Rules and guides- How to use the “Business model builder tool”

Innovation Toolbox:

The Innovation Toolbox

Rules and guides- How to use the “Business model builder tool”

By Ipower WP6DTI - Danish Technological Institute

Content6 AN INTRODUCTION7 HOW TO USE THE TOOLBOX10 FOREWORD12 HOW THE TOOL WORKS14 THE CARDS22 HOW TO USE THE TOOL26 REFERENCES

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Will the end users buy my new product or service? This question inevitably arises in every company developing and supplying new products

– and it is not an easy question to answer. When those products are potentially smart grid oriented and targeted at domestic consumers that might be taking part in a possible future market of flexibility services, the question becomes even more difficult. With the uncertain future of the Danish smart grid, the “technology-push” driven development and the domestic consumers currently experiencing the maximum comfort of on/off electricity supply availa-ble 99.997% of the time, companies that don’t ask that question will be ill prepared for intro-ducing their products and services to domestic consumers.

In this series of innovation tools we provide knowledge, inspiration and process guidance for you to investigate and answer that question by yourself. To do that, we have created four user centered innovation tools each helping you to investigate different aspects of the question above. On top of that we supply two appendixes for further work:

1. Strategic Scenarios: which possible smart grid futures should my company prepare for?2. Personas: What customer preferences should my products and services meet?3. Customer Journey: What customer experiences do my existing products and services pro-vide – and how can these experiences be improved?4. Business Model Builder: What value propositions can my products and services offer – and how can my company profit from delivering that value?

• Appendix 1: Nordic survey of smart grid projects: What have been studied and demon-strated already about domestic consumers in the smart grid?•Appendix2:A guide to perform rapid and cost-effective tests of the business hypothesis behind your products and services.

The tools have been developed as part of iPower, a ”Strategic Platform for Innovation and Research in Intelligent Power”, partly funded by The Danish Council for Strategic Research and The Danish Council for Technology and Innovation: www.ipower-net.dk.

An introduction

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How to use the toolboxThe four innovation tools are interlinked, and we suggest you apply the following approach for using them in your company:

1. Preparation phase:a. Map your customer journey: If you have existing product(s) on the market, use the custo-mer journey tool to collect and structure insights about the user experiences provided by your products and services. This process can take anywhere from a few weeks to half a year. If you do not have an existing product on the market, familiarize yourself with the customer journey concept as preparation for the strategic business modeling game

b. Read and start using the Personas and the Scenarios: Familiarize yourself with the perso-nas and the strategic scenarios, and begin using these for innovation activities and strategic discussions in the company. All the persons who are to participate in the strategic business modeling game should be familiarized with the personas and scenarios first

2. Business model building game :a. Assign and prepare a gamemaster: Prior to engaging in the business model strategic discussion game, assign a gamemaster to read and understand the rules, the tools and the knowledge contained herein. The key function of the gamemaster is to facilitate the game, and he/she should be prepared for this and for answering questions from the other partici-pants.

b. Play the game: Start playing the strategic business model building game, taking departure point in the business model game board and the rulebook provided. The scenarios, personas and customer journey will be included in the game when instructed, and as the nature of the game is iterative, you may revisit all 4 tools several times, or simply play it through once for a start

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3. Going furtherTest the developed business model: With inspiration from the two appendixes provided, test the developed business model in either a demonstration project or by conducting several rapid, low cost tests of the initial and ongoing interest for your business model.

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There is a long-standing tradition for companies to make a business plan descri-bing every detail about the company, market strategy, product development plans, resour-ces etc. In the last decade the business plan has got a companion – the “business model”. Where the business plan is often a document used to show a bank or an investor that it is a sound business to invest in, the business model is more a method to work with your value proposition, how your products and services give value to the customer, and how your company profits from delivering that value.

One could develop several business models, test them, pick one, and then write the busi-ness plan, based on the selected business model. The business model tool is faster to use, faster to innovate with, faster to test and get feedback from – but it is not a business plan. A business model should be a part of a business plan, not vice versa. Although the detailed business plan is becoming less important in these years of crowdfunding via Kickstarter, Indiegogo etc., then a strategy plan built upon the business model might be enough to fulfill the job of a business plan. The business model shows you what to do, and where to do it, but nothing about when to do it, how much resources should be used for it, which results you might need etc. Therefore, there is still room for some planning, even though the business model is a perfect tool for good understanding and innovation of the interaction between you and your customers.

