Professional Documents
Culture Documents
Agenda
Introduction of the course How do you think about innovation? Homework and survey! The Bosch Case: How to grow in a mature and highly competitive market A bit of theory: What is a business model innovation?
Sustaining vs. disruptive innovations
IT, internet, consumer electronic product companies are seen as more innovative than service, retail or banking, but..
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Apple Amazon Toyota Audi Nokia Smart BMW Mercedes Siemens SONY Ryanair Dell IBM Zara Samsung AirBerlin
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Otto Versand Lufthansa Aldi HP EasyJet Lidl Thalia ING-DiBa Dacia Haspa Kaufhof
You think that there are more innovative industries like consumer electronics or IT Zara, Aldi, Dell, ING-DiBa redefined their dull industries through business model innovations even in dull industries business model innovation can change the competitive landscape Apple was a business model innovation for the music industry
Deutsche Bank
0%
20%
40%
60%
80%
100%
business innovators
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first to market value-add bundle of products new customer brand/image more features self service cheaper
0% 20% 40% 60% 80% 100%
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sustaining innovations are rated highly disruptive innovations are rated low answers show typical behavior of current customers that have difficulties to see advantage
The Case
Die Ausgangsituation
At the beginning of the 1990s the world in the power tool industry was in perfect order
Established brands in a growing,European market Competition was well defined and Bosch was the uncontested market leader
Die Ausgangsituation
Die Ausgangsituation
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Die Ausgangsituation
Dire consequences: A steep decline in the average price per sold tool and. 5,9 Sales(Mio. units)
307
78
69
65
price in Euro 64 67 62 58
56
52
93
94
95
96
97
98
99
00
01
02
Source: GfK
and declining market share for the established brands and exponential growth for the no-names and trade brands
Market Share Powertools
(Germany)
100%
27
29
95 73 71 67
Established Brands
Strong increase of market share for no-names and trade brands Bosch Power Tools DIY 2002 with a market share of 33% but loss making
Dr. Patrick Sthler. Leuphana University Lneburg 13
Simple task from your board: Defend market leadership Improve profitability
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How about making a power tool which is much weaker than the last generation but we make it also very handy and nicely designed. For that we charge a premium and market it to people who are not really into DIY. Great idea, isnt it?
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Here is the solution for Bosch: the IXO, the first power tool for the IKEA generation
Bosch introduces the IXO to the market Instead of following the traditional mantra of better, stronger, faster Bosch used a new battery technology to make tools smaller and more user friendly Instead of going for the traditional market of MMS (men, muscles and sweat) the IXO addresses the soft DIYs that assembles its IKEA furniture but not more Thereby, it addresses a new, previously unserved market of noncustomers The IXO is a typical value innovation that opened up new, uncontested markets
Dr. Patrick Sthler. Leuphana University Lneburg 18
Technologie orientation Building and repairing reliable, very powerful and long-living products
inspiring people
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New market: Addressing previously non-customers like soft DIYlers and particularly woman
Changed consumer behavior The first power tool for the kitchen drawer
Dr. Patrick Sthler. Leuphana University Lneburg 22
IXO was first power tool with Li-Ionen technology IXO is the best selling power tool in the world
Dr. Patrick Sthler. Leuphana University Lneburg 23
27
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33
35
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38
40
38
34
31
29
26
25
Other Brands
Bosch 33 33 33 34 37 36 37
'00
'01
'02
'03
'04
'05
'06
Source: GfK
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Bosch used the new battery technology for a disruptive value innovation
Sustaining innovation = Serving todays customers Extend performance in direction of what todays customers like Use the Li-Ion technology for stronger and more heavy duty tools
Advantages of Li-Ion can be formed into a variety of shapes and sizes so as to efficiently fill available space in the devices lighter than otheroften much lighter. do not suffer from the memory effect low self-discharge rate of approximately 5% per month, compared with over 30% per month in nickel metal hydride batteries (Source Wikipedia)
Disruptive innovation = Finding new customers with different needs Use for a new market segments that values different performance parameters like usability, handiness than traditional customers Performance of tool will be worse in parameters current customers value
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Technology does not create value per se. A sustainable business model is needed
technology
X
enables creates
value
business model
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Lets take a look at the innovation process at Bosch The idea of the IXO was born in the strategic planning process after the board order a strategic review of the Bosch Power Tool division It was clear for top management that they wanted to break the rules of the industry with a business model innovation The approach to the IXO was very analytical starting with a market analysis that showed that there was a market for smaller, weaker power tools Particularly women expressed their need for smaller power tools since they wanted to do some home decoration Top Management came finally up with the idea to create the IXO to serve the market Market research firms later calculated that Bosch will sell more of IXO than any competitor had done before. And then they lived forever happily.
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The real story: Driven by chance, luck, professionalism and the right people A young product manager (female) fresh out of university had the idea to make tools for her generation The head of product development (engineer) is open to experiments The development costs for a prototype of a power tool is not very high so that market test could be conducted with real products The president of Bosch Grn has no engineering background but gained his professional experiences in the fast-moving-consumer-goods industry
The crisis and later the success of the IXO change the whole strategy of Bosch Grn towards a user driven company Processes were changed to support the new mantra of consumer-orientation What was once a disruptive move for the company is todays business.
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Creating Business model innovations is a creative and analytical process at the same time. There is a reason why god gave us two brain hemispheres
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Value Proposition What value do we create for our customers and for other stakeholders?
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A business model is the simplified model of a business you can make it as detailed as needed but dont get lost in details
Business Model
Value Proposition
Value Architecture
Revenue Model
For customers
Internal Value Arch. resources value chain communication channels coordination mechanisms
External Value Arch. customer interface distribution channels customer information communication channels value partners active (suppliers, customers, competitors) passive (supplier of complementary goods
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A business model is no strategy: A deliberate change of or an innovation in a business model can be a strategy
Starting points for innovations
Value Proposition
Most business models are constructs of the past All components of a business model can be the starting points for innovation value innovation architectural innovation revenue model innovation In the end all business model innovation must be a value innovation to guarantee success
Architecture
Revenue Model
Business Model
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The strategy canvas of Bosch IXO: A clear profile of the value innovation 6 5 4 3 2 1 0 -1
Traditional brands
No-Name
Bosch
35
Eliminate Reduce Create Raise Matrix Eliminate technology talk cost reduction Create easy of use fun inspiring people
Differentiation
36
We love clear profiles We have only a limited capacity for each category
amazon is online books IKEA is crazy and modern furniture Otto is the mail order house Apple is the cool computer kid
Our service is much worse than your competitors. We need your cooperation for transportation, moving and assembling for our service. But for all your hassle, you really get a great price! Great idea, isnt it?
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Scary to be this nail. Where will the hammer hit next time?
DIFFERENT!
NO,
REALLY
DIFFERENT!
ANY INDUSTRY!
Contact
Dr. oec. (HSG) Patrick Sthler Partner & Founder fluidminds GmbH, the business innovators Gemeindestrasse 23 8032 Zrich Switzerland Tel: +41 79 770 27 09 www.fluidminds.ch Blog.business-model-innovation.com
Ackknowledgement Pictures in the presentation taken from Toni_V (flickr), Bosch and others Graphics in part from Marty Neumeier, Neutron LCC 44