Economics homework help

2.6
Designing in
Established
Organizations

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Osterwalder, A., Pigneur, Y., Bernarda, G., Smith, A., Papadakos, T., & Smith, A. (2014). Value proposition design : How to create products and services customers want. John Wiley & Sons, Incorporated.
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Adopt the Right
Attitude to Invent
or Improve

Existing organizations need to improve

existing value propositions and create

new ones proactively. Make sure you

understand on which end of the spectrum

you are at the beginning of a particular

project, because each requires a diff erent

attitude and process. Great companies

will have a balanced portfolio of proj-

ects covering the entire spectrum from

improve to invent.
Objective Design new value propositions regardless of the potential constraints given by existing value propositions and business models (although leadership may defi ne other constraints). Improve your existing value proposition(s) without radically changing or aff ecting the underlying business model(s).Helps With Proactive bet on the futureTake on a crisisEmergence of a game-changing technology, regulation, etc.Response to a disruptive value proposition of a competitor Renew outdated products and services.Ensure or maintain fi t.Improve profi t potential or cost structure.Keep growth going.Address customer complaints.

Financial Goals At least 50 percent annual revenue growth (caveat: company-specifi c) 0 to15 percent annual revenue increase or more (caveat: company-specifi c)Risk and Uncertainty High LowCustomer Knowledge Low, potentially nonexistent HighBusiness Model Requires radical adaptions or changes Little changeAttitude to Failure Part of learning and iteration process Not an optionMindset Open to exploring new possibilities Focused on making one or several aspects betterDesign Approach Radical/disruptive change to value proposition (and business model) Incremental change and tweaks to existing value propositionMain Activities Search, test, and evaluate Refi ne, plan, and execute

Examples Amazon Web ServicesDesign of a new IT infrastructure value proposition targeted at a new customer segment. Builds on existing key resources and activities but requires a substantial expansion of Amazon.com’s business model. Amazon PrimeIntroduce a membership with special benefi ts targeted at frequent users of Amazon.com.

invent
Objective Design new value propositions regardless of the potential constraints given

by existing value propositions and business models (although leadership

may defi ne other constraints).

Helps With Proactive bet on the future

Take on a crisis

Emergence of a game-changing technology, regulation, etc.

Response to a disruptive value proposition of a competitor

Financial Goals At least 50 percent annual revenue growth (caveat: company-specifi c)

Risk and Uncertainty High

Customer Knowledge Low, potentially nonexistent

Business Model Requires radical adaptions or changes

Attitude to Failure Part of learning and iteration process

Mind-set Open to exploring new possibilities

Design Approach Radical/disruptive change to value proposition (and business model)

Main Activities Search, test, and evaluate

Examples Amazon Web Services

Design of a new IT infrastructure value proposition targeted at a new

customer segment. Builds on existing key resources and activities but

requires a substantial expansion of Amazon.com’s business model.

160

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https://strategyzer.com/vpd/design/2.6

http://Amazon.com

Objective Design new value propositions regardless of the potential constraints given by existing value propositions and business models (although leadership may defi ne other constraints). Improve your existing value proposition(s) without radically changing or aff ecting the underlying business model(s).Helps With Proactive bet on the futureTake on a crisisEmergence of a game-changing technology, regulation, etc.Response to a disruptive value proposition of a competitor Renew outdated products and services.Ensure or maintain fi t.Improve profi t potential or cost structure.Keep growth going.Address customer complaints.

In between: Extend

A common situation in the Improve-

Invent spectrum is the need to fi nd

new growth engines without investing

in substantial changes to the existing

business model. This is often required

to monetize investments in existing

models and platforms.

The objective is to search for new value prop-

ositions that substantially extend the existing

underlying business model, without modifying too

many aspects of it.

For example, with the introduction of the

Kindle, Amazon created a new channel to extend

its digital off ering to Amazon.com customers.

Although this presents a great new value proposi-

tion to its customers, it remains to a large extent

within the parameters of its successfully estab-

lished and well-mastered e-commerce business

model.

Tip

Great companies manage a portfolio of value

propositions and business models that cover the

entire invent-improve spectrum and make syner-

gies and competitive confl icts explicit. They are

proactive and invent while they are still successful,

rather than wait for a crisis.

improve
Improve your existing value proposition(s) without radically changing

or aff ecting the underlying business model(s).

Renew outdated products and services.

Ensure or maintain fi t.

Improve profi t potential or cost structure.

Keep growth going.

Address customer complaints.

0 to15 percent annual revenue increase or more (caveat: company-specifi c)

Low

High

Little change

Not an option

Focused on making one or several aspects better

Incremental change and tweaks to existing value proposition

Refi ne, plan, and execute

Amazon Prime

Introduce a membership with special benefi ts targeted at frequent users

of Amazon.com.

161

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https://strategyzer.com/vpd/design/2.6

http://Amazon.com

The Business Book
of the Future

consulting

call center

service
hourly
charge

attract
experts

community

Imagine if you were a business book publisher. How could

you improve your present off ering and invent the business

book of the future, which might not even be a book anymore?

We sketched out three ideas along the invent-improve

spectrum.

An additional

service capabil-

ity adds a layer

to the business

model but doesn’t

transform it.

This concept

requires an

entirely diff erent

business model

and makes the

original one

obsolete.

The 1-800-Business-Book hotline
A hotline number extending physical business

books and off ering on-demand answers. This

would build on the existing business model but

require an extension from a sales to a service

model.

The YouTube of business education
An online platform matching videos from business

experts with customers who are looking for answers

to their problems. This would require a substantial

extension or reinvention of the business model of

publishing books.

online
answers

online
videos

access 24/ 7

progress at
own pace

sharable
content

low pay-per-
use

infrastruc-
ture

community
management

percent on
matchmaking

Web

physical
book

consulting
hotline

customized
answers to

problems

minimizes
risk of wast-

ing time

invent
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https://strategyzer.com/vpd/design/2.6

The practical business book
Improve business books by making them more

visual and applicable without altering the core

business model behind it substantially.

Improvements

add to the value

proposition and

require only minor

tweaks to the

business model.

The more you move toward the invent

end of the spectrum, the more your

new value proposition will diff er from

your existing ones. Inventing new

value propositions provides an oppor-

tunity to more closely address jobs

that really matter to customers (in

this case, getting answers to business

questions).

Our three-tier value proposition

consists of a physical book, sharable

practical content online, and advanced

learning through our online course. It is

our attempt to push the boundaries of

business learning and doing.

The value proposition of this book

combined with online exercises and

material on Strategyzer.com is our

attempt to more closely address the

jobs we believe matter to our readers.

physical
book

links to Web

how-to guide

easy-to-
understand

language

fewer pages

Web design

more visuals

improve
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https://strategyzer.com/vpd/design/2.6

http://Strategyzer.com

Cost Structure

Key Partnerships

Key Resources Channels

Key Activities Value Propositions Customer
Relationships

Customer
Segments

Revenue Streams

Reinvent by Shifting
from Products…

Read more about Hilti in Johnson, Seizing the Whitespace, 2010.

Construction equipment manufacturer

Hilti reinvented its value proposition

and business model by shifting from

products to services. Its move from

selling branded machine tools to

guaranteeing timely access to them

required a substantial overhaul not

just of their value proposition but also

of their business model. Let’s learn

how Hilti did it.

Many organizations aspire to regain

a competitive advantage by trans-

forming from a product manufacturer

into a service provider. This requires

a substantial reinvention.

An Expired Model
Hilti’s old model focused mainly on selling high-

quality machine tools directly to builders. They

were known for breaking less often, lasting longer,

and overall being less costly by minimizing time

loss. Hilti tools also have a reputation for being

particularly safe and enjoyable to work with.

Unfortunately, this old model was one of

decreasing margins and subject to competition

from lower-cost competitors.