Development of business models is probably best known through the work of Alexander Osterwalder & Yves Pigneur: “Business Model Generation” (Osterwalder & Pigneur, 2009). Here they present the “Business Model Canvas”, in which you develop and describe different circumstances around the value proposition. But many other articles exist on the topic with definitions on the subject and tools to work with. Stated by

(Zott, 2011) – “Numerous business model descriptions and applications have been proposed and investigated”.

Some of these have tried to define the role of a business model like (Magretta, 2002) whose definition of a business model is this:

“A business model is a structured pre-sentation of the value creating compo-nents of a firm and how to appropriate that value.”

Try searching Google for “Business model” and you get around 475,000,000 hits! … and a lot of pictures as well. The Business model canvas dominates the picture, but there are also many other models/drawings to get inspiration from.

When you see a business model (try looking at some of the pictures on the Internet), they seem quite simple and easy to make. There are some material (physical or more of a service nature), a value proposition, a custo-mer, channels and some form of monetary considerations. How difficult can it be! - The business model canvas just needs to be filled in! Well, when you use it to describe your existing business model, it may feel like an easy task. But when you try to come up with new business models, solving the puzzle of merging the elements of your former busi-ness model and merging it with entirely new elements, it tends to be quite difficult. The problem is often to narrow down focus and find/refine the right elements to the different parts of the model. In trying to help different companies doing this task, we developed the tool presented in this booklet.

The main idea of the tool is to inspire, pre-sent and provoke discussions among the participants to choose and build a business model suited for the needs of them and their customers. To provide inspiration the idea of this tool is to present many different possibi-lities for the participants, to help them look

Foreword

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around for new ideas and angels and guide them in a logical sound way through the business model building.

How to get value from using this business model builder tool

Use the business model builder to build and discuss one or more new business models for your company and make better strategic decisions on how to introduce your products and services to the market.

The business model tool presented in this booklet is based on the principle of a cookbook. You start to read the whole recipe to get a firm grasp of the proportions of the work and ingredients needed, check for the ingredients and then start to follow the different steps one by one. When done, you have a freshly made business model that can be discussed and tested internally in the company or externally towards customers. There is one cook (gamemaster) and several chefs assistants who work together through the recipe.

There are several possibilities for learning while using the tool.• In understanding how the tool is used and the business model is constructed• In the discussions for which cards to choose• Checking the interactions between the different cards selected• Discussing how the cards selected fit your customers• In the ensuing tests while testing the model towards customers or colleagues

Due to the nature of a business model (and the design of this tool), you do not want to end up having too many different options in one business model. For example, you seldom have everyone in the world as your target group. You choose, and narrow down the scope. For instance you choose that your value proposition is targeted towards SME (and by that you exclude the private market), and you might as well choose a certain size of the companies, a certain type or branch. By doing this you build up the model (and get inspired) by how to target this customer segment and how the value proposition trigger the desired customer value. Finishing this, you might build another business model with another customer group, value proposition, or other elements. Then one model after the other can be tested and eva-luated, and one or more winners can be picked and introduced to the market.

Select the participants for the business modeling gameThe target group for the participants is the management group of the company, especially stakeholders influencing the company strategy. But it could easily incorporate some emplo-yees as well. Often the employees keep a finger on the pulse and know details of the custo-mer or your product that might be very valuable in this process. Another reason for incorpo-rating employees in the process is to ensure buy-in when the business model is “going live” – they have participated in building the business model or assisted in picking the winner.

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The tool is based on a set of cards divided in 9 subgroups or decks of cards. Each deck is used to discuss and choose one or more of the available options. By going through all 9 card decks, the different part of the business model is put down and visualized on the fly on the game board.

The nine decks of cards are:1. Value proposition• This is the actual product, service, process etc. that is offered to the customer. The name-

states exactly that it is valuable for the customer, which is the reason for the customer to give something in return. This return could be money, but also data, information, mate-rials etc.

2. Customer segment• The value proposition has a main target group. A segment of customers that specifically

get value from the offering you provide.3. Customer value• This is the most important deck of cards of them all! If the customer does not get any

value from the offering, he or she does not want it. The value can be of many sorts. It could be by helping the customer get a better business, a better life, feel secure, have fun etc.

4. Customer relations• This is the deck of cards for customer loyalty, long-lasting relationships, creating ambas-

sadors etc., but often overlooked, though. This is where considerations on the relations-hip between you and you customer are made. By the way - we are not talking newslet-ters!

