Thursday, December 11, 2008

Reinventing Your Business Model
Mark W. Johnson, Clayton M. Christensen, Henning Kagermann
HBR, December 2008
Reprint: R0812C

This is a fabulous article that highlights a key premise of our work at Kellogg – systemic innovation must occur across the whole Business Design that we define by:

This is similar to that proposed in the HBR article. Our work starts with defining the target customers and the outcomes we hope to create for them; this is built from deep customer insights. We then define the Value Proposition for these customers focusing on three vectors: function, economic, and emotive that creates significant competitive separation in the eyes of our customers. Finally, we define how we hope to capture value by clearly defining what we are selling (the Unit of Business); the profit model we hope to deploy; and , how we sure our position.

I strongly recommend you order the article.

Why is it so difficult for established companies to pull off the new growth that business model innovation can bring? Here's why: They don't understand their current business model well enough to know if it would suit a new opportunity or hinder it, and they don't know how to build a new model when they need it. .... .......Successful companies already operate according to a business model that can be broken down into four elements: a customer value proposition that fulfills an important job for the customer in a better way than anything competitors offer; a profit formula that lays out how the company makes money delivering the value proposition; and the key resources and key processes needed to deliver that proposition. Game-changing opportunities deliver radically new customer value propositions: They fulfill a job to be done in a dramatically better way (as P&G did with its Swiffer mops), solve a problem that's never been solved before (as Apple did with its iPod and iTunes electronic entertainment delivery system), or serve an entirely unaddressed customer base (as Tata Motors is doing with its Nano - the $2,500 car aimed at Indian families who can't afford any other type of car and usually use motorcycles to get around—(we discussed this in an earlier posting. Doing so doesn't always require a new business model, but a new model is called for under certain conditions. It is often needed to leverage a new technology (as in Apple's case); is generally required when the opportunity addresses an entirely new group of customers (as with the Nano); and is surely in order when an established company needs to fend off a successful disruptor (as the Nano's competitors will now need to do).

No comments: