succeeding in business model innovation

© 2021 Innosight Consulting, LLC and/or its affiliates

Business Model InnovationF O R R E S I L I E N C E

B U S I N E S S M O D E L I N N O V A T I O N W E B I N A R S E R I E S • M A Y 2 5 , 2 0 2 1

Mark W. JohnsonCo-Founder

& Senior [email protected]

Erika J. MeldrimHead of Business

[email protected]

© 2021 Innosight Consulting, LLC and/or its affiliates 1

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For your reference during today’s webinar


The Lockheed Martin Skunk Works Hybrid Airship

3


Companies struggle to achieve innovation success

4Source: https://hbr.org/2016/09/know-your-customers-jobs-to-be-done

Companies have more data

on customers than ever…Yet, successful innovation rates

remain dismally low

84%of global executives reported that

innovation was extremely

important to their growth strategies

94%said that they were dissatisfied with

their organization’s innovation

performance


Interactive Activity: What are the greatest obstacles

to business model innovation within your organization??

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DiscussionTopics

► WHAT IS A BUSINESS MODEL?

► CIRCUMSTANCES FOR BUSINESS MODEL CHANGE

►PROCESS FOR DESIGNING AND DEVELOPING

A NEW BUSINESS MODEL


The key elements of a business model

Profit Formula

and Core Mission

Customer Value

Proposition

Key

Processes

Key

Resources

9


A business model is an interdependent system

10

Profit Formula

and Core Mission

Customer Value

Proposition

Key

Processes

Key

Resources

CUSTOMER VALUE PROPOSITIONOffering that helps customers more effectively,

reliably, conveniently, or affordably satisfy a job

to be done at a given price

DELIVERY MODELKey resources and processes

that enable delivery of the

CVP in a sustainable,

repeatable, scalable and

manageable way

PROFIT FORMULAEconomic blueprint that

defines how the company will

create value for itself and its

shareholders


The customer value proposition has three elements

11

Profit Formula

and Core Mission

Key

Processes

Key

Resources

Customer Value

Proposition

Access

• How do customers learn about

the offering?

• How do customers get the offering?

Payment scheme

• How do customers pay for the offering?

• How often do customers purchase the

offering?

Offering

• What are you offering?

• Who is your customer?

• What jobs to be done are being

addressed?


The profit formula is defined by four elements

12

Key

Processes

Key

Resources

Customer Value

Proposition

Profit Formula

and Core Mission

Cost structure

• How are costs allocated?

Unit margin

• What sort of margins should each

transaction net to achieve desired profit

levels?

Resource velocity

• How quickly do resources need to be used

to support target volume?

Revenue model

• How do we plan to make money?


The delivery model consists of resources and processes

13

Customer Value

Proposition

Profit Formula

and Core Mission

Key

Processes

Key

Resources

Processes

• Design

• Product development

• Sourcing

• Manufacturing

• Hiring

• Training

• IT

Resources

• People

• Technology

• Equipment

• Information

• Channels

• Partnerships

• Brand


Profit Formula

and Core Mission

Customer Value

Proposition

Key

Processes

Key

Resources

Solution to cardiac disease

made accessible through

new channels and affordable

through product innovation

and third-party financing

Reduced margins at higher

volumes through increased

resource velocity and concurrent

reduction in full-cost structure

Processes

• Depth of experience making and marketing

pacemakers worldwide

Resources

• Strong relationships with the

Indian medical community

• Partnerships with third-party financiers

Medtronic “Healthy Heart for All” Business Model


DiscussionTopics






Circumstances for Business Model Change

A B

TRANSFORMATION A

Reposition TodayTRANSFORMATION B

Create Tomorrow

16

Compete on Convenience

Compete on “Affordability”

Compete in Non-traditional Markets

Create New Markets


Competing on Convenience


The Hilti Fleet Management Solution

18

Subscription-based, comprehensive tool fleet management service offered to contractors

to increase on site productivity


Hilti: Business model innovation

19

Traditional Power Tool Company Tool Fleet Management Services

Power tools and accessoriesFleet management to improve

on-site productivity

Low margin,

high inventory turnover

Subscription model covering

asset-heavy balance sheet

Retail distributionDirect Sales, Contract

Management, IT Systems

Profit Formula

and Core Mission

Customer Value

Proposition

Key

Processes

Key

Resources


Competing on “Affordability”


Disruptive innovation in defense – enabling access and affordability

21

Google Earth

ROVER Handheld

Low Cost UAVs

SUGV T-X Program


Real “affordable innovation” means business model change

22Note: Image reprinted with permission of Harvard Business Review


Competing in Non-traditional Markets /

Creating New Markets


The Lockheed Martin Skunk Works Hybrid Airship

24


Lockheed Martin Hybrid EnterprisesCommercial opportunities called for a new business model

