Transcript Document
Capturing Value for Growth
Productivity performers: innovation comes out on top
Two years ago, having watched their competitiveness crumble through no fault of their own, Australia's business people began the Kubler-Ross "Five Stages of Grief":
Denial, Anger, Bargaining, Depression, and finally… Acceptance.
Business models are being reassessed and those that do not work well are being adjusted. These sectors are becoming leaner and meaner. In this way, the high AUD may be helping to fix Australia's weak productivity problem.
RBA deputy governor Philip Lowe says productivity growth improved in 2012 (2/3/2013)
3 Types of Innovation
1.
Product
2.
Process
3.
Business Model
Aspects of Business Innovation
Innovation to create value
Improving efficiencies through QA, LEAN and other process improvements plus New Technology & Design Applications that are innovative and change people’s behaviours
Innovation enablers that resource change
Access to financial resources, new warehousing or locational opportunities, new skilled staff or competencies, better deployment of capabilities and resources
Innovation that captures value
Focusing on effectiveness innovations and business model processes to capture value that is under-utilized, unassigned, or not value priced
Value Chains
Core Competencies
Those capabilities, resources, opportunities, personnel, locational advantages etc that give your business advantage when optimised. They: Make it difficult for competitors to imitate Can be reused for multiple products and markets, and Contribute to the customers experienced end benefit.
Value Chain Management
Derives from realisation that no company operates independently, they operate in systems or chains of value that can be continually and appreciably improved, invariably by working closer with others
Comparative Differences in Value Chain Structure
A B Value Chain C 1. Transactional A B C 3. Coordinated Value Chain A B C 2. Cooperative Value Chain A C B 4. Collaborative Value Chain Value Chain Management (VCM) - the processes businesses use to manage their own operations and influence the operations of others in their value chain. VCM is a reiterative process that takes time, resources and skill.
Collaboration Co-operation Co-ordination Transactional Driven by mutual self interest
• Requires high levels of commitment on all sides • Creates new value • Value accrues to all parties
Meets a need; often driven by a directive
Can succeed even if commitment is uneven Value often incremental
Driven by directive
Teamwork helps but not pivotal Value unlikely to accrue to all involved
Driven by the need to exchange
Goods and services exchanged Value limited to the price Requires specialisation & commitment of time on each sides. Requires surrender of self to a higher ideal.
Requires high levels of personal trust
Value might accrue to one part or neither
Only requires medium levels of personal trust
Often focused on one-time, short term goals
Personal trust not a key to success
Most often one-off
Trust in the exchange rather than the person
What is collaboration?
Adapted by Frank Wyatt from Economist Intelligence Unit
Business Model Innovation
The discipline of finding new ways of creating, delivering and capturing value by modifying the structures, activities and relationships of the business
Identifies market segments and defines the customer Articulates the value of the proposed offering Focuses on the key attributes of the offering Defining the value chain to deliver more services with the offering Creates not only a way to get paid, but a way to get paid twice Appropriates the value of the proposed products and services Establishes a value network that is needed to make the model self sustaining
Business Model Innovation
When and Why?
• • • • • • • • Underpin the business planning process Identifying under-utilised market segments and better defining customer needs Create a deeper understanding of plans with collaborators, partners and suppliers Provide a clear picture of a planned business to investors or internal stakeholders Creates new ways to get paid twice Develop business cases for market entry Optimise the value obtainable for a given business concept Assist in evaluating alignment with organisational strategy
Competition between business models
11
The competition of today is between business models, not just products or solutions.
FujiFilm Vs Kodak Skype Vs Telstra RyanAir Vs QANTAS Toner Vs Printer
Focus of Innovation Effort
Calculated rate of return on the different innovation types
Calculated rate of return on the different innovation types
Source: Helin, K. and J. Lehtonen “VOITTO: About Business Plan and Innovation”, Presentation
H
Productivity = Efficiency + Effectiveness
Resources, cash, technology, work sequencing, design, products & services = outcomes
L
Innovation, solutions, convergent technologies, customer experience, organisation, collaboration & networking value = impact
H Effectiveness
Business Model Innovation
is about transforming key elements of your business or inventing completely new ways of doing business
What customers or needs have you ignored so far?
HINDSIGHT
What do you know about your customers?
INSIGHT
How does this enable you to get closer to their needs?
FORESIGHT
How might this inform what you will need next?
What products, processes or business model for the future ?
WHY HOW WHAT
Simon Sinek,
http://www.startwithwhy.com/
INTRODUCTIONS
EXERCISE:
At the table where you are sitting introduce yourself to those around you not by the WHAT, nor the HOW, but WHY?
Do not answer with “
to make a profit
” as this is a result not a reason.
Why
do you do what you do? Make the answer customer centric!!
Business Model Innovation Customer Knowledge
A business model is the recipe of your business built around an in-depth customer / consumer knowledge and insight of their needs “ 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
Optional revenue logics
• • • • • Customer focus – traveller Scale = purchasing discounts Joint promotion of cheaper carrier (JetStar) Operational excellence + safety gives customer loyalty Brand association linked to nationalism – customer loyalty • • • • Customer focus – airports Reverse auctioning of landing rights – positive cash flow Operational excellence – low operating costs Listing fees for all on board goods – positive cash flow Revenue logic: Build traveller loyalty + alternative cheaper carrier Revenue logic: Profit sharing with the airport + hybrid customer model
What other customer segments have you not thought of?
