Lecture at European Innovation Academy 2012 Summer

1. European Innovation Academy 2012 Tallinn
Dr. Patrick Stähler, fluidminds
Why should
your business
exist?
so-
The philo
phic al ques-
ll
tion for a
es
buisness
That’s me:
I love to do ski
mountaineering!

2. You need a lot of
to
training and luck
is
have days like th

5. Outside the box thinking
We need new
boxes for fresh
ideas. We see
only what we
are able to see.
What are
the new
boxes?
Would you
invest in this
firm?
„The firm dominates the global market
with a market share of 40% and has
outperformed technology giants like
Siemens or Motorola. No other firm
brings out more new products (around
80 p.a.) to the market. Among
youngsters, it the most admired brand
in its field. ”

6. This was
in 2007 th
most inno e
vative fir
earth. T m
oday, Nok on
in serious ia is
troubles.
Dr. Patrick Stähler |
11!
Apple kille
d Nokia n
with a ne ot
w device
with a pla but
tform eg
business .
model
1 device!

7. „Which innovation expanded
the global addressable market
for mobile communication the
most?*“!
*After the invention of mobile telephony itself!
Which
innovation made
this possible?!
Dr. Patrick Stähler |
14!

8. A smal
l chang
opened e in bill
new ma ing
Africa, rkets in
Asia, L
Americ at
a, Yout in
hs, etc
..!
Prepaid!
1!
Everybody wants to be innovative, but
what is innovation?!
We need new boxes for
innovation!

9. Technological Innovation!
Process Innovation!

10. Process Innovation!
Product & Service
Innovation!

11. Business Model
Innovation!

12. 2!
Beyond product innovation!
Innovation comes in
different forms !
process, service, business models
innovation!
Dr. Patrick Stähler |
24!

13. 1 device!
Innovation is all about being
different!

14. But if everybody is doing the
same, you have to find
something else!
Optimal is when different
business models exists and all
have devoted customers!

15. 3!
Innovation is not only about new things!
Innovation is about
differentiation !
The importance Transistor was invented at the
of business end of the 1940s!
model thinking!

16. But SONY made in 1955 a successful
product out of the transistor and
developed a successful business model
out of it for the next 50 years.!
Do you know this man?!
Hans Rausing = Inventor of the
Tetra Pack Systems!
Dr. Patrick Stähler | 32!

17. He could have sold his
packaging machines, "
but…!
But he sold packaged services! Tetra Pack is not a
product innovation
but an implementatio
n
of an innovative
business model!

18. Technology or a new produt does not create value.
It is the business model
product/technology
X! value
creates
enables business model
defines
business strategy
4!
Beyond product innovation!
Your business model is
decisive for value creation!
not a new technology, not a product!

19. To develop a business model, is "
To Do the "
right things "
And Not to do things right!
„What is a !
! !business
model? “!

20. Are you
aware o
f
your DN
A?!
The business model is the
DNA of your business!
The business model gives
meaning to your employees
and customers!

21. 4 key questions for a successful business:
What excites How do we How do we Who is on our
our create value earn money? team?
customers for our What values
customers? do we
pursue?
Value Proposition Value Architecture Revenue Model Team & Values
The job
of
the entre
pre-
neur
„ What industry are
!
we in? Who are
our competitors?!
“ !

22. „ In which industry
!
are we in?!
“!
„That was the job
!
the customer
wanted to do.!“ !
Dr. Patrick Stähler |
44!

23. What excites your customer?
Customer Value
Value • Who is your • What value do we
Proposition customer? create for our
• What job do we customers? What
solve for them? value do we create
for our partners?

24. “!To put a computer on every desk
and in every home”!

25. “!To organize the world’s information
and make it universally accessible”!

26. How do we create the value?
Offer Distribution & Value Chain
Value • What is our offer? Communication • What activiites do
architecture Channels we have to do to
• How do we reach produce our offer?
our customers? • How does our
• How do we value chain look
communicate with like?
our customers?
Core Capabilities Partner
• What are the core • What partners do
capabilities we we need?
need?
How do we earn money?
Cost Structure Revenue Sources
Revenue • Cost structure is • With what do we
Model defined by your earn money?
value architecture.

27. Who is on our team? What values do we live?
Team Values
Team & • Who is in our • What values do we
Values team? life in our team?
• What • How do we
competencies do interact with each
we have in our other and with
team? customers?

