Business Models Do Fail 10 examples - 5 reasons
www.elton-pickford.com
Introduction Part 1 10 Business Models that Failed Part 2 5 Reasons of Failure Why do Business Models Fail ? Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Business Models do Fail 10 examples - 5 reasons
INTRODUCTION Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Why this paper ? This document aims at identifying the root causes of Business Model failures. This analysis is supported by several real cases and constitutes a practical ground to explore the utilization of the Business Canvas (Alexander Osterwalder) and the Effervescence Framework (Yannick MĂŠriguet Elton-Pickford). Elton-Pickford is striving to provide organizations with efficient ways to explore new Business Models and publishes regularly case studies on Innovative Business Models. This document counter-balances the regular publications on successful Business Models by exposing failures as business reality too. We are proud to offer you this study which we invite you to share and comment with passion.
Achievement: January 2013
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Publication This document is provided under the terms of Creative Common License BY-NC-SA. The modification and the distribution of this copyrighted work for noncommercial use only are authorized under the reference: BUSINESS MODELS DO FAIL - 10 EXAMPLES - 5 REASONS. Attribution - Licensees may copy, distribute, display and perform the work and make derivative works based on it only if they give the author (Antoine Dumont and Elton-Pickford) or licensor the credits in the manner specified by these . Noncommercial - Licensees may copy, distribute, display, and perform the work and make derivative works based on it only for noncommercial purposes. Share Alike - Licensees may distribute derivative works only under a license identical to the license that governs the original work. Achievement: January 2013 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Understand the Elton-Pickford Framework Copyright Elton-Pickford Effervescence Framework Created by Yannick Meriguet, Associated at Elton-Pickford
BUSINESS MODEL What are the fundamental characteristics of the targeted Business Model? How well do they fit the context and scenario specificity & uniqueness? How do they optimize the company strategy?
SCENARIO What are the specific organization objectives (Growth, Performance, Positioning, Differentiation, etc.). What is the internal context of the company (Specific competencies, Tension, M&A, Start Up)? These elements define the foundation of the targeted strategy.
CONTEXT
BUSINESS MODEL
SCENARIO OF THE ORGANIZATION
CONTEXT
The context highlights the critical elements to take into account in the external context of the company. What are the key market characteristics, socio-economic environment, consumer habits, etc. ? And how can it influence the Go To Market Strategy of the organization.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Understand the Business Model Canvas
KP
Value Proposition (VP) The Value Proposition building block describes the bundle of products and services that create value for a specific Customer Segment. It solves a customer problem or satisfies a customer need. The Value Proposition can be characterized by its newness, performance, price, etc. Channels (CH) The Channels building block describes how a company reaches its Customer Segments to deliver a Value Proposition. Channels can be direct or indirect: internet platform, sales forces, store, retailers, etc.
VP
CR
KR
Created by Alexander Osterwalder, Business Model Generation www.businessmodelgeneration.com
Customer Segments (CS) The Customer Segments building block defines the different groups of people or organization an enterprise aims to reach and serve. Different types of customer Segments exist: mass market, niche market, segmented, etc.
KA
C€
CS
CH
R€
www.businessmodelgeneration.com
Customer Relationships (CR) The Customer Relationships building block describes the type of relationships a company establishes with specific customer segments. Customer Relationships may be driven by different motivations: customer acquisition, customer retention and boosting sales. We can distinguish between several categories of Customer Relationships: personnal assistance, self-service, cocreation, etc. Revenue Streams (R€) The Revenue Streams building block represents the cash a company generates from each Customer Segment. There are several way to generate Revenue Streams: asset sale, subscription, usage fee, etc.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Understand the Business Model Canvas
KP
Key Activities (KA) The Key Activities building block describes the most important things a company must do to make its business model work (development, maintenance, production, etc.)
VP
CR
KR
Created by Alexander Osterwalder, Business Model Generation www.businessmodelgeneration.com
Key Ressources (KR) The Key Resources building block describes the most important assets required to make a business model work. Key Resources can be characterized as physical, intellectual, financial, human, etc.
KA
C€
CS
CH
R€
www.businessmodelgeneration.com
Cost Structure (C€) The Cost Structure describes all costs incurred to operate a business model. They can be cost or value driven and be classified as fixed or variable costs.
Key Partners (KP) The Key Partners building block describes the network of suppliers and partners that make the business model work. Reasons behind partnering may be diverse: Optimization and economy of scale, acquisition of particular resources and activities, reduction of risk and uncertainty, etc. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Part 1 10 Business Models that Failed Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Iridium Telecom 1998
Copainsdavant.com Internet 2009
2xmoinscher.com Internet 2012
Encarta Publishing 2009
Spanair Airlines 2012
Kodak Chemistry, digital 2012
Blockbuster Video Movie rentals 2010
Moulinex Consumer Electronics 2009
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Vogica Household furnishing 2010
Bic Perfume 1991
1 copainsdavant.com Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
copainsdavant.com Industry Internet - Social web Date of creation 2001 Corporation Benchmark Group
Scenario Highlights First mover advantage Search of profitability
Context Highlights Growing internet usage
Country of Origin France
Nationwide efficient broad band infrastructure Social web growing interest New competitors
Case’s period 2001 - 2012
Business Model Highlights Social network
Market type Mass market
Connect with past friends on internet
Revenues (2009) Group : 17 M€ / Website : 3,5 M€
Reasons of Failure
Freemium / premium
Customer segment not buying a paid service Number of Employees (Group) 150
Likelihood of profitability Emerging competition
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
copainsdavant.com Initial value proposition
Deployed strategy
New pivot
Created in 2001, "Copains d'avant" is the Facebook made in France, and enable to reconnect with past classmates, publish school promotion pictures and communicate via internal mailing system. The company is quickly becoming the social web leader in France.
After 3 years of existence, with a full free access, the company is searching a path to profitability. In 2004, the decision is made to monetize the site, and the internal mailing system along with additional functionalities are now provided as a paid service. Facing these new constraints, site frequentation is declining and the brand image of the company is hurt. If the value proposition is still attractive for users, they are not ready to pay for such services. The internal mailing system is the cornerstone of the interaction between schoolmates, and if too much constraints (price) exist, they stop to use it, loosing the benefits of the entire value proposition.
In 2007, the company acknowledges the failure of its business model, and re-open the full service for free. Revenues will be now generated by advertising. Additional services are created, and in 2010 the management of the company is changed and re-think its entire positioning and image.
Things get worst : the growing Facebook platform is penetrating the European market with a modern design, increased functionalities and at no cost for the user.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
copainsdavant.com BUSINESS MODEL
SOCIAL NETWORK RE-CONNECT WITH PAST CLASSMATES ON INTERNET BROAD BAND CONNECTION
FREEMIUM / PREMIUM
INTERNET USAGE PENETRATION
SCENARIO
FIRST MOVER ADVANTAGE
NATION WIDE EFFICIENT INTERNET INFRASTRUCTURE DEPLOYED
CONTEXT
SEARCH FOR PROFITBILITY EMERGING SOCIAL WEB NEW ENTRANTS
FACEBOOK Since 2004
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
copainsdavant.com KP
KA
VP
EMAIL : 1 MILLION PER DAY
MAINTENANCE + PLATFORM PROMOTION SOCIAL NETWORK
KR
RE-CONNECT WITH FORMER CLASSMATES
EFFICIENT ADVERTISING SPACE
C€
PLATFORM INFRASTRUCTURE HUMAN RESOURCES
CS
CR
MASS MARKET
MASS PERSONALIZATION OLD USERS 30 - 40 YEARS
CH COPAINSDAVANT.COM
13 MILLIONS OF UNIQUE VISITORS / MONTH
SALES FORCES ADVERTISING ADVERTISING CAMPAIGN
R€
ADVERTISING*
FREE SERVICE
PAID SERVICE
www.businessmodelgeneration.com * Since 2007
Source : La Tribune, Le Français CDA résiste toujours, october 2010 Capital, Petits meurtres entre amis chez CDA, june 2010 Studio Vitamine, CDA : Nouvelle version bêta, february 2012 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2 2xmoinscher.com Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2xmoinscher.com Industry Internet - Marketplace Date of creation 2001 Group 3 Suisses
Scenario Highlights Cost reduction strategy for margin recovery
Context Highlights Numerous emergent competitors Growing Internet Usage
Country of Origin France
Nationwide efficient broad band infrastructure
Business Model Highlights Market Place Case’s period 2001 - 2012 Market type Mass Market Revenues (2007) 3,3 M₏
Transaction Markup Buy/sell - Business to Consumers Secured Transactions
Reasons of Failure Cost reduction program targeting a core activity of the business (Management) Decreasing traffic (Model viability)
Number of Employees (Website) 35
Emerging competition (Environment)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2xmoinscher.com Initial value proposition
Competition & investments
Second chance
Created in 2001, 2Xmoinscher is an internet platform that connect consumers (Buy/sell) along with professional (Sell). Users can buy or sell brand new or second-hand products.
While the company is communicated breaking event after 2 years, it’s facing important economic pressures between 2008 and 2012 generating eventually important financial losses. In addition, Ebay, PrimeMinister, Amazon, LeBonCoin create a highly competitive market which will knock about the sustainability of the business itself.
The customer acquisition cost was becoming superior to the customer Lifetime value, making the business unprofitable.
During the transaction, 2Xmoinscher is positioned as trusted partner by securing and holding the payment between parties. After the transaction is closed without litige the cash transfer is proceed. The revenue model is based on a transaction fees after completion of the sales.
In march 2012, the company communicates is going bankrupt, few months later Uncle Henry buys it and plans to re-open the platform the 15th of October 2012. Stay Tune...
At the same time, the company has embarked in a cost reduction program and curbed their marketing investments. It will have a huge impact on the site attractiveness, decreasing significantly the incoming traffic, and the generated revenues. Presence of large fixed costs (platform) will lead to a rapid margin erosion and eventually financial loss. 2Xmoinscher learned the hard way the specificity of a volume business.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2xmoinscher.com BUSINESS MODEL
MARKET PLACE BUY / SELL NEW AND SECOND END PRODUCTS Business Model Sustainability is based on sustaining traffic vouching generation of revenues.
SECURED TRANSACTION TRANSACTION FEES POSITIONNING AS A TRUSTED PARTNER
EMERGENCE OF SIZABLE COMPETITION
REDUCED INCOMING SITE TRAFFIC
COST REDUCTION PROGRAM FOR MARGIN RECOVERY
DECREASE MARKETING BUDGET
GROWING INTERNET USAGE NATIONWIDE EFFICIENT BROAD BAND INFRASTRUCTURE
SCENARIO
CONTEXT
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2xmoinscher.com KP
KA PLATFORM MAINTENANCE & DEVELOPMENT PLATFORM MARKETING & PROMOTION
KR
VP SELL / BUY & GENERATE REVENUE BUY HALF THE PRICE (NEW & SECOND HAND PRODUCTS)
HUMAN RESOURCES
C€
ADVERTISING HUMAN RESOURCES
CS
CR TRUST PARTNERS WITH SECURED TRANSACTIONS
MERCHANTS & CONSUMERS
CH
BUYERS - MASS MARKET
PLATFORM 2XMOINSCHER
R€
TRANSACTION FEES ON COMPLETED SALES
www.businessmodelgeneration.com
Source : Journal du Net, Fermeture 2xmoischer, march 2012 Tomsguide, 2xmoinscher, Actualité n°2888
Journal du Net, Une page se tourne, 2xmoinscher ferme ses portes PC Impact, 2xfoismoinscher fait ses adieux, News n°69448
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
3 Encarta - Microsoft Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Encarta Industry Publishing / digital Encyclopedia Date of creation 1993 Group Microsoft
Scenario Highlights Model viability Differentiation through content quality Multi platform products (CD, DVD, online)
Context Highlights
Country of Origin USA
Improvement of web content in general (site, blog, media etc.) New Competitor enters the market with free content and a collaborative platform
Case’s period 1993 - 2009
Business Model Highlights Multimedia Encyclopaedia Rich content of high quality
Market type Mass Market
Sales of CDs, DVDs etc. and online access subscription
Revenues NC
Reasons of Failure Profitability of products (Model viability)
Number of Employees NC
Emerging competition (Environment) Business Model not developed further (Company culture)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Encarta Initial value proposition
Change of habits
Fierce competition
Started in 1993, Encarta proposed a digital Encyclopedia available on multiple technology carriers (CD, DVD, online) and in multiple languages. This product by Microsoft established itself very quickly as the Market leader, competing with its 36'500 articles (2007) against large multimedia corporations.
In 2001, Wikipedia enters the market. The content is created and maintained by the users themselves on a free basis, which continuously improves the quality of the platform. Two years later, this platform overtakes Encarta by the number of articles.
These actions have no impact on the Customer’s behaviour. In 2009, Encarta has a low market share of 1.27%, against 97% for Wikipedia.
As a reaction, Encarta improves the content actuality and proposes a free light access to a limited amount of articles.
At this time, Wikipedia has more then three millions articles in English. As a consequence, Microsoft decides not to continue its business model and exits the Market end of 2009.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Encarta BUSINESS MODEL
UNIVERSAL MULTIMEDIA ENCYCLOPAEDIA
35 000 ARTICLES 26 000 MEDIAS
RICH AND HIGH QUALITY CONTENT SALES OF DIGITAL PRODUCTS, SUBSCRIPTION FOR ONLINE ACCESS
MODEL VAIBILITY REVENUE STREAMS / MANUFACTURING COSTS
SCENARIO
DIFFERENTIATION THROUGH CONTENT QUALITY MULTI-PLATFORM PRODUCTS (CD,DVD, Online)
IMPROVEMENT OF WEB CONTENT IN GENERAL (SITE, BLOG, MEDIA,
HIGH CAPABILITY TO CREATE CONTENT VERY RAPIDLY
ETC.)
CONTEXT ENTRY OF A COMPETITOR WITH A FREE AND COLLABORATIVE BUSINESS MODEL
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Encarta KP
KA CONTENT PUBLISHING
PROMOTION OF THE ENCYPLOPAEDIA
VP
CS
CR
MULTIMEDIA ENCYCLOPEDIA
MASS MARKET
RICH AND HIGH QUALITY CONTENT
CH
KR
WEB PLATFORM
HUMAN RESOURCES
CD / DVD
C€
HUMAN RESOURCES
R€
SALES OF DIGITAL PRODUCTS SALES OF SUBSCRIPTION FOR ONLINE ACCESS
www.businessmodelgeneration.com
Source : Première, Encarta, coulé par Wikipédia, ferme définitivement ses pages, march 2009 NouvelObs, L’encyclopédie en ligne Encarta va fermer, march 2009 Clubic, Microsoft fermera Encarta cette année, march2009 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
4 Iridium - Motorola Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Iridium Industry Telecom Services Date of creation 1991
Scenario Highlights Take over Market leadership Deploy a large scale network Manage the world wide phone network Win a major technological challenge
Group Motorola Country of Origin USA
Context Highlights Development of competition Alternative emerging Technologies Cost reduction of Telecom infrastructure Rising customer demand
Case’s period 1991 - 1998 Market type Mass Market Revenues NC
Business Model Highlights Call from anywhere in the world Terminal sales Subscription sales
Reasons of Failure
Number of Employees NC
Profitability of the value proposition (Model viability) Emerging competition (Environment) Technological development (Environment) Project management (Management)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Iridium Initial value proposition In 1991, Iridium starts building a mobile phone system which allows communication from anywhere. This system would cover any cities, any agglomerations and any square meter on earth, being at sea, in the jungle, in the mountains. The system, developed by Motorola, bases on an array of satellites displaced around the globe.
Evolution of the technological environnement During the 8 years of project work, mobile communication developed quickly. Telco operators deployed terrestrial networks, thus covering the main access zones. In parallel, the costs of communication and of acquiring the cell phones have dropped considerably.
This phenomenal project costs app. 6bn USD, and includes the launch of 15 rockets and more than 75 satellites. It started its operation in 1998.
Bankruptcy In 1998, Iridium starts and 9 months later, the company goes into bankruptcy. Customers face technical failures, the product doesn’t work in cars or buildings, as the usage is only possible outside, requiring a open connection to the satellite array. Moreover, the value proposition is very costly: access costs 7 USD per minute against 50 cents for a traditional carrier. To this adds the acquisition of the phone for more than 3’000 $.
iridium Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Iridium BUSINESS MODEL
CALL FROM ANYWHERE IN THE WORLD SALES OF PHONES SALES OF SUBSCRIPTIONS
TO BECOME THE WORLD LEADER ON THE TELECOM MARKET TO DEPLOY A LARGE SCALE NETWORK
SCENARIO
TO MANAGE THE WORLD PHONE NETWORK TO WIN A MAJOR TECHNOLOGICAL CHALLENGE
Development of terrestrial networks
RISE OF COMPETITION NEW EMERGING TECHNOLOGIES COSTS DECREASE OF THE TELECOM INFRASTRUCTURE
CONTEXT
INCREASE IN CUSTOMER DEMAND
The initial customer segment is quite restricted. A mass Market is developing shortly after the Launch
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Iridium KP
KA
VP
CS
CR
NETWORK DEVELOPMENT AND MAINTENANCE
MASS MARKET
CH
KR FINANCIAL RESOURCES 6bn USD
C€
NETWORKS & INFRASTRUCTURE 15 ROCKETS 75 SATELLITES
TELECOM NETWORKS PHONE FROM ANYWHERE
75 SATELLITES
R€
COMMUNICATION: 7$ USD p. min. SALES OF PHONES: 3’000$ USD
www.businessmodelgeneration.com
Source : Libération, Iridium menace de sonner dans le vide, March 2000 Steve Blank, No Business Plan Survives First Contact With A Customer, November 2011 Stéphanie Legrand, Mémoire de recherche IAE de Lille, 2000 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
5 Spanair Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Spanair Industry Airline carrier – Transportation Date of creation 1986 Group IEASA (80,1%) - SAS AB (19,9%) Country of Origin Spain
Scenario Highlights High variable costs Financial tension (debts) Cost reduction strategy based mainly on fixed costs Airplane crash in 2008
Context Highlights High competitive Market New entrants Cost of fuel Security norms & constraints
Case’s period 1986 - 2012 Market type Mass Market Revenues (2009) 670 M€ Number of Employees (2008) 4 000
High Customer’s sensitivity on security policies
Business Model Highlights General airplane transportation Main destinations: Spain, Europe, Latin America
Reasons of Failure Massive increase in fuel costs (Environment) High competitive forces (Environment) Costs reduction with major impact on the main value proposition (Management)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Spanair A new company
A high tension Market
The last flight
Spanair starts in Spain in 1986. Its first flights are conducted in 1988. Quickly, Spanair develops to a major player in air transportation in Spain and soon gains a market share of 22%, directly behind the main player Iberia. Even though the main flights are domestical flights, the company proposes European flights with more than 100 destinations.
