Strategyzer Webinar: Business Model Design For 21st Century Companies

The broadcast is now starting. All attendees are in listen only mode. Hi everybody. Welcome to another Strategizer Strat Chat webinar session. We'll be starting the broadcast momentarily. In the meantime, why don't you take a moment to just think about what you hope to learn from today's session and you can share it in the questions box or in the chat box. And if you're on Twitter, follow us. Strategizer and tweet at us with the hashtag Stratchat will be starting in a couple of minutes. Sa. Hi everyone. For those of you who are just joining us, we'll be starting the session momentarily. In the meantime, we just ask you a question. What do you hope to learn from today's session? You can share it in the chat box, you can share it in the questions box of the GoToWebinar panel, or if you're on Twitter, follow us at Strategizer and tweet us with the hashtag stratchat. We'll be starting in a minute. Sa. All right, let's get started. Hi everybody. Good morning for those of you in North America. Good afternoon for those of you in Europe, good evening to anybody in Asia and the Pacific region and a very late night for those of you on the east coast of Australia. If you're joining, today's Strat Chat webinar session is about business model design for 2020 first century companies. I'm your moderator Kavya Gupta. I manage content and community at Strategizer. You probably noticed me from emails on social media as well as on the blog. Our host today is a good friend of Strategizer, Gregory Bernarda. He's also the co author of Value Proposition Design along with Alexander Osterwalder and Yves Pinier. If you're in Australia or if you're in the Asia Pacific region, Next October, Greg will be hosting a two day Strategizer Masterclass in Melbourne, Australia. It's our first in Australia and it's going to be a hands on learning experience that goes through not only the business model generation, methodology and tool set, but also value proposition design throughout this webinar. If you have any thoughts, comments or feedback, feel free to tweet us rategizer and again use the hashtag Stratchat. You. You can also visit blog.stragizer.com to get more resources and content around topics like today's as well as others in our library. I also want to take a quick moment to talk about our two online courses, Mastering Business models and Mastering Value Propositions. We sell them together as a Master's Bundle and those of you who are attending the webinar today get an exclusive discount to these two courses. Greg will be focusing on business model design for 21st century companies, but a lot of what he might be talking about today goes along with our courses as well. To give you a quick idea of what you get, you're obviously going to get the proven methodology introduced in our global best selling book Business Model Generation and Value Proposition Design. You get over 70 bite sized learning pieces across 13 lessons on 6 crucial topics and you get unlimited access to 50 videos and over 8 hours of learning content that doesn't expire. Of course, what's most important is certificate of completion and that's what's going to differentiate yourself and stand out as a top performer. You can share your accomplishments with our downloadable and verifiable certificates when you complete the course. So the exclusive offer for live attendees today. I'll be sharing the link and the coupon code in the chat box throughout the session. If you purchase the Master's Bundle, Both courses in 48 hours will give you 15% off. All you have to do is use the code September September webinar 2017. You can visit strategizer.com training courses again, I'll pass that link in the chat box and you'll have 48 hours to take advantage of that offer. If you're not satisfied with the courses, we'll simply give you your money back with a 60 day guarantee. That's it. No questions asked. Greg will probably mention a couple of resources and tools. For those of you that have an account or you don't, you can create a free account at Strategizer and you'll get access to our resource library. Now the tools and resources that are mentioned in our blog posts, webinars, books and services are all available for free. You get access to 30 plus templates, guides, all kinds of great stuff in there. Lastly, if you're a large organization looking to bring in training and solutions, you can look at our enterprise offering. We've got many solutions to help global companies upskill teams, validate new ideas, expand existing business lines, or launch new growth engines. You can visit Strategizer for more detail there or you can get in touch directly with our superfast sales team with salestrategizer.com Greg I'm going to pass the reins over to you and let you get started whenever you're ready. Go ahead.

Thanks Gabi hi everyone. Really glad to be Here. So I'm going to start my slides. Gavi, you can tell me if you can see them.

Yep, you're good to go.

