Business Models point of view

in Innovation Management
TU-E5000
Innovation and Project Management
IPM
(5 cr)

28.1.2016

Pekka Berg
Hani Tarabichi
Innovation Management Institute
Aalto University

29/01/2016 © IMI 1
 TOPICS OF THE DAY

9.00 Start of the Day

– Learnings from your Homework
– Lecture 1: Shafer´s Business Models
– Analysis of the pre-readings in the teams
– Outcome of the team discussions
– Lecture 2: Gassmann´s Business Models
– Analysis of the pre-readings in the teams
– Outcome of the team discussions
12.00 Lunch
– Lecture 3: LEGO Serious Play with Agents and Hats
– Intro for the Homework
– Working for the IDBM industrial project dealing with the topic today
15.30 Wrap-Up of the day
16.00 End of the Day

© IMI 2
PreReadings
1. Shafer et.al., 2005, The power of business models, Business Horizons
48, 199-207.
2. O Gassmann, K Frankenberger, M Csik – 2013, The St. Gallen
Business Model Navigator, Working paper, bmi-lab.ch

© IMI 3
 Readings (Voluntary)

1. Sundbo, J., 1997. Management of Innovation in Services.

2. Edvardsson, B. et.al. 2012. Customer integration within service development—A review
of methods and an analysis of insitu and exsitu contributions. Technovation 32 (2012)
419–429.
3. Osterwalder, A. & Pigneur, Y. 2005. Clarifying Business Models: Origins, Present, and
Future of the Concept.
4. Chesbrough, 2007, Business model innovation: it’s not just about technology anymore,
Strategy & leadership , vol. 35 no. 6 2007, pp. 12-17, Q Emerald Group Publishing
Limited, ISSN 1087-8572
5. Amit, Zott, 2012, Creating Value Through Business Model Innovation, MIT Sloan
Management Review.
6. Mabogunje, A., Kyvsgaard Hansen, P., Berg, P. 2013. Exploring Innovation – A Language
Approach. CO-CREATE Conference, Espoo, 16-19 June 2013.
7. Snowden et.al., 2007, A Leader´s Framework for Decision Making, Harward Business
Review, November 2007
© IMI 4
 Homework 3 for 2.2.2016:
Business Model

1. Describe the (d)evolution (=innovation process) of your corporate case business model based on this day learnings
– Your model in the starting point today
• What is the value proposition of your model?
• How do you create value in your model?
• How do you capture value in your model?
– Development of your model
• Use the Shafer´s “components of business model affinity diagram”
• Use the Gassmann´s three-step “imitation and re-combination”-method and consider if some elements or
ideas of the described 55 business models could be useful in your case.
– Extra
• How does your Business Model reflect the strategic choices and their operating implications of your Case
company?
• Think also the change of the business model in next, 3? – 5? – 10 years?
2. Visualize this journey by Legos-paper-mockup prototype(s).
– Create also agents and connect them if relevant
– Take photos and videos
– Be ready to present the status of your work in the wrap-up of the day

29/01/2016 © IMI 5
 Contents

1. Business Model approach

1. Introduction
2. Business Model by Shafer
3. Business Model by Gassmann
2. Teamwork
3. Homework

29/01/2016 © IMI 6
 Goal

To consider business models and

innovation offering in order to create
shared understanding for future work.

29/01/2016 © IMI 7
Why Gassmann?
 Process vs. Offering vs.
Business Model

Before the innovation process can be

discussed, there must be an
understanding of the desired
offering(s) and business model(s) .

29/01/2016 © IMI 9
 “Before discussing how to
innovate a business model, it is
important to understand what it
is that is to be innovated.”

Gassmann, 2013
 Offering + Process + Enablers

ENABLERS

PHASE: Invention Planning Offering Commercialization

Development
Customer
Interaction
Strategy

Business Process
Business Intelligence,

Development
Roadmaps

Portfolio
Goods Service

LAUNCH
Foresight

Cross-
functional
teams

New
Business
Concept
Competence Innovation

Creativity Decision Speed Costs

FOCUS ON: Making

PROCESS OFFERING

29/01/2016 © IMI 11
Business Model between Offering and Impacts
 Outcome/ Offering/ Product?

