5/23/17
1
SteveChu LenaPetrova-ToolsieTreehouseStrategyandCommunications [email protected]
ChangeHappens: BusinessModel Innovation forLanguageCompanies
SteveChuTreehouseStrategyandCommunicationssteve@treehousestrategy.com
50ShadesofGreatBusinessModels
About us
Mission: help companies grow
Demand for strategic planning, management consulting, and technology advisory services in translation and localization industry
We devise strategies to penetrate more customer accounts, broaden the spectrum of solutions and service offerings, and bring them to market.
Headquartered in the Washington DC metropolitan area, Ad Astra’s mission is to seamlessly break down communication barriers while accurately and faithfully conveying meaning and cultural context through full-service linguistic support.
5/23/17
2
• Changing landscape, changing business models
• What is a business model?
• Why innovate?
• Case study
• Framework and tools for innovating business models
Outline
The once mighty video rental chain…
5/23/17
3
Mail order video rental
1998
Streaming Original content provider
2007 2013
• How a company produces value—organizational design, infrastructure, culture, and operational processes
What is a business model?
• strategy determines the direction of organizations and how resources should be used to innovate business models to best meet the needs of customers
• strategy defines and communicates an organization's unique position, and determine how organizational resources, competencies, and expertise should be combined to create competitive advantage
What is
5/23/17
4
Advantage – capabilities and results that are more beneficial to customers than other
alternatives• In the case of language companies: are
you able to charge more for language services than your competition?
Competitive advantage occurs when your products and services can be provided in a way to generate more sales and profits than
a competitor• Who: the customer touch points? Sales,
marketing, operations, AR• When: hours of business operations,
touch points, how fast you generate quotes
• Where: where you support your customers
Business model is the who, when, where, why , and how a company provides products
and services
Business model innovation: substantive changes that enhance a company’s
performance
What is competitive advantage and business model?
• It’s not working
• It’s not producing enough value or not fast enough
• Anticipate changes in the market and industry
Why change business model?
5/23/17
5
Ad Astra is evaluating whether to hire in-house interpreters for in-demand languages for high-volume accounts or locations in order to
• Seek greater control over performance
• Retain trained interpreters
• Realize potential cost savings
• Have greater control over costs (as freelancers are entitled to increase their rates)
Business objectives
5/23/17
6