25

Aeronautics Hybrid Airship

• Government customer

• Competing on superior performance

• Sustaining/derivatives improvement

• Commercial customer

• Convenient, cost-effective access with

limited or no infrastructure

• Direct delivery of goods

• Government accounting • Commercial accounting

• Large-scale complex programs

• Cutting-edge engineering and manufacturing

• Program management

• RFP management

• Commercial logistics

• Capital investment

• Sales and marketing teams

• Small, focused team

• SCM

Profit Formula

and Core Mission

Customer Value

Proposition

Key

Processes

Key

Resources

http://images.google.com/imgres?imgurl=http://www.defenseindustrydaily.com/images/AIR_F-22_10-Oc_Over_Mountains_lg.jpg&imgrefurl=http://www.defenseindustrydaily.com/force_structure/&h=768&w=1024&sz=185&hl=en&start=2&um=1&tbnid=sOlvChfOpWluRM:&tbnh=113&tbnw=150&prev=/images?q=f-22&svnum=10&um=1&hl=en&rls=GGIC,GGIC:2006-14,GGIC:en


Digital transformation enables companies to extractand create value across three areas

C U ST OMERS

I T I NF RAST RU C T U RE

AREA 2 [Customer Experience]

DIGITIZE EXTERNAL STAKEHOLDER INTERFACESCreate better end-to-end stakeholder experiences

through connectivity, data and automation

AREA 3 [Revenue Focus]

DISCOVER & SCALE DIGITAL BUSINESSES

1. Act as a Producer by offering digital

products or services

2. Act as a Platform through a marketplace

that facilitates the exchange of value

AREA 1 [Cost Focus]

DIGITIZE CORE PROCESSES Lower costs and increase efficiencies by capturing data and

automating processes

D A T A


DiscussionTopics






Interactive Poll: Do you have a defined process for

developing new business models in your organization??

Visit

www.slido.com

Enter the event passcode:

BMI

OR

Use the QR code:

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Process for transformational innovation

30

JOBS TO BE DONE

What are the

important, unsatisfied

jobs to be done?

BUSINESS MODEL

DESIGN

How can we design the

business model to

address these jobs?

TEST & LEARN

How can we efficiently

test and validate our

assumptions?


“People don’t want to

buy a quarter-inch

drill, they want a

quarter-inch hole!”

- Ted Levitt


Consider functional, emotional, and social jobs to be done

EMOTIONAL

Describes how the

consumer feels or

wants to feel

“Feel like I have a

private driver”

FUNCTIONAL

Describes how the

consumer achieves a

functional goal

“Get from where I am

to where I want to go”

SOCIAL

Describes how the

consumer wants to be

perceived by others

“Show that I’m part of

the digital generation”


Integrating the right business model behind the job

Profit Formula

and Core Mission

Customer Value

Proposition

Key

Processes

Key

Resources

33


Business Model Canvas

34

CUSTOMER VALUE PROPOSITION (CVP) OPERATING MODEL

PROBLEM or JOBS

FORMULATED AS A POV

CUSTOMER/CONSUMER

CIRCUMSTANCE

CUSTOMER ATTRIBUTES SOLUTION KEY RESOURCES

CHANNELS

KEY PROCESSES

COMPETITION AND

BARRIERS

PAYMENT STRUCTURE

PROFIT FORMULA

REVENUE STREAMS AND ADOPTION COST STRUCTURE

RISKS AND ASSUMPTIONS


OFFERING LEVERSWhat is the consumer buying?

Product Service

Standard Customized

Branded Unbranded

Use Anywhere Centralized Use

Consumable Durable

Individual Bundled

Physical Virtual

Value Premium

ACCESS LEVERSWhere do consumers access it?

PAYMENT LEVERSHow do consumers obtain it?

On-Demand Planned

Pick-Up Delivery

No Support Heavy Support

Known Channel New Channel

Frequent Use Infrequent Use

Mass Appeal Niche Appeal

All at Once Installments

Pay to Own Pay to Access

Regular Ad-Hoc

Upfront After Use

Consider the business model ‘levers’ you can pull


Amazon.com – Built to transform

36


Business Model InnovationF O R R E S I L I E N C E

T H A N K Y O U F O R J O I N I N G & S T A Y T U N E D F O R T H E N E X T B M I W E B I N A R I N T H E S E R I E S

Mark W. JohnsonCo-Founder

& Senior [email protected]

Erika J. MeldrimHead of Business

[email protected]

succeeding in business model innovation

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