be like the internet
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Scott Hirsch, MIG scott@mig5.com
Be Like the Internet:Collaborative, Disruptive, Networked
Scott Hirsch, Management Innovation Group (scott@mig5.com)Web2.0 Expo - November 5, 2007
Scott Hirsch, MIG scott@mig5.com
MIG is a strategy consultancy …here are some companies we’ve helped:
Scott Hirsch, MIG scott@mig5.com
Scott Hirsch, MIG scott@mig5.com
Scott Hirsch, MIG scott@mig5.com
By changing the way you think about your …• development process• products/services• strategy• business model• management decisions• personal skills and leadership style
“We need to stop confusing web2.0 with AJAX,yellow fades, and social networks … it’s a wholenew way of thinking about business.”
--SixApart
Web2.0 Changes the Way You Think About Your Company
Scott Hirsch, MIG scott@mig5.com
The advertising model is something that we've looked at. Can I seean immediate application for the Wii, no. However, one of thethings that we are smart enough to say is "never say never." But itis clear that the Mii consumers love to create their Miis. They wouldlike more and more options to decorate their Miis.
We're going to address part of that with a channel called "CheckMe Out," where you'll be able to post your Miis and create Miis ofhistorical or popular figures and compare and vote on them. This isa recognition of a deep-seated need by consumers to drive a lot ofpersonalization with these Mii characters and we're looking to helpbring that to life in a way that makes sense.
Reggie Fils-AimeCOO, Nintendo
Web2.0 Innovators Are Always Re-framing
What word defines the Wii?
Scott Hirsch, MIG scott@mig5.com
- from The Search by John Battelle
Web2.0 Innovators Are Always Re-framing
A conversation in early 2002
Scott Hirsch, MIG scott@mig5.com
How?
By organizing the worldʼsinformation and making it
accessible and useful
Or?
By providing advertisers with the opportunity to delivermeasurable, cost-effective online advertising that is
relevant to the information displayed on any given page
Scott Hirsch, MIG scott@mig5.com
Find the Frame
Product
Process
CultureProcess
> Rapid prototyping> Willingness to change theparadigm> Commitment to servingadvertisers and consumers
> Fast executionOpen innovation - one dayper week for researchDarwinian prioritization> “Do no evil”
Products
> For consumers - search thatworks and snazzy new apps> For advertisers - access tomotivated customers> For content owners - freemoney
Scott Hirsch, MIG scott@mig5.com
What Weʼre Going to Do
9:30 - 9:45 Introduction and Start-Ups9:45 - 10:15 Learn About Each Other10:15 - 10:45 Bottom-Up Innovation10:45 - 11:00 Break11:00 - 11:45 Web2.0 Strategy and Business Models11:45 - 12:00 Leadership in a Web2.0 World12:00 - 12:15 Learning from Failure Experiences12:15 - 12:30 Putting It Into Practice
Scott Hirsch, MIG scott@mig5.com
Silicon Valley Before 2000• If I discover it, I will find a market for it.• If I launch it first, I will own it.• I can build the most important technology pieces
myself.• If I fail, I will move on to something else.• If I am successful, the best people will want to work for
me.
Web2.0 Shifts• Good Ideas are widely distributed today … there is no
monopoly on useful knowledge.• Innovation doesn’t happen within a single firm anymore.• Failure is an opportunity to learn and change.• Not all the smart people in the world work for us.
The Demise of the Internally Focused System:
Scott Hirsch, MIG scott@mig5.com
About Business
Trends and Discontinuities in Silicon Valley - How Web2.0 Changed the Way We Think
Greatly Reduced Costs• Global talent pools• (Almost) anyone can start
a company• VCs become less
(ir)relevant
New Revenue Streams• Google Adsense makes
business out of hobby• Open platforms broaden
potential audiences
Customers as Partners• Customers lead the
conversation• Customers as developers
on open platforms
About Strategy
Emergent Business Models• Value first … business
model second• Experimentation over set
strategies• Openness is king
Scott Hirsch, MIG scott@mig5.com
• You don’t own your ideas
• You don’t want to own the infrastructure
• You certainly don’t own your customers
“Intellectual property is a vestige of dumb markets”
Some Provocative Points of View - This Sets Up Our First Activity
Scott Hirsch, MIG scott@mig5.com
In the spirit of this being a global conference… that is focused on web2.0 …
Let’s model some collaborative problem solving viasocial networking
Instructions1. Take a moment to think about a challenge you are facing
today, it might be about …a) an innovation challengeb) a new product ideac) a sticky issue you are facing with a client