All right, so about this topic of business model design for 21st century companies. And I'm gonna get into a bit more of what that means. I also want to share three stories today and along with three strategies that hopefully you can take home and apply on your own particular problem sector industry. But first, I want to share kind of a aha moment that I had on this topic. So I do a lot of work on innovation and strategy with organizations of all kinds. And a few years back, I find myself in China and working with a group called the China Development Research foundation. So think tank that advises the Chinese premier. And so we're sitting at the top of this hotel in the middle of Beijing, and they have gathered a group of international guests to talk about the future of China economic and social development models. And so in many ways I find myself in a lot of these types of discussions and it feels pretty similar. But there's one thing that's very different this time, and it's the view from the hotel. All I can see that day is this. And this has a big impression on me. You know, you look out the window and I can't see the bottom of the street. It's like a scene in Mad Max after the apocalypse. And so all of a sudden, the same discussion that I'm having in other parts of the world, they become really real. So with China a few years back and still now, it's getting a little better now, but still now pollution is a big problem. It's also a very messy problem because economic growth is really what created this pollution problems literally killing people. And yet economic growth is also what has lifted hundreds of millions of Chinese out of poverty. So I started wondering, can we imagine a different kind of growth or different kind of progress? And so I leave the workshop. I'm on my way out of China and I have a stopover in Hong Kong. And I have some time until my next flight, so I go to the bookstore. In the entrance of the bookstore, I see this. You may recognize this. Now there's an actual display with the best selling books of the bookstore. And right at the top of the list is is this book Business Model Generation, which you all know. And so I have to put this in context for you because Alex Osterwalde and I are good friends. We were classmates at the University of Lausanne. And so at the time he had told me, you know, I'm Working on this thing, business model, we might put together a book. But you know, it's still very early. And of course, you never really expect your classmate buddy to come up with a best seller just like that. And so there it is. And take a picture. I send it to Alex. But I'm really intrigued because in China we're talking about new social, economic business models. And here I find this book that basically has this approach that makes it extremely easy to think systematically about a business model and also to think with agility, which are, I think, two things. Systematic systemic thinking and agility is what I think is the kind of thing that we need today to tackle these very messy and complex problems. So I have kind of a hope at this point. I'm wondering, can business models save us a little bit? And my answer is that I think yes, I think it's going to help. I think it's already helping. And so I want to put this very quickly in context of the kind of environment that we're in. And you might have heard this before, in a way or another, it's a bit of a caricature. But essentially, if you look at the 20th century, most organizations, they were operating in a simple context, and the main currency for success with exploitation, now in the 21st century, the context has become a lot more complex, right? It's very messy, there's a lot of uncertainty, and yet the currency for success is innovation. So we need to start understanding how we can navigate this very messy complex so that we can find ways to create new values to solve the kind of problems that I've seen in China or some other ones. And so I think one problem that we have today is that organizations are still formatted for the 20th century, not so much for the 21st century. So that's what I want to talk a bit about. And of course, the pollution problem in Beijing is just one example. It was my aha moment, but you might have had another one. You know, there are many problems out there, many opportunities to kind of have aha moments. You know, you can think of obesity, the state of the media, poverty, and so on and so forth. And so there is this group, Havas Havas Media. Havas Group came up with a study a few years back. They still run it every year. And they found out that, you know, people wouldn't care if 74% of all the brands in the world just disappeared from one day to another. It wouldn't make a difference to their life because basically it doesn't add to their quality of life. Doesn't improve their life. So I think the organizations that want to play in this 21st century, they need to start embracing a new mindset, a new toolbox, a new way of doing things. So that's where I think for me, in my own experience, that the business model toolbox is so helpful. So I want to give you a quick reminder before I get into the stories. Some of you might have seen this chart before. This is to kind of put in context what a good business model design is. And you see four different levels here of strategies. The first level, level zero is when you have a great product market fit or a great value proposition, but you're not yet thinking about a business model, right? So you need to have that, but it's not sufficient. Level 1 strategies is when you start thinking about your business model. Maybe you pull out a business model canvas, but you just start to put things into the nine boxes. You don't go much beyond that. So you're kind of looking at, you're going to take the business model canvas is just a checklist and then the next level, level two strategies, when it starts becoming interested, that's where you want to be. It's when you start to have a business model as a story. So you start to pay attention to the relationships between the different blocks and becomes coherent. It hangs together as a system. I think those are the most powerful business models. You think of companies like Nespresso, we've talked a lot about Nespresso here, Apple, low cost airlines and so on and so forth. They have a great business model as a story. And then level three is when you can start. You basically have developed the capability to do that over and over again. You reinvent yourself at the level of business models. So one of the reasons that I like the model and just the BMG and VPD language so much is that it makes it easy to decode the best business model strategies out there. And so because of that, right now, it also makes it much easier to, you know, to stretch ourselves and deal with the kind of messy problems that I was talking about. And so to decode the strategies that make great businesses at the same time as advancing us as a society. So those are the ones that we've become intrigued about and that I want to share. You know, these are the stories that, you know, deal with 21st century type of context. They solve problems like pollution, poverty, fulfill maybe a latent aspiration in customers, maybe they introduce a societal transformation to. They're basically creating a path for us into the future. There's a good quote that I like that also describes these types of stories. It's a quote from Pixar, the animation studio. It's a quote on leadership. That's what they say. Leadership is creating a world people want to belong to. And I think this is a great way of describing what these, these stories are about. And remember, they are doing that at the same time as becoming breakthrough businesses, extremely successful businesses. I think both of these things can be done together and in fact they very much go together in some ways. So I want to share these three stories today, stories of this, what we call 21st century business models. Now, none of them are perfect and I think it would be a mistake to try and look for the perfect stories that are doing everything well. But they each hold a particular recipe, a strategy, a key that we can basically learn from and ultimately we can then take home and apply on our own context. I think also when you start talking about those kinds of business model designs, you have to take the context into account. So I'm going to give you a bit of a variety of contexts. We're going to go to China first, then we're going to go to Europe, look at a B2B company. A lot of people are curious about B2B business models. And then we'll finish in the US to talk about how popular companies thinking about the future. So my first story is this so mentioned. It's in China. And I think this kind of thing, you know, how to create 18 million jobs in 10 years, can probably only happen in China, maybe India as well. And you know, the strategy that I want to kind of put into light is the whole idea of how you build a new ecosystem or you reorganize an ecosystem. And the company I want to talk about is the company of this guy. You may recognize him, he's becoming more and more popular these days. Jack Ma. Jack Ma is the founder of the Alibaba Group and a little bit less well known is this company called Taobao. And Taobao is an e commerce marketplace. It's only in China, only in Chinese language, but it's actually the biggest part of the business of Alibaba. And so it's a huge company, probably the biggest e commerce marketplace on earth, bigger than Amazon and ebay. And it's really a phenomenon. And so if you look at how they started back in 2003 and you have to put yourself in the context there, China is very much of an emerging economy, not so much trust going on in the economy. So the first thing they did is that they created this two way review system, a bit like Amazon, but Amazon came on top of an economy that was already functioning. Taobao did kind of a leapfrog type of jump into an economy where all of a sudden people could trust each other. So they created trust. And then the second thing that they did, they realized there wasn't so much of a developed economy infrastructure in China to do business. So when you're in China, you just basically build the infrastructure yourself. And so they did that by bringing together logistics providers, booming industry. It's become a booming industry in China in part thanks to Taobao. And then they created also a new payment system, kind of like a PayPal equivalent called Alipay. Through a consortium of 70 banks in China, they were able to do that. And so these I think are the two key elements that would not have allowed Taobao to be in business. They would not have been able to create value in the first place if they hadn't brought about trust. Recipe for trust and the whole missing infrastructure. So from there they were able to create a double value proposition. First, a large choice of any types of good at the best price, quality ratio for all the Chinese consumers out there and then giving access to anyone who had something to sell to basically a large market, large pool of consumers channels. With Taobao, there's obviously costs involved in building the IT and the infrastructure and no revenue stream to start with because, you know, this was subsidized to by Alibaba, by the parent company and essentially to start building the business. This is what you see a lot in startups nowadays. And it also helped to drive ebay out of China, which was the leader before Taobao came in. So this is phase one, this is 2003. And so now I want to take you to 2006 and invite you to see what goes on in 2006. All of these people that had something to sell, basically they realized that they had an opportunity to become micro entrepreneurs. And so Taobao realized that and they changed their kind of key activities. They started focusing on these people to help them