Customer Interaction
(High End Service) New Business
Concept/Model
Innovation

Goods Service

29/01/2016 © IMI 13
Why Shafer?
 Product development
according to Hamel

Lähde: Gary Hamel, Leading The

29/01/2016 © IMI Revolution, 2000 15
 Product development according to Hamel

Radical Nonlinear
Business
concept
innovation
innovation
Incremental

Business
Continuous
process
improvement
improvement

Component System
Lähde: Gary Hamel, Leading The
29/01/2016 © IMI Revolution, 2000 16
 Contents

1. Business Model approach

1. Introduction
2. Business Model by Shafer
3. Business Model by Gassmann
2. Teamwork
3. Homework

29/01/2016 © IMI 17
 Souce: Yrjö Neuvo, TEKES Seminar 8.3.2006
29/01/2016 © IMI 18
 Components of Business Model (Osterwalder)

Infrastructure management Product Customer interface

Partner Customer
Network Relationship

Core Value Value Distribution Customer

Capabilities Configuration Proposition Channel Segment

Cost Success/ Revenue

Structure Failure Streams

Financial aspects

29/01/2016 © IMI 20
 What other
business model frames
do you know beyond
Osterwalder?
 Creating Value Through
Business Model Innovation
-
Six questions for Managers

Raphael Amit and Christoph Zott, 2012

 Six key questions that managers should ask themselves when
considering business model innovation:

1. What perceived needs can be satisfied through the new model design?
2. What novel activities are needed to satisfy these perceived needs?
(business model content innovation)
3. How could the required activities be linked to each other in novel ways?
(business model structure innovation)
4. Who should perform each of the activities that are part of the business
model? Should it be the company? A partner? The customer? What novel
governance arrangements could enable this structure? (business
model governance innovation)
5. How is value created through the novel business model for each of the
participants?
6. What revenue model fits with the company’s business model to appropriate
part of the total value it helps create?
 Why don’t more companies innovate
their business models?

• Think of your case company: who is responsible for

Business-Model Innovation?
• Who within the company, other than the CEO, is
responsible for the ways the business creates value in
its products and services and captures that value in the
form of revenue from its customers?

Christoph Zott and Raphael Amit 2010 , Business Model Design: An Activity System Perspective
 Through what kind of
process have you developed
the Business Model of your
Case this far?
Show us the business model
of your Case by LEGO
Serious Play!
 The Facilitator Challenge

1. Select the Mock-Up Facilitator of your team.

 Landscape Example:
The good Elderly Life Landscape
 Contents

1. Business Model approach

1. Introduction
2. Business Model by Shafer
3. Business Model by Gassmann
2. Teamwork
3. Homework

29/01/2016 © IMI 29
 Business Model, Source: Shafer et.al. 2004

Pre-reading: Shafer et.al., 2005, The power of business models,

Business Horizons 48, 199-207
 Business Model, Source: Shafer et.al. 2004

Discuss in your team about topics as follows of the paper:

1. The Components of Business Model?

2. The New Definition of Business Model?

3. Four Problems Associated with Business Models?

 Business Model, Source: Shafer et.al. 2004

Topics of the paper:

1. The Components of Business Model

2. The New Definition of Business Model

3. Four Problems Associated with Business Models

Business Model, Source: Shafer et.al. 2004
 Business Model, Source: Shafer et.al. 2004

Topics of the paper:

1. The Components of Business Model

2. The New Definition of Business Model

3. Four Problems Associated with Business Models

Business Model, Source: Shafer et.al. 2004
Business Model, Source: Shafer et.al. 2004
 Business Model, Source: Shafer et.al. 2004

Topics of the paper:

1. The Components of Business Model

2. The New Definition of Business Model

3. Four Problems Associated with Business Models

 Business Model, Source: Shafer et.al. 2004

Four Problems Associated with Business Models:

1. Flawed assumptions underlying the core logic

• Future?
2. Limitations in the strategic choices considered
• Big Picture?
3. Misunderstandings about value creation and value capture
• Value Capture?
4. Flawed assumptions about the value network
• Future?
 Business Model, Source: Shafer et.al. 2004