After 2000, the air transportation Market becomes more competitive. Notably, new entrants destabilize the market forces through new business models based on low price value propositions. First financial losses appear here and there. The following years are marked by an important rise of fuel cost, a sensitive key element of the business model, which impacts on the margin dramatically. This second element adds to the already very tense financial situation of most companies.
Meanwhile, new security rules have been introduced, requesting more stringent maintenance procedures and quicker renewal of airplanes. This impacts highly on the fix costs situation. On the other hand, consumers are getting more critical, after different air crashes that happened during this period. Many consumers start to look at security & maintenance ranking of the airlines.
At the end, Spanair transported more than 11 mio. passengers yearly, with more than 200 daily flights. During its whole history, the carrier transported app. 104 mio. passengers.
During Summer 2008, the management starts a cost reduction program aiming at reducing head count by 25%, stopping app. 10 destinations and grounding of 15 airplanes.
On August, 20th 2008, flight nbr. 5022 misses the take-off and explodes on the ground. Most passengers die immediately. The following investigations reveal some neglected maintenance elements, showing weaknesses in the maintenance programs, as well as consequential impacts of over aging airplanes. Following this, Spanair looses the main part of its Customer base. A destroyed image and growing debts end in the closure of all activities in Jan. 2012
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Spanair BUSINESS MODEL
MAJOR DESTINATION : SPAIN, EUROPE, LATIN AMERICA
Fuel
MAJOR VARIABLE COSTS
HIGHLY COMPETITIVE MARKET
Many Spanish and Foreign companies
NEW ENTRANTS Major impact on margin
SCENARIO
FINANCIAL DIFFICULTIES, DEBTS
FUEL PRICE FLUCTUATION
FIXES COSTS REDUCTION
CONSTRAINTS THROUGH NEW SECURITY NORMS
AIRPLANE CRASH IN 2008
GROWING CUSTOMER AWARENESS OF SECURITY RULES
Loss of trust from many customers
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
LOW-COST
CONTEXT
Spanair KP
KA
VP
CR
CS
FLIGHT PROMOTION
TRAVEL AGENCIES
AIRPLANE MAINTENANCE
QUICK TRIPS TO SPAIN OR ABROAD
AIRPLANES (75)
AIR ALLIANCE
PILOTS
FUEL
INDIVIDUALS PROFESSIONALS
KR
C€
REASSURE CUSTOMERS ON FLIGHT SECURITY
PASSENGER TRANSPORTATION
AIRPORTS
CH TRAVEL AGENCY
**
AIRPORTS TAXES
AIRPLANE MAINTENANCE
AIRPLANE ACQUISITION
HUMAN RESOURCES
INTERNET SITE OF SPANAIR
R€
SALES OF FLIGHT TICKETS
www.businessmodelgeneration.com
Source : Le Monde, La compagnie aérienne Spanair en faillite, tous ses vols annulés, January 2012, Air Journal, Spanair en faillite, January 2012, L’expansion, Spanair en faillite, January 2012. Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
6
Eastman Kodak Company Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Eastman Kodak Company Industry Chemicals – Manufacturing of photographic films Date of creation 1881 Founder George Eastman Country of Origin USA
Scenario Highlights Work against Market evolution Reinforce existing business model Introduce as many patents as possible to block the emerging digital Market
Context Highlights Technology developments strongly enabling digital photography Photography is getting a mass product for individuals Rising customer demand New competitors in phase with changing Customer requirements
Case’s period 1930 - 2012 Market type Segmented Markets (Individuals + Professionals) Revenues (1995) 15 Mds $ - (2011) 6 Mds $ Number of Employees (1954) 73 000 - (2011) 7 600
Business Model Highlights Manufacturing of photographic films High margins
Reasons of Failure Change in behaviour: Camera as a consumer good for mass markets (Environment) Technology development: digital revolution (Environment) Strong focus on Margin protection (Company culture)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Eastman Kodak Company Technological Innovation In 1880, Georges Eastman, founder of Kodak, invents a special coating machinery that enables the mass production of dry films for photography. For a hundred years, the company will dominate the world of cinema and photography. Kodak bases the growth strategy on the film production and generates record sales growth and huge margins (app. 80%). In 1981, Turnover of Kodak achieves 10 bn USD.
Change in Customer requirements In the early 80’s, Kodak invents digital photography. However, the company is not determined to develop further this technological innovation. Management estimates that the latter could be a major threat to the actual activity, the sale of argentic-based films. The organization got used to very high margin, this for years and years. As a reaction, it tried to protect the existing business instead of satisfying the changing market requirements, thus shifting away from the real changing market.