2. Make sure the problem is something you feel comfortablesharing with the group. If not, think of something else.
3. Write a short description of your issue … try your best tokeep it under three sentences.
Learning About (and from) Each Other
Scott Hirsch, MIG scott@mig5.com
Who Hates Networking?
Scott Hirsch, MIG scott@mig5.com
Be Like the Internet:Collaborative, Disruptive, Networked
Scott Hirsch, Management Innovation GroupWeb2.0 Expo - November 5, 2007
Bottom-Up Innovation
Scott Hirsch, MIG scott@mig5.com
Bottom-Up Innovation:A Personal Guide to Disrupting the World
Demystifying the Issue:- Too much high-level analysis and
“armchair quarterbacking”- Not enough personal stories from
real innovators- Too much emphasis on products,
not enough on process
Methodology:- Open inquiry with web2.0
innovators- Pull characteristics and qualities
of innovators- Ask for referrals for more
interviews
Proposal:- A “how-to” guide for innovation as told by web2.0
entrepreneurs and other market disruptors- Analysis and practical guidance for people at any
level or type of organization- Focus on analytic frameworks, as well as softer
skills of leadership and facilitation
Scott Hirsch, MIG scott@mig5.com
Passionate
Generally, what I’ve heard:
Persuasive
Flexible
Humble
are accepting of failure
Persistent (but not defensive)
Facilitative
have fluid conceptof “ownership”
embrace manypoints of view
Collaborative
don’t over-plantheir strategy
don’t over-commit to solutions
embracetransparency
value inspirationand production
Web2.0 Innovators are … and create cultures that ...
Scott Hirsch, MIG scott@mig5.com
Passionate
Generally, what I heard:
Persuasive
Flexible
Humble share success & accept failure
Persistent (but not defensive)
Facilitative
have fluid conceptof idea ownership
embrace manypoints of view
Collaborative
are open to manyviewpoints/options
Commit to direction,not solutions
embracetransparency
value inspirationand production
Web2.0 Innovators are … and create cultures that … to manage ….
UncertaintyOpennessLeadershipManagementHiringStrategyCompetitionMarketingBiz DevelopmentProduct Development
Scott Hirsch, MIG scott@mig5.com
Strategy - Disruptive• Look at their business as a poker game, rather than a chess
game• Aim to be the most open, rather than the first mover• Look for directional alignment, rather than the “right” answer
Business Models - Networked• Focus on solving universal customer problems, rather than
technology solutions• Favor experimentation over rationalization• Focus on building platforms, rather than owning customers
Management - Collaborative• View opportunity cost as the scarce resource, rather than
people and time.• View themselves as facilitators, rather than managers• Constantly seek to reframe challenges, rather than validate
old points of view.
How Web2.0 Innovators Look at the World
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators’ View of Strategy
Scott Hirsch, MIG scott@mig5.com
Chess• Plan several moves
ahead• No new information
needed• You know what you’ve
got and what youropponent has
• Decisions can be madewith a business case
Web2.0 Innovators’ View of Strategy
Poker• Pay to play … small ante
required to join• Pay for new information
each round• You discover what you’ve
got and can only guess atother players
• Business case is useless,you look at options
Web2.0 Innovators look at their businesslike a poker game, not a chess game
Adapted from Henry Chesborough, UC-Berkeley
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators aim to be the most open,rather than the first mover.
Closed platform
Web2.0 Innovators’ View of Strategy
Open platform
High external awareness
Low external awareness
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators’ View of Business Models
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators focus on solving universal problems,rather than technology solutions.
Web2.0 Innovators’ View of Business Models
“We knew that our focus was on collaboration -- not wikis -- andJoe had been talking about the long-tail of applications, so westarted taking a broader view of the business … Googlewouldn’t have acquired us if it weren’t for that shift in mindset.”
-- Ken Norton
Scott Hirsch, MIG scott@mig5.com
“Only time will tell whether Google has succeeded in building anevolutionary advantage. But consider: Since it's founding, it hasrepeatedly morphed its business model. Google 1.0 was a searchengine that crawled the Web but generated little revenue; which ledto Google 2.0, a company that sold its search capacity toAOL/Netscape, Yahoo and other major portals; which gave way toGoogle 3.0, an Internet contrarian that rejected banner ads andinstead sold simple text ads linked to search results; which spawnedGoogle 4.0, an increasingly global entity that found a way to insertrelevant ads into any and all Web content, dramatically enlargingthe online ad business; which mutated into Google 5.0, aninnovation factory that produces a torrent of new Web-basedservices, including Gmail, Google Desktop, and Google Base. Morethan likely, 6.0 is around the corner.”
- Gary Hamel, Wall Street Journal “Management A la Google” 04/26/06
Web2.0 Innovators’ View of Business Models
Web2.0 Innovators favor experimentation over rationalization.
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators’ View of Management
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators’ View of Management
Web2.0 Innovators believe opportunity cost is the scarce resource,not people, time, or money.
Top-Down ManagementExample: Yahoo! PBmemo
Scarce Resources:• People (engineers)• Time and moneyBottlenecks:• Getting management support• Big “P” PoliticsDecision Models:• Pre-Rationalization process• Business cases
Fear of false positives
Bottom-Up ManagementExample: Google 80/20 rule
Scarce Resources:• Servers, opportunity to test• Opportunity costBottlenecks:• Getting peer support• Little “p” politicsDecision Models:• Darwinian “natural selection”• Strategic options
Fear of false negatives
Scott Hirsch, MIG scott@mig5.com
Web2.0 Innovators’ View of Management
Web2.0 Innovators view themselves as facilitators rather than managers,and encourage smart divergence over quick convergence.
SeniorLeadershipGathers /GenerateIdeas
Fund
Tyranny of thebusiness case
Traditional Rationalized ViewManagement Decides
Generate,Nurture,Promote,Reward ->ideas
Triage,experiment,critique,prioritize,group,abahdon,filter & sort
Adopt
Narrowing throughexperimentation providesbetter data and more criteriathan a business case.
Web2.0 and the Beta ViewManagement Facilitates
Scott Hirsch, MIG scott@mig5.com
Strategy - Disruptive• Look at their business as a poker game, rather than a chess
game• Aim to be the most open, rather than the first mover• Look for directional alignment, rather than the “right” answer
Business Models - Networked• Focus on solving universal customer problems, rather than
technology solutions• Favor experimentation over rationalization• Focus on building platforms, rather than owning customers
Management - Collaborative• View opportunity cost as the scarce resource, rather than
people and time.• View themselves as facilitators, rather than managers• Constantly seek to reframe challenges, rather than validate
old points of view.
How Web2.0 Innovators Look at the World
Web2.0 is about more than AJAX, yellow fade, and social networks
Scott Hirsch, MIG scott@mig5.com
BREAK
Scott Hirsch, MIG scott@mig5.com
Be Like the Internet:Collaborative, Disruptive, Networked
Scott Hirsch, Management Innovation GroupWeb2.0 Expo - November 5, 2007
Uncovering Strategies and Business Models
Scott Hirsch, MIG scott@mig5.com
What is a business model?
Scott Hirsch, MIG scott@mig5.com
Guess thecompany?
Scott Hirsch, MIG scott@mig5.com
DangerʼsSidekick
Can anyone think of a web2.0 version of this?
Scott Hirsch, MIG scott@mig5.com
Generic Business ModelsWhich are Web2.0?
• Per item and “all you can eat”• Razors and blades• Free trial, followed by subscription• Free, advertising supported
• Any non-web2.0 examples?• Recruit your friends and save money• Market maker, aggregator, switchboard
• Ebay, Amazon• Turn cost centers into profit centers
• Ryan Air• Hotels (phone, TV, minibar)• Apple
Scott Hirsch, MIG scott@mig5.com
We shape ourbuildings, andthereafter they
shape us.