Old

Rev

Man
ufac

turin
gg

Br
an

Builders

safe
employees

work
enjoyment

expensive

time lost in
maintenance

get
construction

done

ergonomic,
holds in hand

quality tools

robustness
means less

maintenancelong life
makes overall
cost cheaper
over lifetime

safety trig-
gers against
mishandling

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https://strategyzer.com/vpd/design/2.6

Cost Structure

Key Partnerships

Key Resources Channels

Key Activities Value Propositions Customer
Relationships

Customer
Segments

Revenue Streams

…to Services
Hilti focused on a new job to be done

after discovering that its tools were

related to a more important customer

job: that of delivering projects on time

to avoid fi nancial penalties. They

learned that broken, malfunctioning,

or stolen tools could lead to major

delays and penalties. From there, Hilti

moved toward a new value proposition,

off ering services around machine tools.

A Fresh Start
Hilti used its new service-based value proposition

to create more value for construction companies

by ensuring that they had the right tools at the

right place at the right time. This would help

construction companies achieve a much more

predictable cost management and keep operations

profi table.

Impact on the Business Model
Moving from products to services sounds like an

easy and obvious value proposition shift, but it

requires substantially reengineering the business

model. Hilti had to add substantial new service

resources and activities in addition to manufactur-

ing. But it was worth it. With their new value propo-

sition, Hilti achieves higher margins, recurring

revenues, and better diff erentiation.

New

Reve

BossBo

Man
ufac

turin
gg

Br
an

d
Servic

New service created:

monthly subscriptions to

fl eet management utility

“New” customer, more important

job identifi ed: delivering on time!

Managers

get
construction

done

meet
planning
schedule

work
enjoyment

theft
broken tools

time lost in
maintenance

delays fi nancial
penalties

upfront
investment

safe
employees

100 percent
uptime

profi tability
under

control

right tool,
right place,
right time

immediate
tool

replacement

convenient
tool

procurement

latest
technology

subscription
based fl eet

management
no cost for
repair and

replacement
predictable

costs

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https://strategyzer.com/vpd/design/2.6

The Perfect
Workshop Setting
Workshops are an important part of

value proposition design in established

organizations. Great workshops can

make a big diff erence in the design

process and lead to better results. The

questions below will help you create

the perfect setting.

What tools and materials are needed?
Prepare a self-service area with canvas posters,

sticky notes, paper, blue tack, markers, and other

tools so participants can help themselves with

what they need.

Use wall-sized posters

to sketch out big ideas.

Who should join?
Invite people with diff erent backgrounds, espe-

cially when you know there will be a substantial

eff ect on the business model. Their buy-in is crucial.

Get customer-facing staff to participate to lever-

age their knowledge. Customers or partners may

also be a good addition to help evaluate value

propositions.

What should the format be?
As a rule of thumb, more viewpoints are generally

better than fewer at the early stages of value

proposition design. With 10 participants or more,

you can explore several alternatives in parallel

by working in groups of fi ve. Smaller teams need

to explore alternatives sequentially. At the later

stages of developing and refi ning value proposi-

tions, fewer participants are usually better.

How can space be used as an instrument?
Great workshop spaces are an often-overlooked

instrument to create outstanding workshops with

exceptional outcomes. Choose a space that is

suffi ciently large and off ers large walls or working

areas. Set up the space to support creation,

collaboration, and productivity. For breakthrough

results, choose an unusual and inspiring venue.

Use sticky notes to move

ideas around—ideally

in several colors for

color-coding.

Use thick markers so ideas

are visible from afar.

Check readily available workshop material

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https://strategyzer.com/vpd/design/2.6

SitStand

Venue Size, Look, and Feel

As a rule of thumb, calculate

50m2 per 10 participants.

Favor inspiring venues over

boring hotel meeting rooms.

Projector and Screen

This is used to show slides or

customer videos. It should be

easily viewable by all.

Room Control

This space should

be set aside for the

facilitator and team

to access computer,

sound system, Wi-Fi,

and maybe a printer.

Plenary Space

Everyone can meet here for

plenary presentations and

discussions. It can be set up

with or without tables.

