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1. BUSINESS
MODEL
INNOVATION
2015
Berend-Jan Hilberts,
Menno van Dijk,
Saskia Rotshuizen

2. BUSINESS MODEL INNOVATION
DISRUPTS MASSIVE INDUSTRIES.
Introduction
Small scale
High cost
Compete on
functionality and
performance
Growth
Increasing scale
Cost economies
Compete on quality
and services
Maturity
Market saturation
Commoditization
Compete on
convenience and
price
Product innovation
Business model innovation
Industry development
Industry
size

3. MOST COMPANIES STRUGGLE WITH
THEIR INNOVATION PERFORMANCE
SOURCE: McKinsey Global Innovation Survey, McKinsey Innovation Practice
Percentage of global executives who agree
(%)
84% 80%
Our business
models are at risk
Innovation is important
to our growth strategy
We are satisfied with our
innovation performance
6%

4. AT THNK, WE HAVE SYNTHESIZED
BUSINESS MODEL INNOVATION
INTO 4 MAJOR REFRAMES

5. THESE REFRAMES IMPACT DIFFERENT
ELEMENTS OF THE BUSINESS MODEL

6. FOR EACH OF THE REFRAMES, WE
HAVE BEEN COLLECTING
EXAMPLES
THESE SERVE AS AN INSPIRATION
GALLERY

7. Innovating in customer
relationships
FROM LOYALTY TO EMPOWERMENT
By empowering the
customer, businesses can
lower their production
costs, reach a wider
audience and fulfill the
growing need for user
self-actualization.

8. Do it yourself (DIY) is creating something without the
support or expertise of professionals. This can save cost
and time and gives the satisfaction of self-actualization
and uniqueness.
Could you make your service DIY?
DO-IT-YOURSELF
IKEA delegates the
assembly process
of the furniture to
the consumer.
Squarespace
makes it easy for
anyone to create
beautiful websites
using drag and drop
tools, templates and
e-commerce
features.

9. Freemium is a pricing strategy by which an offering is
provided free of charge, but charges for proprietary or
premium features, functionalities or virtual goods. The
customer is empowered by accessing a free version and
having the choice to upgrade to the premium version. This
strategy also lowers the customer acquisition costs.
How could you provide a free version of your offering to lower
your customer acquisition costs?
FREEMIUM
Dropbox is a file
hosting service that
offers a premium
version with
additional services.
Change.org allows
non-profits to pay
for sponsoring their
petitions and
thereby increasing
visibility.

10. Self-actualization and self-expression give the customer
the opportunity to fulfill their own talents and express their
own ideas, feelings and thoughts. This is usually made
possible via provision of design tools plus raw materials.
Could you provide the tools so your customers design their own
product?
SELF-ACTUALIZATION
Quirky designs and
produces consumer
products as
informed by the
ideas and votes of
an online
community.
MakerLabs is a
makerspace that
provides members
with the tools and
expertise they need
to build what they
want.

11. Disintermediation removes intermediaries in a supply
chain, like brokers, agents, shops. Direct (digital) contact
is created between producer and customer. This saves
costs and avoids the frustration of dealing with the
middleman.
Could you skip the channel and go direct?
DISINTERMEDIATION
E-Trade gives direct
access to specialist
research and stock
screeners,
eliminating the
dependence on a
bank agent.
GiveDirectly sends
money directly to
the extreme poor,
eliminating the
involvement of an
implementation
partner.

12. Inclusive sourcing means connecting consumers directly
to the local producers, contributing to their livelihood and
improving their position in the value chain. The target
market is usually sustainability-conscious.
Could you connect your customers directly to the source
suppliers?
INCLUSIVE SOURCING
Community
Seafood links
consumers to local
family businesses
that produce
organic, sustainable
and fairly-traded
seafood.
Tony Chocolonely is
a chocolate
manufacturer that
strives to have a
slave-free
production chain by
directly connecting
with cocoa farmers.

13. Mass customization combines the low cost per unit of
mass production with flexibility of individual customization
through a pre-selected range of options, thereby offering a
tremendous increase in variety and choice to customers.
Could you offer much, much more choice?
MASS CUSTOMIZATION
NIKEiD allows
customers to
customize the
design of their own
Nike apparel, offline
and online.
Seregentee lets
customers choose a
fabric to customize
their apparel. Each
fabric supports a
specific cause.

14. Unbundling and re-aggregation breaks up and re-
configures content or information to individual personal
preference in a way that is unmatchable by the old order
of traditional providers (e.g., music, education,
broadcasting, publishing).
Could you unbundle your product and sell the components
separately?
UNBUNDLING AND RE-
AGGREGATING
Apple’s iTunes sells
music in individual
tracks as to entire
albums, and
television shows by
episode rather than
as entire season.
Coursera offers
online courses from
accredited
universities,
allowing students to
follow classes from
several universities
simultaneously.