grow their business. They changed the value proposition into a much more of a professional one. And they at that point also brought, and this is another part of the ecosystem, they brought new players into this ecosystem. So app developers, even fashion models that can pose with your product for marketing, a lot of them just live on Taobao. They just make a living on Taobao. They don't have to do anything else. So it's a Huge, huge economy. And so they understood how to do that very well. They started also to develop a different kind of customer relationship. You know, they created the Taobao University to train and empower all of these micro entrepreneurs and in the process started to make their first revenue streams out of that through ads and through the sale of advanced features. So we have now a budding ecosystem that is very successful. And I want to show you one more move that Taobao did. This is in 2008 and they started realizing that with this very popular platform, they had developed a new key asset, basically hundreds of millions of Chinese consumers in their database. And once you have that, you can start creating a new type of value proposition to give basically access to hundreds of millions of consumers, this time to all the big brands out there, the international and Chinese brands that are thinking about establishing themselves in China. This is one part of Taobao, it's called tmom. And again, obviously the customer relationship changes with this and with that. For the first time, they started to charge a commission on membership fee and a commission on the business. So the last thing I want to say here is that, and this is my point, I think Taobao and the leaders of Taobao understood very well that one of the key things they had to do well was to start to understand how to manage this overall ecosystem. So build it in the first place, then manage the policies that allow this whole ecosystem to work very well. And you see that in a lot of these peer to peer platforms nowadays as well. And if you hear Jack Ma, he says we're not so much looking for the next tech developers to hire the next tech developers or marketing whiz kids, that's important too. But what we're really interested in is to get the people like sociologists and psychologists who can understand how to create the policies and the incentives so that the ecosystem works well. So the role of the CEO here and the management team is almost, is actually a lot closer to that of a mayor of a city. So they need to set prices, they build the infrastructure. They even had to manage demonstrations at some point because of the kind of price policies they have. So I think this is what we can learn from Taobao. Obviously huge success in China, we don't know that very well, but it's estimated that they created that they created 18 million jobs, 5 million directly on the platform. Throughout micro entrepreneurs quitting their jobs and becoming self employed, and then 13 other million indirectly through the value chain, etc. There is more trust in the economy and the community. Lots of stories, I won't go too much into that, but really interesting stories of how people start to trust each other a lot more than before. And then it's also giving a marketplace for, for villages, for rural areas, for remote regions to participate in the economy. You know that China is seeing a huge boom of urbanization and part of these e commerce platforms, and Taobao being one of the main ones, is allowing to give opportunities to people in the regions without having to move. And then finally, I think if you look at the state of the digital economy in China, it's actually a lot more advanced, I think, than what we can see in Europe and America. And they're now looking, they're ushering this new future into what they call the C2B economy. So it's where you have consumers coming onto the platform saying I need that kind of product with that kind of features and that kind of design, etc. And then a provider on the platform raises their hand and says, yeah, okay, we can build that for you. It's available at this price. I can ship it to you in so many days and so on and so forth. So reversing the relationship almost. So that's the first story. And so I think the lesson here is that you can create. If you look at how you can create or reorganize the ecosystem, then you can often unlock value or find a way that the market can work. All of a sudden there's a lot of cases where you can just see a block on the road. Maybe there's no payer, people don't have access, they don't have enough skills, maybe they don't understand. So if you think a little bit upstream, organizing the ecosystem, creating a new value chain around that often is a very powerful key for creating a new market. So that is story number one. I want to move to Europe, as I said before, with this B2B company and look at how they basically have been fighting climate change at the same time as unlocking new value for their customers, making them happier. The theme here that I think we can all copy and get inspiration from is servitization and performance. Company I want to talk about is Michelin, the tire company. I think most of us know it as well. So they started with a pretty standard business model, Michelin, you know, they were selling high quality tires to a customer segment made of this time. Here we're focusing on the haulage companies, the CEOs of haulage companies. And they were basically selling tires model to start with this Business model had some. One thing was they were starting to see all of these low cost players come from South Korea, China and so on and so forth that were starting to eat up their margins. The other thing is that they knew they had a superior technology in their tires, but they had struggled up until then to figure out how to monetize that value. And then the last thing they saw is that in Europe, you know, they were writing was kind of on the wall