Collapse At the end of the 80’s, first competitors enter the market with digital cameras. Between 1990 and 1999, Kodak introduces about 1’000 patents in digital photography, but never achieves its final goals, as digital photography is closer to Electronics than traditional photography. In less than 10 years, the company will reduce workforce by 63’000. Handicapped by its own past, Kodak is not able to change direction, and Sony, Canon or Fuji will cause the collapse of Kodak in 2012.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Eastman Kodak Company BUSINESS MODEL
MANUFACTURING OF PHOTOGRAPHIC FILMS MANUFACTURING OF PHOTO CAMERA app. 80 %
VERY HIGH MARGINS
Rise and growth of digital photography
TECHNOLOGY DEVELOPMENT COUNTERACT AGAINST MARKET EVOLUTION
SCENARIO
REINFORCE THE EXISTING BUSINESS MODEL PATENT AS MUCH POSSIBLE IN ORDER TO BLOCK THE DIGITAL MARKET
PHOTO CAMERA AS CONSUMER GOODS IN A MASS MARKET CHANGE IN CUSTOMER REQUIREMENTS NEW COMPETITORS IN PHASE WITH CUSTOMER EXPECTATIONS
CONTEXT
Eastman Kodak Company KP
KA
VP
MANUFACTURING OF PHOTOGRAPHIC FILMS
ADDITIONAL PRODUCTS * Printers Ink cartridges Photo papers One-time usage cameras PHOTO CAMERAS
KR
PHOTOGRAPHIC FILMS R&D
PATENTS
C€
HUMAN RESOURCES RAW MATERIAL
CS
CR
INDIVIDUALS PROFESSIONALS
CH WWW.KODAKEXPRESS.COM
*
RESELLER NETWORK
**
R€
HIGH MARGINS
80 %
** ROYALTIES
75% of GB in 2011
www.businessmodelgeneration.com * From mid 90’s
Source :
** Commercialization in 2003
www.kodak.fr Le Figaro, Kodak se déclare en faillite, January 2012 Philippe Silberzahn, Fin de Kodak, victime dilemme de l’innovateur, January 2012 Knowledge@Wharton, «What’s Wrong with This Picture : Kodak’s 30-year Slide into Bankruptcy», february 2012 Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
7 Blockbuster Video Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Blockbuster Video Industry Movies rentals
Scenario Highlights
Date of creation 1985
Offer a wide selection of movies
Context Highlights
Group Echostar
Expansion of internet
Country of Origin USA
New comers
Business Model Highlights Wide selection of movies for rent Case’s period 1985 - 2010 Market type Mass market - Individuals Revenues (2002) 5,5 bn USD
Exclusive offer of new movies for rent Develop stores in residential areas and malls
Reasons of Failure New usage (environment): illegal downloading, streaming New comers (environment): emerging competitors New technologies (environment): internet, downloading, VOD
Number of Employees 48 000
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Blockbuster Video Innovation in services
A changing environnement
An abrupt end
In 1985, Blockbuster opens its first movie rental store in Dallas. From VHS tape to DVD, the company will have an exponential growth. In early 90's, the demand is booming.
In mid 2000, new signs of change are emerging in the environment. Customers' expectations are changing and new comers are disturbing the existing market. Competitors appear and offer mail-delivered movie rental with a wider catalog. Technological improvements will also disturb Blockbuster business model. Concurrently to internet development, streaming websites will explode along with all illegal downloading possibilities.
In 2009, Blockbuster creates an automated distribution network to rent movies. The goal of this mass deployment is to come back as a key player. For economic reasons, some shops will be replaced by machines. Despite this, the company filed for bankruptcy in 2010. The company left behind more than 6000 franchised and proprietary shops spread over 18 countries representing about 48000 employees.
Movie rental allows to compensate the limited TV channels at that time and offers a wide and attracting catalog of movies. 9 years after its creation, Blockbuster will be valued at $ 7.6 billion.
In addition, more and more TV channels propose new offers such as video on demand.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Blockbuster Video BUSINESS MODEL
87 million customers + 6000 shops Twenty countries
WIDE OFFER OF MOVIES RENTALS NEW MOVIES PROXIMITY WITH RESIDENTIALS AREAS AND MALLS
New usages Illegal downloading Streaming websites
SCENARIO
OFFER A WIDE SELECTION OF MOVIES
INTERNET EXPANSION NEW COMERS
CONTEXT (between 2002 and 2010)
Mail-delivvred rental Video On Demand development
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Blockbuster Video KP
KA
VP
CS
CR
DEVELOPMENT OF THE CONTENT OF THE OFFER DEVELOPMENT OF NETWORK
INFORMATION ON USER BEHAVIOUR
STUDIOS
WIDE MOVIES RENTAL OFFER
INDIVIDUALS 87 MILLIONS OF CUSTOMERS
KR
DEDICATED SHOP + FRANCHISES
48 000 EMPLOYEES
DEDICATED DISTRIBUTION NETWORK
C€
40 % OF TURNOVER DISTRIBUTED TO STUDIOS
CH
PRIORITY ON NEW MOVIES
INFRASTUCTURE EMPLOYEES
R€
6 000 SHOPS IN 18 COUNTRIES
MOVIES RENTAL EXCLUSIVITY ON MOVIES
*
www.businessmodelgeneration.com * On a dedicated period
Source : Le figaro, 24 september 2010 ; Financial Times, 24 february2010 ; Le Monde, 17 february 2010 ;
L’expansion, 11 may 2007 ; The Times, 28 february 2010.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
8 Moulinex Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Moulinex Industry Manufacturer of small appliances Date of creation 1937 Founder Jean Mantelet
Scenario Highlights Financials difficulties in 90's Success story and recognizedd brand Worldwide presence
Context Highlights
Country of Origin France
Bursting of the family unit Development of women's employment Emergence of strong asian competitors Small appliances associated with feeling of pleasure
Case’s period 1937 - 2001 Market type Mass Market
Business Model Highlights Manufacturing of small appliance for women market Mass production and low margin Originally, strong innovation on product
Revenues (1998) 1,21 Billion â‚Ź Number of Employees (1998) 11 000
Reasons of Failure Decrease of product sales with low margin (Business model viability) Emerging competitors (Environment) Financial management (Management)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Moulinex History of the group In 1932, Jean Mantelet invents the vegetable mill. Wishing to end by finding lumps in mash potatoes prepared by his wife, he decided to create the famous "Potato Masher" or "PressePurĂŠe". Manufacturing and distribution of these products are a great success. This new equipment allows solving a shared problem to all housewifes at that time. In 1957, it operates his business under the brand Moulinex. In 1962, appears a strong motto: "Moulinex free women" a period of thirty and mores the beginning of the consumer society. It means liberation of household chores and automation of dedicated tasks. Moulinex will then have huge opportunities to address these new needs. Within only few years, the brand will invent no less than 70 products among which we find the coffee grinder, the multi-function robot, the iron or the microwave.
