Presentation on the value of Business Model Innovation tools and its application in strategy development.

1. RAOMAL PERERA
raomal@LeanDisruptor.com | @raomal @LeanDisruptor | www.facebook.com/LeanDisruptor
BUSINESS MODEL INNOVATION
#BMGEN

2. 2
Skibbereen Raises the Flag Again

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4. 4

5. www.Facebook.com/LeanDisruptor
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7. 7

8. Learning Outcomes
Learn to invent, design and build
powerful new business models
using a set of business model
innovation tools.
8

9. 9
Google Trends
9

10. Find the Gap
How to find
opportunities that others
don’t see.
- Amy Wilkinson
10

11. How breakthrough ideas emerge from
small discoveries
Creative thinkers practice a set of simple but
ingenious experimental methods
• failing quickly to learn fast
• tapping into the genius of play
• engaging in highly immersed
observation
Free their minds, opening them up to making
unexpected connections and perceiving
invaluable insights.
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12. 12

13. 13
BUSINESS MODEL INNOVATION

14. What is a business model?
Discuss with your neighbour what
you think a business model is and
write down your definition [the key
elements] .....
14

15. What is a business model?
A business model describes the rationale
of how an organisation Creates, Delivers
and Captures value
15

16. Why we need a shared language for
business models?
16
https://strategyzer.com/academy/cours
e/business-models-that-work-and-
value-propositions-that-sell/1/1
Note: You may need to license the online learning tool on Strategyzer to
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17. Use of BMC in Established Companies
IMPROVE ----------------------------------INVENT
Know Problem/Know Solution -Unknown Problem/Unknown
Solution
------EXECUTE -------------------------SEARCH------------
17

18. Pivot
SEARCH EXECUTE
Customer Development
18

19. Problem/
Solution Fit
Product/
Market Fit
Scale
The 3 Steps
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19

20. 20
Knowledge is having the right answer.
Intelligence is asking the right questions
The Art of Customer Interviewing

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23. 23

24. Customer Development Process
Post it to the Wall
 Create the canvas
 Make it visible
 Use Yellow Post-It
notes with your
guesses
Get out of the building and test your hypotheses.
There are NO FACTS here. Talk to customers, partners,
vendors. Design experiments, run tests,
get data
24

25. Hypotheses or Guesses
The canvas is a set of hypotheses, i.e. guesses
It helps us to organize our thinking! It is not
about functional organisation, but about the
business
The real question is HOW do we change those
guesses into FACTS?
25

26. Identify the Problem
26
Key Question: Do I have a problem worth solving?
Who has the problem?
What is the top problem?
How is it solved today?
Where do they have the problem or in what context do they have a
problem? (milkshake example)
When do they have the problem?
Why is it a problem? (Root Cause Analysis. Why is the single best
word for creating value in a start-up and an established business)
It is not possible to know what the top problem is without knowing
where, when and why they have a problem. Also the questions may
not be answered in sequence e.g. will we find the problem and the
person with the problem at the same time?

27. 27
Observe

28. Clayton Christensen
28
Jobs to be Done
“If you understand the job,
how to improve the product
becomes just obvious”

29. Define the Solution
29
Take a stab at defining the solution
Build a demo (MVP)
Test it with assumed customers
Will the solution work? (Can the proposed
solution create customer value that exceeds the
cost to produce and deliver the solution to the
customer?)
Who is the early adopter?
Does the pricing model work?

