Teaching strategic marketing through business model innovation

I recently redesigned a strategic marketing management course applying the process and tools described by Patrick van der Pijl in Design Better Business. This article describes the 11 step process that resulted from that redesign.

But Design Better Business describes strategy design as a double loop while those new to design have been trained to think linearly. I realised that to help novice participants assimilate the new ways of thinking and working a halfway house was needed. The strategic marketing course has been designed to be something between loop and linear thinking.

A brief summary of the case study

Finance.co.uk is in trouble. A first mover in the financial products comparison website business – Finance.co.uk has fallen behind newer competitors. The innovation challenge facing the management is twofold; a) turn the existing business around, b) develop the new innovative business that will take the company into the future.

Download the case study Turning Finance.co.uk Around.

Step 1: Map your current marketing strategy – how the business creates, delivers and captures value

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Map the existing business model (strategy). How does the business currently create, deliver and capture value?

Step 2: Examine the factors of success competition is based on

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What does the value proposition look like compared with the value propositions of the value propositions of competitors within the strategic industry group? In the case company, the strategic industry group is financial comparison & advisor services.

What does the value proposition look like compared with the value propositions of the value propositions of competitors within the strategic industry group? In the case company, the strategic industry group is financial comparison & advisor services.

What does the value proposition look like compared with the value propositions of the value propositions of competitors within the strategic industry group? In the case company, the strategic industry group is financial comparison & advisor services.

The objective in this phase is to understand what the direct competitors view as critical success factors (CSF). These are the parts of the value proposition that are gaining investment to create value. Plot the CSFs on the x-axis. For each CSF determine the level of the offering value provided to the customer. That means how much value is the business giving – not how much the customer appreciates the CSF. This produces the competitor value curve. Do this for each competitor and your own value curve.

Critical success factors are not limited to solution features but include pricing, service and accessibility. These aspects of the value proposition can be found in the revenue stream, channel and customer relation blocks of the business model canvas.

Step 3: Understand opportunities and disruptive threats created by external trends

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Having gained an insight into the source of competitive rivalry, it’s time to zoom out and consider the trends buffeting the business. Trends include changes in technology, changes in demographics, changes in regulations, changes in the economy, changes in customer needs, industry outlook, churn and substitutes.

Step 4: Study innovative companies in other industries

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Next, examine the business models of industry disruptors. These new players re-invented business models for the industry they disrupted – how did they do this? Learn from their smart, innovative business model decisions on reducing costs and increasing customer value.

Step 5: Study businesses in other strategic industry groups

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Analyse the business models of businesses in other strategic industry groups. In the case example, these would be groupings of businesses not related to finance product comparison and advice. For example, online payments.

Read Freshwatching Trends: Online Booking/Reservations as a Crucial Value Proposition for the Services Industry for further insight on freshwatching.

Step 6: Understand the real customer job to satisfy

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Having understood what dimensions of assumed value competition is based on today. And looked around at what’s happening to shake up other industries and strategic industry groups, it’s time to look at what really matters – our customers. For each customer type, discover the jobs to be done, pains and gains. This will require conducting a safari to talk to,  and observe, your customers.

Step 7: Reassess critical success factors of competition

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Has the business being doing the wrong things right, the right things wrong, or the right things right? It’s time to revisit – and reconsider – the value curve developed in step 2. This time we’re going to ask ourselves, based on customer insights gained in step 6, if we’re over-, or under delivering on CSFs. Delivering each CSF costs money and resources. If customers don’t place much value on it but we give a lot; it’s a waste. Delivering each CSF costs money and resources. If customers don’t place much value on it but we give a lot; it’s a waste. If customers value something very highly but we don’t give enough then we are missing delighting the customer and opportunities for capturing more value. What will you raise, reduce, eliminate? Lastly, what has your customer safari revealed of customer jobs, pains and gains that no one is currently serving? What CSFs would you add, that creates a new value curve?

Step 8: Reconstruct your business model

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In step eight we ask series of what if questions based on the current business model, running short idea experiments subtracting post-its from the canvas and exploring the impact of the change on the rest of the business model. By delivering a fatal wound to the business model by taking something out we are forced to explore alternative solutions to heal the business. Here are some suggested what if questions to ask in the case example. What if…

  • we stopped banner advertisements on the website?
  • we made it free to advertise on the site?
  • we enabled product managers to manage their own campaigns?
  • we got rid of the account managers and sales director?
  • we stopped driving traffic through Google Adwords?
  • we got rid of the website and only syndicated content?
  • we opened the web platform to consumers & financial advisors to give their top tens / recommendations?
  • we eliminated 50% of fixed costs?
  • we offered a freemium model of content & services to consumers and/or product managers?

Step 9: Articulate your business vision

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You’ve analysed both the internal and external situation. Understood the customer needs and adjusted the value proposition to deliver the most value while reducing cost structure. Now look to the future – the company you want to boldly build. What is the inspiring purpose that drives your business?

Step 10: Define the business criteria

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You’ve captured the 5-10 year aspiration and plotted the big milestones to be achieved. Now determine a set of design criteria to help shape the size of the box within which you can innovate. Map out the measures you are considering taking, big and small, to estimate the impact on costs and value. Step nine and ten form a small loop of calibration between the big picture and the more nitty-gritty details of concrete measures to take in the first big bold step.

Step 11: Generate strategic business model options

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The vision is there, the customer needs are understood, the value proposition (current and new) are known – now design several business models that will deliver and capture value. We’ve done the 1% inspiration, the 1% design and now the 98% sweat work starts of validating those beautifully designed new business assumptions. Test, test, test!

In the program, a customer validation process is not carried out on the basis of the business simulation with a case study. But in a real situation, this would be your next steps would be to validate business model and value propositions. In a next blog post, we’ll cover building a rigorous validation process. Hope you enjoyed this post – let me know what you thought in the comments section below.

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