Business modeling in innovation, Bengt Järrehult, SCA

Business Modeling in innovation - the missing link to customer value!?

Prof. Bengt Järrehult, SCA & LU at Campdigital by Sigma

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”De som vinner i längden är inte de som är snabbast, effektivast eller billigast. Vinnarna finns i stället bland dem som ser innovation och kontinuerliga genombrott som en naturlig del av verksamheten” Håkan Karlsson

2

Managing your Innovation Portfolio , Harvard Business review May 22, 2012

Products & Services

Improve existing

Crea

te &

targ

et n

ew

Develop new Add adjacent

Mar

kets

& C

usto

mer

s

Serv

e ex

istin

g En

ter a

djac

ent

Upgrades/Core Optimizing existing

products for existing customers

Next Generation/Adjacent Expanding from existing

business into “new to the company” business

Breakthroughs/Transformational Developing new products and services and/or aiming for markets that don’t

yet exist

3


Products & Services

Improve existing

Crea

te &

targ

et n

ew


Mar

kets

& C

usto

mer

s

Serv

e ex

istin

g En

ter a

djac

ent

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Is it real? Can we win? Is it worth doing? , Professor George Day at Wharton School, , Harvard Business review December, 2007

5-25%

25-40%

40-55%

50-60%

60-75%

Products & Services

Improve existing

Crea

te &

targ

et n

ew


Mar

kets

& C

usto

mer

s

Serv

e ex

istin

g En

ter a

djac

ent

5


Products & Services

Improve existing

Crea

te &

targ

et n

ew


Mar

kets

& C

usto

mer

s

Serv

e ex

istin

g En

ter a

djac

ent

6

Good Lead Innovator

-general biz

45%

30%

25%

A diversified industrials company

Managing your Innovation Portfolio , Harvard Business review May 22, 2012 + RTEC on Portfolio Management, 2008

70%

20%

10%

A leading consumer goods

company

80%

18%

2%

A midstream technology company

45%

40%

15%

This is the optimal balance for short term rewards…

10%

Good Lead Innovator

- general biz

20%

70%

…whereas long term rewards come as this!

7

Breakthroughs (Genombrott)

New generations

Upgrades

Good Fast Follower

- general biz

”De som vinner i längden är inte de som är snabbast, effektivast eller billigast. Vinnarna finns i stället bland dem som ser innovation och kontinuerliga genombrott som en naturlig del av verksamheten” Håkan Karlsson

8

9


Next generations

Upgrades 1st shipment

to customers

FEASIBILITY DEVELOPMENT LAUNCH CAPABILITY PRE- CONCEPT

Gate2

Gate3

Gate4

Gate 5

Gate1

Robert C. Cooper, Stagegate Inc. + SCA Innovation Funnel 9

Steven Gary Blank (“The entrepreneurs’ guide to start-ups”) + HBR May 2013, Page 54


Next generations

Upgrades

Customer Discovery

Customer Validation

Company Building

Customer Creation

10

SCA’s two “Stone plates” from its Innovation Framework 11


Next generations

Upgrades

12 SCA 2013, Linear and iterative ways of working

BusinessModelGeneration.com

My sweat problem

deprives me of joy in life


Fitting auxiliaries to my clothes

15

http://businessmodelgeneration.com/




My sweat problem



16



My sweat problem



Sweat pads with dating

success guarantee

A reliable product I trust

do perform

17 BusinessModelGeneration.com



My sweat problem



A reliable product I trust

do perform


success guarantee

18


BusinessModelGeneration.com 19


success guarantee

Fashion shop sales minus 30%

Advertising in Amelia

19


BusinessModelGeneration.com 21

Monthly deliveries


success guarantee

Fashion shop sales B2B


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Customer segments: Revenues year 3: Costs year 3:Place your Post-Its here Total # customers Actual year 3 Place your Post-Its here Scroll down % of Cust. Revenue 1 Total Costs segm. 1 Total Costs segm. 2

0 - Please scroll 0% €0 €0 €0Make your own notes Scroll down % of Cust. Revenue 2 Make your own notes Make your own notes

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Total # customers Actual year 3 Scroll down % of Cust. Revenue 1 Scroll down Scroll down Scroll down Scroll down

0 - Please scroll 0% €0 Please scroll Annual costs Please scroll Please scroll Annual costs Please scrollScroll down % of Cust. Revenue 2 Costs 1 Fixed costs Var.costs Costs 1 Fixed costs Var.costs

Make your own notes Please scroll 0% €0 €0 €0 €0.00 €0 €0 €0.00Scroll down % of Cust. Revenue 3 Scroll down Scroll down Scroll down Scroll down

Please scroll 0% €0 Production Annual costs Please scroll Please scroll Annual costs Please scrollScroll down % of Cust. Revenue 4 Costs 2 Fixed costs Var.costs Costs 2 Fixed costs Var.costs

Please scroll 0% €0 €0 €0 €0.00 €0 €0 €0.00

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Fill in Fill in Please scroll Annual costs Please scroll Please scroll Annual costs Please scroll€0 €0 Costs 3 Fixed costs Var.costs Costs 3 Fixed costs Var.costs

