sustainable growth in a sustained crisis - the business model as a tool to innovate (2012)
DESCRIPTION
Research Festival 2012, April 19-20. Copenhagen, Denmark Includes some examples of business model innovation and examples of companies that haven't innovated their business model.TRANSCRIPT
Sustainable growth in a sustained crisis
Kasper V Roldsgaard External lecturer, Dott. Mag., M.Sc.
CBS – Department of Innovation and Organizational Economics (INO)
The Wedge, office # K3.48 21688671
- The business model as a tool to innovate
Getting the terminology right: “In economics, sustainable growth refers to increases in profits, adjusted for changes in the relationship between revenues and costs, which can be sustained over long periods of time” (author’s definition, 19-04-2012).
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Total revenues
Profit for the period(Or loss)
Best practice example of non-sustainable growth
Fig. 8. The growing gap of costs. Source: DSB Annual Reports 1999-2011. To close the growing gap, DSB suspends two contracts: a) the Swedish coast line of the Oresund region in 2011 [contract period: 2009-2017] and b) the Väst region in 2012 [contract period: from 2010 to 2018].
DSB Financial highlights1999-2011
Indicative trendline: -84.72x + 1023.2
R² = 0.3825
-1000-800-600-400-200
0200400600800
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Financial result Best case scenario
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Source: DSB Annual Reports
Financial highlights1999-2011
RQ: How can the curve’s evolution be explained?
Fluid model- adapt to the situation
Expert domain
Executive domain
Outside-in perspective
Inside-out perspective
Expert panel
Railway management
Railway regulation
Agile tactic: Act, then probe. Collect information from the market.
(a) (b)
(c) (d)
Cynefin framework (Snowden, 2007) Correlated logic
If a chaotic situation emerges, then act.
Analyze. Utilize data and expert knowledge.
Distinctive logic
Knowable
Probe. Adapt prior expectations of how things work.
Radical logic
Complex
Act. Then revise if required. Just don’t do nothing.
Disruptive logic
Chaotic
Define laws. Categorize and codify standards.
Incremental logic
Known
Analysis: Starting point
If chaotic situation emerges, then act
Fig. 18. Fluid model - adapt to the situation. The Cynefin framework is to designed to evaluate complexity science from new and different viewpoints based on the assumption that design choices are influenced by multiple factors in our environment and our past experiences (Snowdon & Boone, 2007). The scheme provides an initial overview to protect the Spanish railway against some of the pitfalls observed in the Scandinavian railway market, while developing forward-looking disruptive ideas.
Suggestion: Drift with the environment (but if a crisis emerges then act)
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Today’s program
• Search for business model • Case examples • Business model canvas
”DONG er i dag nr. ét i verden, hvad angår havvind, i kraft af en enestående knowhow, processtyring og forretningsmodel. Men DONG er ikke kapitalstærk nok til at fastholde sin andel på et marked, hvor langt større selskaber kører sig i stilling til kampen om den forventede tidobling af havmøllekapaciteten i 2020.”
Musikbranche, filmbranche, spilbranche, avisbranchen, bogbranche, ejendomsbranche,
Hvor naiv kan man være? Vi har at gøre med et kommercielt foretagende, som store amerikanske venturekapitalister, […] og en kinesisk rigmand har investeret millioner af dollar i. De vil se en forretningsmodel. De vil se et afkast. […] Det er forretning med stort F.
Kilde: Føhns, H. ”Julegave ødelægger forretningsmodel, Facebook fandt en smart model, men en diamantring satte sig fast i forretningens tandhjul”. Information, publiceret 11-12-2007
”den forretningsmodel for havmølleparker [...] er så smart, at DONG’s store tyske konkurrent på det europæiske marked [...] annoncerede, at man nu vil rejse kapital til sine vindmølleprojekter på lignende måde. [Ekspert udtaler:] Den største kompliment, du kan få, det er, når konkurrenterne kopierer dine koncepter.”
