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Types of Innovation
Product and Service Innovation Process Innovation Technology Innovation Business Model Innovation
Bob Higgins, founder and managing general partner of Highland Capital Partners, is quoted in Johnson, Christensen and Kagermann’s Harvard Business Review article as saying, “I think historically where we [venture capitalists] fail is when we back technology. Where we succeed is when we back new business models.”
2
Operating Margin Growth in Excess of Competitive Peers
compound annual growth rate over five years
[Source: IBM, CEOs are expanding the innovation horizon: important implications for CIOs]
3
Benefits Cited by Business Model Innovators
percent of respondents
[Source: IBM, Global CEO Study 2006]
The Power of the Business Model
Movies - “EcoSystem” Horizontal - Production companies, HBO,
Blockbuster [$300MM in late fees in 2005], Movies on-Demand, Netflix [mail], Netflix pivot to streaming, Apple TV, Google TV, Cable Companies
Technology – VHS/Beta, DVD, BlueRay, Bandwidth, HD TV, use of internet for entertainment
Competing on Business Model
Examples
Zip Car - Very short term car rental, subscription, use fees
Apple Music - One song at a time, revenues from devices + music, closed system
NetJets – Fractional ownership
Lending Club – Peer to peer lending, end run around bank
Google – small & medium sized business do direct, national and international ads, end run around agencies; individuals sell advertising space
Competing on Brand
Different than competing on brand
A brand is the way a person feels about a product or company
A business model is the way the person transacts business with the company
Brand or Business Model?
Federal Express
Southwest Airlines
AT&T Uverse
7
VALUEPROPOSITION
COSTSTRUCTURE
CUSTOMERRELATIONSHIPS
CUSTOMERSEGMENTS
Key Resources/Capabilities
KeyPartners
Key Activities
REVENUESTREAMS
INFRASTRUCTURE CUSTOMEROFFER
FINANCE
a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for
creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams
DISTRIBUTIONCHANNELS
[Osterwalder (2004) The Business Model Ontology]
business model framework
8
the business model’s place in the company
BUSINESS MODEL
ORGANIZATION
STRATEGY
TECHNOLOGY
9
Value Proposition Distribution Channel Target Customer
Customer RelationshipKey Activities
Key ResourcesKey Partners
Cost Structure Revenue Model
the big picture
Hardware design
Marketing
PeopleApple BrandContent agreementsIpod hardwareItunes software
Record companies
OEMs
PeopleManufacturingMarketing & sales
Seamless musicExperience
Search, buy and Enjoy digital music
Obsessive brandLoyalty
Switching costs
Retail storesApple storesApple.comItunes Store
Mass market
Large hardware revenuesSome music revenues
Apple iPod/iTunes
10
Value Proposition Distribution Channel Target Customer
Customer RelationshipKey Activities
Key ResourcesKey Partners
Cost Structure Revenue Model
Value creates revenues
Hardware design
Marketing
PeopleApple BrandContent agreementsIpod hardwareItunes software
Record companies
OEMs
PeopleManufacturingMarketing & sales
Seamless musicExperience
Search, buy and Enjoy digital music
Obsessive brandLoyalty
Switching costs
Retail storesApple storesApple.comItunes Store
Mass market
Large hardware revenuesSome music revenues
Apple iPod/iTunes
11
Value Proposition Distribution Channel Target Customer
Customer RelationshipKey Activities
Key ResourcesKey Partners
Cost Structure Revenue Model
Creating value requires infrastructure
Hardware design
Marketing
PeopleApple BrandContent agreementsIpod hardwareItunes software
Record companies
OEMs
PeopleManufacturingMarketing & sales
Seamless musicExperience
Search, buy and Enjoy digital music
Obsessive brandLoyalty
Switching costs
Retail storesApple storesApple.comItunes Store
Mass market
Large hardware revenuesSome music revenues
Apple iPod/iTunes
12
Value Proposition Distribution Channel Target Customer
Customer RelationshipKey Activities
Key ResourcesKey Partners
Cost Structure Revenue Model
Infrastructure generates costs
Hardware design
Marketing
PeopleApple BrandContent agreementsIpod hardwareItunes software
Record companies
OEMs
PeopleManufacturingMarketing & sales
Seamless musicExperience
Search, buy and Enjoy digital music
Obsessive brandLoyalty
Switching costs
Retail storesApple storesApple.comItunes Store
Mass market
Large hardware revenuesSome music revenues
Apple iPod/iTunes
13
Value Proposition Distribution Channel Target Customer
Customer RelationshipKey Activities
Key ResourcesKey Partners
Cost Structure Revenue Model
the profit zone
Hardware design
Marketing
PeopleApple BrandContent agreementsIpod hardwareItunes software
Record companies
OEMs
PeopleManufacturingMarketing & sales
Seamless musicExperience
Search, buy and Enjoy digital music
Obsessive brandLoyalty
Switching costs
Retail storesApple storesApple.comItunes Store
Mass market
Large hardware revenuesSome music revenues
Apple iPod/iTunes
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14
Value Proposition Distribution Channel Target Customer
Customer RelationshipKey Activities
Key ResourcesKey Partners
Cost Structure Revenue Model
start-up Four-Square