Conclusions:

Business models facilitate the

• analysis,
• testing and
• validitation

of the cause-and-effect relationships that flow from the strategic

choices that have been made.
TU-E5000 - Innovation and Project Management
Business Models, Offerings and Impact

Hani Tarabichi

40
Business….What is the SPIRIT for it!!??

• Create Value
• Build New Business
• Improve and transforms organizations
• Innovative way of thinking
• Visionary – Game changer
• Challenge driven
A?!”
WhatsApp!!
• Feb 2014
• Revenues $20
Millions
• Acquired by Facebook
$19 Billions
• WhatsApp with
that!!?

http://www.statista.com/statistics/260819/number-of-monthly-active-whatsapp-users/
• Many firms continuously introduce innovations to their products and
processes.
• Yet, many companies will not survive in the long term despite their
product innovation capabilities
• ???!!
• These companies has failed to adapt their BM to the changing
environment
• The future is for competitions between business models, Not
between technologies and products.
Why companies fail to develop a breakthrough strategies?
• Cultural inertia and unwillingness to change a ‘winning formula’
• Contentment and complacency
• Processes and structures that become rigid and unyielding
• Strong and unquestioned beliefs and corporate sacred cows
• Conservatism and fear of losing the current profit stream
• Strong vested interests and politicking
• Managerial overconfidence or arrogance
• Unyielding habits and company norms
• Overreliance on what has worked in the past
• Passive and uncritical thinking and quick dismissal of information that conflicts with
current view
• Stubbornness and a passionate but unreflective reliance on past processes,
habits, and values

48
So….What’s up with business models??

• Business models have surged into the management vocabulary

• It has become quite fashionable to discuss business models

• Business models can serve a positive and powerful role in corporate

management

• Interest in the BM concept from a wide range of disciplines

So….What’s up with business models??

• Business models can be powerful tools for:

– Analyzing
– Implementing
– communicating strategic choices

• In the mid-1990s, dot-com firms pitched business models to attract funding

• 27% of Fortune 500 firms used the term BM in their 2001 annual reports

• Media have certainly gotten on board also. Within major magazines and
journals, only one article in 1990 used the term business model three times
or more; by 2000, well over 500 articles fell into that category.
So….What’s up with business models??

• Business model can be defined as a unit of analysis to describe how the

business of a firm works.

• Business model is often depicted as an overarching concept that takes

notice of the different components a business is constituted of and puts
them together as a whole (Demil and Lecocq 2010; Osterwalder and
Pigneur, 2010).

• In other words, business models describe how the magic of a business

works based on its individual bits and pieces.
What is a Business Model

A Business Model describes the rationale how

an organization creates, delivers and captures
value.

Source: Alexander Osterwalder and Yves Pigneur, 2010

What is a Business Model

• Business concept must be:

– Simple
– Relevant
– Understandable

• A business model is built on 9/?? blocks covering 4 areas:

– Customer
– Offers
– Infrastructure
– Financial viability
Rationale behind the Business Model Canvas (BMC)

• There is a need for a shared concept that everybody understands

enabling description and commensurate discussion about business
model(s)

– Model must be simple, relevant & intuitively understandable, but not over-
simplifying the complexities of how an enterprise function.

– Differentiating business model from other concepts, such as a revenue model,

strategy etc.
Rationale behind the Business Model Canvas (BMC)

• BMC tool describes any business model with “9/?? building blocks”
indicating the logic how company intends to make money (Value)

– Covers four main areas of business: Customers, offering, infrastructure, and

financial viability

– To describe, analyze, design and validate any business model

– A blueprint for a strategy to be implemented through organizational structures,

processes, and systems
So a quick recap

• 5+5=?
• OK??
• 5 + 5 = 10

• X + Y = 10
• What are the possibilities?