Kilde: Nielsen, J. S., "Schurs show mod Eldrup rammer DONG", 16-03-2012.
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En model (for at tjene penge)
Et koncept (for at tjene penge)
Forretningsmodel krise (44) Forretningsmodel investering (43)
Forretningsmodel finansiering (13)
Forretningsmodel penge (127)
Forretningsmodel succes (48)
Nøgleord: Bæredygtig økonomi, psykologi, politk, (kunder, værdi, krise, success, finansiering,..)
MP3-player/iPod?
“Game changing value rated by the market”
Disruptive/game-changing system
Source: www.hu2.com/store/stay-hungry-stay-foolish-sticker.html, January 25 2012
Author of “The Technology of foolishness” (1971)
Icon of “serious play” with technology (2007)
“Memory is an enemy”
Not if you ask me… take a look at
this
Best practice example of disruptive logic – or icon of “serious play” with technology
Business model inertia
“Many companies fail not because they do something wrong, but because they keep doing what used to be right thing for too long - and thus suffer from the rigidity of their own business models.” (Doz and Kosonen, 2010)
Business model innovation
There are many reasons why the incremental innovation doesn’t just grow into the [disruptive] world. The strategy is a hindrance to free thinking, at least for the grant portion of the innovation, but perhaps also for the development of new business models for existing services. We can also see that the risk picture becomes much more diffused in the [disruptive] innovation world because we have no experience in these new areas. (p. 616) (Elkjær, 2011)
Tabula rasa rationality “[Disruptive] innovation requires a product or service in terms of tabula rasa, which mentally can be an almost insurmountable barrier in the innovation process.” (p. 616) (Elkjær, 2011)
Fig. 16. Visualizing the disruptive curve. Source: Based on Hobcraft P., 2012b, “The pathway curve methodology”, The Agility Innovation Specialists, Online: http://innovationfitnessdynamics.com/2012/02/14/the-pathway-curve-methodology, Published 2012-02-14, Retrieved 2012-04-03.
Visualizing the curve
Searching for an innovation hotspot
“The business environment itself is a choice variable: firms can select a business environment or be selected by it: they can also shape it.”(Teece, 2010)
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Mostly this design leads to loss of competitiveness over time
Examples: Spanair, DSBFirst, Nokia
Nearly always problematic design option
OUTPUT INPUT
Transforms industry structure and/or shifts behavioral trends
Examples: Ryanair, AVE, Apple.
Often under-estimated or overlooked design option
Nearly alw
ays wins
design battle N
early always
loses design battle
Evolution of the dominant logic
Possible problem
Existing focus?
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Track 1 Track 2 Track 3
Fig. 14. Dominant design logic. Source: Based on Hobcraft (2012) “Your dominating innovation design is?”, The Agility Innovation Specialists, Online: http://paul4innovating.com/2012/02/01/your-dominating-innovation-design-is, Published 2012-02-01, Retrieved 2012-04-03.
Taxonomy of dominant design logics
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Progression in small steps
BIG BANG – HIGH RISK SERIES OF SMALL STEPS
Examples a. DSBFirst licences b. IC4 trains in Denmark c. Travelcards (planning)
”The concept of a business model lacks theoretical grounding in economics or in business studies ... [the absence of] business models in economic theory probably stems from the ubiquity of theoretical constructs that have markets solving the problems that – in the real world – business models are created to solve.” Source: Teece, D. (2010:175, emphasis added), Business models, business strategy and innovation, Long Range Planning 43.
“Black Hole” investment strategy
Examples a. AVE trains in Spain (lines, rolling stock) b. Mobile tickets (sms, app..) c. Travelcards (realized)
“Problem-based” investment strategy
We need to solve specific problems
Challenging the normal way
Why do we exist?
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MANAGEMENT EXERCISE
Handouts + posters 20
Business model canvas
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One big idea, multiple perspectives