about, you know, new regulation in terms of climate change, in terms of sustainability. And so they didn't want to become a victim of that. And so they wanted to anticipate that, to lead that. So that's kind of their context, the way they started. So the first thing they did is they started to see if they could understand their customer better. And so the first thing they said was, well, what we know is that this customer needs to buy tires, but actually spending a lot more time with them, they understood that this customer had a whole other host of jobs. For those of you who are familiar with the value proposition canvas here, we're talking about the jobs that people have to do all of these tasks, these objectives that they need to achieve. And so in this case, Mr. Best here, this is the character from Mishnah and you know, he had all of these things and it started to become extremely heavy for this kind of customer. So with this insight, they went back to the business model, they went back to the drawing board and they said, hey, what if we create a new value proposition that takes responsibility for all of these tasks, not just selling the best tire, but taking responsibility for helping this customer manage their budget, dispose the tires, inspect that the tires are in good shape, and so on and so forth. So tire peace of mind, basically. And so with that, they changed their customer relationship into something that was very transactional before, which now became a long term contract based on kilometers that the trucks were driving. And they knew how many kilometers every truck was driving because with telematics chips in the tires and so on, they were able to have that kind of information. And so then they started also to change the way they would charge. So it wasn't just selling tires, it was asking people to pay a monthly cost based on the kilometer, based on the contract, something that was agreed upon before. And you see here that it's very nice for Michelin, obviously, predictable revenue. It's also very nice for the customer, predictable cost. And if you go on the Michelin website, they tell you how much you can save a year if you do that. So it becomes very appealing for the customer. So, you know, they charged. They understood that the customer had a new, a lot more complex set of jobs to meet. They charged per km, not tires. They also, you know, solved the conflict of interest because now they weren't trying to sell as many tires as possible to the customer. They had aligned their interest with trying to optimize the tires because Mishnah actually took the responsibility to dispose of tires and replace them for free. So big conflict of interest solved here. And surprised they didn't expect that, but they saw that in doing that, they were able to establish a deeper relationship and deeper brand loyalty from their customer with Mishler. So based on that, they went one more time, they went one bit further and they realized that if there was even one objective higher than all of this, it was to increase profitability for these customers. So they did one more change to their business model, one more value proposition which is actually promising an increase of profitability. And with that, again, tweak to the customer relationship. It's now a four year contract with a guarantee of outcome and a guarantee of returning the money if the outcomes are not met. So, and then they get paid on results, they get paid on the performance that they're able to deliver. Obviously with all this, I haven't talked much about this, but once you change the front end of the business model, everything that the customer can see, you also need to start changing the back end of the business model. So they had new activities, new resources, a whole set of fleet management tools that Michelin customers were able to use to monitor this whole system. A lot of care in selecting the key partners, a lot of time to actually tweak which partner they would get into to provide this whole system. And obviously a different type of cost structure which have just summarize here with fleet management. So very inspiring, I think, business model, if you look at the results just for the customer, you know, less liters spent per kilometers per hundred kilometers, it's the equivalent of €3,000 less per truck for the customer. So less costs plus 2% in profit margin. You have to imagine that these customers, typically they are between 0 and 2% to start with. So it's a huge increase in their profit margin. And less emissions into the air, which is obviously good for the environment. It's also good for the customer and for Michelin, because at that time, as I mentioned before, the government was talking about putting a tax on emission. And so this also addressed the problem. So here's what we can learn, I think about Michelin here You know, you find the jobs behind the product, right? Often we're stuck in, you know, here's a product we have, we've been selling this, so we're going to keep selling the same product. No, you know, let's stop and look at actually the jobs, the needs behind the product. Let's figure out what it is. Maybe we can also discover new jobs. And then let's see if we can. Instead of just pushing a product, let's see if we can create a service or a promise of performance that does at least as good of a job as the product, or even better, as is the case of Michel. So as the second story, and the last story I want to share with you is a bit more experimental. So it's, you know, the story of a pop philosopher meeting a Silicon Valley CEO. And here I want to talk about this whole idea of embracing higher order needs. And I'll get to that in a second. The company I want to talk about is Airbnb. And I think we all know, and to some extent we've heard too much of Airbnb, you know, the business model, the way they work, their growth, et cetera. When I discovered the story, I thought, oh, there's another angle to how