Brookes Masterclass

Disrupt or be Disrupted
 Session 1

Drivers of Disruption: Globalisation, Digitisation, and Uncertainty

 Uncertainty

Globalisation Digitisation
 Globalisation 3.0

What does it mean? How is it different from 1.0 and 2.0?

Digitisation of Business
How to embrace uncertainty
 Uncertainty

Losses Gains
Gains/ losses
f(X)

Gain
Disruptor (X)

Pain
Gains/ losses
f(X)

Gain

Disruptor (X)
Pain
Thinking
about the
future
The past does not determine
yet constraints the future
An example from a recent workshop
Focal Issue: Brexit impact on SMEs
Some uncertainties matter more than others
Britain ten years from now
Constraint 1

Geographical location
Historical legacy

Constraint 2
Britain ten years from now
Within EU/EEA
Constraint 1

Geographical location
Historical legacy

Constraint 2

Outside EU/EEA
Britain ten years from now
Within EU/EEA
Constraint 1

Geographical location
Historical legacy
European identity

National identity
Constraint 2

Outside EU/EEA
Britain ten years from now
Within EU/EEA
Constraint 1

Geographical location
Historical legacy
European identity

National identity
‘Singapore on Thames’

Constraint 2

Outside EU/EEA
Britain ten years from now
Within EU/EEA
Constraint 1

Geographical location
‘EUSSR’

Historical legacy
European identity

National identity
‘Singapore on Thames’

Constraint 2

Outside EU/EEA
Britain ten years from now
Within EU/EEA
Constraint 1

Geographical location
‘EUSSR’

Historical legacy
European identity

National identity
‘Return of the
‘Singapore on Thames’
Prodigal Son’

Constraint 2

Outside EU/EEA
Britain ten years from now
Within EU/EEA
Constraint 1

Geographical location
‘The European’ ‘EUSSR’

Historical legacy
European identity

National identity
‘Return of the
‘Singapore on Thames’
Prodigal Son’

Constraint 2

Outside EU/EEA
So what?
What you do with
scenarios depends on
who you are
Shapers

Adapters Reacters
 Session 2

Turning the tables: From a Disruptee to a Disruptor

 Mini Steel Mills

Personal Computers
 How to become a Disruptor

Key assumption:

Incumbents are rational, intelligent actors. They want to improve key

performance indicators like return on sales, hence they focus on customers
who provide the biggest profit margin, their most demanding customers.

That is key for the Disruptors. It means that the ‘low quality use’ customers are
not valued by the Incumbents, hence it is possible for Disruptors to attract them
with a offering that meet their needs more effectively with an alternate
technology/ business model (which is often inferior in performance to that of
the Incumbent)
Disruption and the Power of the Place

Where are the disruptors located? `

Disruptor Location
California

Seattle

California

Seattle
What is a Business Model?
 BUSINESS MODEL

Cost Structure Position

Value Market Revenue Competitive
Value Chain and Profit within the
Proposition Segment Mechanism(s) Strategy
Potential value network

Source: Chesborough, 2010

BUSINESS MODEL INNOVATION. WHAT?
What is a business model?
Simply, it is a company's plan for making a profit
It answers 3 basic questions
1. Who is the customer?
2. What does the customer value?
3. What is the underlying economic logic of how we
deliver value to customers at an appropriate cost?
A business model’s great strength is as a planning tool.
It focuses attention on how all the elements of the system fit into a working whole to make money
Business models fail either because
They Fail the narrative test (the story doesn’t make sense)
OR
They Fail the numbers test (the P&L doesn’t add up).
P&L FAIL: E.g. on-line grocers will fail the numbers test.
-Already thin margins
-Customers aren’t willing to pay much more for
online than from stores
NARRATIVE FAIL: Flawed answer to the three questions, solves
an irrelevant customer job or one that customer doesn’t care
much about.
ANY EXAMPLES?
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BUSINESS MODEL INNOVATION – WHY IS IT SO IMPORTANT IN THIS DIGITALY DISRUPTIVE ERA?

DIGITAL COMPETITION SHRINKS VALUE

Customers win, and (incumbent) companies lose.

A ridesharing service When was the last time you

is 40% cheaper than used a travel agent or went to
regular taxis for a 5- deposit a bank cheque?
mile trip into the city
from Temple Meads Digital is creating value for
customers below sustainable
UBER economic thresholds of many
classical business models
TAXI

Mckinsey Research
BUT….WHAT DRIVES BUSINESS MODEL INNOVATION?

A FOUR-LETTER WORD. NEED. CLIENT NEED. CLIENT NEED EXAMPLE. FX

Initial
Cash/Capital
Receives Orders
Payments Raw
(in FX) Materials
Disruptors Sell What Customers Want FX
Working Capital
Trade Services
and Let Competitors Sell What They Don’t Trading Client Asset Finance
Business Cycle
By "decoupling" activities that consumers value
from the ones they don't, enterprising digital Ships
startups are wreaking havoc on established firms. Finished Pays for
products Goods
Trade Services (in FX)
invoice Finance FX
Over the past two decades, entire industries have been
disrupted by Internet competitors who "unbundled"
their content and delivered it to consumers in new ways

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Examples of Business model innovations
1. Pricing – Subscription
2. Pricing - Freemium
3. Ultimate Personalisation – Stitch-fix, Bank for South Asian Students
4. Aggregation – Winc, HSBC Connected, Deliveroo/Just-Eat/Laundrapp
5. Bundling – Concierge, Amazon Prime, Cisco Routers
6. Platforms or Marketplaces– Kahoot! , FIS
7. Education – Devops, Shoot
8. Reputational Tagging
9. Reputational aggregation
10. Tech-innovation based offer - Zara, Mobile Optometry
11. Tech and Pricing innovation – Pulmo

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BUSINESS MODEL INNOVATION . IDEA #1. SUBSCRIPTION PRICING.

A business model currently enjoying unprecedented success isn’t new. It is just being radically altered by Digital.

Businesses are realising that more and more people are interested in the services not the ownership.

CUSTOMERS WANT THE MILK NOT THE COW. We don’t want to buy the music, we want to listen to it.

So, businesses are switching to SUBSCRIPTION PRICING.

Switching isn’t easy. Take Adobe. In 2011 the legendary Photoshop moved to monthly subscription. Their shares
tanked. In 3 years, the risk paid off & Adobe was 2X of pre-subscription value.

Similar story with MS Office, CISCO network services, Oracle, Accounting Software etc. [Not so similar with HMV]

Subscription pricing isn’t restricted to big tech or products. It equally applies to SME’s and services. Examples?

The subscription model is your & your client’s future. Its worth millions in today’s crowded marketplace. (WHY?)

[Local SME Example: Plumber – Boiler Repairs)

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BUSINESS MODEL INNOVATION . IDEA #2. FREEMIUM PRICING.

Traditional Model Land & Expand

Usually a fully-functional product that is free forever, or
has a free trial, but with significant feature limitations
May suffer difficulty converting customers from a free
version to paid version — called the “penny gap.”
Examples: A Dropbox Basic account, Apple’s free iCloud
Get individual users to sign up for a product for free —
 hopefully hitting a sizable threshold of users in the same
organization — and then monetizing your product at the
organizational level.
Example : Yammer sign up users for free & sell to an
organization after hitting a certain threshold of free users.
They have a phenomenal 10–15% up-conversion

How can you Monetize Free Users? Example : Slack let users sign up for free and sell when the
organization wants control over the system
A freemium pricing strategy hinges on the product
offering. It has to be stellar, above and beyond what’s
currently on the market, and consumers must
understand that value.

Freemium pricing will reach a wide & varied audience:

means the internal team must be prepared to deal with
functionality and customer service issues.
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 BUSINESS MODEL INNOVATION . IDEA #3. Hyper-Personalisation / Micro-monetisation.

Hyper-personalization Stitch Fix is an online retailer that combines smart data with a
combines behavioral & personal touch of clothing stylists to help customers find clothing
based on their tastes.
smart data extracted from
its customers. The hand-selected pieces are shipped to their door so customers
can try everything, and only keep & pay for the items they like.

