Innovative Business Models
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This document discusses innovative business models through examples of companies that have disrupted their industries. It begins by defining a business model and its key components, including value proposition, market segment, revenue streams, and competitive strategy. Examples are then given of companies like Airbnb, Uber, Rent the Runway, and Warby Parker that have innovated their business models in areas like peer-to-peer sharing, on-demand services, direct-to-consumer approaches, and eliminating middlemen. The document stresses the importance of business model innovation in driving growth.
Innovative Business Models
- 1. Innovative Business Models Harshani Wathsala Wickramaarachchi
- 3. business model (BM) Business model is a way to conceptualize and understand organizations as systems that have common components Plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs
- 4. Role of bM The technical experts know their domain and the business experts know theirs. The business model serves to connect these two domains as shown in the following diagram,
- 5. Components of Bm • Value proposition - a description of the customer problem, the product that addresses the problem, and the value of the product from the customer's perspective • Market segment - the group of customers to target, recognizing that different market segments have different needs • Value chain structure - the firm's position and activities in the value chain and how the firm will capture part of the value that it creates in the chain
- 6. Components of Bm cont. • Revenue generation and margins - how revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins • Position in value network - identification of competitors, and any network effects that can be utilized to deliver more value to the customer • Competitive strategy - how the company will attempt to develop a sustainable competitive advantage, for example, by means of a cost, differentiation, or niche strategy
- 7. Examples of bms • Bricks and clicks business model - Company integrates both offline (bricks) and online (clicks) presences • Collective business model - Business system, organization or association typically composed of relatively large numbers of businesses, tradespersons or professionals in the same or related fields • Cutting out the middleman model - The removal of intermediaries in a supply chain: "cutting out the middleman" • Direct sales model - Marketing and selling products to consumers directly, away from a fixed retail location • Value-added reseller model - Business makes something which is resold by other businesses but with modifications which add value to the original product or service
- 8. Bm frameworks • Business reference model - Concentrating on the architectural aspects of the core business of an enterprise, service organization or government agency • Component business model - Technique developed by IBM to model and analyze an enterprise. It is a logical representation or map of business components and can be depicted on a single page • Industrialization of services business model - Used in strategic management and services marketing that treats service provision as an industrial process, subject to industrial optimization procedures • Business Model Canvas - One of the most used frameworks for describing the elements of business models
- 9. Bm canvas The value proposition of what is offered to the market The segment(s) of clients that are addressed by the value proposition The communication and distribution channels to reach clients and offer them the value proposition The relationships established with clients The key resources needed to make the business model possible The key activities necessary to implement the business model The key partners and their motivations to participate in the business model The revenue streams generated by the business model The cost structure resulting from the business model
- 10. Bm innovation • The term business model is also closely related to innovation • Business model concept is related to a whole new range of business design opportunities • There are examples of business model innovations in each of the 9 building blocks described earlier • The most obvious is innovating in the value proposition • When mobile phones appeared in the market they offered a different value proposition than fixed line phones • Dell became really successful by exploring the web as a distribution channel • Cisco became famous for its capacity of configuring activities in new and innovative supply chains • Google tapped in an innovative revenue streams by linking highly specific search results and content with text ads
- 11. What is innovation? Innovation is about being different in a way customers love
- 13. BM innovation • The reinventor approach is deployed in light of a fundamental industry challenge,, in which a business model is deteriorating slowly and growth prospects are uncertain. In this situation, the company must reinvent its customer-value proposition and realign its operations. • The adapter approach is used when the current core business, even if reinvented, is unlikely to combat fundamental disruption. Adapters explore adjacent businesses or markets, in some cases exiting their core business entirely.
- 14. BM innovation • The maverick approach deploys business model innovation to scale up a potentially more successful core business. Mavericks which can be either startups or insurgent established companies employ their core advantage. This requires an ability to continually evolve the competitive edge or advantage of the business to drive growth • The adventurer approach aggressively expands the footprint of a business by exploring or venturing into new or adjacent territories. This approach requires an understanding of the company’s competitive advantage and placing careful bets on novel applications of that advantage in order to succeed in new markets
- 15. Innovative Business Models Shaking Up the Marketplace
- 16. Airbnb Launched: 2008 Founders: Brian Chesky, Joe Gebbia and Nathan Blecharczyk Innovative angle: Create a sharing economy that utilizes empty rooms, apartments and homes, upending the hotel sector Lesson: Sharing is caring, peer-to- peer models save consumers money, help owners make money and create a more authentic, local experience for travel. Airbnb is an online community marketplace that connects people looking to rent their homes with people who are looking for accommodations. The site hosts 300,000 listings and has helped more than 4 million travelers book stays.
- 17. Skillshare Launched: 2011 Founders: Malcolm Ong and Michael Karnjanaprakorn Innovative angle: A platform for learning about anything Lesson: Leverage the intelligence and expertise of normals to create a massive intellectual marketplace. Skillshare is a learning community for creators. Anyone can take online classes, watch video lessons, create projects, and even teach a class themselves. Skillshare launched as an education marketplace, experts could teach a class on any subject, and anyone could attend.
