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Reinventing Your Business Model

This document discusses reinventing business models. It defines a business model as consisting of four elements: customer value proposition, profit formula, key resources, and key processes. It advises managers to understand their existing business model and watch for signals that it needs changing, such as new competitors. When reinventing the model, companies should focus on precisely meeting an important customer need in a way that is profitable. An effective new model will integrate resources and processes uniquely to perfectly fulfill the value proposition and profit formula. Established companies should only undertake major business model changes if needed to respond to market shifts or new technologies.

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Pranav Aggarwal
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425 views13 pages

Reinventing Your Business Model

This document discusses reinventing business models. It defines a business model as consisting of four elements: customer value proposition, profit formula, key resources, and key processes. It advises managers to understand their existing business model and watch for signals that it needs changing, such as new competitors. When reinventing the model, companies should focus on precisely meeting an important customer need in a way that is profitable. An effective new model will integrate resources and processes uniquely to perfectly fulfill the value proposition and profit formula. Established companies should only undertake major business model changes if needed to respond to market shifts or new technologies.

Uploaded by

Pranav Aggarwal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Reinventing Your

Business Model
Article by Johnson, Christensen
and Kagermann
HBR 2008

Changing Business Model


Great business models can reshape
industries and drive spectacular growth.
Yet many companies find business-model
innovation difficult.
Managers dont understand their existing
model well enough to know when it needs
changingor how.

Overviewing your Business


Model

1. Articulate what makes your existing


model successful. For example, what
customer problem does it solve? How does
it make money for your firm?
2. Watch for signals that your model needs
changing, such as tough new competitors
on the horizon.
3. Decide whether reinventing your model
is worth the effort. The answers yes only
if the new

Identify when a new model


may be needed

Business Model a
definition

A business model, from our point of view,


consists of four interlocking elements that,
taken together, create and deliver value:

Cusomer value proposition


Profit formula
Key resources
Key processes

Creating Customer Value


Proposition
The most important attribute of a
customer value proposition is its precision:
how perfectly it nails the customer job to
be done and nothing else.
Companies trying to create the new often
neglect to focus on one job; they dilute
their efforts by attempting to do lots of
things.
In doing lots of things, they do nothing
really well.

One way of creating


Customer Value

to think about the four most common


barriers keeping people from getting
particular jobs done: insufficient
wealth,
access,
skill or
time

Designing Profit Formula Hilti

Integration of
Elements of Business Models

Companies will almost always need to


integrate their key resources and
processes in a unique way to get a job
done perfectly for a set of customers.

Focusing first on the value proposition and


the profit formula makes clear how those
resources and processes need to
interrelate.

An Example

For example, most general hospitals offer


a value proposition that might be
described as,

Well do anything for anybody.

Being all things to all people requires


these hospitals to have a vast collection of
resources (specialists, equipment, and so
on)

Be careful to Innovate

Established companies should not


undertake business-model innovation
lightly.

They can often create new products that


disrupt competitors without fundamentally
changing their own business model.

Five Requirements for


Change
1.

2.
3.
4.
5.

The needs of large groups of potential


customers who are shut out of a market entirely
because existing solutions are too expensive or
complicated for them.
capitalize on a brandnew technology by
wrapping a new business model around it
bring a job-to-be-done focus where one does
not yet exist
The need to fend off low-end disrupters
The need to respond to a shifting basis of
competition

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