28. Questions for successful Business Model Innovation
Value Architecture Value Proposition
Offer Distribution & Communication Customers
What is our offer? Channels Who are our customers?
How do we reach our customers? What job do we solve for our
How do we communicate with customers?
our customers?
Value Chain Customer Benefit
What are our value creating steps? What benefit do we create for our
What is our value chain? customers?
What benefit do we create for our
partners?
Core Capabilities Partner
What are the core capabilities Which partners do we need?
we need?
Revenue Model
Cost Structure Revenue Sources
Cost structure is defined by the With what do we earn money?
value architecture.
Team & Values
Team Values
Who is on our team? What values do we pursue?
What competencies do we have How do we interact with each other
on the team? and the customers?
Questions for successful Business Model Innovation
Value Architecture Value Proposition
Offer Distribution & Communication Customers
What is our offer? Channels Who are our customers?
How do we reach our customers? What job do we solve for our
How do we communicate with customers?
our customers?
Value Chain Customer Benefit
What are our value creating steps? What benefit do we create for our
What is our value chain? customers?
What benefit do we create for our
partners?
Core Capabilities Partner
What are the core capabilities Which partners do we need?
we need?
Revenue Model
Cost Structure Revenue Sources
Cost structure is defined by the With what do we earn money?
value architecture.
Team & Values
Team Values
Who is on our team? What values do we pursue?
What competencies do we have How do we interact with each other
on the team? and the customers?

29. The Case!
At the beginning of the 1990s the world in the power tool industry was in
perfect order!
! Established brands in a growing, European market!
! Competition was well defined and Bosch was the uncontested market leader!

30. Die Ausgangsituation!
And then the Chinese came along…..!
! Over 200 new competitors in a short period of time!
…and the market stagnated at the same time. !

31. Dire consequences: "
A steep decline in the average price per sold tool and….!
5,9!
Sales(Mio. units)!
3,8! 307!
Sales (Mio. Euro)!
329!
88! Ø – price in Euro!
78!
69! 65! 64! 67! 62! 58! 56! 52!
93! 94! 95! 96! 97! 98! 99! 00! 01! 02! Source: GfK!
Do-it-yourself chains in Germany: 1993 until 2002!
… and declining market share for the established brands and exponential
growth for the no-names and trade brands!
Market Share Powertools"
(Germany)!
100%
6! 27!
29! 33!
No Names & Trade
Brands
Established Brands
95!
73 71!
67
0%
1991 2000 2001 2002
Source: GfK, Do-it-yourself shops!
! Strong increase of market share for no-names and trade brands!
! Bosch Power Tools DIY 2002 with a market share of 33% but loss making!

32. Simple task from your board:!
! Defend market leadership!
! Improve profitability!
Your Head!
THE working tool "

33. Which directions should we
take?!
Dr. Patrick Stähler. Leuphana University Lüneburg! 65!
How about this crazy idea?!
“ How about making a power tool which is
much weaker than the last generation but we
make it also very handy and nicely designed.
For that we charge a premium and market it
to people who are not really into DIY. ”!
!
“ Great idea, isn’t it? ”!

34. The solution: Tools for the
IKEA Generation!
Here is the solution for Bosch: the IXO, the first power tool for the IKEA
generation!
! Bosch introduces the IXO to the market !
! Instead of following the traditional mantra
of “better, stronger, faster” Bosch used a
new battery technology to make tools
smaller and more user friendly!
! Instead of going for the traditional market
of MMS (men, muscles and sweat) the IXO
addresses the soft DIYs that assembles its
IKEA furniture but not more!
! Thereby, it addresses a new, previously
unserved market of non-customers!
! The IXO is a typical value innovation that
opened up new, uncontested markets!

35. Shift from technology to user orientation !
… prior 2002! since 2002 …!
Technologie" ! ! ! User and usage "
orientation! orientation!
Building and " ! ! ! Building/repair, planning "
repairing! and home decoration!
!reliable, very powerful and " ! ! ! reliable, easy to use "
!
long-living products! products and services!
unemotional " ! ! ! inspiring people!
technology orientation!
The traditional market:"
MMS or Men, Muscles and Sweat!

36. New market:!
Addressing previously non-
customers like soft DIYlers and
particularly woman!
Dr. Patrick Stähler | 71!
Changed consumer behavior!
The first power tool for the kitchen
drawer!

