MGN815: Business

Models
Ajay Chandel
 The basic cycle of business
model innovation
Initiation
Ideation
Integration

 Design

Do-Fail-Redo/Test-Re- Be Visual
test Build dialogue
Iterative Process Invite critiques

 Test  Prototype
Prototype
 The following are the ten keys to success
in the Design-Prototype-Test cycle
Every risk has 100%
likelihood: 1 Openness: Just because we don’t do it doesn’t mean it’s
no good.
A) Yes
B) No
2 Courage: ‘Fortune favors the brave’.
A diverse workforce adds
to the strategic value of 3 Iteration: The good makes way for the better, making for
the organization. continuous improvements and better results.
A) Yes
B) No 4 Diversity: Teams should consist of a balanced mixture of
both divergent and convergent thinkers.

5 Change: Recognize and specifically follow up on pivotal

moments.
6 Summaries: Record what you have learnt after each cycle.

7 Failure: We all need to learn, and failure leads to progress.

Learning is more important than measuring results.

8 Challenge: Ask any number of questions, for they increase

output during implementation.

9 Coach: Make strategic use of pivot thinkers who master

both divergent and convergent thinking to speed up processes.

10 Directions: Be open to ‘dark horses’ that can lead you in

an entirely different direction.
• One of the most intriguing features of IKEA is "Assemble Yourself" philosophy
which reduces costs and results in low prices. Even their marketing statement
is:
“Your partner in better living. We do our part, you do yours. Together we
save money.”
• Another characteristic feature of IKEA is its standardized product range which
changes only 10% in different countries, in other words 90% of its product
range is almost the same all over the world.
 Here are the three main factors why
IKEA Japan failed on its first attempt
1.
1. Consumer Service
• First, for Japanese consumers the quality of service is very
important. When you go into a barbershop or a restaurant,
staff would do everything to make you happy. And, you
never give tips.   IKEA's product range was built for European houses
• Therefore, the idea of buying in ready-to-install kits from
IKEA was not welcome by Japanese consumers. They were
not used to that kind of "assemble yourself" self-service
approach.
2. Product Range
• Japanese houses are too small. Especially Tokyo is
a densely populated city, where land and rents are
very high. Therefore, people live in very small flats.
and Japanese consumers could not find furniture fit
for their houses.
3. Rough competition
• In addition to the lack of experience and consumer
insight, there already were many Japanese furniture
companies (such as MUJI) dominating the market
with their traditional approach.
IKEA Success in JAPAN
Mark W. Johnson
Incubation
• Incubation is the process of identifying the assumptions most critical to the success
of the business proposition and then testing them in a targeted and orderly manner
to quickly prove or disprove their viability.
• At this stage, creative problem solving and a discovery-driven approach to project
planning are critical skills.
• The immediate goal here isn’t necessarily business success; it is new learning and
testing the viability of the new business model.
• To successfully incubate a new business one must identify a foothold market, a small
geographic region or customer group that will serve as the low-cost laboratory.
• Managers need to test early, test cheaply and test often; before committing large
number of resources to a new business model.
 Foothold markets allow for ____ testing
that yields demonstrable results.
A. Safe
B. Low-cost
C. Structured
D. All above

Keep the ‘Core influence’ away from ‘Creative influence’

Which of the following is a social
initiative by HUL:
A. Project Shakti
B. Khushiyon Ki Doli
C. Both A) & B)
D. Neither A) nor B)
A tale of Two “ Low cost carriers”
Acceleration
• Once you’ve proven that a new model is
viable through a well-staged incubation
effort, it’s time to step on the accelerator.
• The knowledge side of the equation is
substantially higher now, so here you
focus less on experimentation and more
on setting up repeatable processes to
make your business profitable.
• Acceleration begins by refining and
standardizing processes, establishing the
business rules that govern them, and
defining metrics that chart continuing
success.
Transition
The final stage of implementation addresses the question: Can the new business be
reintegrated into the core or must it remain a separate unit in order to thrive?

• As a set of general guidelines, a new business • It may be possible to reintegrate a new

model should probably be separated out from business into the core if:
an existing business unit when:
1. It differentiates itself mainly in its resources
1. It calls for a significantly different set of and processes, but its profit formula is
business rules and accompanying metrics, substantially similar or provides greater unit
which will evolve into significantly different margins
norms
2. It requires a distinct brand with a very different
2. It enhances the core brand in some
promise than a core brand to fulfill its CVP significant fashion
3. It tends to be disruptive to the core business 3. It can transform and improve the core
model (that is, it makes money with a much
lower margin) and requires a much lower
overhead structure and/or a much higher
resource velocity
 How Dow Corning Beat Commoditization By Embracing It

The XIAMETER® brand of Dow Corning Corporation offers market-based prices for standard silicone products.
Introduced in 2002, the brand offers thousands of products including silicone fluids, emulsions, antifoams, silanes,
sealants, resins, coatings, and rubbers. The XIAMETER brand is a no-frills model offering cost effective products
through streamlined services and a web-enabled order platform.
HILTI
HUL + Project Shakti Integration