15. Offering the “long tail“ means offering products that are in
low demand or have low sales volume but that collectively
make up a market share that rivals the relatively few
current bestsellers and blockbusters. Success is mostly
dependent on whether the store or channel is large
enough.
Could you offer a long tail of low demand products without lots
of cost?
LONG TAIL
Amazon.com has
an unlimited ability
to hold and stock
products and can
therefore offer items
of which only a
small number will
ever be sold.
Etsy is a global
marketplace for
handmade goods,
which are sold via
individual online
stores.

16. Businesses with a “consume and do good” offer sell a
good or service that makes the world better or at least
donate a portion of the profits to a good cause. This
business model taps into the market of consumers who
want to contribute to a better world.
How could consuming your product make the world a better
place?
CONSUME AND DO GOOD
Toms has a buy-
one-give-one
business model: for
every pair of shoes
purchased, one pair
of shoes is given to
a child in need via
local partners.
Warby Parker is an
eyewear retailer
that donates a
portion of its profits
to non-profit
partners, who sell
glasses at an
affordable price in
developing
countries.

17. Business models that are based on unique experiences
create memorable events for customers, and the memory
itself becomes the product. Customers pay for the feeling
that the ‘experience’ provides when they engage in it,
such as at Disneyland Parks.
How could your service provide a life experience?
EXPERIENCES
Starbucks ensures
that the customer
will feel right at
home in any of its
stores, using
signature drinks,
replicated store
layouts and
emphasis on
customer service.
Concerts create
lasting memories
for the audience,
who then wants to
re-live those
memories through
the associated
songs.

18. Multi-sided platforms are platforms where users
(producers and consumers) can create, share and
exchange things without intervention from the platform
owner. In this model consumers are often also producers.
How could you support your customers transacting with each
other?
MULTI-SIDED PLATFORMS
The App Store
allows users to
browse and
download
applications that
were developed by
other users with
Apple's iOS SDK.
Crowdrise is an
online fundraising
platform that allows
anyone to either
start a campaign or
support an existing
one.

19. Collective pricing is a model by which products and
services are offered at a significantly reduced price on the
condition that a large number of buyers make the
purchase. This allows consumers to buy at prices
otherwise only available to professional volume buyers.
How could you achieve major volume discounts for your
customers?
COLLECTIVE PRICING
Groupon offers
daily deals of up
to a 90% price
reduction, on
the condition
that a set
number of
customers
purchase the
deal.
Groundswell brings
together community
members to
increase their
power to negotiate
prices, starting with
access to clean
energy.

20. Performance contracts specify desired results by using
sophisticated tracking. These provide the service provider
much latitude in deciding how to deliver these results.
“Social impact bonds” (SIB) are one example allowing
private sector service providers to deliver on social
programs.
How could you do a better job if you were under a performance
contract?
PERFORMANCE CONTRACTS
MDRC leads a
program to reduce
recidivism and is
payed based on
reduced re-
admissions via a
SIB with the
Department of
Correction.
General Electrics
equips its products
with sensors that
conduct detailed
performance
tracking and allow
for specific
performance
contracts.

21. Revenue partnerships aim to increase traffic to your
offering via affiliate partners. Affiliates are rewarded based
on the results obtained. This business model innovation is
particularly relevant for e-commerce platforms, for which
the pool of affiliates is easily accessible and unlimited.
How could you leverage revenue partnerships to increase your
revenue channels?
REVENUE PARTNERSHIPS
eBay’s Affiliate
Program increases
the entry points to
the trading platform
via affiliate
websites, and
rewards these
affiliates for
qualifying traffic to
eBay.
Grameen Bank is a
microfinance
organization and
community
development bank
serving the bottom
of the pyramid.

22. Innovating in access to
resources
FROM ASSETS TO ACCESS
.
.
Increased digital connectivity an
d
open source data means that
we can
increasingly leverage data to ta
p
into under-utilized resources.

23. Collaborative consumption encourages sharing, reuse
and (re-)distribution of excess or surplus capacity of
human or physical assets, moving consumers from
ownership to user-ship. This model requires real-time,
location-specific and reputational information.
How could you leverage the underused assets and resources in
your market?
COLLABORATIVE
CONSUMPTION
Peerby is an app
that enables
neighbors to
share under-
utilized items.
Uber enables any
qualified driver with
an acceptable
vehicle to provide
taxi rides.

24. Crowdsourcing is the process of obtaining needed
services, ideas, financing or content by soliciting
contributions from a large group of (laymen) people,
rather than from traditional (professional) employees or
suppliers – often leveraging internet communities.
How could you leverage the crowd to come up with better and
lower cost products?
CROWD SOURCING
Kickstarter is a
platform that
leverages the direct
support of
individuals to bring
to life creative
projects.
Mosaic enables
crowd funding of
loans for solar
development
projects.