30. Design
30

31. 31

32. Build an MVP
Soft launch to early adopters
Do they realise the unique value proposition
How will you find enough early adopters to support
learning?
Are you getting paid?
Analysis: There needs to be a bit of intuitive thinking
around the MVP. We need to ask and then guess how we
can create the most unique customer value in the shortest
amount of time with the least resources. With a bit of
thinking and an equal amount of action we have a chance
of appropriating real value in the short term
VALIDATE THE QUALITATIVELYValidate Qualitatively
32

33.  Launch your refined product to a larger audience
 Have you built something people want?
 How will you reach customers at scale
 Do you have a viable business?
 Analysis: A refined product needs to test both
qualitatively and quantitatively in order to find out why
the refined product creates customers’ value and how
large is the market potential?
 Can this business produce (organically or through
investment) enough cash in the short term in order that
customers value - cost to produce = profit
Validate Quantitatively
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37. 37

38. Traction is a measure of your product’s engagement
with its market. Investors care about traction over
everything else
- Nivi and Nival, Venture Hacks
38
Ideal time to raise money

39. Finding the Problem is the Hard Part
Kevin Systrom & Mike Krieger (Instagram Co-
founders)
Instagram Co-founder Kevin Systrom believes building
solutions for most problems is the easy part; the hard part
is finding the right problem to solve. Here he opens up
about how he and fellow Co-founder Mike Krieger
identified the problems they wanted to solve around
sharing photos through mobile devices. He also reminds
entrepreneurs to embrace simple solutions, as they can
often delight users and customers. 39

40. Strategy and Business Models – DIT PM Module 1 40
BUSINESS MODEL INNOVATION

41. Today, a company’s long term
competitive success depends upon
its ability to create an
innovative business model.
41

42. Business Model Innovation
42

43. Business Model Innovation
43

44. Additional innovation
potential
through business model
innovation
Innovation
potential
Business model
innovation
Process innovation
Product innovation/
Technology
innovation
Time
New Business Models allow for additional
innovation potential on top of product and
process innovation
44

45. 45
“It is not the strongest of the
species that survive, nor the
most intelligent, but the one
most responsive to change.”
- Charles Darwin

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47. Nespresso’s Business Model
What is Nespresso’s Business Model? What
made them so successful?
47

48. “Studies comparing successful and
unsuccessful innovation have found that the
primary discriminator was the degree to
which the user needs were fully
understood.”
– David Garvin, Harvard Business School
48

49. #1 Target
customer
segment
#2
Customer
segment
Also
overseas
market new
set of
customers…
 Who are your
most important
customers?
 What are their
archetype?
 What jobs do
they want you
to get done for
them?
Customer Segments
49

50. Customer Personas/Archetypes
Profile
• Position/Title
• Age/Sex
• Role
• Discretionary budget
• Motivations
• Role models
50
Who are you?
Who influences you?

51. Customer Archetypes
Meet Paul, Sheetal and Barbara
Paul-RegularExerciser
• 20 – 45
• Aim to maintain and
track active lifestyle
• Looking for
inspiration on diet &
exercise regimes
• Gets a buzz from
exercising
Sheetal-SpiritualHealth
•
• 30 – 55
• Already follows a
healthy lifestyle
• Interested in
alternative
medicines/
treatments
• Believes eating well
is as important as
exercise
Barbara-On-OffDieter
•
• 30 +
• Yo-yo dieter, has
tried many of the fad
diets but never stuck
to one
• Needs tips and
motivation to keep
up a healthy lifestyle
• Irregular or
infrequent exerciser
51

52. Customer Types
 Saboteurs
 Intermediaries (OEM’s and resellers)
52

53. Q: Consider Selling Business Intelligence
Software into a large business. Which types
of customers are the following?
1. CFO
2. CIO
3. Report Users
4. Line of Business
Management
5. Business Intelligence
Group inside IT
a. Economic byer
b. Influencer
c. Recommender
d. Decision maker
e. Saboteur
53

54. Q: Consider Selling Business Intelligence
Software into a large business. Which types
of customers are the following?
1. CFO
2. CIO
3. Report Users
4. Line of Business
Management
5. Business Intelligence
Group inside IT
a. Economic byer
b. Influencer
c. Recommender
d. Decision maker
e. Saboteur
54

55. Multi-Sided Model
Buyer/Payer (e.g. Google)
Two sided markets – Buyers/Payees
1.Workers/Recruiters - LinkedIn
2.Banks/Merchants - Visa
3.Sellers/Buyers - eBay
4.Readers/Advertisers - New York Times
Each has its own value proposition
Each has its own revenue streams
One segment cannot exist without the other
55