Pricing policy In 1950, Jean Mantelet developed a different pricing strategy from its competitors. Instead of establishing a selling price based on cost price including depreciation of production equipment, he focused on the consumer. His approach is based on the consumer's ability to buy the product by defining a "democratic" price. The entrepreneur looks for a mass production to ensure low costs and a minimum profitability.
Worlwide exposure The exponential market growth allows Moulinex to be located in several countries. At the end 80's, Moulinex products are distributed in more than 135 countries. However, the company activity is largely based in France. Only 20% of the turnover is generated abroad against 40% for SEB, its main competitor.
End of the story This booming market quickly attractes competitors, firstly european and then asian ones. The market was huge and attracting. The low complexity of products and the low level of maintenance for this type of goods reduced seriously entry barriers. In the 90's starts the decline of the group. A slowdown in gross markets can be explained by the saturation of several customer segments. Sales suddenly collapsed. The emblematic founder died in 1991. It leaved room for internal dissension, mismanagement and a lack of innovation. In an effort of diversification of its products, he company made a major acquisition (Krups) which increased its debts and reduced its flexibility. Despite several massive restructuring and merger attempts or capital opening, the French jewel is closed in 2001, September 7th. The brand still exists today. It has been acquired by SEB group together with some French production units.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Moulinex BUSINESS MODEL
IN 1931 BY THE FOUNDER, THE «POTATO MASHER»
SMALL APPLIANCES PRODUCTS MANUFACTURING MASS PRODUCTION LOW MARGIN STRONG INITIAL VALUE PROPOSITION
The increase of singleparent families promote the market growth
INNOVATION IN PRODUCTS
FINANCIAL ISSUES IN THE 90’S
MARKET GROWTH DEPENDS ON HOUSEHOLDS NUMBER
OLD SUCCESS STORY STRONG BRAND
SCENARIO
WORLWIDE PRESENCE 135 COUNTRIES
Represents only 20% of Moulinex turnover
INCREASE OF WOMEN EMPLOYMENT DECLINE OF AVERAGE HOUSING SIZE EMERGENCE OF STRONG ASIAN COMPETITORS
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Looking for time savings in houshold chores
CONTEXT
Decline of storage areas: search for multifunctions products
Moulinex KP
KA
VP
CS
CR
BRAND PROMOTION ADVERTISING
RESELLERS NETWORK
LOGISTICS DISTRIBUTION
ADVERTISING AGENCIES
MASS PRODUCTION 180 000 UNIT / DAY*
SMALL APPLIANCES EQUIPMENTS
WOMEN
135 COUNTRIES
CH
KR STRONG BRAND
SMALL APPLIANCES IMPORTANT REAL ESTATE RESOURCES
STORES
HUMAN RESOURCES Unskilled labor Mainly women
C€
IMPORTANT REAL ESTATE RESOURCES
ADVERTISING BUDGET
HUMANS RESOURCES
MASS-MARKET RETAILING
R€
SELL EQUIPMENTS WITH REASONNABLE PRICE PRESSURE ON PRICE LOW MARGIN
20% OF TURNOVER DONE ABROAD
www.businessmodelgeneration.com * Production for 16 plants in 1980
Source : Marketing Magazine N°144, Saga Française à succès, 2010 ; Ministère de l’industrie, Approche sectorielle - électroménager, 1999 Mémoires d’entreprises, Moulinex,1993
OuestFrance, La bataille des millions, 2009 Stratégies, Moulinex se robot que je ne saurais voir, 1998.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
9 Cuisines Vogica Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
VGC Distribution Industry Furniture fabrication Date of creation 1976 Leadership William Ego
Scenario Highlights Financial difficulties Strong decline of customer satisfaction
Context Highlights
Country of Origin
Economic Crisis
France
Highly competitive environment
Business Model Highlights Case’s period 2000 - 2010
Activities unbundling Failure of key partners Customer segmentation (professional / individuals)
Market type
Important logistics activities
Mass Market Revenues (2008) 107 Million â‚Ź Number of Employees
Reasons of Failure Financial Management (Management) Failure of key partners (Business model execution)
(Groupe) 1 000
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
VGC Distribution Value proposition
Business model execution
Located in "Les Vosges", VGC Distribution group combines manufacturing and distribution activities of kitchens and bathrooms. After various takeovers and restructuring, the group wants to be one of the key players in this business. With 45 stores located in France, VGC Distribution addresses two different customer segments. On one hand, it offers individuals the construction and installation of custom kitchens. It can also include appliances. On the other hand, it addresses major retailers such as Castorama, But or Brico-D茅p么t by providing kitchens in kits.
In the early 2000s, the company faced several financial difficulties mainly related to inadequate management choices. The company is forced to leave construction activities. From then relying on Nevelt, a subcontractor that will ensure the production. VGC Distribution will then focus on sales and distribution.
Final closure Delivery delays and lower product quality caused a growing customer frustration. In addition, VGC Distribution is facing chronic financial difficulties and a major economic crisis. As a result many orders will be canceled. Unable to pay Nevelt, its supplier, the group go into receivership for several months before its liquidation.
