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MS MIT 8699 Process Innovation © Duane Truex, 2011 Day 2 Part I–Business Modeling Canvas : Innovation & Prototyping -and- Part II – Adopting Business Process Perspectives

Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

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Page 1: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Day 2 Part I–Business Modeling Canvas : Innovation &

Prototyping -and-

Part II – Adopting Business Process Perspectives

Page 2: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Three Types of Business Models   Value chains

  Value shops

  Value networks

Based on Stabell and Fjeldstad, “Configuring Value for Competitive Advantage: On Chains, Shops, and Networks,” Strategic Management Journal, 19:1, 1998, pp. 413-437.

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Logic of value creation   Value chain: Transformation of inputs into

products   Manufacturers

  Value shop: Solving customer problems   Professional services: medicine, law, architecture,

engineering

  Network: Linking customers who wish to be independent   Telephone companies, banks, insurance companies

Page 4: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Brief review   Parts of the canvas are?

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MS MIT 8699 Process Innovation © Duane Truex, 2011

5

WHAT WHO HOW

HOW MUCH

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MS MIT 8699 Process Innovation © Duane Truex, 2011

CANVAS OVERLAY OFFER

CHANNELS

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

REVENUE STREAMS COST STRUCTURE

KEY ACTIVITIES

KEY PARTNERS

KEY RESOURCES

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MS MIT 8699 Process Innovation © Duane Truex, 2011

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

CHANNELS

VALUE PROPOSITIONS

COST $TRUCTURE

REVENUE $TREAMS

KEY PARTNERS

KEY ACTIVITIES

KEY RESOURCES

bird’s eye view

Page 8: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

OFFER

DISTRIBUTION CHANNELS

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

REVENUE STREAMS COST STRUCTURE

KEY ACTIVITIES

PARTNER NETWORK

KEY RESOURCES

the business model canvas

3rd party sellers

warehouses &

inventory

retail stuff over the web

sales margin

amazon.com

affiliates

mass-customization

IT infrastructure

delivery

affiliates

people

fulfillment

content management

fulfillment technology & content

marketing

IT management

mass customers globally

Page 9: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

IT Infrastructure Services are Amazon.com’s big strategic bet!

Page 10: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

OFFER

DISTRIBUTION CHANNELS

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

REVENUE STREAMS COST STRUCTURE

KEY ACTIVITIES

PARTNER NETWORK

KEY RESOURCES

the business model canvas

3rd party sellers

warehouses &

inventory

retail stuff over the web

sales margin

mass customers globally

amazon.com

affiliates

mass-customization

delivery

affiliates

people

fulfillment

content management

fulfillment

IT services

(e.g. S3, EC2) Internet interfaces

Internet companies

utility fees

IT management

IT infrastructure

marketing technology &

content

Page 11: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Simply….INNOVATION

Discuss the Chesbrough “Bringing Open Innovation to Services” MIT Sloan Management Review article

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MS MIT 8699 Process Innovation © Duane Truex, 2011

What is unique about this model? What is YOUR key take-away? How might we apply his points?

break-out

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MS MIT 8699 Process Innovation © Duane Truex, 2011

How to foster Service Innovation

  Work Closely with customers to develop new solutions

  Focus offers on utility, rather than on the product

  Embed your company in your customer’s organization

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MS MIT 8699 Process Innovation © Duane Truex, 2011

?"the skype‘s business model

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MS MIT 8699 Process Innovation © Duane Truex, 2011

skype.com

Logitech ...

SME businesses

mass customers globally

free VOIP &

video calling

cheap calls (skype out)

mass customization

fraud management

software development

software

development

complaint management

software

software developers

Logitech

payment providers

telco partners

skype out

hardware sales

free

Page 16: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

CHANNELS

VALUE PROPOSITIONS

COST $TRUCTURE

REVENUE $TREAMS

KEY PARTNERS

KEY ACTIVITIES

KEY RESOURCES

free VoIP &

video calling

Page 17: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

mass customized

VALUE PROPOSITIONS

DISTRIBUTION CHANNELS

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

REVENUE $TREAMS

KEY ACTIVITIES

free VoIP &

video calling

Logitech partnership

Skype.com

SME businesses

mass customers globally cheap calls

(Skype Out)

hardware sales

COST $TRUCTURE

software

development

KEY RESOURCES

KEY PARTNERS

software

developers

Software

telco partners

fraud management

software development

payment providers

Logitech

free Skype Out complaint management

Page 18: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

RESULTS…"500 million users

1 billion revenue 8 billion in capitalization

Page 19: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

?"what is the difference with the Telco business model?"

Page 20: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

skype.com

Logitech ...

SME businesses

mass customers globally

free VOIP & video

calling

cheap calls (skype out)

mass customization

fraud management

software development

software development complaint management

software

software developers

Logitech

payment providers

telco partners

skype out

hardware sales

free

20

global coverage!

100% low cost!

100% automatic!

roughly similar but cheaper/free!

no network!

software developm.!

not all have to pay!

software company!

outsourcing non-core!

