W8.

New Business Models

BUS020X618S - Managing Innovation
Module Structure

foundations types applied

4. Product 8. New Business

2. Strategy Innovation Models
Revisited
1. Introduction
5. Process 11.Revisi
to 9. Doing Good
Innovation on
Innovation
3. Knowledge &
Creativity 7. Business Model 10.Innovation in
Innovation Practice

Dr. Taman Powell BUS020X618S - Managing Innovation 2

Learning Objectives

1. Understanding of 8 of the 55 business

models.

Dr. Taman Powell BUS020X618S - Managing Innovation 3

55 Business Models

- ‘We have analysed the most revolutionary business

model innovations over the past 50 years to
determine which predictable and systematic were at
their core. … we discovered that over 90 per cent of
all business model innovations simply recombine
existing ideas and concepts from other industries.’
- ‘the Business Model Navigator, consists of 55
successful business model patterns, which can serve
as blueprints for your own business model innovation
efforts.’

Dr. Taman Powell BUS020X618S - Managing Innovation 4

55 Business Models

1. Add-on 15. Flat Rate 29. Make More of it 42. Reverse

2. Affiliation 16. Fractional Ownership 30. Mass Customisation Engineering
3. Aikido 17. Franchising 31. No Frills 43. Reverse Innovation
4. Auction 18. Freemium 32. Open Business 44. Robin Hood
5. Barter 19. From Push to Pull 33. Open Source 45. Self-service
6. Cash Machine 20. Guaranteed 34. Orchestrator 46. Shop in Shop
7. Cross-selling Availability 35. Pay Per Use 47. Solution Provider
8. Crowdfunding 21. Hidden Revenue 36. Pay What You Want 48. Subscription
9. Crowdsourcing 22. Ingredient Branding 37. Peer to Peer 49. Supermarket
10. Customer Loyalty 23. Integrator 38. Performance-based 50. Target the Poor
11. Digitisation 24. Layer Player Contracting 51. Trash to Cash
12. Direct Selling 25. Leverage Customer 39. Razor and Blade 52. Two-sided Market
13. E-commerce Data 40. Rent Instead of Buy 53. Ultimate Luxury
14. Experience Selling 26. Licensing 41. Revenue Sharing 54. User Design
27. Lock-in 55. White Label
28. Long Tail
Dr. Taman Powell BUS020X618S - Managing Innovation 5
55 Business Models

1. Add-on 15. Flat Rate 29. Make More of it 42. Reverse

2. Affiliation 16. Fractional Ownership 30. Mass Customisation Engineering
3. Aikido 17. Franchising 31. No Frills 43. Reverse Innovation
4. Auction 18. Freemium 32. Open Business 44. Robin Hood
5. Barter 19. From Push to Pull 33. Open Source 45. Self-service
6. Cash Machine 20. Guaranteed 34. Orchestrator 46. Shop in Shop
7. Cross-selling Availability 35. Pay Per Use 47. Solution Provider
8. Crowdfunding 21. Hidden Revenue 36. Pay What You Want 48. Subscription
9. Crowdsourcing 22. Ingredient Branding 37. Peer to Peer 49. Supermarket
10. Customer Loyalty 23. Integrator 38. Performance-based 50. Target the Poor
11. Digitisation 24. Layer Player Contracting 51. Trash to Cash
12. Direct Selling 25. Leverage Customer 39. Razor and Blade 52. Two-sided Market
13. E-commerce Data 40. Rent Instead of Buy 53. Ultimate Luxury
14. Experience Selling 26. Licensing 41. Revenue Sharing 54. User Design
27. Lock-in 55. White Label
28. Long Tail
Dr. Taman Powell BUS020X618S - Managing Innovation 6
2. Affiliation

- General sales commission model. But now turbo-

charged.
- Old print/TV advertising vs. affiliate advertising.
- Instagram - influencers aren’t using products for free.
- Blogs, price comparison sites, product service
directories, Amazon, Pinterest.
- Particularly important for start-ups as converts FC to
VC, micro-payments, measureable.
- Product needs to be popular - stock turns.
- Careful if what you recommend has problems -
Groupon.

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5. Barter

- You trade something for something else.

- Seems primitive but happens daily.
- Google.
- Facebook.
- Tesco clubcard.
- Amazon.

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8. Crowdfunding

- British ‘Longitude Act’ of 1714: The government

offered a £20,000 reward to anyone who could find a
practical method of determining a ship’s exact
longitude.
- Kickstarter/Indiegogo
- Crowdcube/SeedInvest
- Public validation/research/money
- BrewDog

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16. Fractional Ownership

- Customers purchase only a part of an asset.

- Gives possibility to purchase asset that normally
wouldn’t be able to afford.
- Receive a certain amount of access based on % of
ownership.

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28. Long Tail

- Sell small quantities of a very large range (vs.

Blockbuster).
- 80/20 rule.
- Benefits from the internet where there is no limit on
shelf space.
- NetFlix customers have access to 100k shows - many
more than traditional video rental.

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39. Razor and Blade

- Basic product offered at a bargain price below cost or

even for free. Additional products that customers need
in order to use the basic product are high-priced.
- Razor blades, Nespresso, printers
- Kindle?
- Rockefeller - cheap paraffin lamps in 19th century.

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37. Peer to Peer

Facilitate a market between people - basically a directlry.

Often a winner takes all dynamic.
- Ebay - garage sale.
- TaskRabbit - odd jobs.
- Airbnb - be a hotel.
- RelayRides - rent out your car.
- Uber - be a taxi.
- Zopa - borrow and lend money.
- Tinder…

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52. Two-sided Market

- Platform that facilitate interaction between two

complementary groups
- Credit cards - customers & business owners.
- Games consoles - players & game writers.
- Operating systems - end-users & developers.
- Groupon - customers & business owners.
- Metro newspaper - advertisers & readers.

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Netflix

- Founded in 1997.
- Market dominated by Blockbuster VHS rental.
- Began renting out DVD’s by mail in April 1998 -
only 2% of American households owned a DVD
player [direct selling & e-commerce].
- Founders believed if the market reached 20% of
households, they would have a viable business.
- The first business model was to let people rent
videos by selecting it online and having it
delivered to their door.
- No late fees.
- Changed to subscription model in 1999 [flat
rate].
Dr. Taman Powell BUS020X618S - Managing Innovation 31
Netflix

- Switched to streaming movies [digitisation,

guaranteed availability & long tail].
- Data: number of views, customer feedback, if
videos were watched until the end [leverage
customer data].
- Prize of $1m (called The Netflix Prize) was
awarded to a team for improving Netflix’s
recommendation model [crowd sourcing].
- In 2013, Netflix started to develop their own
production and shows, based on the analysis of
their own customers’ data. House of Cards first
hit.
- Rolled out a new recommendation algorithm
that knows which image will make you click play.
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Netflix

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Netflix

Dr. Taman Powell BUS020X618S - Managing Innovation 34

Netflix

1. Add-on 15. Flat Rate 2 29. Make More of it 42. Reverse

2. Affiliation 16. Fractional Ownership 30. Mass Customisation Engineering
3. Aikido 17. Franchising 31. No Frills 43. Reverse Innovation
4. Auction 18. Freemium 32. Open Business 44. Robin Hood
5. Barter 19. From Push to Pull 33. Open Source 45. Self-service
6. Cash Machine 20. Guaranteed 3 34. Orchestrator 46. Shop in Shop
7. Cross-selling Availability 35. Pay Per Use 47. Solution Provider
8. Crowdfunding 21. Hidden Revenue 36. Pay What You Want 48. Subscription
9. Crowdsourcing 4 22. Ingredient Branding 37. Peer to Peer 49. Supermarket
10. Customer Loyalty 23. Integrator 38. Performance-based 50. Target the Poor
11. Digitisation 3 24. Layer Player 5 Contracting 51. Trash to Cash
12. Direct Selling 25. Leverage Customer 39. Razor and Blade 52. Two-sided Market
1
13. E-commerce Data 40. Rent Instead of Buy 53. Ultimate Luxury
14. Experience Selling 26. Licensing 3 41. Revenue Sharing 54. User Design
27. Lock-in 55. White Label
28. Long Tail
Dr. Taman Powell BUS020X618S - Managing Innovation 35
Netflix

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Netflix

Dr. Taman Powell BUS020X618S - Managing Innovation 37

Learning Objectives

1. Understanding of 8 of the 55 business

models.

Dr. Taman Powell BUS020X618S - Managing Innovation 38

Readings

Gassmann, O., Frankenberger, K. & Csik, M. (2014) “The

Business Model Navigator: 55 Models that Will Revolutionise
Your Business”. FT Publishing International.

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