5. Market• A few cards on what your market could look like. 6. Value streams - Finance• This is one of the cornerstones behind the “invention” of business models – today there

are many ways to get a healthy and sustainable business, a lot more ways than just deli-vering a product to the customer and get paid.

7. Platforms• Some businesses are based on a more traditional platform (if any) and some do excel

in very sophisticated platforms for their business. It is a way to access the market either alone or in corporation with others. (It could be franchising, peer-to-peer, e-commerce etc.)

8. Partner / value chain• There are many options when setting up the back-stage engine of your company; should

you have partners, how will suppliers be integrated etc.9. Specialization• These cards are a sort of dark horses, they may not be relevant at all, the issue may have

been covered already or they may send you back to start to rethink the whole business model again. By specializing you focus on delivering value in a specific way, better than your competitors - but you may delimit yourself from capturing related forms of value or from adjacent market segments.

Extra: Considerations• This is a smaller deck of cards used when the game master finds the situation locked or

for other reasons wants to introduce a new perspective. These cards are not necessarily used and are placed in a separate pile on the table.

How the tool works

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The nine decks of cards are played in the above order. Starting with the definition of your value proposition (#1), you choose your product, ser-vice, process or whatever you offer to your customer. Then going through #2-#5 defining your market and customers and how you interact with them. #6 and #7 concern how you can design a value stream that suits your purpose. The model building ends by working with your value chain at the last #9, which is a sort of “joker”. Sometimes you do not need these cards, sometimes it sends you back to “start over”, and sometimes it is just the icing on the cake that makes it perfect.

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The cards are parted in 9 decks of cards, where each card has the name of the group at the top. Some of the card decks have a sub-name. Then follows the specific charac-teristic of the card and a description. Below are the cards mentioned in the card decks from #1 to #9.

Step1: #1 Cards: Value proposition• Value proposition - ProductThe value proposition is a manufactured product. Could be produced or just sold, but it is merely the product.

• Value proposition - ServiceThe value proposition is mainly based on services.

• Value proposition - Product/serviceThe value proposition is a combination of a physical product and enclosed or stand-alone service.

• Value proposition - TradingThe value proposition is based on trading with products or services.• Value proposition - Media / content pro-

ductionThe offering is mainly content for media or other social interaction media.

• Value proposition - Education / trainingThe offering is mainly educationally based. Could be either educational material, digi-tally based learning, or other ways of know-ledge transfer.

• Value proposition - Logistics and infra-structure

The offering is to take care of the customer’s logistic and/or infrastructure demands

• Value proposition - EventsThe offering is event-based.It happens occa-sionally, might only be one single time, or recurring.Might involve one customer or multiple customers, streets, neighbourhood,

etc.

• Value proposition - Research and development

The offerings take care of research and development for the customer. This might be part of a project or turn-key delivery.

• Value proposition - Sales of knowledge and consultancy

Could be information on detected improve-ment possibilities at the customer’s premises, based on internal knowledge, big data, visits etc. From infotainment spanning to direct consultancy projects.

• Value proposition - Arts and craftsThe value for the customer is of artistic value, but could be static, event-based, vir-tual, physical or a service and stretching into entertainment.

• Value proposition - PlatformThe offering is a platform where the custo-mer is able to meet a bunch of different value propositions. The platform can be physical, virtual, recurring or single occur-rence, but is more than just a single offering. It is a platform where several different value propositions are offered. (More details in the deck of cards named “platform”).

Step 2:#2 Cards: Customer segment• Customer segment - TypeSingles

• Customer segment - TypeFamilies

• Customer segment - TypeOrganisation

• Customer segment - Age0-12 yearsOr SMEs below 25 employees

The cards

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• Customer segment - Age13-18 yearsOr SMEs below 100 employees

• Customer segment - Age19-25 years Or SMEs (from 0-250 employees)

• Customer segment - Age26-40 years Or Larger corporations

• Customer segment - Age41-60 years

• Customer segment - Age61+ years

• Customer segment - GenderMale Or In company: Specific department

• Customer segment - GenderFemale OrIn company: CEO, COO

• Customer segment - GenderDoes not matter OrIn company: could be anyone

• Customer segment - LocationUrban

• Customer segment - LocationRural district

• Customer segment - LocationIslands or otherwise remote areas

• Customer segment - LocationDo no matter

• Customer segment - Physical expressionshared housing: Scouts, NGO, leisure centre, village or meeting hall

• Customer segment - Physical expression

real estate – villa, terraced house, town house.