• 1+1=?
• 1 + 1 > 3 now that’s innovation
management , be radical

56
• Business is fundamentally concerned with creating value and capturing
returns from that value, and a model is simply a representation of reality
• a firm’s underlying core logic and strategic choices for creating and
capturing value within a value network
– core logic: suggests that a properly crafted business model helps articulate and make
explicit key assumptions about cause-and-effect relationships and the internal
consistency of strategic choices
– business model reflects the strategic choices that have been made
– Successful firms create substantial value by doing things in ways that differentiate them
from the competition
Value!!

• G-D Logic vs S-D Logic

• Value in exchange (G-D): Value is created in firm and distributed in market
through exchange of goods for money. Roles of producers and consumers
are distinct, value creation is a series of activities formed by the firm

• Value in use (S-D): roles of producer and consumer are not distinct. Value is
co-created jointly and reciprocally. Value is created through interaction
among providers and beneficiaries through integration of resources and
application of competencies
Value Creation, Value Capture

• Can Value creation occurs alone!!!?

• Can value capture occurs alone!!?

• Hamel 2001, argues:

– neither value creation, nor value captures occurs in a vacuum!
– Both occur within a VALUE NETWORK
• Suppliers
• Partners
• Distribution channels
• Coalitions
– The role a firm chooses to play within its value network is an important element of BM

59
Value Creation, Value Capture
Components of BM according to Shafer et .al. 2004

Capture Value
Strategic Create Value Value Network

• Resource/Assets • Suppliers • Cost

• Customer • Processes/ Activities •

•
•
Customer information
Customer relationship
Information flows
• Financial aspects
• Profits

• Value proposition • Product/Service flow

• Capabilities/compet
encies
• Revenue/Pricing
• Competitors
• Output (offering)
• Strategy
• Branding
• Differentiation
• Mission
Adopted from: The power of business models, Scott M. Shafer, H. Jeff Smith, Jane C. Linder
Business Model .vs. Strategy!!

• A Business model is not a strategy

• Strategy can be viewed as a pattern of choices made over time!

• Strategy is a forward looking plan (Mintzberg), pattern, position, or

perspective.

• Strategy is a position (Porter), choices about which products or services are

offered in which markets based on differentiation features

• Strategy is a perspective (Drucker), choices about how business is

conceptualized

62
Business Model .vs. Strategy!!

• A business model facilitates:

– Analysis
– Testing
– Validating firm’s strategic choices

63
Problems of Business Models

• Misusing the business model concept can lead to problems

• Four common problems associated with creation and use of BMs:

– Flawed assumptions underlying the core logic
– Limitations in the strategic choices considered
– Misunderstandings about value creation and value capture
– Relying on flawed assumptions about the value network

64
Problems of Business Models 1/4

• Flawed assumptions underlying the core logic:

– A firm moves into a danger zone if its business model’s core logic is based on flawed or
untested assumptions about the future

– Don’t confuse assumptions with reality

– once a set of strategic choices has been made, the resulting business model be
checked to ensure that implicit and explicit cause-and-effect relationships are well-
grounded as well as logical.

65
Problems of Business Models 2/4

• Limitations in the strategic choices considered:

– A business model should address all of the firm’s core logic for creating and capturing
value, not just a portion of that logic

– Customer acquisition .vs. fulfilling orders (eToys)

66
Problems of Business Models 3/4

• Misunderstandings about value creation and value capture:

– Tendency to focus so much on the value creation

– Organizations are unable to capture corresponding economic returns in relation to the

value they create. (Yahoo!)
• Searches of the Web, e-mail accounts, stock quotes and other financial information, greeting
cards, maps, driving direction….Where is the money?????

– Executives confuse potential value with actual value

67
Problems of Business Models 4/4

• Relying on flawed assumptions about the value network:

– A model mistakenly assumes that the existing value network will continue unchanged
into the future

– Gas stations and supermarkets

68
 Contents

1. Business Model approach

1. Introduction
2. Business Model by Shafer
3. Business Model by Gassmann
2. Teamwork
3. Homework

29/01/2016 © IMI 69
PreReadings:
O Gassmann, K Frankenberger, M Csik – 2013,
The St. Gallen Business Model Navigator, Working paper, bmi-lab.ch

© IMI 70
 Business Model, Source: Gassmann et.al. 2013

Discuss in your team about topics as follows of the paper:

1. Business model´s four central dimensions: the Who, the

What, the How, and the Value?