Work-in-Progress Gallery/Inspiration Wall

Set up an area where you can expose canvases

and other work in progress. Add an “inspiration

wall” with content that participants can draw

from, such as reference models, examples, and

models of competitors.

Walls

Large vertical surfaces are

indispensable, whether

movable or part of the build-

ing. Make sure you can stick

large posters, sticky notes,

and fl ip chart paper on them.

Small Group Areas

This is where work

gets done. Four or

fi ve people per group

is best. Do not use

chairs or tables unless

required for specifi c

work. Keep working

groups in the same

room rather than a

break-out room to

retain high energy

levels throughout the

workshop.

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https://strategyzer.com/vpd/design/2.6

Compose
Your Workshop
A great workshop produces tangible

and actionable outcomes. Use the

tools and processes from this book

to start designing a draft workshop

outline that leads to great results.

Design Principles for a Great Workshop
Create a workshop agenda with a clear

thread that shows participants how the new

or improved value proposition(s) or business

model(s) will emerge.

Take participants on a journey of many steps

by focusing on one simple task (module) at

a time.

Avoid “blah blah blah” and favor structured

interactions with tools like the canvases or

processes like the thinking hats.

Alternate between work in small groups (4–6

people) and plenary sessions for presentations

and integration.

Strictly manage time for each module, in

particular for prototyping. Use a timer visible

to all participants.

Design the agenda as a series of iterations for

the same value proposition (or business model).

Design, critique, iterate, and pivot.

Avoid slow activities after lunch.

Day 1
9 AM

10 AM

11 AM

12 PM

1 PM

2 PM

3 PM

4 PM

5 PM

Day 2
9 AM

10 AM

11 AM

12 PM

1 PM

2 PM

3 PM

4 PM

5 PM

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https://strategyzer.com/vpd/design/2.6

Before Your Workshop

Do your homework and gather

customer insights → p. 106.

After Your Workshop

Get going with testing your

value propositions and busi-

ness models in the real world

→ p. 172.

Get Online For:

sample agendas

templates and instructions

all-in-one material package

Prototype Possibilities

Trigger Questions — → p. 15, 17, 31, 33

CS Mapping — → p. 22

VP Mapping — → p. 36

Napkin Sketches — → p. 80

Ad libs — → p. 82

Flesh out Ideas with VPC — → p. 84

Constraints — → p. 90

New Ideas with Books — → p. 92

Push / Pull Exercise — → p. 94

Six Ways to Innovate — → p. 102

Making Choices

Rank Jobs, Pains, and Gains — → p. 20

Check Your Fit — → p. 94

‘Job’ Selection — → p. 100

10 Questions — → p. 122

Voice of Customer — → p. 124

Assess against Environment — → p. 126

Differentiate from Competition — → p. 128

De Bono’s Hats — → p. 136

Dotmocracy — → p. 138

Selecting Prototype — → p. 140

Back and Forth with Business Model

Back and Forth Iteration — → p. 152

Numbers Projections — → p. 154

7 BM Questions — → p. 156

Breaks

Lunch

Coffee and snacks

Preparing Tests

Extracting Hypotheses — → p. 200

Prioritizing Hypotheses — → p. 202

Test Design — → p. 204

Choose a Mix of Experiments — → p. 216

Test Road Map — → p. 242–245

Use the modules below as

a menu of options to draft

a workshop agenda.

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https://strategyzer.com/vpd/design/2.6

Prototyping Possibilities

Rapidly prototype alternative value

propositions and business models.

Don’t fall in love with your first ideas.

Keep your early models rough enough

to throw away without regret so that

they can evolve and improve.

Lessons Learned

Understanding Customers

Imagine, observe, and understand

your customers. Put yourself in their

shoes. Learn what they are trying to

get done in their work and in their lives.

Understand what prevents them from

getting this done well. Unearth which

outcomes they are looking for.

Finding the Right
Business Model

Search for the right value proposition

embedded in the right business model,

because every product, service, and

technology can have many different

models. Even the best value proposi-

tions can fail without a sound business

model. The right business model can

be the difference between success

and failure.

170

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