37. Bosch IXO is the world record holder in units sales!
10 Mi
o
times so . "
ld!
2004! 2005! 2006! 2007! 2008! 2009! 2010!
! IXO was first power tool with Li-Ionen technology!
! IXO is the best selling power tool in the world!
Growing market share and highly profitable!
Market share in power tools "
(DIY Shops Germany)!
!
27 29 33 35 34 38 38
No Name / Trade
Brands
40 38 29
34 31 26 25
Other Brands
Bosch
33 33 33 34 37 36 37
'00 '01 '02 '03 '04 '05 '06 Source: GfK!

38. The strategy canvas of Bosch IXO: A clear profile of the value innovation!
6 Traditional brands No-Name Bosch
5
4
3
2
1
0
-1
Bosch used the new battery technology for a disruptive value innovation!
Sustaining innovation = Serving today’s
Advantages of Li-Ion! customers!
! can be formed into a variety of shapes and ! Extend performance in direction of what
sizes so as to efficiently fill available space today’s customers like!
in the devices! ! Use the Li-Ion technology for stronger and
! lighter than other—often much lighter.! more heavy duty tools!
! do not suffer from the memory effect!
! low self-discharge rate of approximately
5% per month, compared with over 30% Disruptive innovation = Finding new
per month in nickel metal hydride batteries customers with different needs!
(Source Wikipedia)! ! Use for a new market segments that values
different performance parameters like
usability, handiness than traditional
customers!
! Performance of tool will be worse in
parameters current customers value!

39. Your Head!
THE working tool "
Sustaining innovations are difficult to
5!
master, but !
Disruptive innovation can
kill your business model!

40. Your Head!
Also the biggest
impediment to change
European Innovation Academy 2012 Tallinn
Dr. Patrick Stähler, fluidminds
Business Model
Innovation:
Killing your
competitor
softly

41. If you are in a market for
giants...!
.. and you play with their rules
you will get nowhere…!

42. „…but if you can create your own rules
of engagement than you can compete
even in a market for giants. “!
Would yo
ud
this? Wha are to say
t would b
the answ e
er of you
boss? r
“Well, I know we are in a
commodity market where the
price is key, but I believe we can
sell the good for 10x as much
as before.”!

43. The magic
formular for Customer!
utility!
great firms!
customer!
+! value!
price!
company !
+! profit!
costs!

44. Business model innovation!
1. Value Innovation "
We offer a better value proposition for an existing or new
problem!
2. Architectural innovation "
We reconfigure the value chain so that a better value
proposition emerges!
3. Revenue model innovation "
We change the revenue mix and thereby creating a better
value proposition!
4. Cultural Innovation"
Change the culture to create more value, e.g. Zappos with the
best customer service !
Fight eye diseases in India
with mass production
processes for low costs"
the basic idea behind Aravind Eye Hospitals!
! The network of not-for-profit hospitals and vision
centers performs 300,000 eye surgeries each year --
70% for free -- using broadband connections to on-call
doctors in city hospitals for instant diagnosis. !
! Camps in rural areas screen thousands of patients
weekly. "We are going from village to village to provide
eye care to the unreached," says Aravind's chairman, Dr.
P. Namperumalsamy. !
! Aravind won the 2008 Gates Award for Global Health.!

45. Business Model:
Value Architecture Value Proposition
Offer Distribution & Communication Customers
Channels
! eye surgery ! paramedics scanning ! middle class Indians
rual villages ! poor Indians
Value Chain Customer Benefit
! highly standardized surgeries
! high division of labor ! good quality eye surgery
! affordable eye surgery even
Core Capabilities Partner for the poor
! Doing good for middle class
! process know-how indians
Revenue Model
Cost Structure Revenue Sources
! low cost production system ! cross- subsidies between middle class
patients and the poor
Team & Values
Team Values
Case IKEA!
Value Architecture!
! Customers have to transport and
assemble the furniture by themselves,
thereby saving IKEA to expensive steps in
their value creating process!
Value Proposition!
! At the same time a new value proposition
is created: Instant satisfaction without
waiting for the later delivery of the
furniture!
Revenue Model!
! Due to the high volume, furniture can be
produced in an industrial fashion that
leads to even lower production costs!
! Therefore, the furniture can be sold for a
much lower price!