Scott Hirsch, MIG scott@mig5.com
We shape ourbuildings business
models, and thereafterthey shape us.
Scott Hirsch, MIG scott@mig5.com
Why do businessmodels matter?
technology companies succeed bykeeping switching costs high,selling version upgrades(think microsoft)Growth -> increase the installbase, while keeping attrition lowCustomer acquisition costs arehigh (unless you have a monopoly)$/user is largely fixed
Because switching cost is high,products only need to be “goodenough”
Customers aremotivated by:
availability of other ISPs
unwillingness to switch
loyalty to AOL “software”and content
ISP service
Customers Revenue and CostsProducts
Software services for mycomputer
Scott Hirsch, MIG scott@mig5.com
Why do businessmodels matter?
Media companies succeed byconnecting customers with usefulcontent/services (think craigslist);monetizing more customerinteractions (think adsense)Growth -> many levers: increasevisits, pageviews, CPM, long-tailand mass marketsCustomer acquisition costs are low$/user is variable
Products need to work well --innovations can be used to hooknew customers
Customers aremotivated by:
the value of the AOLnetwork of content andservicesloyalty to AOL “hooks”(products that uniquelycombine content andservices)relative value of the AOLexperience
Monetizable content
Customers Revenue and CostsProducts
Software services for me
Scott Hirsch, MIG scott@mig5.com
-B2B-B2C
How would you describeeCommerce businessmodels? -Content provider
-Direct to consumer -Full service provider -Intermediary- Shared infrastructure- Value net integrator -Virtual community - Whole of enterprise
-Brokerage (e.g., buyer aggregator,auctions, search agent, marketplace)
- Advertising (e.g., portals, free model,attention marketing, bargain discounter)
-Infomediary (e.g. registration)
-Merchant (e.g., virtual store)
- Manufacturer (i.e., disintermediation)
- Affiliate (i.e.,click-through purchase)
- Community (e.g., knowledgenetworks)
-Subscription
- Utility (i.e., pay as you go)
- Focused distributor (e-tailers,market-places, aggregators,infomediaries) - Portal (horizontal, vertical, affinity) - Producer (manufacturer, infoservices)- Infrastructure (ISP, hardware,software)
Scott Hirsch, MIG scott@mig5.com
The Frame of Your Business Model Matters… A LOT!
Scott Hirsch, MIG scott@mig5.com
Make & Sell
Strategic Lenses• Forecasting• Planning
The Strategic Continuum
Sense & Respond
Strategic Lenses• Learning• Adaptation
Web2.0 is more like a taxi than a bus.
Scott Hirsch, MIG scott@mig5.com
Make & Sell• Offer to the Market• Knowledge Embedded
in Things• Mass-production• Focus on Efficiency• Profit from Margin and
Scale
The Strategic Continuum
Sense & Respond• Respond to the Market• Knowledge Embedded in
People/Process• Customization• Focus on Flexibility• Profit from Return and
Scope
Is your company a taxi or a bus.
Scott Hirsch, MIG scott@mig5.com
Business Model Lock-In +the Innovatorʼs Dilemma
Concrete
Abstract
Analysis Synthesis
Observations:Confirmation Bias
Leads Us to See WhatWe Know
Frameworks: WeIdentify the
Problems That FitIn Our Definition of
the Industry
Imperatives: We FallBack on the Value
Propositions That FitOur Solutions
Solutions: WeCreate Incremental
Improvements to theWrong Problems
Scott Hirsch, MIG scott@mig5.com
Example from Telecoms
Concrete
Abstract
Analysis Synthesis
Observations:Customers Get
Frustrated When TheyCan’t Make Calls
Frameworks:Reliability of theNetwork is Key
(.99999 availability)
Imperatives: Invest inPOTS Redundancy to
Ensure Uptime
Solutions: Fiber OpticCables and High
Throughput Switches
Scott Hirsch, MIG scott@mig5.com
Other Examples
“I think there is a world marketfor maybe five computers.”- IBM Chairman Tom Watson
“The Americans have need of thetelephone, but we do not. We haveplenty of messenger boys.” - British Post Office
Commissioner Sir William Preece
"While theoretically andtechnically television may be
feasible, commercially andfinancially it is an impossibility."