2. Research methodology? How they did this study?

3. Three steps pave the road to a new business model?

 Business Model, Source: Gassmann et.al. 2013

Discuss in your team about topics as follows of the paper:

1. Business model´s four central dimensions: the Who, the

What, the How, and the Value?

2. Research methodology? How they did this study?

3. Three steps pave the road to a new business model?

 Business Model, Source: Gassmann et.al. 2013

Discuss in your team about topics as follows of the paper:

1. Business model´s four central dimensions: the Who, the

What, the How, and the Value?

2. Research methodology? How they did this study?

3. Three steps pave the road to a new business model?

 Business Model, Source: Gassmann et.al. 2013

Discuss in your team about topics as follows of the paper:

1. Business model´s four central dimensions: the Who, the

What, the How, and the Value?

2. Research methodology? How they did this study?

3. Three steps pave the road to a new business model?

Business Model, Source: Gassmann et.al. 2013

O Gassmann, K Frankenberger, M Csik - 2013 The St. Gallen business model navigator- bmi-lab.ch
 Business model definition – the magic triangle
What?: The value proposition towards the customer
The second dimension describes what is offered to the target
customer, or put differently, what the customer values.
This notion is commonly referred to as the customer value
proposition, or more simply, the value proposition. It can be
defined as a holistic view of a company’s bundle of products and
Value?: The revenue model that services that are of value to the customer
captures the value
The fourth dimension explains why the
business model is financially viable; thus it How?: The value chain behind the creation
relates to the revenue model. In essence, it of this value
unifies aspects such as, for example, the To build and distribute the value proposition, a firm
cost structure and the applied revenue has to master several processes and activities. These
mechanisms, and points to the elementary processes and activities, along with the relevant
question of any firm, namely how to resources and capabilities, plus their orchestration in
generate value the focal firm’s internal value chain form the third
dimension within the design of a new business model.

Who?: The target customer

Every business model serves a certain
customer group. Thus, it should answer
the question ‘Who is the customer?’
Drawing on the argument that the “failure
to adequately define the market is a key
factor associated with venture failure”, we
identify the definition of the target
customer as one central dimension in
designing a new business model.

O Gassmann, K Frankenberger, M Csik - 2013 The St. Gallen business model navigator- bmi-lab.ch
Barriers to innovation

• Why doesn't more companies just come up with a new business model and
move into a ‘blue ocean’?

• It is because thinking outside the box is hard to do

• Mental barriers block the road towards innovative ideas

78
Oliver Gassmann, Karolin Frankenberger, Michaela Csik

• Identified 55 patterns of business models after studying hundreds of

companies’ models from different industries applied in the past 25 years

• Only few phenomena are really new

• Often, innovations are slight variations of something that has existed
elsewhere, in other industries, or in other geographical areas
• about 90 % of the innovations turned out to be such re-combinations of
previously existing concepts

79
80
The St Gallen Business Model Navigator

• Transforms the main concept – creating business model ideas by utilizing

the power of recombination – into a ready-to-use methodology, which has
proven its usefulness in countless workshops and other formats

• 3 steps for a new business model:

– Initiation – preparing the journey
– Ideation – moving into new directions
– Integration – completing the picture

81
The St Gallen Business Model Navigator
Initiation – preparing the journey 1/3

• Before embarking on the journey towards new business models, it is

important to define a starting point and rough direction.
• Describing the current business model, its value logic, and its interactions
with the outside world is a good exercise for getting into the logic of
business model thinking.
• It also builds a common understanding of why the current business model
will need an overhaul, which factors endanger its future, or which
opportunities cannot be exploited in the current business model.
• Investigating these woes and the predominant industry logic provides a
rough direction according to which the generic business model patterns
should be interpreted in step 2.

82
The St Gallen Business Model Navigator
Ideation – moving into new directions 2/3

• Re-combining existing concepts is a powerful tool to break out of the box

and generate ideas for new business models.