Stylists use returns information to better understand customer

preferences and improve the recommendations over time.

In 8 years it has 3m clients, $1b revenue, growing at 25% p.a. and is

coming to UK soon!

A Digital only bank for South Asian foreign students in

Redbrick universities in EU and US.

Market Segmenting & Targeting specific customers isn’t new.

Digital now allows for ultra focused targeting.

Proposition: Support in native languages, fee free foreign

payments, credit for student loans against foreign assets
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BUSINESS MODEL INNOVATION . IDEA #4. Aggregation

Winc: Subscription wine club Winc became a top-50 US winery

last year by flipping the typical wine business model on its head.
While traditional vintners make a wine and then market it, Winc
creates bottles based on more than 5 million customer ratings.
Its winemaking team takes those signals and sources the grapes.
In four years, the company started making its own wines (instead
of distributing others’ labels), shipped an estimated 300,000
cases & revenue has grown 292%.

LAUNDRAPP: Dry Cleaning & Laundry to Your Door

[Local SME Example: Local garage, MOT for pensioners]

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BUSINESS MODEL INNOVATION . IDEA #5. BUNDLING

Example: Home Concierge

How to grow a utility business?

44
BUSINESS MODEL INNOVATION . IDEA #6. Platforms or Marketplaces

KAHOOT SHOOT

[Local SME Example: Lawyer firm – Legal forms for startups]

45
BUSINESS MODEL INNOVATION . IDEA #7. BUSINESS EDUCATION

[Local SME Example: What’s the

business opportunity?

46
BUSINESS MODEL INNOVATION . IDEA #8. REPUTATION TAGGING

47
BUSINESS MODEL INNOVATION . IDEA #9. REPUTATION AGGREGATION

48
Open Innovation
SME-Academia Collaboration A Tale of Two Worlds

Academics
CEO/Owner

Senior Management Deans

Operations VC
 Session 3

The Holy Grail: Gaining Competitive Advantage

Strategy: The Linear View

External Internal Positioning

Analysis Analysis the firm
 Scenario Thinking
PESTEL Delphi Method

Frameworks for
External Analysis
Strategic Groups
5 Forces Analysis

Industry Life Cycle

 Scenario Thinking
PESTEL Delphi Method

Frameworks for
External Analysis
Strategic Groups
5 Forces Analysis

Industry Life Cycle

 Scenario Thinking
PESTEL Delphi Method

Frameworks for
External Analysis
Strategic Groups
5 Forces Analysis

Industry Life Cycle

 Resource Based View of the Firm Generic Strategies

4P Innovation Matrix
Dynamic Capabilities Frameworks for
Internal Analysis Open Innovation

Real Options Disruptive Innovation

Core Competences
Design Driven Innovation
 Resource Based View of the Firm Generic Strategies

4P Innovation Matrix
Dynamic Capabilities Frameworks for
Internal Analysis Open Innovation

Real Options Disruptive Innovation

Core Competences
Design Driven Innovation
 Resource Based View of the Firm Generic Strategies

4P Innovation Matrix
Dynamic Capabilities Frameworks for
Internal Analysis Open Innovation

Real Options Disruptive Innovation

Core Competences
Design Driven Innovation
Resource
Audit
 Unique Resources and Threshold Resources Obsolete Resources
Capabilities and Capabilities and Capabilities

Delivers competitive advantage What it takes to be a player Makes the firm uncompetitive
the industry
 Unique Resources and Threshold Resources Obsolete Resources
Capabilities and Capabilities and Capabilities

Delivers competitive advantage What it takes to be a player Makes the firm uncompetitive
the industry
 Strategic Strategic Strategic
Resources Resources Resources
and and and
Capabilities Capabilities Capabilities

Time
Developing Dynamic Capabilities

Sensing Sense Seize Gain

Competing
Seizing
threats opportun competiti
and ities by ve
opportunit acting on
ies in the advantag
them e
external
environme
nt
Hyperrationality vs Optionality
Hyperrationality vs Optionality
Gains/ losses
f(X)

Gain

Disruptor (X)
Pain

Pay-off of a Real Option on a potentially disruptive technology (x)