- TV inventor Lee DeForest
“So we went to Atari and said, 'Hey,we've got this amazing thing, even builtwith some of your parts, and what doyou think about funding us? Or we'llgive it to you. We just want to do it. Payour salary, we'll come work for you.'And they said, 'No.' So then we went toHewlett-Packard, and they said, 'Hey,we don't need you. You haven't gotthrough college yet.”. - Apple Founder Steve Jobs
Scott Hirsch, MIG scott@mig5.com
Innovating on Business Models“…the key to sustained success is business model innovation.”
- Harvard Business Schoolʼs Clay Christensen
Who do we serve?
What do we provide?How do we provide it?
How do wemake money?
How do we differentiate &sustain advantage?
Scott Hirsch, MIG scott@mig5.com
Developing Business Models
Who do we serve?What do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
Scott Hirsch, MIG scott@mig5.com
Developing Business Models
Who do we serve?What do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
How do wedifferentiate &sustainadvantage?
Scott Hirsch, MIG scott@mig5.com
Marketing innovationsWhat do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
Serving differentpeople,servingthem differently
Scott Hirsch, MIG scott@mig5.com
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Targeting Different Customers
Scott Hirsch, MIG scott@mig5.com
Channel Innovations
Who do we serve?What do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
Getting productsto customersdifferently
Scott Hirsch, MIG scott@mig5.com
Cement is a commodity … need to differentiate the businessmodel. Major builders and distributors touch only part ofthe national market for cement.
“Platforms” explore major opportunity arenas:How to serve very poor customersHow to deliver “solutions” (rather than cement)How to address the needs of small vendors
Platform Innovation at
1. KEEP THE AIMINGPOINTS FRESH.
2. TIME BOUND THECHALLENGES.
3. MOVE ON TO THENEXT.
Opening Up Whole New Markets
Scott Hirsch, MIG scott@mig5.com
New Product Innovations
Who do we serve?What do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
Scott Hirsch, MIG scott@mig5.com
New Product Categories
Scott Hirsch, MIG scott@mig5.com
Customer Experience Innovations
Who do we serve?What do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
Scott Hirsch, MIG scott@mig5.com
Can flying actually be fun again?
Can Target make it easierto take your medicine?
Finding new approachesfor known needs
Scott Hirsch, MIG scott@mig5.com
Finance innovations
Who do we serve?What do weprovide?
How do we provide it?
How do we make money?
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUEPROPOSITION
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
PRODUCT/SERVICE
COSTSTRUCTURE
REVENUESTREAMS
Getting paid bydifferentpeople or indifferent ways
Scott Hirsch, MIG scott@mig5.com
Innovations in coststructures
Dell pioneered a J-I-Tproduction system thatallowed them to pay forcomponents after theircustomers had already paidDell.
Skype uses openinternet standardsand freeinfrastructure tooffer free and low-cost calls to itscustomers.
Scott Hirsch, MIG scott@mig5.com
Innovations in whererevenue comes from
Trilogy createscustomized softwarethat helps its customerssolve business problemsand gets paid as apercentage of costsavings or new revenuecreated.
Scott Hirsch, MIG scott@mig5.com
Hybrid innovations: newrevenue, new sales channels
Enterprise: Focus on offeringshort-term replacement vehiclespaid for by insurance companies
Scott Hirsch, MIG scott@mig5.com
Innovative combinations:new cost structures, newcustomers, new partners
Radically reducing costs opens upnew target customer possibilities
vs.
Scott Hirsch, MIG scott@mig5.com
Hybrid innovations: newcustomer experiences, newproducts, new services, newcapabilities
Scott Hirsch, MIG scott@mig5.com
Business Model(Netflix in 1999)
Who do we serve?
What value do we provide?
How do we provide it?
How do we make money?
How are we differentiated?
