Using business model for innovating government services

Dr. K.B.C. Saxena

Fortune Institute of International BusinessNew Delhi

November 8, 2014

Using Business Model for Innovating Government Services

What is a Business Model?

• A business model basically explains how a company/ autonomous agency is doing its business. The business model explains how value is created for the consumers and how value is captured for the company/agency and its stakeholders.

• Generally, a better understanding of the business model gives the agency a good overview of how it creates and captures value. It gives the agency insights to the relationship between what the agency does and the agency’s successes, and it gives the agency the ability to compare its business model with other similar agencies and to understand what can advantageously be changed to keep its service advantage to the community so that future growth of the agency will continue.

2Business Model Innovation in Govt

Why bother about Business Model?

It helps an autonomous/ govt. agency:

• Communicate it to others (through a common language)

• Consider the whole (holistic appearance)

• Be creative in providing corruption-proof service.

Business Model Innovation in Govt 3

Visualising the Business ModelStep 1: the most important part


Value Proposition

Consumer Segments

The offer to the

consumer including how

and why it addresses

their need/ fulfills their

job to be done.

How consumers

themselves will describe

the benefit?

What group of people

benefit from the

Value Proposition?

How many there are

now and in the

future?

Visualising the Business ModelStep 1: the most important part


Value Proposition

Consumer Segments

Visualising the Business Model (cont.)

Step 2: How you deliver and realise value?


Value Proposition

Consumer Segments

Channels

Pricing Model

How the VP is delivered to the consumer

(distribution

)?

How it is communicated to them (marketing)?

How we will price the proposition, whether

fixed, variable or subscription pricing?

Includes alternative sources of revenue,

particularly important if the consumer is not

expected to pay (social services).


Step 2: How you deliver and realise value?


Value Proposition

Consumer Segments

Channels

Pricing Model

Consumer-facing Model


Step 3: but how is it different?


Value Proposition

Consumer Segments

Channels

Pricing Model

Competitive Strategy

Who the existing competitors are and how we will

react to them?

Likely new entrants into this space. Why will we win?


Step 3: but how is it different?


Value Proposition

Consumer Segments

Channels

Pricing Model



Step 4: How you create the value?


Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities


Who will we need to partner with or

the input we are dependent on in

order to develop/ deliver the VP?

The skills we need in order to

create the VP, particularly the team.


Step 4: How you create the value?


Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities


Visualising the Business Model (cont.) Step 5: How much it costs you to create?


Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities

Costs


How much will it cost to initially develop

the VP, and how much it will cost to

subsequently market and deliver it?



Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities

Costs




Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities

Costs


Problem: This model assumes static no. of consumers!



Pricing Model

Costs

Profitability



Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities

Costs


Growth Strategy (for Dynamic Consumer nos.)

How we plan to grow and what we hope

our organization will be in 5 years? Do we

plan to sell, and if so, to who and when?



Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities

Costs


Growth Strategy (for Dynamic Consumer nos.)

Step 6: How will you grow?

Business Model Canvas


Value Proposition

Consumer Segments

Channels

Pricing Model

Partners

Capabilities

Costs


Growth Strategy

Business Model Innovation• As society and consumers change, agencies need to

challenge, re-think or re-invent their business model in order to stay cost-effective. For instance:– By re-thinking their value proposition to the consumers

– Seeking new ways to capture new consumer segments

– Applying a new profit formula

– Restructuring their activities, resources and partnerships

• As the business model takes a holistic approach towards how agencies provide services, agencies can use the business model canvas tool to go through the business model and question each building block and its relationship with other building blocks and think through the consequences of changing the business model.


Five Forms of Business Model Innovation

• Resource driven innovation is transforming the business model from the agency’s infrastructure, key partners, and key resources.

• Offer driven innovation is offering consumers a radical new value proposition affecting the other business model building blocks.

• Consumer driven innovation is based on new consumer needs, facilitated access or increased convenience.

• Finance driven innovation is finding new revenue streams, pricing mechanisms or reduced cost structures.

• Multiple-epicentre driven innovation is characterized by several epicenters in the business model canvas.


Case Study: Water Policy Innovation in Singapore

Due to Singapore’s small land mass and limited water storage facilities, Singapore has historically been forced to rely on imported water from Malaysia, despite its relatively high and regular rainfall.

At the local level, the country’s heavily reliance on a single supplier and its exposure to potential unilateral price hikes have resulted in the water supply becoming a strategic priority for the government and wider population.

As a result, there has been clear political intent and wide spread public support for ensuring national water security and establishing a diversified, clean, safe and sustainable water supply that is sufficient to meet the country’s growing demand for water going forward.


Traditional Approaches to Water Security

• Pricing water at market rates.• Appliance rating systems for water use efficiency.• Water supply source diversification.• Waste water recycling.


Business Model Canvas for Water Policy


Value Proposition

-Reduce water consumption-Enhance water supply through capture and conversion-Educate public about water management

Consumer Segments

- Citizens

-Businesses

Channels-School education

Pricing Model-Standard price, subsidy to poor, higher tax to higher consumption

Partners- Siemens R&D

Capabilities-Water recycling--Desalitation

Costs-R & D-- Water purification-- Water desalitation


Policy-based + technological

Growth Strategy

Water Policy Innovation in Singapore• Develop R&D capabilities in new, diversified and more

efficient water technologies.• Work with local and international partners, in both the

public and private sectors, to conduct applied research for Singapore having an efficient, adequate and sustainable water supply.

• Support of Siemens’ Global Water R&D Centre in Singapore for producing ‘next generation’ desalination units


Supply-Side Policy Innovation• Four national taps:

1. Local catchments

2. Imported water from Malaysia

3. Recycled water, brand name ‘NEWater’

4. Desalination

• PUB (Public Utility Board) manages each component of water cycle, from sourcing and collecting water, to supplying water for domestic and industrial use, to the treatment of used water to produce NEWater.


Demand-Side Policy Innovation• Water pricing policy:

1. Water priced to reflect its cost base

2. Imposing a Water Conservation Tax (WCT)

3. Efficient tariff structure: standardised pricing structure for all households; subsidy to low-income households.

4. Progressive WCT: increases as water consumption rises.

• Three point communication strategy:1. School and public educational campaigns to raise awareness

of water issues

2. “10-Litre Challenge” program to get people to reduce their daily water consumption by 10 litres

3. Water volunteer groups and promotion of dual-flush low capacity flushing cisterns


How did the Business

Model help Singapore in innovating

water management?


Using business model for innovating government services

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