Podcast
Questions and Answers
What was the main innovation that Apple introduced with the iPod and iTunes store?
What was the main innovation that Apple introduced with the iPod and iTunes store?
What strategy did Apple employ by giving away low-margin iTunes music?
What strategy did Apple employ by giving away low-margin iTunes music?
What challenge do senior managers at incumbent companies face in terms of business model innovation?
What challenge do senior managers at incumbent companies face in terms of business model innovation?
Why do new business models often appear unattractive to stakeholders?
Why do new business models often appear unattractive to stakeholders?
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What was highlighted as a key issue regarding business model development?
What was highlighted as a key issue regarding business model development?
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What was a significant challenge faced by Dow Corning when trying to adapt to a new model?
What was a significant challenge faced by Dow Corning when trying to adapt to a new model?
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How did Dow Corning plan to serve customers in the commoditizing silicone market?
How did Dow Corning plan to serve customers in the commoditizing silicone market?
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What characteristic of the new business model at Dow Corning was emphasized to thrive in a fast-changing environment?
What characteristic of the new business model at Dow Corning was emphasized to thrive in a fast-changing environment?
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What is a recommended approach for companies with new business models according to the case study?
What is a recommended approach for companies with new business models according to the case study?
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Why was information technology identified as an essential competency for Dow Corning's new venture?
Why was information technology identified as an essential competency for Dow Corning's new venture?
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What did Dow Corning have to sacrifice for better automation in their new model?
What did Dow Corning have to sacrifice for better automation in their new model?
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What does the term 'secret sauce: patience' refer to in the context of new business models?
What does the term 'secret sauce: patience' refer to in the context of new business models?
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What aspect of technology's role is highlighted in transforming businesses according to the case study?
What aspect of technology's role is highlighted in transforming businesses according to the case study?
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What is the initial focus of developing a successful business model?
What is the initial focus of developing a successful business model?
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Which element is crucial for defining a customer value proposition (CVP)?
Which element is crucial for defining a customer value proposition (CVP)?
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Which of the following does NOT represent a key resource in a business model?
Which of the following does NOT represent a key resource in a business model?
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What does the profit formula primarily consist of?
What does the profit formula primarily consist of?
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Which situation is likely to necessitate a change in the business model?
Which situation is likely to necessitate a change in the business model?
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In relation to key processes, what aspect is essential for successful companies?
In relation to key processes, what aspect is essential for successful companies?
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What should companies avoid when developing a customer value proposition?
What should companies avoid when developing a customer value proposition?
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What characterizes a situation where a new business model is warranted?
What characterizes a situation where a new business model is warranted?
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How does Ratan Tata's approach to breaking the wealth barrier demonstrate business model innovation?
How does Ratan Tata's approach to breaking the wealth barrier demonstrate business model innovation?
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What does resource velocity refer to in a business model?
What does resource velocity refer to in a business model?
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Which question is critical for evaluating the feasibility of a new business model?
Which question is critical for evaluating the feasibility of a new business model?
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Why should established companies be cautious about undertaking business model innovations?
Why should established companies be cautious about undertaking business model innovations?
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What type of opportunities can arise from disruptive innovation?
What type of opportunities can arise from disruptive innovation?
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What aspect should companies consider when designing their profit formula?
What aspect should companies consider when designing their profit formula?
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What was a significant element of Apple's strategy that differentiated it from its competitors in the digital music player market?
What was a significant element of Apple's strategy that differentiated it from its competitors in the digital music player market?
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Why do many companies struggle to adapt their business models despite recognizing the need for change?
Why do many companies struggle to adapt their business models despite recognizing the need for change?
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What key factor often leads to the rejection of new business models by stakeholders?
What key factor often leads to the rejection of new business models by stakeholders?
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What primary benefit do business model innovations provide to the consumer?
What primary benefit do business model innovations provide to the consumer?
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Which issue is often highlighted as a barrier to successful business model innovation in established companies?
Which issue is often highlighted as a barrier to successful business model innovation in established companies?
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What fundamental change was required for Dow Corning to reduce product prices and enhance sales?
What fundamental change was required for Dow Corning to reduce product prices and enhance sales?
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What was a significant risk for Dow Corning when pursuing its new business model?
What was a significant risk for Dow Corning when pursuing its new business model?
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How did Dow Corning plan to enhance its operational efficiency in the new model?
How did Dow Corning plan to enhance its operational efficiency in the new model?
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What attitude is recommended for companies developing new business models towards profitability?
What attitude is recommended for companies developing new business models towards profitability?
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What was necessary for the new business at Dow Corning to tap into existing expertise effectively?
What was necessary for the new business at Dow Corning to tap into existing expertise effectively?
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What aspect of Dow Corning’s previous business model hindered its new venture’s success?