• Customer segment - physical expressionCompany

• Customer segment - physical expressionFlat

#3 Cards: Customer value• Customer value - Managing tasks

EfficiencyThe customers achieve a higher level of effi-ciency in their business or at home

• Customer value - Managing tasks Task of the customer is solved in a new way / or more tasks solved concurrently in a new way. The job of the customer is handled in a new and better way, and/or more jobs are addressed concurrently relieving the custo-mer of a burden

• Customer value – Emotional value/ArtThe value is merely of artistic value

• Customer value- Managing tasks - Simplification

It has become easier to do certain things / to get the tasks done.

• Customer value - Economic value - Save energy / Save money

Certain tasks are optimized or managed in a way that uses less resources and by that save money for the customer (could be short term or long term)

• Customer value - Emotional value - Security and safety

Feed information to the customer to make the customer feel less insecure when using this offer. Could be regarding real threats such as theft, but as well nature related, acci-dents, lack of knowledge, etc.

• Customer value - Managing tasks - A more easy way to get things done.

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Helping the customer get a job done in a more easy way, be it automatically, digitally or manually – the customer sees it as an easier way to handle his job/life/situation

• Customer value - Economic value - Help the customer earn money.

While using this value proposition the custo-mer is able to earn money that he would not be able to else.

• Customer value - Emotional value - Eliminate / reduce risk

Protect the customer against a defined risk

• Customer value - Managing tasks - Wider scope / several tasks.

Tasks can be solved simultaneously that were managed discretely before.

• Customer value - Economic value - Using energy in a better way

The customer is being helped to use the same amount of energy in a better way. E.g., get better comfort, get more benefit, higher profit etc.

• Customer value - Emotional value - Remove a problem or issue.

Help remove something that irritates the customer, fixing a problem, either short or long-term.

• Customer value - Social benefitHelp the customer support a desired image or brand by taking care of the issues around this.

• Customer value - Social benefit - Interaction with others.

Help the customers with maintaining or implementing relationships, network or other social interaction to benefit the custo-mer.

• Customer value - Social benefit - Learning / knowledge / education

Gives the customer a possibility to obtain

more knowledge on a given subject. Either direct or in-direct.

• Customer value - Social benefit - Entertainment / home entertainment.

B2B : Ensure some sort of workplace enter-tainment, employee benefit, service etc.B2C : Delivering and/or maintaining home entertainment, be it equipment, channels, service etc.

• Customer value - Social benefit - Desire for better environment

Helping the customer protect his environ-ment either in small or larger scale.

• Customer value - Social benefit - Healthcare

Helping the customer with healthcare related issues, covering the whole scale of know-ledge, training, health, comfort, support for treatment, childcare etc.

• Customer value - Social benefit - NGO Supporting a NGO or other not-for-profit organization, or the customer’s participation in this. Example: donate you excess power to the power-less families. (Families that struggle to pay the bills from the power plant).

#4 Cards: Customer-relations Customer-relations - Web 2.0 based relationsSocial interaction on digital media.

• Customer-relations - Guaranteed avai-lability

Like Hilti Fleet Management takes care of all in relation to the use of their tools, the term applies to ”mission critical” tasks e.g. in the oil industry, where downtime is much more expensive than service contracts, etc.

• Customer-relations - Experience selling You might think you buy a product when you buy a Harley Davidson motorbike, but actually, you buy a lot more. (Training, tours, lifestyle, clothing, etc.)

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• Customer-relations - Customer loyalty Systems to keep customers in-house; Buy 10 - get one for free, collecting stamps, clubs, credit cards, if you do not stay there, you will lose something, often a rebate etc.

• Customer-relations - Solution ProviderOne stop shop – whatever your customers want, you can deliver (might be in a certain area, or to certain activities, or for a whole business….)

• Customer-relations - From push to pullLet the customers tell you (or show by buy-ing) what they want, and then make it, and react fast. Zara (clothing) reacts extremely fast compared to the rest of the competitors, giving customers what they ask for.Buying clubs, Muuse - the Danish fashion designer – they produce the clothing when enough have signed up.

• Customer-relations - GamificationUse internal and external motivation, fun, gaming elements.

• Customer-relations - SubscriptionsSubscriptions that keep running and are sup-ported by close relationship between custo-mer and producer.

• Customer-relations - Club/member based

Membership, either free or at a cost – the important part is what you get as a member.