- 18. Uber Launched: 2009 Founders: Travis Kalanick and Garrett Camp Innovative angle: Upending the taxi/transportation ecosystem with on-demand drivers and dynamic pricing Lesson: Innovation is an uphill battle, but it's one worth fighting. Uber is an app- based transportation network and taxi company. The company uses a smartphone application to receive ride requests and then sends these trip requests to their drivers
- 19. StyleSaint Launched: 2010 Founders: Allison Beal and Brian Garrett Innovative angle: Fashion meets media in this fashion label, whose designs are inspired by customer interests The Los Angeles-based retail company began as a self- publishing platform where style- minded users could create their own "tear sheets." Those tear sheets were then used by founder as inspiration for the inaugural StyleSaint collection. The direct-to-consumer approach helps to reduce excess inventory and spare fast fashion in favor of quality goods. Lesson: The customer is right, especially when it comes to her own taste.
- 20. Rent the Runway Launched: 2009 Founders: Jennifer Hyman and Jenny Fleiss Innovative angle: Rent inventory of high-end dresses at a fraction of the price to create a "Cinderella moment" and introduce women to brands they wouldn't otherwise wear Lesson: Aspirational fashion and try-before-you-buy are potent sales drivers. Rent the Runway is a fashion company powered by a transformative business model, proprietary technology, and a unique reverse-logistics operation. Rent the Runway offer in-season merchandise and rents the items out to different consumers every week, so it recoups the cost of the items and functions as a gateway for women to get into luxury brands.
- 21. Zola Launched: 2013 Founders: Shan-Lyn Ma, Nobu Nakaguchi and Kevin Ryan Innovative angle: A fully customizable registry, with group-buying for bigger gifts and a "cash fund." The founders came up with Zola as a new alternative for modern couples to register for homewares, kitchen equipment, furniture, food, bicycles, experiences, honeymoon funds and cash funds. Engaged couples can create a fully customizable registry with unique features for guests, such as group gifting. Lesson: A beautiful interface and the ability to customize go a long way, as does reinventing the traditional way of doing things.
- 22. Warby Parker Launched: 2010 Founders: David Gilboa, Neil Blumenthal, Andrew Hunt, Jeffrey Raider Innovative angle: Cutting out the middleman transforming a medical device into a fashion accessory Lesson: Change the way people see an industry. Warby Parker is an American brand of prescription eyeglasses and sunglasses. Warby Parker designs glasses in-house and sells directly to customers to avoid retail markups. A lower price is possible because glasses are designed in-house, eliminating licensing fees. Warby Parker does not sell glasses through third party brick-and- mortar retailers, whose markups can double or triple prices.
- 23. Handybook Launched: 2012 Founders: Umang Dua, Oisin Hanrahan, Ignacio Leonhardt and Weina Scott Innovative angle: On-demand home services, like cleaning or repairs, bookable from a sleek mobile app Handybook is a marketplace that handles payments and scheduling on both the supply and the demand end of the home services industry. It operates in 26 cities. The way Handybook set up is to think about all the services need inside home and how they can be a remote control for managing those services. Lesson: Convenience is key.
- 24. Paperless Post Launched: 2008 Founders: James Hirschfeld and Alexa Hirschfeld Innovative angle: Reinventing the world of stationery, by taking it online, then back offline Paperless Post is an e-commerce company focusing on design- driven online and printed stationery, including greetings, invitations, birth announcements, wedding suites, and custom stationery. It encourages people to email invitations and announcements, made pretty with hundreds of design templates. Lesson: Aesthetics matter.
- 25. Stitch Fix Launched: 2011 Founder: Katrina Lake Innovative angle: Personal styling made smarter by data and trendy part-time fashionistas Lesson: A product that uses smart data to surprise, delight and save consumers time is a win. Stitch Fix is a combination of the art and science and has not been seen before in retail industry. It provides a truly personalized retail experience at the affordable price point. Stitch Fix originally targeted urban professional who has a demanding job and does not have much time to shop.
- 26. Thank You!!!
Editor's Notes
- #8: One example of the bricks-and-clicks model is when a chain of stores allows the user to order products online, but lets them pick up their order at a local store which pools resources, shares information or provides other benefits for their members Instead of going through traditional distribution channels. Companies may now deal with every customer directly, for example via the Internet. Sales are typically made through party plan, one-to-one demonstrations, and other personal contact arrangements. Businesses going for a VAR model have to develop a VAR network. It is one of the latest collaborative business models which can help in faster development cycles and is adopted by many Technology companies especially software.
- #10: 9 building blocks that constitute the business model canvas
- #13: Impetus: Is the company defending against an external threat, such as commoditization, new regulation, or an economic downturn—or is it proactively disrupting the status. Focus: What is the most attractive area of opportunity—does it reside in the core business or in adjacent businesses or markets? These two factors define a matrix of four approaches to business model innovation. Within each of the four approaches, companies will employ different tactics to successfully rebuild their models and make different choices.
- #20: Today, StyleSaint makes new collections every six to eight weeks based on those tear sheets.