56. Corporate? Consumer?
 Business to Business (B to B)
–Use or buy inside a company
 Business to Consumer (B to C)
–Use or buy for themselves
 Business to Business to Consumer (B to B
to C)
–Sell a business to get to a consumer
–Other Multi-sided Markets with multiple
customers
56

57. © 2004 Valista Ltd. confidential information.57
 top up
my phone
 subscribe to a
newspaper
 book a flight
download
a report
 book a hotel
pay a bill
 cancel a check
 top-up kid’s
phones
 vote online
 top-up my phone
 download a
new game
 buy an MP3
 download
a voucher
 change my ringtone
 play the lottery
 check my
phone credit
12
6
39
1
2
4
57
8
10
11
on the move at home
at play at work
premium services for subscribers
about Valista

58. “No one cares how much you know,
until they know how much you care”
– Theodore Roosevelt
EMPATHY MAPS
58

59. Value proposition
• Which of our
customer’s
problems are we
helping to solve?
• Which Customer
needs are we
satisfying?
• What are the key
features of our
product that match
customers
problem/need?
What jobs do
they want done
, what's a good
outcomes for
them
What are
competitive
options and
how do I
differentiate
over others
59

60. 60
60

61. 6161

62. 7 Questions to improve your business model
1. Switching Costs
– e.g. Apple iPod & iTunes
2. Recurring Revenues
– e.g. Nespresso
3. Earn before you Spend
– e.g. Dell
4. Game changing Cost Structures
– e.g. Skype
5. Getting others to do the work
– e.g. Facebook
6. Scalability
– e.g. Diners Club
7. Protection from Competition
– e.g. Apple i-Phone (double sided market – app
developers/users) 62

63. Great Business Models always
outcompete great products and
great technologies
– Alex Osterwalder
63
https://strategyzer.com/projects/academy/7-
questions-to-improve-your-business-model-design

64. Nespresso – what’s next
https://strategyzer.com/training/courses/
business-models-that-work-and-value-
propositions-that-sell/1/1/4
64

65. Prepare to cannibalize your Business Model
65
“If you don’t cannibalize
yourself, someone else
will. Don’t protect your
products …. Protect the
customer experience and
your customer
relationships” – Steve Jobs

66. The Environment
66

67. Review
–Great business models always
outcompete great products and
technologies
–If you understand the job, how to
improve the product becomes
obvious
–The BMC is a shared language for
business modelling
–Understanding the environment
67

68. Strategy and Business Models – DIT PM Module 1
raomal@LeanDisruptor.com | @raomal @LeanDisruptor | www.facebook.com/LeanDisruptor
RAOMAL PERERA
THANK YOU!

69. 69
APPENDIX

70. 70
WORKSHOPS

71. Fund Raising for Entrepreneurs
71

72. Building Emotional Capital for Leadership
72

73. Business Model Innovation
73

74. How to Build a Startup
74

75. Additional Resources: Books
75

76. Additional Resources Books
76
Books:
The Creator's Code: The Six Essential Skills
of Extraordinary Entrepreneurs - Amy
Wilkinson
The Business Model Navigator – The 55
Models that will revolutionize your business
– Gassmann, Frankenberger & Csik
What Customers Want – Using Outcome-
Driven Innovation to Create Breakthrough
Products and Services – Ulwick

77. Additional Resources
77
BMC Online Tools:
Strategyzer
https://canvanizer.com/ (free tool)
Stattys Notes; http://www.stattys.com/
- A new generation of adhesive notes with a unique "Write
and Slide" function.

