v.camp : Business Model Development & Innovation (P)Re-Think Your Business Model Exercises

Transcription

1 v.camp : Business Model Development & Innovation (P)Re-Think Your Business Model Exercises

2 Exercises

3 Exercises Baseline and 4 Iterations 2: Analyze & Improve 1: Describe Baseline 3: Challenge & Change 4: Test & Verify 5: Evaluate & Decide My Company My Customers My Partners My Competition 2013 SAP AG. All rights reserved. 3

4 Describe Baseline mindset process team Business Model Development & Innovation

5 Exercise 1: Describe Business Model (Baseline) Step 1 (Network View) Describe how the company is embedded into its business network Focus on important actors Distinguish customers, partners and competitors, one entity can have more than one role! What you call a partner, might be a customer, so ask yourself: Do I need a value proposition? Is my business model obsolete, if this entity can not be convinced? Or: Is this entity just enhancing my capabilities / resources? Could it be substituted? Describe all relations in detail. If helpful, categorize relations, e.g. goods & services, money, contracts, data, rights, experience, market access, joint activities etc. My Company My Customers My Partners My Competition 2013 SAP AG. All rights reserved. 5

6 Exercise 1: Describe Business Model (Baseline) Step 2 (Enterprise View) Transfer customers and partners Start with the value proposition(s). Each customer deserves an individual value proposition! Key question: How do we reflect the needs of our customers in the value proposition? Add information about the channel and the customer relation. Think about key activities & resources next. Key questions: what do we have to do to deliver the required value for our customers? What are our unique capabilities that we leverage to create value for our customers? Finally think about financials. Key question: how do we capture the value? What is the (quantifiable) value for the customers? With which mechanism do we get our share? What are the major cost factors? What is the role of the partners (make or buy)? My Company My Customers My Partners My Competition 2013 SAP AG. All rights reserved. 6

7 Exercise 1: Describe Business Model (Baseline) How to Get Started Exercise: Step 1: Network view Step 2: Enterprise view Key Activities Customer Relationship Value Proposition? Key Resources Cost Structure???? Channels Revenue Streams My Company My Customers My Partners My Competition 2013 SAP AG. All rights reserved. 7

8 Analyze & Improve mindset process team Business Model Development & Innovation

9 Define & Prioritize Analysis Needs Use the Business Model Baseline to Check all aspects. Typical Outcomes: (Re-)segment Target Customers Understand Customer Needs Analyze Market & Environment Partnering Options Investigate Competitive Business Models (Re-)consider Channels Analyze Monetization Options SAP AG. All rights reserved. 9

10 Exercise 2: Analyze & Improve Business Model Customer Needs: What is the Job To Be Done? Definition: A job to be done is a fundamental task (or problem) the customer is trying to get done (or solve) in a particular circumstance Examples: Hilti: People don t want to buy a drill they don t want holes in the wall they want to hang up a picture or assemble / repair something Tata Motors: People don t need a car they want to get safely from A to B Sources: (M. Johnson) 2013 SAP AG. All rights reserved. 10

11 Exercise 2: Analyze & Improve Business Model Customer Needs: How to Identify the Job To Be Done? To figure out a solution, you might ask: what? To figure out the job to be done, you have to ask: why? Customer: I need a bridge over the river. You: Why? Customer: I need to get to the other side. You: Why? Customer: I need to deliver someone a message You: Why? Find out the ultimate goal of your customers and help them get their job done SAP AG. All rights reserved. 11

12 Exercise 2: Analyze & Improve Business Model Value Proposition Canvas Gain Creators Gains Value Proposition Pain Relievers : ) : ( Pains Customer Job(s) 2013 SAP AG. All rights reserved. 12

13 Exercise 2: Analyze & Improve Business Model Exercise: Improve Business Model By Analyzing Customers Needs Exercise: Step 1: Focus on one customer group. List their Job to be done and derive the 2 most important jobs and mark them on the value proposition canvas. Step 2: Identify their gains (and pains) while doing the 2 most important jobs to get a better understanding for a winning value proposition. Step 3: Improve the value proposition (and, if required, additional elements of the business model) and add them to the business model (marked with 1 for 1 st iteration) SAP AG. All rights reserved. 13

14 Challenge & Change mindset process team Business Model Development & Innovation

15 Exercise 3: Challenge & Change Business Model Analyze Triggers for Change Internal Opportunity External Opportunity e.g. under-utilized resources, unique skills, under-utilized market access e.g. new technologies, new customer segments, new demands e.g. inappropriate competencies, excessive costs Internal Threat e.g. price erosion, new competitors, competitors tackling new markets External Threat 2013 SAP AG. All rights reserved. 15