Scott Hirsch, MIG scott@mig5.com
Activity: Prototyping Business Models
How do we provide it?- Partner network:- Distribution channel:- Core capability:
What do we provide (key attribute in the value proposition)?- Product/service- Value proposition
Who Is the consumer / market segment?- Target customer- Customer relationship
How do we make money?-Revenue streams:-Cost structure
How do wedifferentiate& sustainadvantage?
Scott Hirsch, MIG scott@mig5.com
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
The Innovation Cycle Applied toBusiness Models
Scott Hirsch, MIG scott@mig5.com
The Innovation Cycle Applied toBusiness Models
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Describe thebusiness model
Scott Hirsch, MIG scott@mig5.com
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Find thewhitespace
The Innovation Cycle Applied toBusiness Models
Scott Hirsch, MIG scott@mig5.com
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Describe the newvalue combination
The Innovation Cycle Applied toBusiness Models
Scott Hirsch, MIG scott@mig5.com
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Think through go-to-market strategy
The Innovation Cycle Applied toBusiness Models
Scott Hirsch, MIG scott@mig5.com
Moving from Customer to Business
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Find thestory
Scott Hirsch, MIG scott@mig5.com
Moving from Todayʼs Story to Tomorrowʼs
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Tell anewstory
Scott Hirsch, MIG scott@mig5.com
Telling a New Story
What Weʼre Going to Do …- First step was to take an analytic look at the existing
story.- Now weʼre going to stretch to be a little more creative
to tell a new story- Show you a framework for thinking about business
models through innovation lenses.- Weʼre going to practice using these lenses
Scott Hirsch, MIG scott@mig5.com
Innovation LensesFinding Opportunity
Customer Needs Business Models
Trends &Discontinuities
UnleveragedAssets
IndustryOrthodoxies
Latent &Unmet Needs
Innovations Products Services Markets Partners Channels Management
Scott Hirsch, MIG scott@mig5.com
Innovation LensesOpportunities Derived from Customer Needs
Customer Needs
Trends &Discontinuities
Latent &Unmet Needs
Innovations Products Services Markets Partners Channels Management
Trends & DiscontinuitiesWhatʼs happening in themarket? What emergingtechnological, social, oreconomic changes mightimpact your competitiveenvironment?
Latent & Unmet NeedsLooking at your currentcustomers or target market,what needs are not beingaddressed?
Scott Hirsch, MIG scott@mig5.com
Innovation LensesFinding Opportunity
Business Models
UnleveragedAssets
IndustryOrthodoxiesInnovations
Products Services Markets Partners Channels Management
Industry OrthodoxiesWhat does the industry takefor granted about how tomake money? Can youimagine alternatives?
Unleveraged AssetsWhat assets do you have thatdisruptors donʼt? Are theybeing used?
Scott Hirsch, MIG scott@mig5.com
Finding new channelsSame benefits as MS Office, but viathe Web rather than installed software.
Industry Orthodoxies- people value security- don’t trust online storage- MS owns this market
Trends & Discontinuities- software as a service- ubiquitous connectivity
Scott Hirsch, MIG scott@mig5.com
Customer Service and Experience
Unmet Needs people want F2F support people want education
Industry Orthodoxies retail is a reseller industry there is no profit in retail
Trends & Discontinuities people are willing to pay
extra for service Ipod halo effect is real
Scott Hirsch, MIG scott@mig5.com
New customers, new distribution,new value configuration
37Signals’ Basecamp project management tools targetend-users as buyers, rather than corporate IT buyers.
Unmet Needs Enterprise solutions
overshot needs of users Industry Orthodoxies IT Manager won’t allow it Business customers
won’t buy it
Trends & Discontinuities Software as service Corporate rebellion
Scott Hirsch, MIG scott@mig5.com
What data do youhave access to thatcan be repurposed tohelp customers buyfrom you more often?