they're looking at the future right now, which I think is really interesting. So I want to pull here the customer profile of a typical traveler. And when I think about this myself or when I do this exercise in a workshop, often people come up with very kind of, you know, standard, let's say, jobs, pains and gains, right? It's things like, you know, I need to organize myself for traveling, I need to find a room to stay, you know, get work done on the road and so on and so forth, right? Then the kind of pains that you see, well, you know what, it's too expensive. Maybe I end up in a tourist trap. You know, I lose my luggage, my flight is canceled, and so on and so forth. And the kind of gains, you know, maybe you want to have the whole process be really extremely easy. Maybe you want tips on what to visit on your trip, you want to have a great breakfast, and so on and so forth. And in many ways, Airbnb does that very well. But they started, you know, the company focused on learning. They started to look at the experience of their, of their customers. And so they realized after studying and following customers for quite a long time that 75% of people, customers or travelers are dissatisfied with their journey. And so this may have nothing to do with Airbnb itself. You know, in Many ways it's, you know, it's very convenient, clean, often lower, you know, price than a hotel. People are happy with these things, but in general, they're dissatisfied with their journey. And so there may be a more fundamental reason behind this. And this is where the philosopher comes in. Some of you may recognize Alain de Botton. He's an author. He's also the founder of the School of Life, based in London. And so here's what he says about the state of capitalism, also state of business today. He says, you know, people don't like capitalism because it does not deliver on the ultimate promise of deeper satisfaction. He uses a Greek term called eudaimonia, which means deeper satisfaction. He thinks, you know, we're a little bit tired of this. And, you know, he shows us that advertisers actually do a great job at understanding this deeper satisfaction that we're after. So I'll use two examples that he mentions here in a liquor company, in this case, Smirnoff here, promising great moments of being among friends and having a good time, etc. Use another example. Patek Philippe watch company talking about the whole joy of passing values onto the next generation. But what he says is that, you know what, these are great values. This is exactly what we're looking for. But the products behind the bottle of liquor and the watch, they actually are not helping us to get that deeper satisfaction. Right? They don't deliver on these promises. So here he introduces to us the fact that if you're familiar with the Maslow pyramid of need, the fact that a lot of the economic activity. Available is still focused on the lower end of the pyramid. Physiological safety, belonging, everything that has to do with convenience, lower price, getting faster, cheaper, and so on and so forth. What is the future? 21st century, which is what we're interested in today, there will be a shift. There is an opportunity to satisfy those needs. And so Airbnb, if you look at their advertising, is a bit in the same predicament. They have great advertising. They talk about belonging everywhere. That's what their logo represents, too. But yet travelers are quite dissatisfied, as we've seen before. And so Alain de Botton was actually invited to work with Airbnb, and they have a whole collaboration. You can read about it. They even published a book together, new version of a book of Alain de Botton. But travel. And this is what he says about travelers or travel agencies like Airbnb. So travel agents would be wiser to ask us what we hope to change about our lives, rather than simply where we Wish to go. So that was the insight that the philosopher kind of brought to the CEO. And at the same time, it really matched the view that Brian Chesky here, the CEO of Airbnb, had about the business. I'm not in the business of selling room. I'm in the business of happy traveling. So they started to look at what they could do with that kind of new insight. And if you go back to our customer profile here, they actually identified three things that they said, you know what, we can create new value here. The first need, the first higher order need was, you know what people, when they travel, they want to connect with another culture. And they don't want to do that by, you know, hitting every museum in town, but actually through having a meaningful relationship with local people. Second thing was want to improve relationships. So a lot of people actually hope that's what they discovered, that going away with their loved one will get them to deepen their connection with them. And again, the botan says it's not just by having nice candle in the room or maybe being in a place that has nice view, maybe it can help, but that doesn't go to the fundamentals of what you're really trying to get done. And the third thing that they identified was that we often take traveling with the hope of taking a break from everything and enabling us to think about our future, gain clarity about our future, what we were, what our work is about, our dreams, how we live our life, and so on and so forth. So as mentioned now, this is experimental. There's no business model behind this. We don't know how all this translates into a business yet for Airbnb. But for me, when you start asking that question, you start imagining all sorts of new possibilities. And I think this is the value of this, of this story. And so if you go back to our pyramid of needs here, you can see that if you get stuck at the low end of the pyramid, you're going to keep imagining how to make the platform more convenient, cheaper services, going that direction and so on and so forth. But if you start plugging in those needs, like