78. MVP
A Minimum Viable Product (MVP) is “that
product which has just those features and no
more that allows you to ship a product that
early adopters see and, at least some of whom
resonate with, pay you money for, and start to
give you feedback on”
78

79. MVP #1 Explainer video
An explainer video is a short video that explains what
your product does and why people should buy it.
A simple, 90 seconds animation is sufficient.
e.g. Dropbox
How to make an explainer video
79

80. MVP #2 A Landing Place
A landing page is a web page where visitors
“land” after clicking a link from an ad, e-mail
or another type of a campaign.
80

81. MVP #2 A Landing Page
• Craft your Landing Page
• Set up a Google AdWord campaign to drive traffic to your new
landing page. You can let the AdWord engine rotate different
messages and test what works best on your prospects
• Set up Google Analytics. The most important thing to measure
is conversions – percent of visitors that sign up (or perform
another desired action)
• Set up a chat so that visitors can easily raise questions
• Set up a service like Qualaroo to survey your visitors
81

82. MVP #3 Wizard of Oz
A “Wizard of Oz” MVP is when you put up a front that
looks like a real working product, but you manually carry
out product functions. It’s also known as “Flinstoning”
Zappos shoes is the biggest online shoe retailer, with
annual sales exceeding $1 billion. In his Lean Startup book,
Eric Ries describes how the founder started with a Wizard
of Oz product.
82

83. MVP #4 The Concierge MVP
Instead of providing a product, you start with a manual
service. But not just any service! The service should consist
of exactly the same steps people would go through with
your product.
83

84. MVP #5 Piecemeal MVP
This strategy is a blend between the “Wizard of
Oz” and “Concierge” approaches. Again, you
emulate the steps people would go through using
your product – as you envision it.
84

85. MVP #6 Crowd Funding
85
Sell it before you build it
The basic idea is simple: launch a crowd
funding campaign on platforms such as
Kickstarter or IndieGoGo. Not only will
you validate if customers want to buy
your product, but you will also raise
money

86. “Pattern in architecture is the idea of
capturing architectural design ideas
as archetypical and reusable
descriptions”
– Christopher Alexander, Architect
Patterns
86

87. Identified 55 Business Model
patterns in the 5+ years of
intensive research into detailed
analysis of all major successful
business model innovators in the
last 50 years
-University of St. Gallen
87

88. Pattern 39: Razor and Blade
Apple
iPod/iTunes
(2003)
Nestlé
BabyNes
(2012)
Nestlé
Special.Tea
(2010)
Hewlett-
Packard
(1984)
Nestlé
Nespresso
(1986)
Gillette
(1904)
Standard Oil
Company
(1880)
The basic product is either cheap
or give away for free. The
consumables that are needed for it
on the other hand are expensive or
high margin.
88

89. Pattern 48: Subscription
Next Issue
Media (2011)
Dollar Shave
Club (2012)
Jamba
2004
Spotify
2006
Netflix
(1999)
Salesforce
(1999)
The customer pays a regular fee,
typically on a monthly or an annual
basis, in order to gain access to a
product or service.
89
Blacksocks
(1999)

90. Lock-
in
Razor and
blade
Direct
selling
Gillette
(1904)
Nestlé
Nespresso
(1986)
Nestlé
Special Tea.
(2011)
Nestlé
BabyNes
(2012)
Source: Gassmann, Frankenberger, Csik (2012), Aus alt mach neu, Harvard Business Manager, 2012
LeverageCombineTransfer
3 Strategies to generate new Business Model
ideas: Transfer, Combine and Leverage
90

91. 91
3 Challenges in Business Model Innovation
1. Overcoming the dominant Industry
logic
2. Thinking in Business Models and not in
Technology and/or Products
3. Lack of Systematic Tools

92. 92
Successful business model
innovation creates value for your
customers and captures value for
your company. Many business
models fail to capture enough
value.

93. Who uses the business model canvas
and why do they use it?
93
https://strategyzer.com/training/course
s/business-models-that-work-and-
value-propositions-that-sell/2/1/1
Note: You may need to license the online learning tool on Strategyzer to
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94. 15 ways to use the business model
canvas
94
https://strategyzer.com/training/course
s/business-models-that-work-and-
value-propositions-that-sell/2/1/2
Note: You may need to license the online learning tool on Strategyzer to
view this clip from Osterwalder