Power of Customer Data Unleveraged Assets• Customer browse and
purchase histories• Capability to determine
likelihood to buy
Scott Hirsch, MIG scott@mig5.com
Moving from Todayʼs Story to Tomorrowʼs
Concrete
Abstract
Analysis Synthesis
Observations(Context)
Frameworks(Insight)
Imperatives(Ideas)
Solutions(Artifacts)
Tell anewstory
Scott Hirsch, MIG scott@mig5.com
Innovation Lenses(Netflix in 1999)
Unmet Needs- I hate paying late fees- I want a bigger selection
Trends/Discontinuities- Demise of VHS- Rise of DVD players
Industry Orthodoxies- People want to see the box- You need retail space to carry inventory
Unleveraged Assets- Customer data
Scott Hirsch, MIG scott@mig5.com
Innovation Lenses(Netflix in 2007)
Unmet Needs• I can’t get the darn video
onto my ipod
Trends/Discontinuities• More and more interest in watching video anywhere and anytime
Industry Orthodoxies• Digital Rights Management cannot be overcome
Unleveraged Assets- Online relationships, huge selection- Database of customer preferences, recommendations
Scott Hirsch, MIG scott@mig5.com
Exercise: Telling a new storyFirst, do some brainstorming around the innovation lenses:- Latent/Unmet Needs
What insights do you have about how customers behave?- Trends and Discontinuities
What trends can you get ahead of the cure on?- Industry Orthodoxies:
How can you challenge the current beliefs about your market?- Unleveraged Assets:
What assets do you have that others donʼt … or donʼt use?
Some challenge questions to get you thinking:How would we make money if we gave the product away?What assets are we not leveraging? Include intangibles!(relationships, data, etc.)If you were a start up with the same assets what would you doto disrupt this market
Scott Hirsch, MIG scott@mig5.com
Prototyping Business Models
Who is in our value chain?
What do we provide (key attribute in the value proposition)?
Who Is the consumer / market segment?
How do we make money?How do wedifferentiate& sustainadvantage?
Scott Hirsch, MIG scott@mig5.com
Innovation LensesFinding Opportunity
Customer Needs Business Models
Trends &Discontinuities
UnleveragedAssets
IndustryOrthodoxies
Latent &Unmet Needs
Innovations Products Services Markets Partners Channels Management
Scott Hirsch, MIG scott@mig5.com
Key Takeaways:
• The way you frame your business model reallymatters … Are you a bus company or a taxicompany?
• Frames help you understand your business model… look for patterns
• Frames change when you look forward … breakyour current frame to look at the future
Scott Hirsch, MIG scott@mig5.com
Be Like the Internet:Collaborative, Disruptive, Networked
Scott Hirsch, Management Innovation GroupWeb2.0 Expo - November 5, 2007
Learning from a Failure ExperienceActivity in Teams of Two
Scott Hirsch, MIG scott@mig5.com
Where You Are Now
Learning from Experiences:How People Make Decisions
context
opportunity
problem
solution Where You Want To Be
Scott Hirsch, MIG scott@mig5.com
• People think much more objectively and criticallyabout failures
In analyzing past successes, people are naturallysusceptible to “self-attribution bias”
• Those who don’t learn from history are doomed torepeat it.
• That which doesn’t kill you, makes you stronger
Why A Failure Experience?
Scott Hirsch, MIG scott@mig5.com
Innovation Mindset:Finding Opportunity In Failure
context
opportunity
problem
solutionHow would you handle the
situation differently,knowing what you know
now?
What is the context of thefailure experience? Who
were the key playersinvolved?
What were the barriersyou encountered? Focus
on interpersonal andsystemic barriers.
Scott Hirsch, MIG scott@mig5.com
1. Cast aside your biases, listen & observe• Let them tell their story• Listen for emotion
2. Note any contradictions• Inconsistencies beg additional questions• Check for clarity
3. Listen for the personal story• Challenge perceptions for normal• Note sources of pride and frustration
4. Distinguish between needs and solutions• Needs open up possibilities• Solutions constrain them
5. Look beyond the obvious• Watch for workarounds• Great insight is in the nuances
Five Things to Remember When Doing Inquiry:
Scott Hirsch, MIG scott@mig5.com
• What did you learn in your interview?
Were you able to frame the problem?
Were you able to reframe and find the opportunity?
Discussion and Questions …
Scott Hirsch, MIG scott@mig5.com
Thank you!Scott Hirsch
Management Innovation GroupScott@mig5.com
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