16 Exercise 3: Challenge & Change Business Model Part 1: Derive Your Business Model Challenge Exercise: Step 1: Figure out why you need or might want to look for a modified or extended business model. Step 2: Pick one or two triggers for your (!) Business Model Design Challenge and write it down. Trigger Analysis (Reason for Change) Int. Opportunity Ext. Opportunity Int. Threat Ext. Threat BM Design Challenge: How might we...? 2013 SAP AG. All rights reserved. 16

17 Incremental Systematic Disruptive Imaginative Exercise 3: Challenge & Change Business Model Ideation Methodology Blue Ocean Logo Battle Kill The Company Lead Industries Learn & Adapt Morphological Analysis Company Perspective Global perspective Learn from Others Challenge Yourself 2013 SAP AG. All rights reserved. 17

18 Exercise 3: Challenge & Change Business Model Morphological Analysis Reconsider 2 elements of the «aytm.com» business model separately, e.g. Customer groups Value propositions Channels Revenue models and try to alter their attributes systematically in order to find new value generating modifications. Decide in the team first, which elements to pick depending on your design challenge. Then, let each team member develop a few ideas before presenting and clustering the ideas in the team SAP AG. All rights reserved. 18

19 Exercise 3: Challenge & Change Business Model Logo Battle: How would McDonalds / Aldi / IKEA etc. run your business? The Logo Battle method uses innovative, well-known company examples to trigger associations with a certain business model and hence, inspire new ideas. Display the logos and use them to come up with innovative ideas. Ask yourself: How would McDonalds / Aldi / IKEA etc. run your business? Food Electronics Ecommerce Finance Aerospace Consumer Goods Services 2013 SAP AG. All rights reserved. 19

20 Exercise 3: Challenge & Change Business Model Part 2: Ideation, Clustering, Prioritization and Extended Business Model Exercise: Step 1: At the beginning recall your Business model Design Challenge to ensure a targeted ideation. Use 2 methods ( e.g. Morphological Analysis & Logo Battle). Cluster your ideas as you go. Step2: Prioritize the 2-3 best ideas for an extended business model (e.g. 2 votes per team member). Step 3: Use your favorite ideas to create an extended business model (network and enterprise view) around it. Add them to the business model (marked with 2 for 2 nd iteration). Cluster 1 Cluster n Cluster 2 Cluster SAP AG. All rights reserved. 20

21 Test & Verify mindset process team Business Model Development & Innovation

22 Exercise 4: Test & Verify Business Model Build Measure Learn Cycle To test hypotheses, you build an artifact that works as the foundation, you define what you want to measure and what the consequences for different results would be, you test (mostly with potential customers) and you learn by analyzing the results and gaining insights. The artifact that you use for the test is called Minimal Viable Product (MVP). The basis for the measurement are Actionable Metrics. Hypothesis to be tested Build Learn MVP Measure 2013 SAP AG. All rights reserved. 22

23 Exercise 4: Test & Verify Business Model Minimal Viable Product (MVP) The Minimal Viable Product (MVP) is a product (or just an artifact) with the fewest number of features needed to achieve a specific objective, and users are willing to pay in some form of a scarce resource (e.g. time, awareness or money). In the beginning the MVP is mostly not a minimized version of the final product (or service). It is rather the smallest thing possible to measure and learn. You want to minimize the effort and time needed since there might be a lot of iterations needed. Examples for suitable early MVPs are: Videos, story-boards, blogs & simple websites with more info, forward to a friend or even buy buttons, Google Adwords campaigns or even just interviews. Towards the end of the testing, the MVP becomes more and more the real product, but with limited features to control the effort SAP AG. All rights reserved. 23

24 Exercise 4: Test & Verify Business Model Actionable Metrics For each test you should define actionable metrics. These are some key metrics that allow you to test the respective hypothesis and to take action based on the results. What you should avoid are vanity metrics, that make you feel good, however, provide no insight for an educated decision afterwards. Example for actionable metrics: you set up a simple websites with more info and forward to a friend buttons. You monitor the number of people using these buttons to figure out, if the problem you want to address is relevant to a sufficient number of potential customers. Example for vanity metrics: you talk to a few potential customers that you already know very well, you explain the product idea and they tell you that this is interesting. You might like these comments, but what do you do with them? 2013 SAP AG. All rights reserved. 24

