Business model innovation basics
Hey there i'm kenan, from board of innovation and welcome. To this webinar on, business, model innovation today. We'll be diving into the, process, of creating business models what. Is a business model in the first place and why, should we innovate business models so let's, dive in, so. You're on here to learn about business model, innovation but. Why. Is business model innovation actually. Important. Why, is it worth even diving. Into this topic well, firstly. I'd like to take a look at this graph. With you this, was a study that was done by autopsy. Which. Is a company, that analyzes. Startup. Deaths and they. Analyzed, over 300. Startup failures and listed, the primary, reasons, for, the failures of these startups and as, you can see from this graph. The. Two primary. Reasons for startup, failures are the wrong team and the. Wrong business, model, as. You can see having, the wrong business model accounts, for almost 20%, of. Startup. Failure, so it's obviously, you, know super. Important, when launching, a new project within a company or launching. Your own venture. The. Importance of business model innovation is, also, reflected. In this book ten types of innovation, where, the author really looks at how. Companies, invest. In innovation. And. When we're talking, about investing, the thing that we want to maximize is, our ROI, or return on investment, so, the. Author looked, at how our company's investing. Money, into innovation, and what is the ROI of each of these investments, as you, can see from this graph there, are three, broad categories, of innovation. Configuration. Offering, an experience. Configuration. Is more on the business model aspect. Offering. Is really more on the product, or service itself and experience. Is really more on, the. Marketing. Around. That company. Or around that product or service so. We can see here. That most, companies are, investing. Most. Of their, innovation. Or most resources, into. Innovating. On the. Offering, so they're focusing on creating new features. Making. The product really cool and, you can see that actually the least amount is. Being invested. Into, business, model innovation. However. If. We look at the, returns. Of. You. Know investing. Into these different categories, of innovation, we, can see, that. The, returns of investing, into business motivation are way, higher than investing. Into, the, offering, so, paradoxically. Companies. Are investing, most of their time and resources investing, into, product. Innovation, whereas, business, model innovation actually, yields, the hot the highest ROI. So. Again to, recap this part business. Model innovation is super, important, because. Not. Only is, it the, main reason why most projects, and startups fail but it's also the main way. To maximize, your turn on investment, if you're looking into how should I invest my time and resources, into. Innovation. So, now that we know why. Business model innovation is important, let's, answer you, know the obvious. Question, or the. Seemingly, obvious question what, is a business model so, before I actually go into that I want you to think about this for a second what, is the business model in your, terms, how would you define, a business, model. Now. I hope that you thought about it for a few seconds and. If. You're like most people you'll. Probably define, business, model, a business, model as a company's, way. Of making. Money, now. You're, not the only one because I would argue that 80 to 90 percent of people define, a business model in this way the only look at it as a way for. A company to, make money or it's their way or it's a company's way of how. They define their money-making activities, but. I'm. Here you know to, show you that the business model is not that you. Know the, way most people think that business, models is actually, a revenue, model so, a revenue model describes. How. Company makes money through its various, revenue streams and that's, not the, business model a revenue, model is part.
Of The business model but, it's not the entire thing there's much much more to a business model and that's, what I want to cover with you guys here to here on this webinar a. Business. Model is actually an, organization's, way of creating. Delivering. And capturing, value, so. There, are three key activities, within a business model creating. Value delivering, value and capturing. Value, so, you see that the. Business model doesn't really revolve around money it revolves. Around value. So let's take a look at an. Example to better understand, how a, business model works so. If we look at the news industry in. The 20th century how was that done well. Basically the. News industry or a news, company how, would they create value they, would have, journalists. Write articles, and produce, newspapers, how would they deliver this value they would have these paper boys that, would go around delivering, these newspapers, around neighborhoods, and how, would they capture, value oh they, would have companies, that, would advertise. Place. Ads in, these newspapers, and that's, how they would capture the value that they are creating, and delivering. Now. What, about in the 21st century how does the news industry look like today, well. We, can see that it's the exact same three. Core pillars creating, delivering, capturing value but, it's not in a different way so rather. Than having, journalists. Create, value, today we, create, value we the people who, use platforms, like Facebook, and Google, we. Are the ones that are creating, content. It's. Being delivered on these, platforms Facebook Google, Instagram. YouTube, these are all the platforms that, are, delivering the content we create and how. Is that content, or that value in the content being captured, I was, being captured through advertisements. Through, Google Ads Facebook ads YouTube. Ads so, the process, is still the same but. Obviously. It's been updated and innovated, in a different way to, fit in with the, ecology of the 21st. Century, again. If we look at the example, of a grocery, store same. Same, example the 20th century you, know a grocery, store would create value, by accumulating. All the goods. And products. From farmers, from butchers into one location so they would create value, by offering. That location, they. Would deliver value. By. Basically, allowing people to come in to that location and pick, whatever they would want and it would capture that value at the cash register. Today. And the 21st century again still the same process but. Done in a different way so companies. Like hellofresh and delivery are pretty. Much revolutionising. The way we get groceries. And the way we eat so. For example hellofresh, what they do is they, create value create. Value by. Creating. Recipes and. They deliver those recipes to, you so you don't have to actually go to a store or physical, location, they're, actually delivered, to you how. Do they capture, that value well you're no longer paying out a checkout or a cash register, you're, oftentimes, subscribing. To a monthly. Fee so, again the, process is still the same creating, delivering, and capturing. Value but. We, can innovate on the ways it's being done and that's really the point of business. Model innovation, so. Again to, really emphasize it's, all about value it's not about money it's about value, how do we create deliver, and capture, value. Now. When it comes to business modeling this, is this, equation, here is extremely. Important. We. Have to create more value than we, capture, and we have to capture more value than, it. Costs, us to deliver that value a, business. Model will only be sustainable. If this. Equation, holds true and what's. Interesting is, that when we look at business model innovation we. Can innovate on each of these aspects, so. Again most people when they think of business modeling they think of the, revenue streams so, they're only going to really focus on how, do we capture value. How do we better capitalize, on the. Problem, but, business, model innovation overall, looks at all three of these elements and it, really tries to answer these, three questions how. Can we better solve. The problem, how can we better capitalize, on the problem, and how. Can we be more more, efficient, at solving, the, problem, and. To. Put it into more. Of a contextual.