Comments Comments €0 €0 €0.00 €0 €0 €0.00This is … Scroll down Scroll down Scroll down Scroll down

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€0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down

Fill in Fill in Please scroll Annual costs Please scroll Please scroll Annual costs Please scroll0% Year 1 0% Costs 5 Fixed costs Var.costs Costs 5 Fixed costs Var.costs0% Year 2 0% €0 €0 €0.00 €0 €0 €0.000% Year 3 0% Scroll down Scroll down Scroll down Scroll down

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0 0 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down


€0 €0 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down


€0.00 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down


0% 0% €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down




€0.00 €0.00 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down


0 0 €0 €0 €0.00 €0 €0 €0.00

Number of Units used /customer, year

Fixed price/customer,year [€]

Average sales price per unit [€]

Number of visits/customer, year

Rebate given to retailer per unit [%]

Fixed commission fee/customer, year [€]

Variable commission fee/unit [€]

Market share [%]

Notes

Notes

Extraordinary annual side-effect revenue

This is …

Comments

€0€0€0€1€1€1

Costs Customer 1

€0€0€0€1€1€1

Costs Customer 2

€0€0€0€1€1€1

Revenues Cust. 1

€0€0€0€1€1€1

Revenues Cust. 2

Do you have any extraordinary side

effects on the revenue stemmingfrom your Value

Proposition

Copyright: Bengt Järrehult, SCA

€0

€0

€0

€1

€1

€1

1 2 3

Costs

Revenues

Year

€0

€0

€0

€1

€1

€1

1 2 3

Costs

Revenues

Year

Customer segments: Revenues year 3: Costs year 3:Place your Post-Its here Total # consumers Actual year 3 Place your Post-Its here Scroll down % of Cust. Revenue 1 Total Costs segm. 1 Total Costs segm. 2

500 50 Retailer sales 100% €2,193,750 €257,101 €3,399,567Make your own notes Scroll down % of Cust. Revenue 2 Make your own notes Make your own notes



Please scroll 0% €0 Place your Post-Its here Place your Post-Its here

Total # consumers Actual year 3 Scroll down % of Cust. Revenue 1 Scroll down Scroll down Scroll down Scroll down

700,000 42,000 eCommerce 100% €5,292,000 Legal & Brand Annual costs Cost/unit Transport Annual costs Please scrollScroll down % of Cust. Revenue 2 Costs 1 Fixed costs Var.costs Costs 1 Fixed costs Var.costs

Make your own notes Please scroll 0% €0 €187,500 €0 €0.05 €250,000 €250,000 €0.04Scroll down % of Cust. Revenue 3 Scroll down Scroll down Scroll down Scroll down

Please scroll 0% €0 Other Annual costs No var. costs Please scroll Annual costs No var. costsScroll down % of Cust. Revenue 4 Costs 2 Fixed costs Var.costs Costs 2 Fixed costs Var.costs

Please scroll 0% €0 €2,000 €2,000 €0.00 €15,567 €15,567 €0.00

Scroll down Scroll down Scroll down Scroll down

Fill in Fill in Legal & Brand Annual costs Cost/unit Please scroll Annual costs No var. costs€0 €0 Costs 3 Fixed costs Var.costs Costs 3 Fixed costs Var.costs

Comments Comments €20,000 €20,000 €0.00 €0 €0 €0.00This is … Scroll down Scroll down Scroll down Scroll down

Production Annual costs Cost/unit Other Annual costs Cost/unitCosts 4 Fixed costs Var.costs Costs 4 Fixed costs Var.costs

€2,562,500 €2,000,000 €0.15 €351,200 €200,000 €0.02Scroll down Scroll down Scroll down Scroll down

Fill in Fill in Legal & Brand Annual costs No var. costs Other Annual costs Please scroll2% Year 1 1% Costs 5 Fixed costs Var.costs Costs 5 Fixed costs Var.costs6% Year 2 3% €101 €20,000 €0.00 €0 €0 €0.00

10% Year 3 6% Scroll down Scroll down Scroll down Scroll down

Legal & Brand Annual costs No var. costs Other Annual costs No var. costsFill in Fill in Costs 6 Fixed costs Var.costs Costs 6 Fixed costs Var.costs

75000 180 €0 €5,000 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down

Transport Annual costs Cost/unit Legal & Brand Annual costs Please scrollFill in Fill in Costs 7 Fixed costs Var.costs Costs 7 Fixed costs Var.costs

€0 €0 €37,500 €0 €0.01 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down

Personnel Annual costs Cost/visit Production Annual costs Cost/unitFill in Fill in Costs 8 Fixed costs Var.costs Costs 8 Fixed costs Var.costs

€0.90 €0.70 €10,000 €0 €100.00 €3,134,000 €2,000,000 €0.15Scroll down Scroll down Scroll down Scroll down


35% 0% €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down




€0.00 €0.00 €0 €0 €0.00 €0 €0 €0.00Scroll down Scroll down Scroll down Scroll down


2 0 €0 €0 €0.00 €0 €0 €0.00

Number of Units used /customer, year

Fixed price/customer,year [€]