• Customer-relations - PlatformSupermarket: You develop a platform where other companies can introduce their value propositions to a broad or selected customer group. You get your share either as a part of the sales that take place, or by hosting a place where a lot of people pass by. (Ads, Big data, cross sale, etc.)

#5 Cards: Market • Market - Massmarket

• Market - Niche / segment

• Market - DiversifiedDifferent products for different customer groups

• Market - Platform(See later card deck for more choices in plat-forms)

Step 3:#6 Cards: Finance - Value stream• Value stream - Crowdfunding Using platforms as Kickstarter, Indiegogo to both test your idea and search for money.

• Value stream - Rent instead of buyingEither as normal renting or we-economy.

• Value stream- Cash MachineHave a business that lives from the interest rate and/or in other ways is part of a lar-ger cash flow where just a small fraction is enough to live on.

• Value stream - Direct selling Like Dell - direct selling between the produ-cer and the customer.

• Value stream - Subscription Pay per hour, day, week, month, year…

• Value stream - Barter : Legal barter of goods

Could be with non-monetary values like brands, postings on social media, likes, pro-motion of each other’s products, etc. More difficult when tax-issues are to be taken into account, but not impossible.

• Value stream - Freemium -> premiumOften many customers get it for free, and a minor group pay a premium fee.

• Value stream - Pay what you want

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A model that asks for voluntary donations.

• Value stream - Pay per useThe most famous are aircraft engines by Rolls Royce, but also movie streaming, rent a car, bike etc.

• Value stream - AuctionA lot of webpages (ebay as the most promi-nent) have an auction model

• Value stream - Flat rate Like the most cell-phone subscriptions are made. You know what to pay today and tomorrow.

• Value stream - Target the Poor Many customers at a low price, as opposite to few customers at a high price.

• Value stream - Self-serviceSelf-service petrol, top up, cafeteria online banking, etc

• Value stream - Fractional OwnershipWee-economy / time share - Ownership is spread out on a broad customer base, making a higher price product possible.

• Value stream - Open SourceMoney is earned on service and support activities, whereas the software itself is for free, or very cheap.

• Value stream - Robin Hood Sell expensively to the wealthy, cheaply to the broad masses or poor people. Like companies donate money whenever you buy one of their products, or new type of medicine where a lower margin is accepted in some countries.

• Value stream - Hidden Revenue Youtube film channels, Facebook.Double business models: Ad-Word & Google Search.

• Value stream - Razor and blade

You sell the razor at a low price, and when you have customer “lock-in” you sell the blade at a high price. The same with inkjet printers, and cellphone subscriptions some time ago.

• Value stream - Lock-in High switching costs. You help the customer to get well accustomed to your product and ensure that a switch over is expensive or in other ways requires a lot of resources. (The downfall is that when customers switch, they are hard to get back).

• Value stream - Performance-based con-tracting

You are paid for what you really deliver. A machine is delivered for free, but for every single item made on it, the user pays a frac-tion. A French teacher is paid for every word his pupils say in French, not like normally by the hours he teaches. #7 Cards: Platform• Platform - IntegratorYou integrate the necessary amount of companies to constitute a total system/one stop shop for your customers that can solve the whole task.

• Platform - Shop in shopYou can either be the provider of the plat-form where others can have their mini-shop, or you can provide the mini-shop with your products to others.

• Platform - Revenue sharingYou build or support a platform where mul-tiple suppliers offer a broader market for the customers. Like Apple’s or Google’s App stores. And you all share the revenue.• Platform - User DesignHelp the customers either in direct co-crea-tion, or by supporting their developing pro-cess (prototyping, workshops, classes, shops with materials, communication platforms.) • Platform - Peer to Peer Building a platform where users can inter-

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change something (examples are Instagram, “Den blå avis”, eBay), and a growing market in we-economy (Uber, Airbnb, Task rabbit etc.).

• Platform - Two-side MarketTwo distinct user groups who provide each other with network benefits. A way to solve the “chicken-and-egg” issue. E.g., Credit cards. The more customers who have a cer-tain credit card brand, the more shops will accept them, and the more shops that accept it, the more customers will want that type of card.

• Platform - Long tailHaving a strategy of selling a large number of unique items with relatively small quanti-ties sold of each item — usually in addition (or opposition) to selling fewer popular items in large quantities.

• Platform - FranchisingCan be both the one having the concept and the one buying into (A well-known example is McDonald’s).

• Platform - E-commerceOnline channels - Creating sales, contacts and relationship via online media, social fora etc.

• Platform - Leverage Customer Data Either as a producer, collector or interpreter of the data. Could be the sole business or part of another business where data is gene-rated as a sub-process.

#8 Cards: Partner / value chain• Partner / value chain - OrchestratorHaving focus on all or part of the core com-petencies, other parts are outsourced, but controlled in a tight network of partnership.

• Partner / value chain - Partnership of resources

A group or network of partners join forces regarding resources. Sharing knowledge or

ability to use each other’s waste as input to own process for mutual benefit. • Partner / value chain - Jointly purchaseSharing cost of purchase in group or net-work. Could be driven by all, or by one. Revenue could be shared according to seve-ral different schemes.

• Partner / value chain - Marketing part-ner

Partnership regarding a mutually beneficial approach by helping a partner doing marke-ting, and vice versa. Maybe based on com-plementary products or access to different markets.

• Partner / value chain - ConsortiumA larger group of companies collaborate towards a common goal.

• Partner / value chain - Joint ventureA business agreement in which the parties agree to develop a new entity with a goal that can be reached only by their joined for-ces.

• Partner / value chain - Strategic alliance A cooperation that lies between mergers and acquisitions and organic growth. Strategic alliances occur when two or more organiza-tions join together to pursue mutual bene-fits, but stay as two entities.

• Partner / value chain - Affiliation : Sales-partner

An affiliate is a commercial entity formed as a relationship with a peer or a larger entity – usually with one large organization that only possesses a minority share of a smaller company.

• Partner / value chain - Cross-sellingSelling more value propositions to the custo-mer than the one on stake now. Could be closely related service or product, or merely related by the presence of the supplier, based on knowledge not sold before, big data

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access etc.

• Partner / value chain - Outsourcing – sourcing

Getting a supplier to take care of a specific area. Normally “non-core” areas, but could also be a well-defined part of core business

• Partner / value chain - Shared R&DShare the R&D effort. Could be between parts that are in totally different market, but as well between companies in a local cluster that see competitors in a more global view.

• Partner / value chain - CrowdsourcingCrowdsourcing is often used to subdivide tedious work, often through digital media.Examples could be picture recognition (App like Vivino) or CPU sharing in astronomical computing.

• Partner / value chain - The Customers are sole creators or co-creators

The open source systems like Fablabs and technologies like 3D printing put the private individual as a creator in the center. There is still a need for a lot of facilitation processes around it, though.

• Partner / value chain - The Customers are co-creators

As co-creator the customer can be a sort of free-lance developer like at LEGO, or in the more traditional user driven innova-tion. There is often a very solid community around it all. #9 Cards: Specialisation• Specialisation - Ingredient Branding The branding is highly focused on certain aspects of the offering. The “Intel Inside” branding campaign is an example on how Intel gets branding on computers, where otherwise it is difficult to see which brand CPU is inside the PC.• Specialisation - Digitisation/Virtual

offerings

Traditional manual services are converted to digital services and are offered on the web, smartphones, social media, etc.

• Specialisation - Add-on : Standard pro-duct with extra acquisitions.

The offering has a base of standard products / services, and on top of this is a choice of add-on offerings that typically have a pre-mium price.

• Specialisation - White Label : OEMYou sell to another vendor that puts his brand and name on the product. Could be re-seller as well as system integra-tor as other manufacturing companies and bought-in service providers.

• Specialisation - Ultimate LuxuryYour offering is in the luxury business and probably in the higher end of value and price.

• Specialisation - Trash to Cash : Working up throw-away products and materials up to new sales.

You save on the material costs, and environ-ment footprints

• Specialisation - Mass customizationYour production and logistic lines are able to customise offerings so that every customer believes he gets a very customized product even though it might have a lot of similari-ties with other customer choices. • Specialisation - No FrillsCore services cut to the bone . ( Wal-Mart, Netto, Aldi )

• Specialisation - Reverse innovation : products developed for developing countries are transferred to developed countries

E.g., washing machines on the Chinese mar-ket are based on few models, with very rug-ged design. Whereas European companies develop products targeting luxury and a lot

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of functionality and different product lines.

• Specialisation - Licensing: IPR licenserYou earn the profit by licensing knowledge, patents etc. to other companies OR you benefit from research in other companies by buying into their IPR (and maybe selling part of this to third parties.) • Specialisation - Co-creationYou create the offering together with custo-mers. This can be done simultaneously in the consuming process or merely in the developing process.

