Business Model Innovation

Ross Pearce July 2019

Topics

definition

the forces of change

a framework for innovation

business model innovation

tools

definition

innovation is

the discipline of creating value

Technology

Climate

Energy

Urban

Social

the forces of change Defining the future

• Materials• Quantum Computing• Internet of Things (IoT)• Sensors• Robotics• Self Driving Vehicles• Medical Technologies• Genetics (Crispr)• Bio Engineering (Genomics)• Food Technologies

Everything has hit an exponential inflexion pointthe forces of change

the forces of change

• Computing Power• Sensors• Big Data• Artificial Intelligence• Robotics & Augmentation• Renewable Energy Te

chno

logy

Soci

al

• Climate Change• Carbon Reduction• Urban Shift• Cultural Norms & Beliefs• Privacy

Shaping the construction business landscape over the next 5 –10 years

the forces of change Convergence

What will your near future business environment look like?

a framework for innovation

TEN TYPES OF INNOVATIONTHE DISCIPLINE OF BUILDING BREAKTHROUGHS

Larry Keeley, Ten Types of Innovation: The Discipline of Building Breakthroughs

“If in principle we are all in favour of innovation, in practice we try to make our world safe and certain.”

“Innovation is the elegant integration of many things.”

volume of innovation efforts 10 Years 2002-2012

Source: Doblin

cumulative value creation10 Years 2002-2012

Source: Doblin

business model innovation

Core 50%Customers you currently have

Core Extension 30%Customers you can get to

Transformative 20%Customers you currently can’t get to

Core Core Extension TransformativeToday 5-8 years

innovation portfolio

Business Model

Good Customer experienceLow fixed CostsSubscription Profit Model

Poor Customer experienceHigh fixed CostsTransaction Profit Model

Blockbuster 1985 -2010 Netflix 1997

Customer Experience Physical presence required, limited choice, pay for each rental, fined for late returns.

Unlimited choice from home (Eg Indie), no late fees, unlimited rentals per month

Brand Physical Signage & Print DigitalChannel Brick & Mortar Retail Stores Mail Service By store (variable) Dependant on 3rd party (US Postal service)

Product System Local video “library” National film resource accessible from home by mail.

Product Retail of video content Home Delivered video contentProcess Individual stores choose titles, Hold Stock

(limited), Physical counter transactionBuild web site, Stock digital (unlimited, burn DVD’s on demand), Automated transaction, Delivery by mail.

Structure Inventory (Limited), Stores (many in high rental locations), Staff (Many)

Inventory (Unlimited), Warehouses (few in cheap locations), Staff (few)

Network Movie Producers, Game producers & Console Manufacturers, Food & Beverage Providers, Real Estate Managers

Movie Producers, Content Providers, Postal Service

Profit Model Transactional: per rental + late fees Subscription: Monthly (no late fees)

example 1 NetflixVS

Netflix 1997 Netflix 2007 +

Customer Experience Unlimited choice from home (Eg Indie), no late fees, unlimited rentals per month

Unlimited instant streaming choice

Brand Digital DigitalChannel Mail Internet - onlineService Dependant on 3rd party (US Postal service) One source (Consistent)

Product System National film resource accessible from home by mail.

Instant access from the couch

Product Home Delivered video content Streaming + own production contentProcess Build web site, Stock digital (unlimited, burn DVD’s

on demand), Automated transaction, Delivery by mail.

Automated online customer profiling, transactions and delivery. Software development.

Structure Inventory (Unlimited), Warehouses (few in cheap locations), Staff (few)

Inventory (Unlimited), Data farms,

Network Movie Studios , Postal Service Movie studios, Independent Producers, directors, writers etc,, Data farms/hardware suppliers/developers, programmers.

Profit Model Subscription: Monthly (no late fees) Subscription: Monthly (no late fees)

example 1 Netflix Excellent Customer experienceLow fixed CostsSubscription Profit Model

Good Customer experienceLow fixed CostsSubscription Profit Model

VS

example 1 Netflix

Netflix's market value increased dramatically in 9 years from USD2.2Billion in 2010 to USD158 billion in 2019

Blockbuster disrupted

example 2

Description of firm: They design, manufacture and construct multi-story commercial buildings for building owners and are the largest design/builder of parking structures in the United States.

Industry: Construction; precast prestressed concrete; design build; engineering; architecture; general contracting; software

In 2013 Finfrock’s CEO decided that their largest risk was sticking with a broken business model based on the commodity mentality of the bidding process.

The company now sells to owners and developers as a design-build contractor vertically integrated into precast. Its value promise is faster completion, less schedule risk and more money left over for design features, all of which increase ROI to building projects.

example 2

Finfrock’s revenue increased over twenty-fold with an even greater percentage gain in operating profits.

Finfrock’s new business model is hard to copy they have added new business models as well.• Its software system to streamline design and project

management is now sold to other builders. • A new licensable building component is in development; once

Finfrock started doing entire projects, it saw ways to fundamentally improve precast.

example 2

Our growth is due to:

• Our differentiated business model that provides us with many competitive advantages.

• It sets the direction of our company and helps to define our corporate culture.

• It also enables our customers to easily obtain a high degree of value.

• Finally, it sets us apart, by allowing us to deliver a finished building as a product rather than a series of separate services typical in the construction industry.

example 2

Kate Plantes, Innovation Management A Compelling Example of Business Model Innovation: Finfrock Industries

Reduced Risk for OwnersBy providing single source responsibility for the entire process, FINFROCK virtually eliminates your risk. Our experience enables us to deliver exactly the building you need.Reduced CostsFINFROCK’s project delivery system is unmatched in its quality and efficiency. This enables us to lower our costs while improving performance, resulting in more value for your project dollar. FINFROCK leverages its parking garage experience to provide early, accurate, guaranteed all-inclusive prices that include design by answering 3 to 6 critical questions.Reduced ScheduleAs a vertically integrated company FINFROCK is able to conduct work in multiple phases of a project simultaneously. With multiple disciplines moving forward at the same time, schedules are shortened.

example 2

example 2

the results speak for themselves 260% growth over 5 years

2013 USD 87.8 million 2018 USD 224.4 million

tools

tools

tools

its all about the value proposition