Prof Göran Roos Thinker in Residence, South Australia

Transcription

1 Prof Göran Roos Thinker in Residence, South Australia Chairman, VTT International Honorary Professor at Warwick Business School, Warwick University Visiting Professor in Innovation Management and Business Model Innovation, VTT Technical Research Centre of Finland Visiting Professor in Business Performance and Intangible Asset Management, Centre for Business Performance, Cranfield University, Cranfield Senior Advisor, Asia Pacific, Aalto Executive Education Academy Part-Time Professor, Strategic Design, Faculty of Design, Swinburne University of Technology

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4 Efficiency Increasing Innovations Innovations out of 5 different knowledge domains

5 Explanatory Models Explaining Reality Universal Understanding Abstract Presentation of Insights Expressing Models Questioning Reality Individual Understanding Science Art Reductionist Approach Integrative Approach Medicine Design Working Models Improving Reality Hermeneutic Understanding Practical Presentation of Insights Exploring Models Changing Reality Subjective Understanding

6 Technology Based Innovation Design Based Innovation

7 Technologies that enable or delivers on the desired changes in the business model or design objectives

8 Source: F. Hacklin, C. Marxt, M. Inganäs, 2005, Technology acquisition through convergence: the role of dynamic capabilities, 14th International Conference on Management of Technology, Vienna, May 22-26,

9 Design

10 Desirable from the users point of view [i.e. they are better of in their own opinion after the change] Beneficial to the supplier Positively impacting other stakeholders

11 Source: Nyberg, M. and Lindström, M. (2005), Muotoilun Taloudelliset Vaikutukset, ETLA, Discussion papers No. 982, p. 20. Design Council. The Impact of Design on Stock Market Performance. An Analysis of UK Quoted Companies London 2004.

12 Design Methodology Observation Brainstorming Rapid Prototyping Refining Implementation Living Labs A Living Lab is an embodied research methodology for sensing, prototyping, validating and refining complex solutions in multiple and evolving real life contexts. In essence it applies a design methodological approach within a semi-open innovation framework [Semi-open innovation framework means that it builds on the principle of crowd sourcing but the crowd is defined and delimited by the originator of the problem] to enhance the fast prototyping co-creation thinking when it comes to products, services and solutions that are either systemic in nature or part of a greater systemic/holistic setting.

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14 Source: Helin, K. and J. Lehtonen VOITTO: About Business Plan and Innovation, Presentation

15 Effectiveness Increasing Innovations Business Model Based Innovations

16 Is the recipe of your business and is built around an in-depth customer/consumer insight: Last year one million quarter inch drills were sold. Not because people wanted quarter inch drills but because they wanted quarter inch holes. President of Black & Decker What we sell is the ability of a 43- year-old accountant to dress in black leather, ride through small towns and have people be afraid of him. Harley-Davidson marketing executive

17 You are producing romantic pocket books for teenage females and younger middle age females with lower levels of education You are distributing through bookshops etc. Your price the consumer is $1 Your distribution channel keeps 50% Your author gets 20% Your operating costs are 25% Leaving you with 5% in contribution [or $0.05]

18 Easton Press Best materials, production and presentation no compromise High price high margin business Revenue Logic: Value-based pricing RyanAir Scale gives some purchasing discounts Reverse auctioning of landing rights gives positive cash flow Operational excellence gives low operating cost Listing fees for all on-board goods provides positive cash flow Revenue Logic: Profit sharing with airports + Hybrid/Media model

19 You get your profit exceeds your revenue from the base offering

20 Stakeholder identification Stakeholder need identification Ecosystem mapping Firm technology roadmap Distribution Channels Supply chain Relationship depth Partner mapping Value creation strategies Economic Logic Resource mapping Resource deployment system optimisation Cost structure optimisation Profit pool identification Revenue models mapping Business strategy Innovation Strategy

21 Value Proposition Value from Cocreating the offering Value from the purchasing phase Value from use Value from renewing the offering Value from removing the offering Source: Osterwalder, A. The Business Model Ontology A Proposition In A Design Science Approach, These, Ecole Des Hautes Etudes Commerciales, Universite De Lausanne, 2004

22 Performance The dimensions that might matter in my business

23 Powerful Dormant Dangerous Dominant Definitive Demanding Dependent Discretionary Urgent Legitimate Source: Agle, B., Mitchell, R., and Sonnenfield, J., 1999, What Matters to CEOs? An Investigation into Stakeholder Attributes and Salience, Corporate Performance and CEO Values, Academy of Management Journal, 42, 5:

24 Intrinsic Must be Identified and if necessary segmented using value based segmentation methods Instrumental Extrinsic

25 Value derived from the possession of the offering Value derived from the appreciation of the offering Value derived from the deployment of the offering Instrumental value Intrinsic value Extrinsic value

26 Reduce Which factors should be reduced well below the industry s standard? Eliminate Which of the factors that the industry takes for granted should be eliminates? A New Value Curve Create Which factors should be created that the industry has never offered Raise Which factors should be raised well above the industry s standard? Kim & Mauborgne 2005

27 Channels Awareness Evaluation Purchase After Sales Source: Osterwalder, A. The Business Model Ontology A Proposition In A Design Science Approach, These, Ecole Des Hautes Etudes Commerciales, Universite De Lausanne, 2004

28 Relationship describes the kind of link a company establishes between itself and the customer. But as interactions come at a given cost, firms must carefully define what kind of relationship they want to establish with what kind of stakeholder. The depth of a relationship goes from transactional through repeat to embedded & symbiotic Profits from customer relationships are the lifeblood of all businesses. These profits can be achieved through: the acquisition of new customers the enhancement of profitability of existing customers [add on selling] the extension of the duration of existing customer relationships [retention] The relationship mechanism can either personalize a relationship, contribute to customer trust, or contribute to brand reputation & relationship.

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30 Support Activities Infrastructure Human Resource Management Technology development Procurement Primary Activities Inbound logistics Operations Outbound logistics Marketing & Sales Service Source: Porter, M.E. 1985: Competitive Advantage; Creating and Sustaining Superior Performance, The Free Press

31 Effectiveness Is all about transformation of inputs into outputs. The value resides solely in the resulting output. Economies of Scale Primary resource cannot be Human If primary resource is relational or organisational then transformation efficiency must be high Economies of Learning [Repetition] A Value Chain has an inherent drive towards efficiency High Low V A L U E C H A I N Low Efficiency High

32 Support Activities Infrastructure Human Resource Management Technology development Procurement Primary Activities Find someone with a problem Control/Evaluation Acquire the right to address the problem Execute Develop alternative solutions Co-select with client one solution Source: Stabel,. B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998

33 Effectiveness Is all about (re-)solving customer problems. The value resides in two in-separable components: The solution and the individuals that came up with the solution. Economies of Scope Primary resource cannot be Monetary or Physical If primary resource is relational or organisational then transformation efficiency must not be high A Value Shop has an inherent drive towards effectiveness High VALUE SHOP Low Low Efficiency High

34 Support Activities Infrastructure Human Resource Management Technology development Procurement Primary Activities Promote Network Manage Member Contracts Service Provisioning Infrastructure Operation & Maintenance Source: Stabel,. B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998

35 Effectiveness Is all about linking customers who are or wish to be interdependent. The value resides in the enabling itself. Network Economics Primary resource cannot be Human or Monetary or Physical transformation efficiency relating to Organisational or Relational must be on the level of maximum marginal return A Value Network has no inherent drive towards neither efficiency nor effectiveness High Low VALUE NETWORK Low Efficiency High

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37 Owned or Controlled By the Firm Owned or Controlled By the Firm Owned or Controlled by the Other Party Owned or Controlled By the Firm Owned or Controlled By the Employee Additive Additive

38 Decreasing Marginal Return Value Chain Increasing Marginal Return Value Shop Network Economic Return Value Network

39 Industrial Economics Network Economics Knowledge Economics

40 MONETARY PHYSICAL REL. ORG. HUMAN MONETARY Investment In financial instruments Investment in assets Investment in building links Investment in brands, image and systems Recruitment training, conditions PHYSICAL Sales of products Chemical synthesis Design & Chemical effect New Processes New Knowledge RELATIONAL Relationship arbitrage Use of other company s assets Word of mouth Access to process Co-learning ORGANISATIONAL Sale of IP, processes & knowledge Produce By numbers CRM Systems generate IP Developing competence through use HUMAN Sales of man-hours Developing prototypes Building & developing relationships Knowledge codification, new IP Training

41 Effectiveness Coordination costs occur in the interface between different strategic logics for two reasons: Different [economic] behaviour of resources Different behaviour of individuals Coordination Costs High Low Low Value Shop V A L U E C H A I N High Efficiency Transaction Costs