Average sales price per unit [€]

Number of visits/customer, year

Rebate given to retailer per unit [%]

Fixed commission fee/customer, year [€]

Variable commission fee/unit [€]

Market share [%]

Notes

Notes

Extraordinary annual side-effect revenue

This is …

Comments

€0€500,000

€1,000,000€1,500,000€2,000,000€2,500,000€3,000,000

Lega

l &…

Lega

l &…

Lega

l &…

Tran

spor

tPl

ease

scro

llPl

ease

scro

ll

Costs Customer 1

€0€500,000

€1,000,000€1,500,000€2,000,000€2,500,000€3,000,000€3,500,000

Tran

spor

tPl

ease

scro

llO

ther

Lega

l &…

Plea

se sc

roll

Plea

se sc

roll

Costs Customer 2

€0€500,000

€1,000,000€1,500,000€2,000,000€2,500,000

Reta

iler s

ales

Plea

se sc

roll

Plea

se sc

roll

Plea

se sc

roll

Side

effe

cts

Revenues Cust. 1

€0€1,000,000€2,000,000€3,000,000€4,000,000€5,000,000€6,000,000

eCom

mer

cePl

ease

scro

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scro

llPl

ease

scro

llSi

de e

ffect

s

Revenues Cust. 2

Do you have any extraordinary side

effects on the revenue stemmingfrom your Value

Proposition

Copyright: Bengt Järrehult, SCA

€0

€500,000

€1,000,000

€1,500,000

€2,000,000

€2,500,000

€3,000,000

1 2 3

Costs

Revenues

Year

€0

€1,000,000

€2,000,000

€3,000,000

€4,000,000

€5,000,000

€6,000,000

1 2 3

Costs

Revenues

Year

Monthly deliveries


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Monthly deliveries

Fashion shop salesB2B


#Act.Cust.50

#Act.Cust.42,000

Revenue tot€438,750

€1,316,250

€2,193,750

Revenue tot€882,000

€2,646,000

€5,292,000

Costs tot€2,201,520

€2,510,561

€257,101

Costs tot€2,679,767

€3,108,167

€3,399,567

€0€500,000

€1,000,000€1,500,000€2,000,000€2,500,000€3,000,000

Lega

l &…

Oth

erLe

gal &

…Pr

oduc

tion

Lega

l &…

Lega

l &…

Tran

spor

tPe

rson

nel

Plea

se…

Plea

se…

Plea

se…

Costs year 3 for customer 1

€0€1,000,000€2,000,000€3,000,000€4,000,000

Tran

spor

tPl

ease

…Pl

ease

…O

ther

Oth

erO

ther

Lega

l &…

Prod

uctio

nPl

ease

…Pl

ease

…Pl

ease

…

Costs year 3 for customer 2

€0€500,000

€1,000,000€1,500,000€2,000,000€2,500,000

Revenues year 3 for customer 1

€0

€2,000,000

€4,000,000

€6,000,000

Revenues year 3 for customer 2

€0

€500,000

€1,000,000

€1,500,000

€2,000,000

€2,500,000

€3,000,000

1 2 3Year

Customer1

€0

€1,000,000

€2,000,000

€3,000,000

€4,000,000

€5,000,000

€6,000,000

1 2 3Year

Customer 2

-100%

-50%

0%

50%

1 2 3Year

Profit [%]

€0

€2,000,000

€4,000,000

€6,000,000

€8,000,000

1 2 3Year

Both customers

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Lead Customers

24 Geoffrey A. Moore (“Crossing the Chasm”)

Company Building

Customer Discovery

Customer Validation

Customer Creation

The Chasm

Lead Customers 1. Find the customer’s

gains & pains 2. Find the gain creators

& pain relievers = Offer 3. Find many different

BMs 4. Test them by asking

customers, iterate

Steven Gary Blank (“The entrepreneurs’ guide to start-ups”) 25

Company Building

Customer Discovery

Customer Validation

Customer Creation

Pers

ever

ing

The Chasm

Acceleration Lead

Customers

Pivoting

1. Set the “final” Business Model

2. Get first sales to Lead Customer/Early adopter

3. If negative - pivot 4. If positive - persevere


Company Building

Customer Discovery

Customer Validation

Customer Creation

The Chasm

1. Cross the Chasm the big Early Majority

2. Position the value proposition

3. Launch the value proposition large scale

4. Create demand for non-customers


Company Building

Customer Discovery

Customer Validation

Customer Creation

The Chasm

1. Reach out for the Late Majority & Laggards

2. Review mission/culture 3. Review organization

- venture in the existing company or in a new?

4. Focus on efficiency

28 Steven Gary Blank (“The entrepreneurs’ guide to start-ups”)

Company Building

Customer Discovery

Customer Validation

Customer Creation

Company Building

Customer Discovery

Customer Validation

Customer Creation

Company Building

Customer Discovery

Customer Validation

Customer Creation

Company Building

Customer Discovery

Customer Validation

Customer Creation

29

Business modeling in innovation, Bengt Järrehult, SCA

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