1. Business Model Innovation
Andrew Leone, BS Engineering, MBA, MS Finance

2. 2
Recommended Reading
Girotra, K. and Netessine, S. (2014). The Risk Driven Business
Model: Four Questions that Will Define Your Company. Boston,
Massachusetts: Harvard Business School Publishing.

3. 3
Archimedes’ Lever
“Give me a lever long enough, and a fulcrum strong enough on which to place it, and I will move the world.”
- Greek mathematician Archimedes
Applying a relatively lesser force to produce an outsized change

4. 4
Path to Reinventing Business Model
Adopt framework & guidelines to changes how decisions are made
1Identify key decisions of current
business model
3Change the decision pattern
associated with consequential
decisions to create new,
superior business models that
defy risks
2 Map out risks and
inefficiencies that these
decisions create in order to
identify those most
consequential

5. 5
Two Key Sources of Inefficiencies
• Decisions based on incorrect or incomplete informationInformation Risk
• Decisions based on conflicting self interests b/w partiesIncentive-alignment Risk
Risk arising due to existing decision patterns

6. 6
Audit Factors Impacting Profit Formula
Revenue model:
• Price
• Volume (M/S)
• Ancillary sales
Cost structure:
• Direct, indirect costs
• Economies of scale
• Scope
Resource velocity:
• Rate of value output
• Lead times
• Throughput, utilization
Riskiness of revenues, costs and resource velocity
Sensitivity of profits to changes in price, volume, costs, resources utilization
Leveraging techniques such as “Five Whys” to determine root causes of risks

7. 7
Example: LiveOps Call Center Model
Traditional Call Center Model
LiveOps Business Model
Employee
Selection
Client
sign-up
Staffing
decisions
Incoming
‘calls
Client
Sign-up
Incoming
calls
Employee
selection
Staffing
decisions

8. 8
4 W’s: Anchor Framework
Innovator’s focal point for systematically identifying key risks and lead to unlocking value
Theme
Idea Triggers
Example
What When Who Why
What decisions the
business model
involves
When a decision is
made
Who should make a
decision
Why the decision
maker makes the
decision they way he
does
Diapers.com LiveOps Walmart DoD
• Selected focused v.
flexible model
• Change the scope
of decisions
• Hedge or
compliment
decisions w. others
• Delay decisions as
much as possible
• Change the
sequence of
decisions
• Split decisions to
obtain partial info
before completion
• Transfer decisions
to best informed
• Transfer rights to te
party best able to
tolerate
consequences
• Move costs of
decision to party
• Change the profit or
revenue stream to
align incentives
• Synchronize
differing time
horizons
• Pursue a strategy of
vertical integration

9. 9
Continue the Conversation
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