What aspect of Dow Corning’s previous business model hindered its new venture’s success?
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Which competency emerged as essential for Dow Corning's new web-enabled business?
Which competency emerged as essential for Dow Corning's new web-enabled business?
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What does successful new business development often involve based on Dow Corning's experience?
What does successful new business development often involve based on Dow Corning's experience?
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What is the first step to consider when approaching a new business model?
What is the first step to consider when approaching a new business model?
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What does the customer value proposition (CVP) primarily focus on?
What does the customer value proposition (CVP) primarily focus on?
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What is a key reason why companies should avoid diluting their efforts?
What is a key reason why companies should avoid diluting their efforts?
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When designing the profit formula, what is the first action suggested?
When designing the profit formula, what is the first action suggested?
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What are key processes in a business model crucial for?
What are key processes in a business model crucial for?
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What represents the 'resource velocity' in a profit formula?
What represents the 'resource velocity' in a profit formula?
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What triggers the necessity for a new business model?
What triggers the necessity for a new business model?
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What factor is critical in evaluating the challenges of business model innovation?
What factor is critical in evaluating the challenges of business model innovation?
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Why is assessing customer job barriers important in formulating a CVP?
Why is assessing customer job barriers important in formulating a CVP?
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What do successful companies often overlook in their business models?
What do successful companies often overlook in their business models?
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What is a common strategic circumstance that may necessitate a business model change?
What is a common strategic circumstance that may necessitate a business model change?
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What type of businesses should be most cautious about innovating their business models?
What type of businesses should be most cautious about innovating their business models?
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What best describes the interrelationship among key resources and processes?
What best describes the interrelationship among key resources and processes?
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Study Notes
Reinventing Your Business Model
- iPod and iTunes Revolution: Apple's iPod and iTunes store redefined the portable entertainment market. Instead of just a new technology, they created a superior business model. The key innovation was to make downloading digital music easy and convenient, essentially bundling a low-margin service with a high-margin product.
Defining Business Models
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Lack of Definition: Business model development is often poorly understood, with little formal study of its intricacies. Incumbents often don't have a clear grasp of their own existing models – their strengths, weaknesses, underlying assumptions and interdependencies.
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Roadmap for Change: Three steps for inventing a strong business model:
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Focus on the Customer Job: Prioritize understanding the customer's needs (the "job to be done").
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Blueprint for Fulfillment: Create a detailed plan for delivering value.
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Comparison and Evaluation: Analyze how the new model compares to the existing one and determine if a new venture is necessary or if existing resources can be leveraged.
Essential Elements of a Business Model
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Customer Value Proposition (CVP): Successful companies identify a crucial problem a customer needs solved, then devise a solution that perfectly addresses it and surpasses existing options. The more critical the job to the customer, the stronger the CVP.
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Profit Formula: Value proposition drives price. Backward engineering variable costs allows accurate margin calculation and resource velocity estimation needed for desired profits.
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Key Resources: A business model builds on people, technology, products, facilities, and channels to deliver value to targeted customers.
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Key Processes: Efficient operational processes are essential for successful scaling. These processes include training, manufacturing, and more. Norms, rules, and metrics are factors in this.
Building a Great Business Model
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Precise CVP: Concentrate on one customer job; avoid spreading resources across too many. High precision is key. Barriers to fulfilling are access, time, skill, and wealth.
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Design Profit Formula: In innovation, pricing to meet the CVP may require significant margin sacrifices. Consider drastically reducing costs to increase volume if needed for profit.
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Strategic Resources and Processes: In professional services, people are often the key resource; understanding how they interact forms a strong business model.
When Re-invention is Required
- Disruption: New models address significant market gaps by lowering costs or improving services for large customer segments excluded from the existing market.
- Technological Leverage: New or tested technologies can be incorporated into new business models to reach new markets or customer segments.
- New Focus: A new area of need for a solution.
- Responding to Competitors: Addressing emerging challenges like low-end competitors or changing market conditions.
Crucial Questions for Assessing Innovation
- Effective Value Proposition: Does it successfully address the need?
- Efficient Execution: Does every factor work together for success?
- Independent Development Process: Can it operate independently?
- Disruption: Will new models disrupt competitors?
- Reinforcing Core Business: Does the new model enhance the existing one?
Specific Success Cases
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Dow Corning: Dow Corning transitioned from high-end services and products to low-cost commoditized products in response to market shifts. This involved significant changes to its processes and culture while maintaining core competence.
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Innovation's Long-Term Nature: Business models often require several iterations before profitability is achieved. The key to success is continuous learning and adjustment.
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Description
Explore how Apple's iPod and iTunes revolutionized the entertainment market through innovative business models. Understand the importance of defining your business model and learn the three essential steps for creating a strong model focused on customer needs. This quiz covers both the theoretical aspects and practical applications of business model development.