25. Re-use involves collecting and repurposing products for
further use in a profitable and sustainable way. Also
known as up-cycling or cradle to cradle, it can reduce
sourcing costs as the offering is manufactured out of what
would normally be considered as waste.
How could you re-use the products and services you produce?
RE-USE
Desso is a
carpentry
manufacturer that
aims to have all its
products
disassembled after
the end of their life
cycle and the
materials reused or
recycled.
Hipcycle is the
leading online
store for ‘upcycled’
goods, i.e. new
products made of
waste.

26. A supplier network is a series of connected facilities and
distribution channels. By adopting a focus on access
rather than ownership, supplier networks can limit risks
associated with the production process and increase the
overall efficiency of the delivery system.
How would you use a supplier network to replace in-house
resources?
SUPPLIER NETWORKS
Li & Fung is a
global sourcing firm
that relies on
detailed information
regarding the
changing utilization
and costs in the
factories of their
suppliers.
Zaycon Foods
shortens the
distribution channel
from farm to
customer by
leveraging its
network of farms
and selling fresh
food directly to
customers.

27. FROM EFFICIENT TO INTELLIGENT
Innovating in activities
Businesses that leverage dig
itization
to create a learning system g
ain
Further control over costs an
d open
new revenue opportunities.

28. Companies in the ‘behavior change’ model encourage
consumers to reduce consumption, change purchasing
patterns or modify daily habits by empowering them with
knowledge about their consumption and helping them
track product use.
How could you encourage your customers to change their
behavior?
BEHAVIOR CHANGE
Patagonia
encourages
consumers to buy
less and repair
more by making
recycling, repairing
and responsible
sourcing part of its
strategy.
The Digifit is an
application that
tracks and records
the metrics of the
user’s athletic
endeavors to
improve future
performance.

29. Infomediaries collect information about the
service/product and price of various providers and share
this with consumers to facilitate comparison. At the same
time, infomediaries share information about online
behavior of consumers to the service providers to allow
targeted offerings.
How could the information you collect about your customers
help fill a user need?
INFOMEDIARIES
Skyscanner is a
flight comparison
tool that aggregates
the most up-to-date
flight prices from
different travel
websites.
Ashoka is a global
network of social
entrepreneurs,
providing
investments and
mentorships all
around the world.

30. When a product is sold as a service, a previously one-
time transaction is now provided on a per-use basis. This
creates a rich flow of information on usage with in turn can
be used for product improvement (e.g., upgrades) and
cross-selling.
How could you leverage the usage information if your product
becomes a service?
EVERYTHING AS A SERVICE
Car2go’s car-
sharing service
features one-way
point-to-point
rentals, which
charges users by
the minute, with
hourly and daily
rates available.
With Hilti Fleet
Management a
fixed monthly
charge covers all
tool, service and
repair costs.

31. “Produce to demand“ means that the offering is produced
or prepared specifically when someone requests it. This
approach, adopted by pioneering company Dell, also
allows for the offering to be customized as desired by the
customer, reduces costs associated with storage, and
leads to leaner supply chains.
How could you produce to demand?
PRODUCE TO DEMAND
Threadless lets
consumers vote on
shirts designs,
which means shirts
are only produce
when consumer
demand has been
confirmed.
Dell’s just-in-time
ordering increases
its competitive
edge.

32. Robots are machines that have been programmed with
the intelligence necessary to perform specific tasks,
usually jobs that are particularly dangerous, unhealthy or
stressful for humans to perform. By equipping robots with
software that learns, the task delivery is constantly
improved.
How could you make your automation learning?
AUTOMATION AND ROBOTICS
Fellow Robots
support retail
employees with the
most up to date
information on
inventory and
location of goods
and services.
The Da Vinci
Surgical System
enables minimal
invasiveness,
increased precision
and enhanced
dexterity during
medical
procedures.

33. Innovating on cost
structures
FROM LOW TO NO COST
Business models that exp
loit
zero-variable cost of prod
uction
offer products or services
at a very low price or for fr
ee to rapidly
Build scale. This includes
Providing service through
software.

34. A business model that does not have any variable costs
can grow without seeing an increase in cost structure.
This model is usually associated with an automated
customer relationship, no incremental production costs,
and an unlimited supply of the offering. As a result, the
offering can be made available for free or almost free.
How could you turn your business into a zero-variable cost
structure?
ZERO-VARIABLE COSTS
Google’s cost base
does not go up with
additional users,
hence Google can
offer its service to
users for free.
SunnyMoney sells
and distributes
solar-powered
lights in Africa,
creating new
entrepreneurship
and livelihood
opportunities.

35. ‘Service to Software’ means using computer software as a
substitution to humans for fulfilling specific tasks.
Common examples include translators, ATMs, and
automatic checkouts. Such a move can lead to almost
zero operating costs and increased performance.
How could you turn your service into a software solution?
FROM SERVICE TO
SOFTWARE
Fusion Suite™,
designed by
Dolbey, includes
software and
hardware for
dictation,
transcription and
speech recognition
needs for medical
doctors.
Jacaranda Health
uses an electronic
medical record
system to improve
quality of care in
private maternity
clinics in East
Africa.