Johnson, Mark W.
Christensen, Clayton M.
Kagermann, Henning
2008
Reinventing Your Business Model

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“a recent American Management Association study determined that no more than 10% of innovation investment at global companies is focused on developing new business models.”

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Definition-business model:
“A business model, from our point of view, consists of four interlocking elements that, taken together, create and deliver value. The most important to get right, by far, is the first.”

1. Customer value proposition (CVP). A successful company is one that has found a way to create value for customers – that is, a way to help customers get an important job done. By “job” we mean a fundamental problem in a given situation that needs a solution.
2. Profit formula. The profit formula is the blueprint that defines how the company creates value for itself while providing value to the customer.
3. Key resources. The key resources [not all, just the important ones] are assets such as the people, technology, products, facilities, equipment, channels, and brand required to deliver the value proposition to the targeted customer.
4. Key processes. Successful companies have operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale.

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“These four elements form the building blocks of any business. The customer value proposition and the profit formula define value for the customer and the company, respectively; key resources and key processes describe how that value will be delivered to both the customer and the company.”

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“The most important attribute of a customer value proposition is its precision: how perfectly it nails the customer job to be done – and nothing else.”

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“Rules, norms, and metrics are often the last element to emerge in a developing business model. They may not be fully envisioned until the new product or service has been road tested. Nor should they be. Business models need to have the flexibility to change in their early years.”

“Pursuing a new business model that’s not new or game-changing to your industry or market is a waste of time and money.”

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“Creating a new model for a new business does not mean the current model is threatened or should be changed. A new model often reinforces and complements the core business […].”

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“Successful new businesses typically revise their business models four times or so on the road to profitability.”

“We recommend companies with new business models be patient for growth (to allow the market opportunity to unfold) but impatient for profit (as an early validation that the model works). A profitable business is the best early indication of a viable model.”

Bob Higgins: “”I think historically where we [venture capitalists] fail is when we back technology. Where we succeed is when we back new business models.””