• How many interpreters should Ad Astra hire on a fulltime basis for each grouping of sites, for each language?
• What are the potential cost saving and benefits in each scenario?
Questions we are trying to answer
• An in-house interpreter is versatile and can handle different types of interpretation assignments
• Past patterns predict the future
• Assuming changes in the marketplace in the long-term as well as anticipated new contracts
Assumption
• Look at “hot zones” for each language
• Consider annual aggregate volume
• Compare volume year-over-year
• Analyze volume and utilization by week
• Analyze volume and utilization by day
Methodology
5/23/17
7
• Focus on Spanish, American Sign Language, and potentially the next two languages
• Focus on 3-5 major accounts in government and healthcare
Scope of study
Language Jan to Apr2 0 1 6 Jan to Ap r2 0 1 7Span ish >1 0 ,0 0 0 >2 0 ,0 0 0American Sign Language >1 0 0 0 >2 0 0 0Fren ch 1 0 0 ’s 1 0 0 0 ’sMandarin 1 0 0 ’s 1 0 0 0 ’sAmharic 1 0 0 ’s 1 0 0 0 ’sKo reanRu ssianFarsiVietn amese
Top languages, by accountHe althcare Account Gove rnment He althcare
Language 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6 2 0 1 7
Span ish 2 ,0 7 8 .7 7 3 ,9 1 1 .5 8 6 1 5 .6 4 9 8 1 .4 3 1 6 ,5 5 4 .1 1 3 5 ,4 2 2 .6 8Ko rean 8 4 .7 1 2 4 .9 8 4 0 8 .9 2 7 2 8 .9 7 6 .1 2 0 .0 0American Sign Language 9 5 .3 2 2 7 .6 5 2 8 9 .9 0 7 4 9 .0 1 0 .0 0 0 .0 0Mandarin 8 5 .9 7 5 2 2 .4 6 1 6 5 .6 1 2 9 4 .9 7 0 .0 0 1 .0 2Amharic 2 7 5 .6 0 2 5 0 .9 5 8 2 .7 3 2 7 2 .9 1 0 .0 0 0 .0 0Farsi 3 0 7 .8 2 2 1 .0 1 1 3 7 .7 7 3 5 3 .2 9 0 .0 0 0 .0 0Vietn amese 1 5 2 .7 0 6 0 .5 5 1 8 4 .9 6 1 9 3 .3 4 0 .0 0 0 .0 0Arab ic 1 4 3 .1 3 4 .9 6 1 4 7 .3 2 1 0 0 .4 0 4 .0 8 1 .4 3Ru ssian 2 4 .8 2 4 0 .1 6 3 6 .2 7 4 4 .3 2 0 .0 0 0 .0 0Grand To tal
Jan to Ap r
Spanish, Jan – Apr 2016
Rockville, MD 20850
Baltimore, MD 20632
Hagerstown, MD 21740
Baltimore, MD 21202
Baltimore, MD 21234
5/23/17
8
Spanish, Jan – Apr 2017
Rockville, MD 20850
Rockville, MD 20850
Baltimore, MD 20632
Hot zone: Rockville, MD 20850
Company B
Company A
0.4 mile apart
Volume by day
Wk/Date Healthcare Government Grand Total1 151.76 447.22 598.981/1/2017 14 47.92 61.921/2/2017 20.42 48 68.421/3/2017 31.25 54.15 85.41/4/2017 23.83 68.03 91.861/5/2017 20 83.04 103.041/6/2017 24.09 74.08 98.171/7/2017 18.17 72 90.172 115.37 449.45 564.821/8/2017 20.37 71.76 92.131/9/2017 22.67 71.76 94.431/10/2017 19.24 72.6 91.841/11/2017 21.75 61.5 83.251/12/2017 10.09 60.33 70.421/13/2017 7.75 61.5 69.251/14/2017 13.5 50 63.5
5/23/17
9
Hot zone: Rockville, MD 20850 – Spanish, FTE
2 0 1 7 We e k Emma Olivia Ava Isabe lla Soph ia Mia Charlo tte NoahGrand To tal
#o fve ndorswho worked more than 3 5 h rs FTE