How else could you deliver your capabilities & offerings?
Business Model Innovation: Appropriating value
Assuming you owned a chain of restaurants where global sales were sliding south rapidly, how would you double your turnover within 6 months?
What assets and capabilities do you have to resource the change?
What business model innovations could you apply?
Appropriating value: McCafé
Ecology of existing & potential customer Utilise existing assets – chain of restaurants – new store layout and atmosphere Re-branded to McCafé Linked to the family and environmental concerns (Rainforest Alliance) Capture more customers at breakfast time and won them over from coffee chains to its lower-priced drinks (cheaper than Starbucks) Linking generational expectations – coffee and cake with BigMac people linger longer and buy more New revenues from old assets
Options for appropriating value
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 to the consumer is $1 Your distribution channel keeps 50% Your author gets 20% Your operating costs are 25% This leaves you with 5% in profit contribution [or $0.05]
How do you quadruple the profit contribution without increasing the price?
Appropriating value – Mills & Boon
Get into the customer eco-system –
customer? What the customer wants?
what do we know about the
People who wanted to write, who wanted to talk about writing, and publish their writings
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
Options for capturing value
Imagine you want to make $750,000 in 30 hours with a new music album EXERCISE
How would you go about it without a record company?
You are not bothered by licensing so you use creative commons license?
How would you connect with your fans to create a reason to buy?
Appropriating value
–
Nine Inch Nails
NIN Rigorously connected to fans C2Fs + RtB = Business Model = $$$$s Ghost I IV Album 1 st Album
Created numerous options for interaction between the fans Free download of 9 tracks by inserting your email address $5 got you full 36 tracks + 46 page PDF file on the band and music = cheaper than iTunes $75 for the deluxe box with DVD, Blue Ray, and other cool stuff $300 Ultra Deluxe pack, only 2,500 personally signed packs = this sold out in 30 hours = $750,000 Issued under Creative Commons License, encouraged fans to remix it, share it, post it to b logs, play on podcasts, give it away…..
Amazon lists it as the highest selling album for 3 years running
The Slip 2 nd
Album
Totally free album download – HQ MP3 with live Google maps of where it was being downloaded and live networks to join to engage with others + embedded tickets to purchase online for the next concert – 5,000 fans/concert @ $70/head = $375,000 x 3 concerts = $1,125m
Converting your business model
Your in the leisure and entertainment business Industry has been dominated by 3 to 5 national companies Your customer base has been largely restricted to children and parents Competition in your market is furious with multiple new entrants using new technologies and different offerings Margins have collapsed as cost increased
How do you convert your business model to quadruple your returns?
Business Model
Traditional circus
Core elements - tent, clowns, animals & trainers, and acrobatic acts Star performers One show repeated, unrelated acts Children are principle customers supported by parents Animal acts are the main feature supported by clowns and gymnastics Emphasis on fun / Thrills
Cirque Du Soleil
Core elements - tent, clowns and the acrobatic acts No star performers No expensive animal acts & trainers Multiple productions, theme based Launch shows based on unique themes, soundtrack, costumes and sets Emphasis on Artistry Adults rather than children Cirque's 'one of a kind' shows resemble theatrics and ballet performances
Cirque Du Soleil Revenue Logic
1.
New, more profitable segment of customers Higher willingness to pay: Price increase 1.
Multiple Productions: more visits per customer Higher Volumes Revenue Generation 2.
Increased value for customers the Industry Pulls New Customers into 3.
Eliminated costs yearly productions, faster turn around Leveraging higher value
Learning from other industries
You’re a small textile manufacturer – GFC from the sector one of the few that survived the You produce low-margin fabrics highly moisture absorbent Specialised fabric can sell for ONLY 20c a square metre Factory is a model of efficiency with all product produced to order and shipped the day it is made Company is non-unionised with 50 staff rewarded for performance with a share of 10% of company profit Realise that niche is small thinking, think big like other successful manufacturers
How do you reposition to produce higher returns and ensure sustainability of your business?
Options for Textor
High innovation ecology - CSIRO scientists working with the company to increase understanding of man-made fibres High tech equipment increased turnover by 72% & reduced labour costs as a percentage of sales by 26 per cent Only take orders of millions of square metres at a time Use the high A$ value to buy equipment NOW Effectively turned their textile plant into a process engineering plant industries – learnt from petrochemical and power “
Labour cost is not the problem. The problem is, your business model has to make sense in a global world
” Phil Butler, CEO Textor
Re-focusing Value Positioning
© Copyright Göran Roos 2011 Value derived from the
appreciation
of the offering Value derived from the
deployment
of the offering Value derived from the possession of the offering
Instrumental value Intrinsic value Extrinsic value
Instrumental (Contractor) Intrinsic (Specifier) Extrinsic (End User)
Exercise: Apply this thinking to two businesses at your tables and consider how they might shift the value up towards Extrinsic Value
Clipping the Ticket
Front – End Services Back-End Services
Business Problem Solving Consulting Product Design Supplier Management Production & System Integration
Product
Delivery
Product Sales & Operations Installation & Commissioning Product Life Cycle On-site Management Asset Manage ment Process Outsourcing
Where in this value chain are you not clipping the ticket?
What are your options for appropriating value?
Clipping the ticket
Exercise:
Where in your production process are you not clipping the ticket?
Take two companies at your table and propose options for how they may appropriate value currently unassigned or not value priced?