• Specialisation - Reverse engineering : Copy cat / fast follower - “Second mouse gets the cheese”.

Don’t try to create a market yourself – whe-never anybody else has paved the road you develop the right product and have a much higher hit-rate. E.g., Amazon, Singer sewing machine, vacuum cleaner/ hoover, Google AdWords. #Extra Cards: Situation • Situation - Traditions, norms etc.Select, describe or discuss the traditions, customs and habits applicable in this area?What are the norms, cultural standards, fro-zen politics (we do it THIS way), etc.Any of these we need to face?

• Situation - ParalysingWhich areas do we not see clearly?Where do we think we have the whole pic-ture, though we might not..?

• Situation - Breaking the norms What attitudes, prejudices, opinions etc. underlie the present state?What should one do to be considered as one breaking the norms?

• Situation - What ”Jobs” does a customer need to get done during the day?

Job as in something the customer already does, wants to be able to do, wants to do

better etc. The “job” is something you either could hire another person to do or get something that could help you to do better.

• Situation - What is good about the situation as it is now ?

What is not as perfect about it now? Make a list with 10 in each, and ensure you keep the good ones - and innovation on the bad list.

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How to use the “Business model builder tool” The business model builder tool is used in conjunction with the other tools; customer jour-ney, personas and the scenarios.This game is divided in 4 main groups: The entrance, Customer and market, Value streams and Value chain. You meet the groups in this sequence.

The figure below shows the sequence in which the 9 different card decks should be used – with the four above mentioned groups marked with different colours.

How to use the tool

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How many cards to choose from each deck of cards ?The decks of cards named ‘Customer value’ and ‘Customer segment’ have sub-groups of cards. You are allowed to select one card from each sub-group.

You may find that you would like to select multiple cards from a deck of cards. In two of the decks it is fine, in the rest of the decks you need to consider it carefully. You should always look at the cards and ask the que-stion: Can one business model contain both these cards? For example, a business model is very seldom able to contain customer seg-ments that are both companies and private households. Every time you want to select more than one card from the deck, ask your-self: How will this affect the other card decks in the game?

However, there are two decks (Customer value and Customer relations) where selec-ting more than one card is acceptable. In the rest of the decks it should be done carefully.

Starting the game in “Step 1”: The entranceScenarios:First things first – you got to choose the scenario(s) that you think is most likely to happen, and that is what the following will relate to.Step 1:Deck of cards #1: Value propositionThe game starts by taking the card named “value proposition”. This goes into the entrance field of the game map. Here you have to define what your company is offe-ring the customers. Sometimes a lot of the value in this tool is the discussion itself. Everybody gets a common understanding of what the company is offering and the stra-tegy behind it. Later in the game the same understanding and common language are obtained on the other areas that are proces-sed. It is therefore important that enough time is used for everyone to understand the

issues, although maybe not agreeing 100% on the cards selected. If it seems that the participants are divided into two or more camps, it may be a good idea to choose one of the options, and agree that a later game will focus on the other party’s ideas.

The card decks #1 and #3 (Value proposition and Customer value) have time constraints. This is due to these two areas tending to open up to very long discussions. That is fine, but on the other hand, you also want to be able to get through all card decks. This is the reason why there is a time limit on these two subjects of 15 minutes. When the 15 minutes have passed (or before) you have to decide on which card should be selected and move on.

Step 2: Customer and marketDeck of cards #2: Customer segmentNext step is the “Customer segment”. Here are several sub-groups to choose from. You do not need to select cards from every sub-group, only relevant cards should be selected. Please ensure that the chosen seg-ment is limited enough for you to actually be able to find and get in touch with these customers. One would think that to have the whole world as the customer segment would be marvelous. However, how would you tar-get that group? Digitally, newspapers, radio, whitepapers - jack of all trades is a master of none. Reduce the segment as much as pos-sible - this makes the ideation process much easier. At a later time after the game you can broaden up again, if you think the chosen model is able to accommodate for more pos-sibilities.

Actionmark 1: Scenarios:After “Customer segment” has been defined, you hold this up against the scenarios you chose. Does your offering and the segment fit into one of the scenarios, and only one, or maybe more than one ? What can you con-clude on this? If somehow it does not match,

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start over again.

