design tool of management...• the analysis of business modeling from the design of the value ......
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Design – Tool of Management
How business models can support at global scale product and service design and development
Design for Business Models
Andrea Ferrari
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Reasons why
• Models of business are strongly correlated to the way products and services are designed
• There is a strict correlation between the ideas to be developed and the cultural framework of the market
• Synergies can be created when approaching new products and identifying their ways to the Customers, to:
– Ensure the commercial success
– Reduce time to market
– Ensure customers to be adequately addressed
– Improve profitability
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What you will learn
• To design business models, from theoretical and applied market science
• To adopt different business models
• To use the Business Model Canvas tool
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Business Model
• A business model is a description of how a company creates, delivers and captures value, out of innovative product, process or service, delivering it to Customers into the marketplace, and exploiting a complete value chain
• A business model consists of four interlocking elements
1. Value proposition
2. Profit-Costs formula
3. Key Resources
4. Key Processes
• Describing the rationale of how an organization interacts with the market
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Four Interlocking Elements
• Do you have under control all of the four elements?
• Does your company intends to develop business pushing on some specific element rather than the others?
• Are they regional-specific?
• Can you apply the same model globally?
• Think about it!
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Value proposition
• Value proposition is the way to gain a competitive advantage, when providing the model of business in its different markets declinations
• Cultural approach is core to the deployment of models of business and their design to permit the success in global competition
• The analysis of Business Modeling from the design of the value proposition represents the natural entry point to a successful approach
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Value proposition
• Two approaches (the most representative) design a Value proposition, to reach the Customers:
– Technology Push, through R&D, manufacturing and market, not starting from the user needs
– Market Pull, developed by the R&D in response to an identified market need
R&D ProductionTarget Market
End-User
Market Needs R&D Production End-User
Technology
Push
Market
Pull
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Business model – the Canvas
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Business model Canvas: the 9 building blocks
• Four Building Blocks are relevant for Costs, to be incurred by the company to deliver the Value
– The Key Resources indicate the most important assets of a company to create the value proposition and to deliver it
– The Key Activities show the relevant tasks / actions performed by a company to make sustainable its business model
– The Key Partnerships describe the relevant partners (suppliers, distributors, etc.) contributing to the creation of the value chain and to the sustainability of the model
– The Cost Structure indicate all the costs to be sustained for implementing the business model
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Business model Canvas: the 9 building blocks
• Four building blocks are associated to the revenues, in terms of the markets and customers addressed and the way to reach them
– The Customer Segments illustrate the target groups that a company aims to reach through its value proposition
– The Channels show the means that a company uses to reach its customers for delivering a value proposition
– The Customer Relationships illustrate the relationships established by a company with its Customer
– The Revenue Streams represent the cash a company generates from its Customer Segment (different pricing mechanisms)
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Business model Canvas: the 9 building blocks
• Value Proposition describes the product(s)/service(s) of a company that create value for a specific customer segment. It solves a customer problem, or meets a customer need
• Being the value generated, implicitly it owns elements of costs and of revenues, and therefore it is split between the two sides
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Business model Canvas: the 9 building blocks
VA
LU
E
PR
OP
OS
ITIO
N
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Business model Canvas: the 9 building blocks
• Which is the business model of your company?
• Which is the value proposition?
• Try to describe the nine blocks in your business!
• Think about their importance to reach your Customers!
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Business model canvas: the 9 building blocks Why Design for Business Culture makes
the difference
• Nespresso, from a cup to a capsule
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The nespresso case
• Nestlé Nespresso S.A. belongs to Nestlè Group. The company sells worldwide a system of coffee machines and capsules
• Sales of coffee capsules reached €10.2bn worldwide in 2013, with Nespresso’s market leader position at € 3.2bn (31% share)
• What is the secret of Nespresso “phenomenon”?
• Why are people preferring to spend 48 €/kg for capsules instead of 10 €/kg (reference Italian market) for coffee powder?
• What makes this model so transversal worldwide?
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The nespresso case – early times
1976 Nestlé market leader in the instant coffee sector with its well known
brand “Nescafe’” Its position is quite weak in the other coffee market segments
Eric Favre, a young researcher of Nestlé laboratory registered
the first patent related to Nespresso system
(currently the company owns 1700 patents)
Failed attempt to enter
in the restaurant market
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The nespresso case – early times
1986 Nestlé founded Nespresso SA, with
the aim to foster the Nespresso system in the office sector, by
supporting another Group company, manufacturer of coffee machines, already active in the office sectors
Results: sales of Nespresso were definitely below the
expectations and the company has not been
closed only for the large stock of coffee machines
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The nespresso case – turning point to
success
1988 Nestlé appointed Mr Gaillard as Nespresso CEO
Gaillard introduced a radically new Business Model The target was moved from the office sector to the high-
income families and the selling strategy was based on post shipments
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The nespresso case – turning point to
success 2000 ...
With the introduction of internet, the online selling have been pushed and the first Nespresso stores have been created in high level locations (e.g. Champs Elysees @Paris,
Fifth Street @New York)
Loyalty Creation through Nespresso Club
Special attention to the customers
Marketing target actions (Advertising, George Clooney, easy slogan: “What else” …)
The strategic decisions have
been a success!