Perspective. If, you look at the business model canvas. We. See that there are nine different elements. To. The business, model canvas and. People. Tend to just focus again either on innovating. The value proposition, or innovating. The, revenue, stream coming up with new ways to create more value through a value proposition or coming. Up with new ways to create revenue streams, in. That, element of the business model canvas however, there, are so many other elements in the business model canvas so, business model innovation is, all. About, challenging. All the elements, of the business model canvas and not, just looking at one or two of them because, there are a lot of under. Utilized. Or. Under. Yeah undervalued. Elements of the business model canvas that. Most. People aren't looking at but if you can innovate on those, particular. Elements you, can really create a competitive advantage that's. Very difficult for other people and other companies, to copy so. Having. Covered why, business model innovation is important, and what a business model is let's. Look into the actual process. How do we design, a business model knowing that it's all about value how, do we design a process, around. Creating. Delivering, and capturing. Value. So. The question is where. Do we start, now, I want you to think about that for a second when. You're talking about business modeling where. What is the first point should always start with and, here's. A hint for you guys you. Should probably be familiar, with this the. Three pillars of, any. Business, desirability. Viability, and feasibility, so. If, you, answer desirability, then you are correct. No. Matter if we're talking about business, model innovation or, design, thinking, we, always, always always have to start with the end user or the end customer. So, desirability, is still the core of any, business model, we're not only looking at viability. You. Know it's important, but we always have to start with. Desirability. Because, if we build something that's viable again. From a business model perspective, but. It's, something that the end user and customer doesn't really want well it doesn't really matter so always, keep this in mind that we still need, to focus on desirability, throughout. The business. Model innovation. Process. So. Here we have the business model, design process. Now this is a process that we have board of innovation, have designed, after, working, with hundreds of clients all, across, the, world it's. A very thorough, process and, today, we're gonna just, give you an overview of this process, and in later.
Webinars, In this series we're, gonna dive into each, of, these stages and, what, we specifically, do what tools we use and what, techniques, we use to really innovate at each stage of this process now, before. Giving. You an overview of each stage I just want to point out that, it's important, to see that there are two tracks going, on at the same time we. Have desirability. At, the top and viability. At the bottom again linking, back to. What I just said, desirability. Is still, the core of business model innovation so, these, two tracks are running, parallel at, the same time we've. Noticed, that many. Companies, in many startups, what they do is they. Go through this process only, focusing, on desirability, and, coming. To a market, fit so they find a product, market fit with the solution they've created but, they've completely ignored the business model component, so that so, then they then once, they found the product market fit focus on the business model but, we've, realized that the best way you know to maximize your. Resources, and your time is. To really do it simultaneously, so. You should be looking at each stage of the process from, a desirability, perspective. Are we building something. That the user wants and from. A viability perspective. Is our, business model actually. Making sense, so that, being, said let's, go into each stage of this business model design process. The, first. Stage is discovery. So what we want to do in this stage again. On the desirability, perspective. Is we, really want to define, the job, to be done and map out the customer, journey of how that job is being done on. The viability side, so, again focusing, one the business model we really want to look at the market we, want to do what we call market exploration. And the key, question that we want to answer in. This part of the process is to, what extent is, this market, even, worth entering, so we look at things like the tangible, sorry, the total total. Addressable market the. TAM we. Look at the competitive landscape, because. Again if we, find you know a job to be done we map out the customer journey and see that there may be potential problems, it's. Important, for us to understand, you, know is this market, even big enough, to. Create a solution in is it even worth entering. This. Market, so. Once we've covered, the discovery, part we then move on to the problem fit so, we determined, that this is an interesting, market to enter now. Let's dive deeper into the problem so on the desirability, perspective. We're, identifying, and validating, customer, pains along, the journey we've map with them and we're, also identifying and. Validating, customer, segments, using, techniques, and design thinking, like. Personas, but. On the viability perspective. And business model innovation what, we want to do is we, really want to look into the, user problem, exploration, and value. These problems, and size them so the. Desirability, perspective, we've figured, out these are pains but, how. Much. Money are these pains worth how much money is being spent on them how valuable, are these pains and is, it again, worth it for us to even solve these pains and that's. The key question we want to answer and the, business model innovation aspect is which. Pains should. We focus on. And which customer, segments, should we focus on and this is where we do techniques. Such as problem, sizing, to assign values, to different customer segments, and to different problems in order to prioritize which. Ones we, should focus on. Once. We've done the problem, fit we, move into the, solution fit stage and this is where we begin I da, ting solutions, we begin evaluating, them and. We begin uncovering. Assumptions. But in the first part of solution fit you, know we really focus on ideation. So on the. Desirability. Component. We're. I da, ting multiple, concepts, were, writing. Down the assumptions, we need to test from these different concepts, but on the business model side not, only are we I da ting you. Know the concept, and the product itself we're also I da ting business. Models as well and so, again this first part of a solution fit is AI da. Ting business models where we use lots.