Vs. Telco

Page 21: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

mass customized

OFFER

DISTRIBUTION CHANNELS

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

REVENUE STREAMS

KEY ACTIVITIES

free VoIP & video

calling

Logitech partnership

Skype.com

SME businesses

mass customers globally cheap calls

(Skype Out)

hardware sales

COST STRUCTURE

software

development

KEY RESOURCES

PARTNER NETWORK

software

developers

Software

telco partners

fraud management

software development

payment providers

Logitech

free Skype Out complaint management

global coverage!

100% low cost!

100% automatic!

roughly similar but cheaper/free!

no network!

software developm.!

not all have to pay!

software company!

outsourcing non-core!

Vs. Telco

Page 22: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

break-out

Examine each team’s model in formation….

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MS MIT 8699 Process Innovation © Duane Truex, 2011

analytical thinking"

intuitive thinking"

design thinking

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MS MIT 8699 Process Innovation © Duane Truex, 2011

business people don’t just

need to understand

designers better; they need

to become designers

Roger Martin, Dean Rotman School "

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MS MIT 8699 Process Innovation © Duane Truex, 2011

the designer’s

toolkit ...

Page 26: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Page 27: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Page 28: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Page 29: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Page 30: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Business Architecture expressed as Component Business Models

  Component Business Model is a Matrix

 Horizontal: Business competencies   Not just organization chart

  Vertical: Direct, control, execute   Use these to organize components

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Form of a Component Business Model

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Dimensions of a Business Component

  Business purpose   Why does this component exist?

  Activities:   What actions does it perform?

  Resources   What assets are required, including human, technical, and other

resources?

  Governance   How are activities and resources managed?

  Business services   What is received from and offered to other components?

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

CBM Example

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Where are the Priorities for Change?

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Toward a “service-oriented” view of a firm

  What is a service?

  Is it possible to contribute to a firm’s operation without performing service for someone?

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Service-oriented view of a firm

  Based on article in IBM Systems Journal

  Each component receives and produces services.

  We can take the same approach when the components are subdivided into service systems.

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Examples of Service Systems (from MBA students at Georgia State)

Calculating rates for insurance renewals

Managing software development projects

Acquiring clients at a professional service firm

Receiving materials at a large warehouse

Approving real estate loan applications

Planning and dispatching trucking services

Performing pre-employment background checks

Performing financial planning for wealthy individuals

Scheduling and tracking health service appointments

Operating an engineering call center

Purchasing advertising services

Determining salary increases

Collecting and reporting sales data for a wholesaler

Planning for outages in key real time information systems

Invoicing for construction work

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Ideally cover any type of service

  Services for internal and/or external customers

  Automated, IT-reliant, and non-automated services

  Customized, semi-customized, and commodity services

  Personal and impersonal services

  Repetitive and non-repetitive services

  Long-term and short-term services

  Services with varying degrees of self-service responsibilities.

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Examples for testing different definitions of service

  Doctor provides medical care

  Circus performance

  Produce statue of grandiose CEO of an American company

  Painter paints office in your business

  DHL delivers a package to you

(c) Steven Alter 2011

Page 42: Day2 Canvas review-innovation...RELATIONSHIPS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS KEY ACTIVITIES PARTNER NETWORK KEY RESOURCES the business model canvas warehouses & t

MS MIT 8699 Process Innovation © Duane Truex, 2011

Alternative Definitions of Service Bring Valuable Ideas and Implications

  A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. (Kotler and Keller, 2006)

  A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer (Fitzsimmons and Fitzsimmons 2006).

  “With service processes, the customer provides significant inputs into the production process.” (Sampson and Froehle, 2006)

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Other definitions of service   Services are capabilities or competencies that one

person, organization, enterprise, or system provides for another (Vargo and Lusch, 2004).

  A service is a provider-client interaction that creates and captures value (IBM Research 2004).

  “In general, the definitions [of service] emphasize a simultaneous or near-simultaneous exchange of production and consumption, transformation in the experience and value that customers receive from engagement with providers, and intangibility in that goods are not exchanged.” (Rai and Sambamurthy, 2006)

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Characteristics often Associated with Services

  Co-production/ co-creation of value

  Intangibility

  Customization

  Simultaneity of production and consumption

  Not resulting in ownership of anything

  Time-perishability

  Centrality of customer interactions

  Centrality of customer experiences

The useful question: Positioning of specific service systems along continuous design dimensions implied by these characteristics.

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Products and services

  Products are produced by acts performed for others.   Thus, products are like services in a different form.

  This is consistent with service-dominant logic.

  Characteristics are associated with products and/or with services.

  Product versus service is a valuable design dimension even though product vs. service as a classification is not very useful for design.

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Product vs. Service as a Design Dimension

(c) Steven Alter 2011

PRODUCT –LIKE <----------------- > SERVICE- LIKE

Standard <----------------- > Customized

Tangible <----------------- > Intangible

Transferred and used <----------------- > Consumed as produced

Goods <----------------- > An experience

Transaction-based <----------------- > Relationship-based

Produced <----------------- > Co-produced

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Services are co-produced to varying extents

  Almost all services start with a service request, and therefore are co-produced to some extent.

  Others involve extensive service interactions.

  Implication: Co-produced or not is not the interesting question. The interesting question is the desired extent of co-production.

(c) Steven Alter 2011

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MS MIT 8699 Process Innovation © Duane Truex, 2011

Value from services   Value-in-use vs. value-in-action

  Customer value can occur during service processes and after service processes have completed.

(c) Steven Alter 2011