1 3 6 5 9 .8 4 8 2 1 .4 2 6 1 5 3 1 8 9 .2 2 3 4 .72 1 4 5 9 .9 3 4 8 .2 5 4 8 .0 7 3 1 .9 2 3 1 .8 7 8 1 4 .1 7 2 5 6 .2 1 3 6 .43 4 2 .0 8 4 0 .9 2 1 2 4 2 2 6 .8 3 2 3 .5 1 1 .7 5 1 9 9 .0 8 3 5 .04 1 2 2 4 3 6 2 4 .2 8 4 4 .7 5 3 3 2 3 .5 1 2 2 0 9 .5 3 2 5 .25 3 6 1 2 4 8 1 8 .1 7 5 7 .5 2 5 2 2 .1 7 4 0 2 5 8 .8 4 4 6 .56 2 4 3 6 3 6 2 4 4 3 .3 3 2 5 2 7 .2 5 1 2 2 4 2 5 1 .5 8 3 6 .37 2 3 .9 5 4 2 4 3 6 2 2 2 4 .6 7 3 5 .7 2 1 5 2 3 5 .2 9 3 5 .98 4 8 .3 3 6 0 1 2 3 0 2 2 1 3 .5 2 3 .8 3 1 1 2 2 0 .6 6 2 5 .59 2 4 .2 2 2 4 .8 3 7 1 .7 5 4 2 .4 5 2 9 .5 8 2 2 1 3 .8 3 1 2 4 1 .6 8 2 8 2 .3 4 3 7 .11 0 1 2 4 8 1 2 1 1 .9 8 2 3 .2 5 3 1 .6 3 2 3 .9 8 1 8 .1 7 1 8 1 .0 1 1 4 .51 1 3 5 .9 2 6 0 .2 5 1 1 .9 7 7 .2 5 2 7 2 9 .2 5 3 6 6 .5 2 8 4 .0 7 4 7 .11 2 2 3 .9 3 2 4 3 6 .0 8 2 4 3 0 .5 3 5 .7 8 3 6 .6 7 2 1 0 .9 6 3 5 .31 3 4 8 2 2 .9 5 1 2 3 .8 3 2 1 .8 4 1 4 3 6 .2 6 2 6 1 8 4 .8 8 2 4 .61 4 4 7 .8 3 2 4 1 2 2 6 .8 3 5 3 1 .5 2 5 5 0 2 2 2 .1 6 2 5 .61 5 3 3 .6 7 4 8 4 8 6 8 2 7 2 6 .1 5 1 1 .7 8 1 6 2 7 8 .6 3 7 .01 6 2 4 3 6 .0 8 3 6 .0 7 1 3 1 5 7 2 4 1 5 1 7 0 .1 5 2 4 .31 7 4 7 .8 3 1 2 4 8 2 5 3 .0 8 5 1 1 .9 2 1 9 .5 1 7 2 .3 3 2 4 .3
Grand To tal 5 4 5 .7 1 4 9 1 .8 4 4 7 8 .8 2 4 7 8 .1 8 4 6 9 .3 3 3 5 9 .8 7 3 4 6 .4 5 3 2 6 .1 9 3 2 2 .5 2 3 8 1 8 .91
• Hourly rate of $15-20
• Annualized $30,000 to $40,000
• Tax and benefits, assumed to be 30%
Current rates
• Based on Google search, hypothetically we pay interpreters $15-25.
In-house interpreter assumptions and current rates
Rate Loade d rate Annual salary Loade d salary$ 1 5 .0 0 $ 1 9 .5 0 $ 3 0 ,0 0 0 $ 3 9 ,0 0 0 $ 1 5 .5 0 $ 2 0 .1 5 $ 3 1 ,0 0 0 $ 4 0 ,3 0 0 $ 1 6 .0 0 $ 2 0 .8 0 $ 3 2 ,0 0 0 $ 4 1 ,6 0 0 $ 1 6 .5 0 $ 2 1 .4 5 $ 3 3 ,0 0 0 $ 4 2 ,9 0 0 $ 1 7 .0 0 $ 2 2 .1 0 $ 3 4 ,0 0 0 $ 4 4 ,2 0 0 $ 1 7 .5 0 $ 2 2 .7 5 $ 3 5 ,0 0 0 $ 4 5 ,5 0 0 $ 1 8 .0 0 $ 2 3 .4 0 $ 3 6 ,0 0 0 $ 4 6 ,8 0 0 $ 1 8 .5 0 $ 2 4 .0 5 $ 3 7 ,0 0 0 $ 4 8 ,1 0 0 $ 1 9 .0 0 $ 2 4 .7 0 $ 3 8 ,0 0 0 $ 4 9 ,4 0 0 $ 1 9 .5 0 $ 2 5 .3 5 $ 3 9 ,0 0 0 $ 5 0 ,7 0 0 $ 2 0 .0 0 $ 2 6 .0 0 $ 4 0 ,0 0 0 $ 5 2 ,0 0 0 $ 2 0 .5 0 $ 2 6 .6 5 $ 4 1 ,0 0 0 $ 5 3 ,3 0 0
Financial breakeven point is $38,000 or $19 per hour
• There is enough volume for three Spanish interpreters for this site conservatively, potentially four
• Data is From Jan to Apr 2017, the first 17 weeks of the year
• Three interpreters at $17/hr
• 10%+ cost saving
Recommendation for Rockville, MD 20850
Rate Hours CostNoah $ 1 8 5 4 5 .7 1 $ 1 2 ,0 0 5 .6 2 Emma $ 2 3 4 9 1 .8 4 $ 9 ,8 3 6 .8 0 Olivia $ 2 5 4 7 8 .8 2 $ 1 1 ,9 7 0 .5 0 Isabe lla $ 2 6 4 7 8 .1 8 $ 9 ,5 6 3 .6 0 Total 1 9 9 4 .5 5 $ 4 3 ,3 7 6 .5 2
Rate Loade dLoade d cost fo r
1 7 we e ksCapacity fo r1 7
we e ksIn -house Span ish in te rp re te r $ 1 7 $ 1 9 .5 0 $ 1 3 ,2 6 0 .0 0 6 8 0In -house Span ish in te rp re te r $ 1 7 $ 1 9 .5 0 $ 1 3 ,2 6 0 .0 0 6 8 0In -house Span ish in te rp re te r $ 1 7 $ 1 9 .5 0 $ 1 3 ,2 6 0 .0 0 6 8 0
Total $ 3 9 ,7 8 0 .0 0 2 0 4 0
5/23/17
10
How do you innovate business model?
