Reinventing Your Business Model

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Reinventing Your Business Model Aviral Kumra Pramila Das Nafisa Islam Anchal Maheshwari Aditya Ramanarayanan

One Secret to maintaining a thriving business is recognising when it needs a fundamental change ! 2

VUCA Volatility is the quality of being subject to frequent, rapid and significant change in a volatile market Uncertainty is a component of that situation, in which events and outcomes are unpredictable Complexity involves a multiplicity of issues and factors, some of which may be intricately interconnected

Ambiguity is manifested in a lack of clarity and the difficulty of understanding exactly what the situation is

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Why Did iPod Succeed? It was not the product but….. It’s is Business Model

1998: Diamond multimedia introduce- Diamond Rio

2003: Apple introduces iPod/iTunes

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Apple- Before and After Business Model Reinvention

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What is a Business Model ?

Elements of a successful Business Model !

Examples Showing How Great Models Are Built

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Hilti Sidesteps Commoditization Traditional Power Tool Company

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Elements

Hilti’s tool fleet management service

Sales of industrial and professional power tools and accessories

Customer value proposition

Leasing a comprehensive fleet of tools to increase contractors on-site productivity

Low margins, high inventory turnover

Profit formula

Higher margins, asset heavy, monthly payments for tool maintenance, repair & replacement

Distribution channel, low-cost manufacturing plants in developing countries, R&D

Key resources & processes

Strong direct-sales approach, contract management, IT systems for inventory management and repair, warehousing

Hilti’s Fleet Management

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Dow Corning’s Way

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Established Business

Elements

New Business Unit

Customized solutions, negotiated contracts

Customer value proposition

No frills, bulk prices, sell through the internet

High-margin, high-overhead retail prices pay for value-added services

Profit formula

Spot-market pricing, low overhead to accommodate lower margins, high throughput

R&D, sales & services orientation

Key resources & processes

IT system, lowest-cost processes, maximum automation

When Will The Old Model Work When one will fulfil new customer value proposition:

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With your current profit formula Using current key resources and key processes Using same core norms, metrics and rules

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What are the norms, metrics and rules Financial

Operational

Other

Gross margin Opportunity size Unit pricing Unit margin Time to breakeven Net present value calculations Fixed cost investment Credit items

End-product quality Supplier quality Owned versus outsourced manufacturing Customer service Channels Lead times Throughput

Pricing Performance demands Product-development life cycles Basic for individuals’ rewards & incentives Brand parameters

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When is a New Business Model needed? Whoa! That Five strategic circumstances that often require business model change:

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The opportunity to address through disruptive innovation the needs of large groups of potential customers who are shut out of a market entirely because existing solutions are too expensive or complicated for them. The opportunity to capitalize on a brand-new technology. The opportunity to bring a job-to-be-done focus. The need to respond to a shifting basis of competition.

Companies should not pursue business model reinvention unless the are confident that the opportunity is large enough to warrant the effort.

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These questions will help you evaluate whether the challenge of business model innovation will yield acceptable results .

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Can you nail the job with a focused, compelling customer value proposition?

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Can you devise a model in which all the elements – the customer value proposition, the profit formula, the key resources, and the key processes work together to get the job done in the most efficient way possible?

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Can you create a new business development process unfettered by the often negative influences of your core business?

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Will the new business model disrupt competitors?

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How Dow Corning Got Out of Its Own Way ▫

Formulating a customer value proposition

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Breaking the rules

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Identifying new competencies.

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THANKS! Any questions?