too-rare-to-study businesses• What are challenges of circular business models?• What are challenges of …
Method development:• How can [particular method] be adapted to better suit
development for…• …complex business eco-systems, Large established
organizations, Non-profits, Particular offering type (multimodal transports, product-service systems, eco-innovation, …)
Marcus Linder
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THANK YOU FOR LISTENING
1. Business model concept
2. Search vs. execution
3. Systematic search
4. Eco-systems
5. Research projects
Marcus Linder