Of Different tools and techniques to come up with as many potential. Business models we can, once. We've actually ideated. A bunch. Of business models we're, now going to really. Converge. And. Identify. Which ones actually makes sense and this is in the evaluation. Stage of the solution fit so, the key question we want to answer here, is to. What extent does. This business model actually make sense on paper because. If, you, can't make it work on paper it's going to be really difficult to make it work in real life so. At this stage we're evaluating the business models and we're also uncovering. The assumptions, that need to be tested, in. The solution fit so, basically by the end of this stage in the process solution. Fit we should have I dated. Many. Business, models then. Evaluated. Which one of them actually makes, sense and from the ones that do make sense which. Assumptions, do we now need to test in the, market fit stage and, that. Brings us to, the penultimate, stage. Of the, business model design process, which, is market, fit again, from, the desirability, perspective. At this point we, will have. Gone. Through solution fits we'll have found a, solution. That our. Customers, do value that and it does solve a legitimate, pain so at this point we will have launched, an MVP, we. Will have gained feedback, you. Know from our first users you. Know to improve, that MVP so again on the desirability, perspective. You. Know we have something, out there in the market that people are using and it's our MVP but, from the viability perspective. Again we will have launched, our business model we, will have tested, our growth model, and just, like we're refining the. Concept. Based. On user feedback we're also, refining. The business, model itself so. At this stage of the process it's, really where we're. Done you, know doing desk research you. Know where we, finished evaluating, on paper, and now we're really out there in person, on the, market having real people real customers, you, know using our product. Or service, and so we're validating our, assumptions. In the business model this. Is where it's really important, again to be very practical. And. Understand. Which assumptions. Are the most risky, ones to, test first and so, we have various tools and techniques to help you identify how, to test assumptions. And how to identify which ones are the most important, to test now. By. The time you know you've gone through this entire process successfully. On the, desirability, perspective. You would have found your product market fit you've. Built a solution or, you built a product or service that customers really, value, you, will have validated, the, viability. Perspective. Completely, so you will have gone through the whole business model process. Of, figuring out whether, it's a market to enter figuring, out which problems, and customer segments, to, focus on. Identifying. Viable. Business models on paper and then validating. Those business models through. Real-life interactions. Through getting your first, customers. In your first sales so, at this point but, you know once you've gone through this whole process you. Should have a product, market fit and a. Business, model fit, and now. You're pretty much ready to scale and. This is where you, it's.
All About growth, where you flip the switch and you, know put the pedal. To the metal and. Obviously, this process, entails. A whole different, type of process, but. Most, companies, and most startups you know fail to even get to this point because they might have a product market fit but, they might not have a, business, model fit and that's what we really want to emphasize that, this. Process, of business model innovation is, a, simultaneous. Process. You're, focusing, on what the customer, wants but the same time focusing. On the. Business model itself, throughout. The entire process. So that's, it for this webinar. I hope, you've really enjoyed it I hope you've gained you know a lot of value from this keep. In mind that the business, model is not, a revenue, model it's, not only, looking at how you make money it's, really about how do, you create value, how do you capture value, and how, do you deliver value, overall, it's a very holistic view. Of your. Business we'll. Be doing more, webinars. In this series again, diving into each stage of the, business, model design process. So make sure to you know stay, tuned for the following webinars make. Sure to follow us and if. You want to connect with me personally you, know you can find me on LinkedIn, if, you want to connect with board innovation, and you. Don't want to miss out on the upcoming webinars, make sure to follow us as well on on the, LinkedIn feel, free to check out our website you can find lots of tools there so, thank you again for, joining, this webinar and, I hope to see you on the next one.