• To ease this process, we have condensed the 55 patterns of successful

business models into a handy set of pattern cards. Each pattern card (see
Fig. 28) contains the essential information that is needed to understand the
concept behind the pattern: a title, a description of the general logic, and a
concrete example of a company implementing the pattern in its business
model. During the ideation stage, the level of information on the card is just
right to trigger the creation of innovative ideas.

83
The St Gallen Business Model Navigator
Integration – completing the picture 3/3

• There is no idea that is clear enough to be immediately implemented in a

company.

• On the contrary, promising ideas need to be gradually elaborated into full-

blown business models that describe all four dimensions (who? what? how?
why?) and also consider stakeholders, new partners, and consequences for
the market.

84
Remarks about BM

• An organization’s business model is never complete as the process of

making strategic choices and testing business models should be ongoing
and iterative

• The probability of long-term success increases with the rigor and formality
with which an organization tests its strategic options through business
models

85
86
 Contents

1. Business Model approach

1. Introduction
2. Business Model by Shafer
3. Business Model by Gassmann
2. Teamwork
3. Homework

29/01/2016 © IMI 97
 The Facilitator Challenge

• Creates Open-ended building challenges

• Gets the group’s dialogue to serve its purpose
• Makes the reflections and dialogue process easier
• Helps participants express themselves
• Asks clarifying questions
• Is the time-keeper
 The Facilitator Challenge

1. Select the Mock-Up Facilitator of your team.

2. Remember the four central elements in the LSP

process, which build on the hands and brain
interplay:

• Construct
• Give meaning
• Make the story
• Reflection
 Individual Exercise

• Each person picks 10 different LEGO bricks. If possible

pick some bricks with exiting functions

• Make a model from free imagination! Use all bricks

• You have three minutes

 Individual Exercise, 3 min

Well, your model does actually represent

something real.

Choose one of the following dealing with your

corporate case business model:
– Value Creation
– Value Proposition
– Value Capturing

– Each student in the team chooses a different

viewpoint!
Explain your model to your teammates!

2 minutes/ presentation

– Make notes from the stories

– Take pictures
– Take videos
– Make movies
– ……
 Team Exercise 1

Merge your individual models, take more

LEGOs and create your team model.

You have time 15 minutes.

The good Elderly Life Landscape
 Team Exercise 2

Use the Shafer´s “components of business

model affinity diagram” thinking.

Take more LEGOs and iterate your team model

by adding and removing Legos...or create
completely new model.

You have time 15 minutes.

Business Model, Source: Shafer et.al. 2004
 Team Exercise 3

Use the Gassmann´s three-step “imitation and re-

combination”-method and consider if some elements or
ideas of the described 55 business models could be useful in
your case.

Take more LEGOs and create your team model.

You have time this afternoon.

Be prepared to present the status of your model at 15:30.

Business Model, Source: Gassmann et.al. 2013

O Gassmann, K Frankenberger, M Csik - 2013 The St. Gallen business model navigator- bmi-lab.
 Role of Agents – Create Agents

Create external forces/agents that could potentially

influence your model.

The examples include:

• cyber-terrorism,
• aging population,
• migration,
• climate change,
• the media,
• digitalization,
• changes in European/Global policy, etc.
Modeling Agents
 Role of Agents –
Make links and connections

Position agents in relation to your shared model

according to the degree of impact and importance.

Link relevant agents with Lego chains and strings, each

represent different degrees of the connections between
different agents.

As you move one agent, you could see how an agent would have an impact on
other agents. Some direct, others indirect. Some predictable, others less so.
When focusing on one aspect, the details tend to blind you to the big picture.
However, the connections you make between agents allow you to see the
model’s ‘systemic consequences’.
Connecting Agents
 Contents

1. Business Model approach

1. Introduction
2. Business Model by Shafer
3. Business Model by Gassmann
2. Teamwork
3. Homework

29/01/2016 © IMI 113

 Homework 1 for 26.1.2016/ Corporate Case
Illustrate Objectives of Your Case by
Logical Areas and Logical Frame (see next two slides)

1. What is the vision of your industry project?

2. What is the nature of your project?

3. What are the hoped for impacts of your project?

4. What are the hoped for results of your project?

5. What are the next activities of your project?

© IMI 114
 Logical areas of the of a project
Logical Frame

Strategies IMPACTS

NATURE

OF
Business VISION
PROJECT
FOCUS AREAS/
RESULTS
Intelligence

ACTIONS
Resources

Input Analysis Goal setting

© Jussi Pihlajamaa, Pekka Berg / 9.1.2001/ IMI

 OBJECTIVES OF THE PROJECT

Desired industry impacts

Priority 1 Priority 2 Priority 3 Priority 4
of the project (WHY?)