42 Shareholder Value Creation Increase net operating profit after tax (NOPAT) (I/S) Improve capital allocation (B/S) Increase gross profit Decrease operating expenses Capital deployment Cost of capital Increase revenues Decrease costs Reduce selling costs Reduce distribution costs Reduce administrative costs Value Levers Increase price Increase volume Improve mix Improve process Reduce cost of inputs Improve warehouse utilization Increase productivity Decrease staffing Optimize scheduling Optimize physical network Decrease staffing Use alternative distribution Lower Customer Service & Order Lower Management I/S costs Costs Lower Finance/Acctg. costs Lower HR costs Improve capital planning/ investment process Reduce inventories Reduce A/R increase A/P N/A Transformation Benefit Profit-driven marketing efforts: Target best customers Offer best product mix Improve pricing management Proactive production planning for inventory management Most profitable capacity allocation/utilization Reduced sales management layers Focus on high-profit accounts Improved inventory flow visibility Lower transportation costs Higher facilities utilization Less fire fighting Better carrier evaluation /mgmt. Higher quality Customer Service Improved Supply Chain visibility Improved order fill rates Significantly lower cost More consistent service Faster problem resolution Improved capital stewardship Increased capital productivity Reduced inventory investment Reduced receivables investment

43 Effort-based pricing A cost-based (or effort-driven) pricing model Value-based pricing A value-based (or perception-driven) pricing model Profit Sharing Revenue-sharing contract with primary customers Licensing Charging on copyright (the right to use the IP) Loss Leader-pricing Creating customer base (for later revenue) or supporting sales of other parts of the product/service offering Hybrid/Media model Vendor sells/leases ad space or information [space] based on customer relationship Channel charging Vendor charges for carrying information relating to other goods in/on its primary product/offering Membership fee Vendor charges for the right to take part in an activity Negative Working capital Vendor generates financial returns on the capital held as a consequence of getting paid by its customers before paying its suppliers Source: Osterwalder, A. The Business Model Ontology A Proposition In A Design Science Approach, These, Ecole Des Hautes Etudes Commerciales, Universite De Lausanne, 2004

44 Technology based Innovations are combined with Design Innovations and Business Model Innovations To address all dimensions of the customers value drivers

45 Owner of L.A. Times files for bankruptcy December 09, 2008 James Rainey and Michael A. Hiltzik Rainey and Hiltzik are Times staff writers. In perhaps the starkest sign yet of trouble in the news business, media giant Tribune Co. -- owner of the Los Angeles Times, KTLA-TV Channel 5 and other newspapers and TV stations -- filed Monday for bankruptcy protection from creditors.

46 Pearson "proud" over 2009 preliminary results Catherine Neilan Pearson's chief executive has said everyone in the company "can be proud" of the preliminary results for 2009, in which sales and profits grew "in a tough climate". Penguin had a record year, growing sales above the 1bn mark for the first time - up 11% to 1.002bn - however, profit slumped 10% to 84m, owing to one-off costs of 9m in relation to the company's restructure midway through the year. The Pearson group saw headline growth in sales of 17%, to 5.624bn, with growth at a constant exchange rate up 4%, and adjusted operating profit also up 4%, to 858m. Operating cash flow increased by 15% to 913m. Pearson Education experienced "strong growth", thanks to "sustained investment and our leadership position in learning services and technologies". The North American division grew 23% to 2.47bn, while adjusted operating profits were up by a third to 403m, with the international arm, which includes the UK, growing sales 20% to 1.035bn. Profits increased by 4% to 141m.

47 6% of volume 45% of Profit Pool In less then 3 years

48 Improve existing business Add new businesses Not to be copied or distributed in any form whatsoever without the express permission of the author. Sources in main document.

49 Business Model Innovation with emphasis on what to improve in my present business? Not to be copied or distributed in any form whatsoever without the express permission of the author. Sources in main document.

50 The Book eco-system The Radio play eco-system The TV series eco-system The Advertisement eco-system The E-Distribution eco-system for books The Mobile pay-as-you-go entertainment eco-system The Peer-to-peer publishing eco-system The Education eco-system The Product placement eco-system The Gaming eco-system The Bundled product eco-system Not to be copied or distributed in any form whatsoever without the express permission of the author. Sources in main document.