46. Geberit – a product innovator?!
From plumber supply to under-the-wall systems for baths!
Business Model:
Value Architecture Value Proposition
Offer Distribution & Communication Customers
Channels
• Plumbers are as well • Homeowners,
customers as the • Plumbers
Value Chain Customer Benefit
distribution channel
• Plumbers are also reached • Faster and more
via trainings convenient renovation of
Core Capabilities Partner
baths
• Partner management • Plumbers have all
• Plumbers
• Training of components from one
Geberit’s innovation: source. High margin
plumbers From plumbers’
supplier to baths
Revenue Model
renovator
Cost Structure Revenue Sources
• Higher costs due to more expenses • Higher revenues since plumbers know
e.g. trainings only „Geberit“
Team & Values
Team Values
• Longterm thinking
• relationship building

47. A deliberate change of a business model is a great strategy!
Starting points of business
model innovation!
Business Model:
! All components of a business
Value Architecture Value Proposition model are starting points for
innovation!
Offer Distribution & Communication Customers
Channels
Value Chain Customer Benefit
! Value Innovation!
! Architectural Innovation!
Core Capabilities Partner
Revenue Model
Cost Structure Revenue Sources
! Revenue Model Innovation!
Team & Values
! Cultural Innovation!
Team Values
! At the end, all business model
innovation must create more value
to the customers!
European Innovation Academy 2012 Tallinn
Dr. Patrick Stähler, fluidminds
Entrepreneurial
Design

48. Creating Business model innovations is a creative and
analytical process at the same time. There is a reason
why god gave us two brain hemispheres !

49. 1 2 3
Customer Insight Understand Ideate
- Observe your customers - understand the current Develop as many ideas as
What job is not yet or solutions and their possible in the area of
badly solved? strength & weakness - customers/ value
- How does the Customer - understand how the proposition
Experience Cycle look potential customer - value architecture
like? thinks and decides - revenue model
- On what customer insights - understand the market &
is your idea based? market mechanism
- validate customer insight
4 5 6
Design Decide & Prototype Build & Learn
- decide for three or four - decide for the best - execute business model
options model to go for - learn continuously from
- design the business - build prototype customer feedback and
models for the options - test prototype with control KPIs
- check the customers - adjust and refine
interdependencies in the - write business case continuously the
business models - decide again or work on business model
- work on the uniqueness different option
(positioning)
- optimize the building
blocks
Where do we get a Value
Innovation from? Let‘s find
new customer insights as a Business
starting point! model
innovation
New value
proposition
Customers’
insight

50. 1
Customer Insight
- Observe your customers
What job is not yet or
badly solved?
- How does the Customer
Experience Cycle look
like?
- On what customer insights
is your idea based?
- validate customer insight
The best way is to
Value Proposition start with the job
we solve for our
Customers customers?
Who are our customers?
What job do we solve for our
customers?

51. How can we find systematically new customer insights?!
Buyer Utility Map!
Delivery/ Comple-
Buy Usage Service Disposal
Assembly ments
! Understand how the customers are buying, ! How can we improve the buyer‘s utility cycle?!
using and disposing the product! ! Can we do more for the customer?!
! Understand the whole lifecycle of customers‘ ! Can we leave something to the customer?!
utility!
Source: cp. Kim, W.C., Mauborgne, R., Knowing a Winning Business Idea when
you see one, HBR Sep-Oct. 2000!
Where can I start in the buyer utility map? – " value
The Dyson Vacuum Cleaner! Dyson =
!
innovation
Starting"
Buy! Delivery! Use! Complements! Service! Disposal!
Points!
Customer!
Productivity!
Simplicity!
Usability!
++!
Risk!
Image & !
fun!
Enviromental !
friendlyness!

52. Dyson vacuum cleaner – inspired by technology"
The vacuum cleaner for men! Dyson =
!
Value
n!
Innovatio
Customer Insights!
! Bags and filters get clogged and restrict
airflow. Loss of suction!
! Vacuum cleaners are marketed as
household aids. Are there different
segments?"
!
Value Proposition for customers!
! Dyson vacuum cleaners have NO bags
and do NOT get clogged due Cyclone
technology. Therefore, NO loss of
suction. !
! Dyson positions itself as technical, highly
engineered products that address men. !
Revenue Model!
! Dyson demands premium prices for its
vacuum cleaners.!
Blacksocks – we save the world from socks problems!
Putting"
Starting" Buy! Delivery! Use! Washing! Disposal!
in pairs!
Points!
Customer!
Productivity!
Simplicity!
Usability!
Risk!
Image & !
fun!
Enviromental !
friendlyness!

