This document summarizes Kimmo Koivisto's presentation on business model innovation. The presentation discusses what a business model is, why business models matter, and provides examples of classic business model cases for inspiration. Some examples discussed include JC Decaux's earnings logic model, Ryanair's low-cost model, Hilti's tool rental "as a service" model, Minute Clinic's standardization model in healthcare, and Threadless' co-creation model leveraging online communities. The presentation emphasizes that startups should focus on innovating radical new business models, and established companies often fail because they prioritize products over reinventing their business model.
2. Who is this Kimmo Koivisto?
Today
• Tellyo
Co-founder and CEO
• Teho-Opisto
Co-founder and board member
Before
• Vectia
Management consultant
• Nokia
Research strategy
• Helsinki university of Technology
3. Tellyo converts 2nd screen to a smart TV remote for
spontaneous discovery, interaction and sharing
@TellyoTV
4.
5. Who is this Kimmo Koivisto?
Today
• Tellyo
Co-founder and CEO
• Teho-Opisto
Co-founder and board member
Before
• Vectia
Management consultant
• Nokia
Research strategy
• Helsinki university of Technology
6. Agenda
• What is business model
• Why business model matters
• Classic cases for inspiration
7. Agenda
• What is business model
• Why business model matters
• Classic cases for inspiration
8.
9. ”A business model describes
the rationale of how an organization
creates, delivers, and captures value”
10.
11. Agenda
• What is business model
• Why business model matters
• Classic cases for inspiration
13. Startups are about inventing
radical business models
Incumbents fail because of:
1) CEOs don't really want a new business model
2) Product is king. Nothing else matters
3) Cannibalization is off the table
4) ROI hurdles are too aggressive for fledgling models
5) Rogues and renegades get no respect
14. Agenda
• What is business model
• Why business model matters
• Classic cases for inspiration
15.
16. Where to look for innovative
business models?
Earnings logic
Business model
innovation
directions
21. Where to look for innovative
business models?
Earnings logic Low cost As a service
Business model
innovation
directions
22. As a service: Case Hilti
Traditional Hilti Fleet
Business Management
High-quality tools
Customer value Tools when needed and
proposition with service guarantee
Low margins, high Increased cost of capital
inventory turnover Profit but higher margins, montly
payments
One-time investment + Predictable
hard-to-predict service fees Procurement continuous cost
Small batches of tools to Management-level sales of
individual contractors Sales long-term service contracts
Manufacturing & Inventory, replacement
Distribution Processes and service process
management
R&D, low-cost
manufacturing Resources Warehousing & IT
Sources: Johnson et al. (2008) www.hilti.com
23. Where to look for innovative
business models?
Earnings logic Low cost As a service
Standardization
Business model
innovation
directions
25. Where to look for innovative
business models?
Earnings logic Low cost As a service
Co-creation Standardization
Business model
innovation
directions
26. Co-creation: Case Threadless
Leveraging the Love
• All products are designed, rated
and marketed by community
members
• Engages creators, critics, joiners
and spectators
• Valuable return on time spent
• No advertising, no professional
designers, no retail distribution,
no salespeople – low overhead,
high margins
27. Where to look for innovative
business models?
Earnings logic Low cost As a service
Co-creation Standardization
Business model
innovation
directions
Long tail
28. Long tail: Case Amazon
An example of a power law graph showing
popularity ranking
Head
Hit items, the few that
dominate
Sales
Long tail
Non-hit items, unique items in
relatively low quantities
Products
Demand shifts towards niches with high availability of choice and when there is large
population and negligible distribution and stocking costs
Reference: Anderson, C. (2006).
The Long Tail: Why the Future of Business is Selling Less of More
29. Where to look for innovative
business models?
Earnings logic Low cost As a service
Co-creation Standardization
Business model
innovation
directions
Long tail Network effect
31. Network effect: Case
personalized publications
Readers, who are the most price Content creation (# shared
sensitive, are subsidized to drive More readymade content articles) is stimulated to add
demand available for publications. platform value
CONTENT
READERS CREATORS
Increased demand for
the created content
The integrator facilitates the Higher demand lowers prices and
process and captures part of the allows variety on printed media
created value
INTEGRATOR PRINT SHOPS
Wider reach and Higher subsidizing
more granular targeting increases demand
Advertisers are charged as their demand
grows more strongly in response to
growth in the user side
Established
practices increase ADVERTISERS
ad sales
32. Where to look for innovative
business models?
Earnings logic Low cost As a service
Co-creation Standardization
Business model
innovation
directions
Long tail Network effect
33. Key take aways
Startups are about innovating
radical business models
Take lessons from
other industries
All elements of the model
must fit together
1) CEOs don't really want a new business model.The most obvious reason companies fail at business model innovation is because CEOs and their senior leadership teams don't want to explore new business models. They are content with the current one and want everyone in the organization focused on how to improve its performance. The clearest indication that a company and its leaders aren't interested in business model innovation is when any discussion about emerging business models and disruptive technology is viewed and treated solely as a competitive threat.2) Product is king. Nothing else matters. The lines are blurring between product and service. Business models that are exclusively focused on products are vulnerable to being disrupted by models that blend both product and service to significantly change the value proposition. Think iPod. Apple didn't bring the first mp3 player to the market. It changed the way we experienced music by delivering on a value proposition that bundled product (iPod) and service (iTunes). Industrial era thinking and NAICS industry codes reinforce the habit of characterizing a business model as being either product or service focused, but this is a false choice constraining business model innovation. Sometimes a proud product heritage can get in the way.3) Cannibalization is off the table. Part of the thinking by line executives in most organizations goes like this: "the last thing we want to do is risk any of our current business. It's hard enough being at war with the competition in a battle for market share. Why would we want to compete against ourselves?" These sentiments tend to be voiced whenever new business model ideas threaten to cannibalize existing sales. When executives look at new opportunities they see them through the lens of the current business model and view them as competing with the current way the organization creates, delivers, and captures value. Organizations fail at business model innovation because they blindly take cannibalization off the table even if a new business model may have significant upside potential.4) ROI hurdles are too aggressive for fledgling models.There's no easier way to prevent business model innovation than to assess potential new models using the same economics and financial metrics as projects to improve the performance of the current business model. Financial metrics utilized to assess alternative projects to improve the current business model reflect the cost structure and required returns to sustain and grow in the context of today's model. New business models are likely to have very different economics and must be assessed in that context. Most new business models will be dismissed out of hand if judged by the economics and constrained by the ROI requirements of the current model. Organizations fail at business model innovation because they apply the wrong financial lens in assessing the attractiveness and feasibility of new business models.5) Rogues and renegades get no respect. Many organizations fail at business model innovation because they shoot their renegades. Or, if they don't shoot them, they wear them down until they leave. Business model innovators go against the corporate grain. They see entirely new ways to create, deliver, and capture value. If those that are tasked with sustaining and growing today's business models are allowed to reject those with the perspective and insight to help design the next one, business model innovation efforts will fail. Organizations must learn to celebrate and support people within the organization who are willing to challenge the status quo, to bring totally different perspectives on delivering value to the table, and to take experimental risks to explore new models.