Desired immediate impacts

of the project Priority 1 Priority 2 Priority 3 Priority 4
for the company (WHY?)
Target group Target group Target group
Users of the outputs Target group
of the project (TO WHOM?)

Focus 1 Focus 2 Focus 3 Focus 4

Focus areas/
Results of the project Desired results by focus areas
(subprojects) New knowledge, wisdom, products, services and methods
(WHAT?)

Planned actions for realizing

the outputs of project Priority 1 Priority 2 Priority 3 Priority 4
(HOW?)

Jussi Pihlajamaa, Pekka Berg / 9.1.2001/ IMI

 Homework 2 for 28.1.2016:
Offering (see the next slide)

1. What is the position of your case-company along the goods-services continuum?

• Today and in the Future
2. Consider the customer/user of your case
• What are the needs in your customer process?
• What are the needs for your customer outcome?
3. Consider the structure of offering – What are the elements of offering in your case?
• Remember all 3: concept (also goods), system and process
• Think also the change of the offering in next, 3 – 5 – 10 years
4. What would you like to add from Service-Dominant-Logic to your Case?
5. Visualize your ideas by Legos-paper-mockup prototype(s).
• Take photos and videos
• Be ready to present the status of your work in the wrap-up of the day

29/01/2016 © IMI 117

 Offering Innovation
1. CUSTOMER OUTCOME 2. CUSTOMER PROCESS

OFFERING
MODEL

3. PREREQUISITES

Concept System Service process

Goods structure Manufacturing Process phases
- Core goods vs. - roles of service provider
supplementary goods Technology, models, and user
quidelines
Service structure Character of the customer
-Core services vs. Organization interface (personal vs
supplementary services utilization of ICT)
Competences
Pricing (providers, customers and Depth of the service
user) relationship
Market (mass service vs. key clients
- customer segments Subcontractors

Physical environment
29/01/2016 © IMI
Edited from Bo Edvardsson´s Service Innovation Model by Berg and Pihlajamaa
 Homework 3 for 2.2.2016:
Business Model (see the next two slides)

1. Describe the (d)evolution (=innovation process) of your corporate case business model based on this day learnings
– Your model in the starting point today
• What is the value proposition of your model?
• How do you create value in your model?
• How do you capture value in your model?
– Development of your model
• Use the Shafer´s “components of business model affinity diagram”
• Use the Gassmann´s three-step “imitation and re-combination”-method and consider if some elements or
ideas of the described 55 business models could be useful in your case.
– Extra
• How does your Business Model reflect the strategic choices and their operating implications of your Case
company?
• Think also the change of the business model in next, 3? – 5? – 10 years?
2. Visualize this journey by Legos-paper-mockup prototype(s).
– Create also agents and connect them if relevant
– Take photos and videos
– Be ready to present the status of your work in the wrap-up of the day

29/01/2016 © IMI 119

Business Model, Source: Shafer et.al. 2004
Business Model, Source: Gassmann et.al. 2013

O Gassmann, K Frankenberger, M Csik - 2013 The St. Gallen business model navigator- bmi-lab.
 Homework

1. Don`t forget your Logical Frame Homework and Offering Homework

2. Continue with your Business Model Homework.

3. Read the Pre-readings for the next lecture

4. Bring with you the background material supporting your team in the
next lecture dealing with the scenario building of your case (documents,
information, thoughts,…)

© IMI 122
 If something unclear – don´t hesitate to ask.

Thank you !

pekka.berg@aalto.fi

040-5455560
www.imi.aalto.fi

29/01/2016 © IMI 123