Deck of cards #3: Customer value.Here again is a time constraint (15 minutes) due to the overwhelming discussions that might open up when talking about what value the customers are ACTUALLY buying into. The product may deliver one thing, but it could give something different to the customer. For example, an offer may be to remotely control the lock on your front door. What is the value? Easier lock-ing and unlocking of the door? Or is it the accompanying app, where the user can see when his children come home, or that he can check the lock from his bed? Whatever you decide is the value will affect the rest of the game, and you will probably find that the participants in the group point to dif-ferent values. So go through a discussion and choose the values that seem the strongest in selling your value proposition.

Actionmark 2: Personas:Now take the customer segments and the customer value cards and compare these to the different personas. Do they fit every persona? Anyone that fits best? And what about the others – is the customer segment chosen well enough? If your offer only fits one or two of the personas - is this enough? Could there be other customer values that would fit more personas? Ask the chosen personas how they would relate to the offer (i.e., discuss it among the participants in the game). How much would they be willing to pay for it?

Deck of cards #4: Customer relationsTake the next deck of cards, Customer Relations, and find the best way to get in contact with the customers. A lot of produ-cts have a lot of interaction while the custo-mer is in the phase of the buying decision and implementation. After that period much of the relationship between customer and company ceases out. Is this satisfactory, or could you give the customer much more

value if the relationship continues? Find out how you could establish and maintain such a relationship and increase both the customer loyalty and the possibility of selling more to the same customer.

Actionmark 3: Customer journey:After this, now have all the cards selected in you mind and hold them up against the customer journey. How would such a jour-ney look with this customer segment, the customer values and the initiative you are going to take in order to establish some sort of relationship with the customer? Where are the most important moments in the custo-mer journey at which the performance of your offering either can turn the customer into a loyal ambassador or could result in an opt-out? How can you design these moments - do you own them or do other stakeholders “own” the contact with the customer? Is this journey satisfactory? If not, go back and recheck the deck of cards that caused the uncertainty.

Deck of cards #5: MarketThe last deck of cards in this group is “Market”. There are not many cards, and it is probably quite easy to choose the right ones after you have passed the other card decks. It is all about choosing how you prefer to look at the “market”. Is it a mass market, where broad marketing should be used, or is it a much more distinct or diversified market, global or local? The different market places and the chosen customer segment should match!

Step 3: Value streamsDeck of cards #6: FinanceNow it is time to go to the “Value streams” deck of cards. Starting with the cards named “Finance” you have to choose cards that describe how you will earn money or whate-ver you get in return from your customers.Perhaps more than one card could be selected here, but again - look carefully – if they are too far away from each other, it

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might be two different business models. (Like Google Search is one model – the users pay with their data. The second model is AdWords – getting money from advertising. Two dif-ferent models with two different customer segments, but together they give value and money in return.)

Actionmark 4: Personas:Now validate again towards the personas. Does such a value stream fit these customers? Are they willing to pay whatever the cost is?

Deck of cards #7: PlatformsPlatforms are another way to finance or establish what you are doing. You may be alone or together with partners, supplies, customers, competitors – anything that gives value to your business model. Platform is when you do business in some sort of new way, different from the traditional way of doing things.When done, then it is time for the last group of cards: “Value chain”.

Group 4: Value chainDeck of cards #8: Partner / value chainWith all the above under control you can now examine how the value chain is going to look. Do you need to team up with someone, could there be some sort of synergy with other busi-ness models – could you be the driver, or the passenger? To what level should you cooperate with your suppliers?

Deck of cards #9: SpecializationBy specializing, you focus on delivering value in a specific way, better than your competitors - but you may delimit yourself from capturing related forms of value or from adjacent market segments.These cards are a sort of dark horses, they may not be relevant at all, the issue may have been covered already or they may send you back to start to rethink the whole business model again. Check the cards, do they match what you already have, or do they add something?

Actionmark 5: FinalizingThe business model has now been through the first draft phase. Before you go out and test it on customers and potential partners, please test it again towards the customer journey. Does it still fit? Will it give the expected benefits and value to the customer? Take the personas, the whole model, and go through a complete customer journey. How do you get in contact with the customer, what happens along the way, and are you getting return on all of what you put into the model? How and when does your relationship end, - if it ends? Is it cyclic?

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ReferencesMagretta, J. (2002). Why Business Models Matter. Harvard Business Review 80: 86-92, 86-92.

Osterwalder, A., & Pigneur, Y. (2009). Buisness Model Generation. Mudderman.Zott, C. R. (2011). ”The Business Model: Recent Developments and Future. Journal of Ma-nagement 37(4): 1019-1042., 1019-1042.

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