25 Exercise 4: Test & Verify Business Model Test One Hypothesis Exercise: Step1: Derive a few important assumptions (= hypotheses) the extended business model is build upon. Select one that implies a significant risk. Step 2:Describe one test that could be used to test this hypotheses. What could you learn and which risk could you mitigate with this test? Step 3: Describe the Minimal Viable Product (MVP) that could be used for this test. Hypothesis to be tested Build Step 4: Define actionable metrics for the test. Describe what you expect to confirm your hypothesis and what you would do if the hypothesis is not confirmed. Learn MVP Actionable Metrics Measure 2013 SAP AG. All rights reserved. 25

26 Evaluate & Decide mindset process team Business Model Development & Innovation

27 Exercise 5: Evaluate & Decide About Business Model Develop Evaluation Framework Two dimensions are key: impact and ease of implementation Approach allows to combine all criteria in one framework Develop criteria using a PEST approach Define project specific criteria incl. financial aspects and risks Assign weights according to importance Adjust in an iterative manner based on experts feedback Evaluation Dimensions Impact Ease of Implementation Revenue potential. Customer acceptance Privacy. Costs Risks Economic Social Political Technological 2013 SAP AG. All rights reserved. 27

28 Exercise 5: Evaluate & Decide About Business Model Bottom Up Approach Based on Business Model: Revenues The business model defines the business logic, that is the foundation for the business case. However, in addition you need quantities to calculate. To calculate the revenues, analyze the situation for each customer group separately. First of all, estimate how many customers will buy per year within the next X years. Next, estimate the average deal size: the revenue models (e.g. upfront license or subscription), provide the strategy. In addition, you need the price points. Prices are tactics. To get a first estimation, investigate prices for alternatives of your solution in the market. Finally, multiply the number of customers (per year, for the next X years) with the average deal size (per customer group). Differentiate between one-time and recurring revenues SAP AG. All rights reserved. 28

29 Exercise 5: Evaluate & Decide About Business Model Bottom Up Approach Based on Business Model: Costs To calculate the costs, you have to take everything that you need to create and distribute the solution into account. Start with the solution itself: what are the fixed (e.g. development costs) and variable costs (e.g. sales) to create and deliver it (within the next X years)? In addition, consider the ramp-up or go-to-market costs. What about the customer acquisition costs? Are there costs to bring partners on board or do they reduce the costs by taking over parts of the solution creation and delivery? Differentiate between fixed / one-time, fixed / recurring (e.g. per year) and variable (per unit) costs. Use the number of solutions sold or number of customers to calculate all costs per year for the next X years SAP AG. All rights reserved. 29

30 Exercise 5: Evaluate & Decide About Business Model Bottom Up Approach Based on Business Model: Profit & Loss For a simplified business case, it is sufficient to compare revenues and costs for the next X years. X needs to be defined according to the type of solution and market. This is not a cash flow calculation! For example, the solutions sold might be paid a year later. However, it is usually sufficient because the main purpose of the business case at this stage is to compare different business model options. Year Variable Costs Fixed Costs Total Costs Average deal size Number of deals Revenue Profit SAP AG. All rights reserved. 30

31 Exercise 5: Evaluate & Decide About Business Model Assumptions and Scenarios Summarize your assumptions and consider alternative outcomes caused by variations of the assumptions in the future. For a simple risk assessment compare three scenarios: Best case scenario, realistic case scenario, worst case scenario. Regard the business case you have created in the first place as a realistic case scenario and add the other scenarios by modifying your assumptions, e.g. regarding price points, number of customers, important cost blocks etc. Look at the differences in regards to profit and loss between the three scenarios and their impact on the level of the financial risk of your business model SAP AG. All rights reserved. 31

32 Exercise 5: Evaluate & Decide Business Model Business Case Exercise: Step 1: Develop a basic business case for your extended business model. Calculate the revenue, costs and profit for the next 3 years (for the extensions only!) via a bottom-up approach. Therefore, define justifiable price-points according to the revenue models you have defined in the business model and estimate the number of customers (per customer group) you can acquire for each year. Estimate your costs per year according to the cost blocks you have derived in the business model (both one-time and recurring costs). Calculate the profit (or loss) per year. Optional Step 2: Regard the business case you have created as a realistic case scenario and add a worst case and best case scenario by modifying your assumptions regarding price points, number of customers, costs etc. Look at the differences in regards to profit and loss between the 3 scenarios and discuss the level of the financial risk of your business model. Price 1 (Model A) Price 2 (Model B) # customers A # customers B One Time Costs Recurring Cost X Recurring Cost Y Revenues - Costs = Profit Y1 Y2 Y SAP AG. All rights reserved. 32

33 Thank You! Contact information: process mindset team Business Model Development & Innovation