VGC sales exceeds forecasts. but having Nevelt not being able to honor all orders, increasing immediately delivery times for end customers. Delivery time initially negotiated to 8 weeks will become several months. In addition, some sets are coming with missing parts which forces VGC to perform installation in several steps. This will increase significantly logistic costs of the company.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
VGC Distribution BUSINESS MODEL
CONSTRUCTION & ASSEMBLY KITCHEN AND BATHROOM FURNITURE OWN DISTRIBUTION NETWORKS
CUSTOMIZED RELATION
FINANCIAL DIFFICULTIES
SCENARIO
FAILED PARTNER NEGATIVE CUSTOMER REPUTATION
DECLINE OF HOUSEHOLD CONSUMPTION STRONG COMPETITION
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
CONTEXT
Vogica - VGC Distribution KP
KA
VP
CS
CR PERSONNAL
LOGISTIC Routing orders
NEVELT Furniture production
KITCHEN & BATHROOM
INDIVIDUALS
CUSTOM ASSEMBY
KITCHEN & BATHROOM
AGRESSIVE BUSINESS PRACTICES
FURNITURE KIT Appliances Supplier
KR
APPLIANCES under its brand 1982
PROFESSIONALS Castorama Brico dépôt But
CH MANUEST VOGICA 45 stores Delivery within 8 weeks
C€
R€
NEVELT Furniture production
SALES OF FURNITURES Slow margin
SALES OF FURNITURE Strong margin
www.businessmodelgeneration.com
Source : Le figaro, 8 november 2010 ; Huffington Post, 27 september 2010 ;
Usine nouvelle, 28 september 2010 ; Le Point, 9 november 2010.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
10 Group BIC Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
BIC - Perfumes Industry Consumer products Date of creation 1945 Leadership Bruno Bitch
Scenario Highlights Several success stories in marketing of disposable products Financial results of the group Capitalization on distribution network
Context Highlights
Country of Origin France
Product praised by the public Increase of perfume price Growing competitor products
Case’s period 1988 - 1991 Market type Mass Market
Business Model Highlights Perfume manufacturing and sales Low price Distribution through tobacco shops and bars channel Focus on simple and practical usage
Revenues (2010) 1.830 Billionâ‚Ź
Reasons of Failure
Number of Employees
Mistake in distribution channel selection
(Group) 9 200
Inappropriate value proposition with customer expectations (VP/CS)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
BIC - Perfumes Diversity of products
Innovation in products
Wrong distribution channel
Founded in 1945 by Edouard Buffard and Marcel Bitch, Bic group launches in its first years the Bic Crysta ball-point pen. Today the group operates worldwide and in more than 160 countries. For almost 60 years, BIC has shown a real ability to diversify its activities and products. To date, the French group produces lighters, razors, and various water sport articles (windsurfing, kayak...) in addition to pens.
In 1988, BIC launched its own range of flagrances. This perfume is accessible for everyone, used by everyone at any time. Marketing teams rely on the practical side by offering small bottles shaped like lighters that are easily transportable. It also perfectly fits in a pocket or a handbag. Sold for 25 francs (3.5 â‚Ź) for about 300 sprays, the product comes in 4 colors (red and blue for women, black and green for men). Each perfume targets a specific customer segment or a specific context depending of its flavoring composition.
Three years after the launch, sales didn't take off and BIC ceases its perfumer activity. It appears that the distribution channel was not the right one. Many tests have been carried out on the product and on customer ability to buy. But, conditions and retail environment were not considered. Flagrances are often associated to luxury, good time or even enjoyable olfactoric moments. Tobacconists do not match with this universe. Odors, atmosphere, as well as sellers competences are in total opposition with the selling experience expected by the customer. Actually this is not reflecting the real customer perception.
Since 2008, BIC also sells a mobile phone manufactured and distributed in partnership with Alcatel and Orange.
After many marketing studies, it was decided to distribute the perfume on a large scale in Europe, USA and several countries in Africa. Leveraging on its large ligther distribution network, the bottles are proposed to the mass market through existing retail shops. In apparence, it seems convenient for the customer to combine the purchase of a lighter with a perfume.
In view of the customer, a good fragrance is strongly paired with emotions, and disposable goods (as the other products from BIC are) do not match with this image.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
BIC - Perfumes BUSINESS MODEL
FRAGRANCE SMALL AND PRACTICAL FORMAT EASY TO USE
Perfume for 20 Francs
LOW PRICE DISTRIBUTION THROUGH TOBACCONISTS
CAPITALIZATION ON THE DISTRIBUTION NETWORK SCENARIO
COMPETITIVE PRODUCTS «EAU DE TOILETTE»
SUCCESS STORY ON LOW PRICE
CONTEXT
AND PRACTICAL PRODUCTS GROWING STAGNANT TURNOVER 2,2% DECREASE IN 1987
FINANCIAL RESULTS
INCREASE OF PERFUME
OF THE GROUP
PRICE
NEED TO RENEW Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
PRICE INCREASED 66% BETWEEN 1981 AND 1988
BIC - Perfumes KP
KA
VP
ASSISTANCE IN SALES IN TOBACCO BARS AREAS
MANUFACTURING PROMOTION
PERFUMER EXPERT
PARTNERS DISTRIBUTORS TOBACCONISTS
KR MANUFACTURING DISTRIBUTION NETWORK STRONG BRAND
C€
MANUFACTURING
ADVERTISING
CS
CR PRODUCT EXPERIENCE «DREAMS»
PERFUME: HIGH END PRODUCT
SMALL AND PRACTICAL FORMAT BASED ON ITS FUNCTIONALITY
R€
MASS MARKET Male / Female WORLWIDE
CH ADVERTISING
DISTRIBUTORS TOBACCO BARS
LOW PRICE
www.businessmodelgeneration.com
Source : Bicworld.com, 6 décembre 2012 ; L’Obs économie, Le bide de bic, 17 novembre 1988.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Part 2
5 reasons of failure Why do Business Models Fail ?