53. Blacksocks – We solve the world from its socks problems! ks =
Blacksoc
odel
revenue m
!
Socks subscription! innovation
(2001-2008)! Customer Insights!
40'000 ! Buying socks is no fun!
40'000 ! Putting socks in pairs even less fun!
20% market share! ! Good socks are a sign of „Being well
dressed“"
in Switzerland*! !
30'000 Value Proposition!
! Blacksocks subscription solves all
25'000
problems!
! Always enough new socks !
! No pairing needed since all socks are
20'000 identical!
12'000 Revenue Model!
10'000 ! Upfront payment !
10'000 ! Easy planning and negative working
capital!
0
2001 2002 2005 2008
* premium segment starting at 9CHF!
2
Understand
- understand the current
solutions and their
strength & weakness
- understand how the
potential customer thinks
and decides
- understand the market &
market mechanism

54. 3
Ideate
Develop as many ideas as
possible in the area of
- customers/ value
proposition
- value architecture
- revenue model
Business Model:
Value Architecture
Use the canvas to
Value Proposition
develop your
Offer Distribution & Communication Customers
business model!
Channels
Value Chain Customer Benefit
Core Capabilities Partner
Revenue Model
Cost Structure Revenue Sources
Team & Values
Team Values

55. 4
Design
- decide for three or four
options
- design the business
models for the options
- check the Geschäftsmodell:
Wertschöpfungsarchitektur Value Proposition
interdependencies in the Angebot Vertrieb & Kommunikation Kunden
business models Produktion Nutzen
- work on the uniqueness Kernfähigkeiten Partner
(positioning)
- optimize the building Ertragsmodell
Kostenstruktur Ertragsquellen
blocks Team & Werte
Team Werte
Created with the friendly support of Wolfsburg AG | Designed by Gottschalk+Ash Int’l
5
Decide & Prototype
- decide for the best model
to go for
- build prototype
- test prototype with
customers
- write business case
- decide again or work on
different option

56. 6
Build & Learn
- execute business model
- learn continuously from
customer feedback and
control KPIs
- adjust and refine
continuously the business
model
1 2 3
Customer Insight Understand Ideate
- Observe your customers - understand the current Develop as many ideas as
What job is not yet or solutions and their possible in the area of
badly solved? strength & weakness - customers/ value
- How does the Customer - understand how the proposition
Experience Cycle look potential customer - value architecture
like? thinks and decides - revenue model
- On what customer insights - understand the market &
is your idea based? market mechanism
- validate customer insight
4 5 6
Design Decide & Prototype Build & Learn
- decide for three or four - decide for the best - execute business model
options model to go for - learn continuously from
- design the business - build prototype customer feedback and
models for the options - test prototype with control KPIs
- check the customers - adjust and refine
interdependencies in the - write business case continuously the
business models - decide again or work on business model
- work on the uniqueness different option
(positioning)
- optimize the building
blocks

57. Checklist for writing your business model!
! Be specific!
! Keep it simple!
! Self-explanatory!
! Focus on the relevant points!
! Do not reinvent the world!
Checklist for positioning your business model!
! differentiated!
! customer-centric!
! specific!
! better narrow than broad!
! relevant!
! based-on core capabilities!

58. 3rd part!
The Art of Pitching!
European Innovation Academy 2012 Tallinn
Dr. Patrick Stähler, fluidminds
I pitch,
therefore I am
Source: Great ideas for starting something (by Guy Kawasaki)!

59. Know your audience for the pitch!
Pitch to Sales pitch to
Investor‘s pitch!
partners! customers!
What do you do?!
What is a good pitch for
investors? (short version)! Problem you solve!
Your solution & benefit for customer!
Your business model (the essentials)!
Underlying magic (uniqueness)!
Key financials!
Current Status, timeline!
Source: Great ideas for starting something (by Guy Kawasaki)!

60. 10!
Customers are slow to change behavior!
Customers need time to
understand and learn
about the innovation!
What is a good strategy?!
trend!
differenti
focus!
ation!
build on strengths!

61. It’s about finding the right
trend to surf! !
It is about differentiation!

62. „Business model innovation is !
!about being!
!DIFFERENT!“!
NO, REALLY !
DIFFERENT!

63. Dr. Patrick Stähler | 125!
DOING!
not learning to do,!
is the essence of
!entrepreneurship!
Guy Kawasaki, The Art of the Start 2004, p. xi!

64. „Scary to be this nail. Where
will the hammer hit next
time?“!

65. More Information on
http://blog.business-model-innovation.com
Dr. oec. Patrick Stähler!
fluidminds GmbH!
Seefeldstrasse 5a!
CH-8008 Zürich!
Patrick.Staehler@fluidminds.ch!
www.fluidminds.ch!
blog.business-model-innovation.com!