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The nespresso case – business model Canvas
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Business model across Cultures
• Does a Business Model make the difference?
• In 2004 Nestlè lauched different kinds of beverage based on capsules (cappucino, tea, milk…)
• Decision to create a new brand (Nescafè Dolce Gusto)
• Different coffee types to reach different markets and different customers (highlighted by different capsules designs)
• Nestlè created different Business Models for coffee products targeting different customer segments
• Let’s think on it, when deciding what coffee to drink!
High Level
Nespesso
Medium Level
Dolce Gusto
Mass Market
Nescafè
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Nescafè Business model
Nespesso
Dolce Gusto
Nescafè
• The starting point is an innovation/technology that origin a value proposition that can be
customized to solve a customer problem or a specific needs
Nescafè Instant Coffee
Mass Market
Retail
Revenues from Sales through retails (Low Margin)
Retailers
Marketing
Production
Production Plants
Brand
Production
Marketing
Sales
Global Presence
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Dolce gusto Business model
Nespesso
Dolce Gusto
Nescafè
• The starting point is an innovation/technology that origin a value proposition that can be
customized to solve a customer problem or a specific needs
Dolce
Gusto
multi
beverage
machines
and
capsules
Mass
Market
Retail
Sales through retails (Low Margin)
Sales online (High Margin)
Retailers
Marketing
Production
Production
Plants
Brand
Production
Marketing
Sales
Online
shop
Coffe
Machine
Manufacturers Global Presence
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Business Model Patterns
• The 90% of business model innovation is a recombination of 55 business model patterns
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Business Model Patterns - Multi-Sided
Platform
• A multi-sided platform “connects” two or more different but interdependent groups of customers
• A multi-sided platform leverages on the so called “network effect” as its value grows in accordance to the capability to attract more users
• Example of multi-sided platforms are VISA, Google and Facebook
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Business Model Patterns - Multi-Sided
Platform
• The starting point is an innovation/technology
that origin a value proposition that can be
customized to solve a customer problem or a
specific needs
Payment Platform
for card programs
Security,
Convenience
for cashless
payment
Service and
improved sales
Banks
(Issuers, Acquirers)
Card
owners
Trader
Advertising
Sponsorships
Reveneus from
services
Revenues from
Data processing
Revenues from International Transactions
Commercial
Partners
Technological
Partners
Personnel Brand Promotion
Communications Legal Issues
Payment
Platform
Brand
Payment Platform
Management
Transaction
Management
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Business Model Patterns - Freemium
• “Freemium” is the combination of the words “free” and “premium”
• Most of the users have access to basic free services, whereas most of the revenues come from selling premium services to a limited array of users
• Explanatory examples of this pattern are Skype, Linkedin, Spotify
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Business Model Patterns – peer-to-peer
• Dedicated pattern is established on transition from “ownership” towards “accessibility”
• In conventional markets, consumers buy products becoming owners
• In an accessibility-based system, consumers pay for temporary access to a product, seen as a service
• The business model pushed by the “sharing economy” is based on online market places, where the match between demand for assets or services amongst peers is connected with the ownership of those assets and services by other peers
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Business Model Patterns – peer-to-peer
• 3D HUBS has been founded in 2013 with the aim to connect all 3D printers globally into one online platform and make them locally accessible
• 3D HUBS is an online 3D printing service platform which operates a network of more than 24.000 3D printing service providers in over 150 Countries (as of December 2015: https://www.3dhubs.com/trends)
• 3D Printer Owners can share their printers. 3D HUBS acts as “facilitator” in connecting them to Customers of 3D prints
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Business Model Patterns – peer-to-peer
• In 2015, 3D Hubs has raised $4.5M in investments and expanded the team to 35 people (New York and Amsterdam)
• Printer Owners can add their printers to the catalogue for free
• 3D Hubs charges a 15% of commission fee for each order
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Business Model Patterns – Unbundling
• The unbundling business model aims to move from an integrated structure where Infrastructure Management, Product Innovation, and Customer Relationships are combined, to a paradigm where they are separated in three different complementary models
• Typical example are the telecommunications companies as aim the economy of scale, establishing small dynamic and creative companies (regarding the product innovation) and in particular for focusing their main tasks on customer relationships
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Business Model Patterns – long tail
• The long tail business model proposes to de-focus a company from a limited number of products/services sold in high volumes
• The innovative paradigm is: selling a very large number of niche products / services (each in relatively small quantities) is a profitable business
• Movement from commodities to specialties: typical example of this business model are Amazon, Netflix, Lulu.com
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Business Model Patterns – open business
• Open business model is based on the concept that a company can create and capture value by systematically collaborating with external partners
• There are two different approaches for this model: “outside-in” and “inside-out”:
– Outside-in: a company exploits external ideas for its business
– Inside-out: a company provides external parties with ideas which could not be fully exploited internally (or belong to non strategic markets)
Thank you for your attention
www.designforenterprises.eu #D4E
Design – Tool of Management
Design for Business Models