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
1
Alignment between Value Proposition and Customer Segment
Missmatch between the Value Proposition and the Customer Segments. The value proposition doesn’t answer a real need or doesn’t address a real problem of the customer.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
1
Alignment between Value Proposition and Customer Segment Conflict within the Business Model: Inadequate fit between Value Proposition and Customer Segment
Value  proposition BUSINESS MODEL
The Business Model is disconnected from the Context SCENARIO OF THE ORGANIZATION
CONTEXT
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
1 PC
Alignment between Value Proposition and Customer Segment Fight ! AC
PV
RC
Value
RC
proposition
CX
SC Customer segment
R€
C€ www.businessmodelgeneration.com
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2
Business Model financial viability
The costs exceed the revenues generated making the business nonprofitable. Don’t confuse «impossible profitability» with slow return. Example : customer acquisition cost or production cost too high etc.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2
Business Model financial viability Conflict within the Business Model : No profitability
Value proposition Costs > revenues
BUSINESS MODEL
SCENARIO OF THE ORGANIZATION
CONTEXT
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
2 KP
Business Model financial viability KA
VP Costs
KR
Câ‚Ź
Costs
CR
CS
ues n e v e R
CH !!! ! ! s e s Los
Râ‚Ź
Revenues
www.businessmodelgeneration.com Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
3
Environmental constraints are not fully integrated with the design of the Business Model
Poor analysis of the environment : competition, technological trends, regulation and economics forces are poorly evaluated. Main environmental changes must be challenged prior to developping new business models.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
3
Environmental constraints are not fully integrated with the design of the Business Model
Value proposition Costs > revenues
NOT integrated
BUSINESS MODEL
Environment
SCENARIO OF THE ORGANIZATION
CONTEXT
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Key elements
3
Environmental constraints are not fully integrated with the design of the Business Model e ts Financial mark
nds Technology tre
PC
AC
New Entrants
PV
RC
C€
Competition
CX
RC
New customer behaviors
SC
Globalization
R€
www.businessmodelgeneration.com
...*
Regulation * Non exhaustive list
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
4
Business Model Execution
Management team did not focus enough on execution by lack of competencies, poor governance, or low transformation support.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
4
Business Model Execution Conflict & absence of key competencies within the management team
Value proposition Costs > revenues
BUSINESS MODEL
Environment Management SCENARIO OF THE ORGANIZATION
CONTEXT
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
4
Business Model Execution
Analysis of the Environment
KP
KA
Identification of opportunities
VP
CR
KR
CH
Business Model Generation
Execution
CS
Management Failure
R€
C€ www.businessmodelgeneration.com
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
5
The goose that lays the golden egg
It is difficult for companies to break old patterns that made them successful in the past. And the temptation is strong to pursue what has worked before. The risk is to look at new opportunities thru the lens of current profits and performance yields.
The management does not take into account the necessity to adapt its business model. It stays unbalanced between a radical shift and incremental improvements.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
5
The goose that lays the golden egg Organizational culture and past successes doesn’t encourage the management to question the real foundation of its current Business Model and new opprtunities for growth.
Value proposition Costs > revenues
BUSINESS MODEL
Environment Management Organizational culture
SCENARIO OF THE ORGANIZATION
CONTEXT
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
5
The goose that lays the golden egg Potential profits
Actual profits KP
VP
KA
CR
KR
CS
KP
R€
www.businessmodelgeneration.com
VP
CR
KR
CH
C€
KA
CS
CH
R€
C€ www.businessmodelgeneration.com
Actual model
Future model
Very profitable
Less profitable
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Mission Elton-Pickford is a leading consulting firm specialized in Business Model Innovation. Our customers are large corporations recognizing the necessary investment in Business Model Innovation. We provide premium consulting services and unique experience workshops with a sole objective of improving client’s condition. Today, reinventing its business models is not an option anymore. It is a path for a sustainable growth and new performance.
"Elton-Pickford is a facilitator and helps industry leaders to reinvent their business and explore opportunities for growth and new performance".
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Corporate Education
Business Experiment
Industry watch
Building leadership in Business Model innovation starts with Education. So, change the rules of the game: Experience a full immersion in design thinking & corporate entrepreneurship and start looking at your business differently.
Engaging in Business Model Innovation initiative can be challenging for any organization. We believe that the best way to achieve rapid results is to design practical experiences around company strategic concerns. We call them Business Experiments.
We provide organizations with critical insights on innovative business models used in key industries (Industry cases, Industry trends, Spot news)
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Customer voice You have questions, remarks or suggestions ? Your feedback is important to us, contact us ! You wish to have a live presentation of this document ? Let’s meet and discuss ! You wish to access others studies ? Please visit our website and register to our newsletter You wish to know more on how Elton-Pickford can assist you ? Contact us and plan a meeting
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
Paris Office
Zurich Office
Elton-Pickford 3 rue Chauveau-Lagarde 75008 Paris FRANCE
Elton-Pickford DACH Markets Wolleraustrasse 41b 8807 Freienbach SUISSE
+33(0)9 50 699 646 www.elton-pickford.com
+41 55 410 14 14 www.elton-pickford.de
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
About the author Antoine Dumont is associate at Elton-Pickford. He actively participates in the elaboration of the global strategy and development of the business activities. CrĂŠdit photo (c) 2012 Karine Paoli
He is an expert in economic intelligence and conducts regulary missions on this subjects for french Ministries of the Interior and the Defense. Antoine started his career as M&A consultant. He moved as Sales Director in the IT industry where he worked for large industrial and financial clients (BNP Paribas, Oseo, Saint Gobain, Rieter Automotive). He conducts, on a regular basis, speaking engagements on Business Model Innovation. He contributed to the Blackbook - 10 Innovative Business Models, and wrote several case studies on disruptive Business Models. He followed the Executive Program in Management and Strategy to the ESCP Europe.
Contact : antoine.dumont@elton-pickford.com +33 (0)6 25 55 09 88 @AntoineDmt
Acknowledgements Peter Keates, Yannick Meriguet, Olivier Gemoets, Franck Louesdon.
Elton-Pickford I Business Model Innovation & Strategy I Business Models Do Fail - 10 Examples - 5 Reasons I 2013
www.elton-pickford.com