Growth agenda
Growth agenda
Grow from the core
• Stick to your knitting• Align organizational
performance to goals and vision• MBO• Balanced Scorecard
Pursue quality & efficiency advantage
• Quality improvements• ISO• TQM• Lean
• Turnaround time improvements
• Response time to customers
5/23/17
11
Growth agenda
Pursue marketplace advantage
• Buyer power• Supplier power• Substitutes• New entrants• Competition
Innovate into new areas
• Unserved market• Underserved
market
• Customer segments
• Value propositions
• Channels
• Customer relationships
• Revenue streams
• Key resources
• Key activities
• Key partnerships
• Cost structure
9 building blocks of business model generation
ChannelsDef. How you communicate with your customer segments to deliver your value propositions.
• Sales force• Web sales• Telesales• Partner channels• Larger suppliers
Def. Different groups of people or organizations you are targeting to serve.
Customer Segments Value Propositions
• Needs require a different offer
• Reached through different channels
• Require different types of relationships
• Have substantially different profitabilities
• Willing to pay for different aspects of products and services• Mass market• Niche• Industry segments
Def. The bundle of products and services that create value for a specific customer segment.• Value quantitatively measured (price, turnaround time)
• Qualitatively measured (quality, customer service)
• Newness• Performance• Customization• ‘Get the job done’• Price• Quality• Convenience• Cost reduction• Risk reduction
5 phases• Awareness• Evaluation• Purchase• Delivery/fulfillment• Post-sales support
9 building blocks
5/23/17
12
Key ResourcesDef. The most important assets needed to make a business model work.
• Physical• Intellectual• Human• Financial
Def. The type of relationships you have with your customer segments.
Customer Relationships Revenue Streams
• Personal assistance• Dedicated personal assistance
• Self-service• Automated services• Communities• Co-creationDriven by these motivations:• Customer acquisition• Customer retention• Boosting sales (upselling)
Def. The money a company generates from each customer segment.• Usage fee (service fee)• Asset sale• Subscription fees• Licensing fees• Lending/renting• Brokerage fees• Advertising• Fixed menu pricing• Dynamic pricing
9 building blocks
Cost StructureDef. All costs incurred to operate a business model.
• Cost-driven• Value-driven
Def. The most critical things you must do to make the business model work.
Key Activities Key Partnerships
• Production• Designing/making/delivering products
• Problem solving• Platform/network
Def. The network of suppliers and partners that make the business model work. • Strategic alliances
between non-competitors• Coopetition: strategic
partnerships between competitors
• Joint ventures to develop new businesses
• Buyer-supplier relationships• Optimizing and economy of scale
• Reduction of risk and uncertainty
• Acquisition of particular resources and activities
• Fixed costs• Variable costs• Economies of scale• Economies of scope
9 building blocks
Key partners Key activities Value proposition Customer relationships
Customer segments
ChannelsKey resources
Cost structure Revenue streams
Top Related