stepping back so that our future, improving our relationship and connecting with another culture, then it opens up, you know, it opens up for all sorts of new possibilities. And so I think what we have to do, and I think this is what we can learn from Airbnb here. Thinking about the higher order jobs, the higher order needs of our customers is interesting to imagine new ways of creating value and basically helping them to, through new value proposition, helping your customers achieve them Helping them almost climb that hierarchy of needs, I think is what we can all think about in our respective businesses. So I want to summarize quickly the three stories in a way that hopefully make them translatable in your, in your own sector. We first look at Taobao. Taobao had an approach of building the missing infrastructure, developing the ecosystem. This allowed them to create a new value proposition. And then they realized that one big job for the management of the company was to actually manage that ecosystem. So that was the first story. The second story was with Michelin. Michelin looked at changing their value proposition by serving the function behind the product, not just selling the product, going to customers with a longer term relationship and charging for performance, ultimately for kilometers first, then for performance. And then Airbnb thought of looked at their customers not just in the standard way, but starting to uncover these higher order needs and working to now helping their customers climb the pyramid through new value proposition and ultimately a new business model. So this is a little bit the vision, I think, the interest we have with these stories, 21st century business models as we call them now, we've talked about three themes today. New ecosystems and value chains, servitization and performance. High order needs. I think there's many other themes like that that we could talk about. You know, three that come to mind is how do you build communities in interesting ways. The whole theme of circular economy, which is certainly becoming very big in Europe, and the whole idea of, you know, behavior change, helping people change, helping companies change, I think is very big. There's a lot more you could imagine. That's just a starting list which we find interesting. So that's, I think what I had to share and I think Kavi, over to you and let's see if we can have a bit of a conversation, see if there's any questions.

Awesome. Thanks, Greg. Just a reminder to everyone who's in the session right now, we will be providing a recording of the webinar. We won't be providing the slides, but we will be providing a recording. If you had a technical glitch and you had to drop out and come back in again, you'll be able to catch up on any of the parts that you missed. So, Greg, I have a couple of questions here that have come through. We might not have enough time to get through all of them, but let's take a few. One of the first is a pretty broad question for you, but what is the difference between strategy and business model for you?

Okay, good question. So I think your business model Is your strategic roadmap strategy, broadly, is.

Where.

And where are you going to play in which particular market, with which customers, with which assets, and how are you going to do that? And I think if you look at your business model, it basically translates that aspiration into a map in order for you to be able to do that. So I think the business model, especially if you use the business model canvas, becomes the way to operationalize your strategy, I would say.

Awesome. Let's jump into something that came out of your Michelin case. When you talked about Michelin evolving their models, do you think they knew it would work, build it and sell it, or do you think they work with one or two pilot customers to run some tests or were there other approaches? Do you think it was a bit of a shot in the dark?

Yeah. So what I know about it is that it actually took them 10 years to get the model profitable. So they tweaked a lot. The partners that they were working with, trying something with one partner, realizing it doesn't work, starting with a new one, talking to customers a lot, observing customers, spending a lot of time with them. So definitely not a big plan where we design the strategy in a workshop room and then go out and implement had to be a trial and error process. I don't know if they went in very consciously into that trial and error process. I think this, this is, you know, 10, 15 years ago now when they started. So I'm assuming that they learned a lot on the way and if they had to start again, could do it a lot more systematically. This whole idea of trial and error.

From what you understand when you studied that case, do you think, how do you think the shift of Michelin was perceived from a tire provider to a fleet manager.

By the customer? So I mean, I think from every angle it's, you know, it's a success story. And you know, obviously from the point of view of Michelin being able to differentiate themselves from the point of view of the regulator, seeing that, you know, there's innovation in industries from. And obviously from the point of view of customers, because ultimately the. The business is successful. I think customers starting to understand and again, if you go on the website of Michelin, it's interesting, your costs are typically this. If you work with us, you pay us that much, but then you're going to have a saving of X amount of thousands of euros. I think they've developed a formula that becomes extremely attractive for customers. And you see it with the brand loyalty that customers kind of embrace with Michelin, are they Very happy. They don't need to think about all of these sort of pains that come along with the tire post and they can focus on their main business. So I think it's kind of a win, win, win strategy here. Win, win, win formula that they were able to create.

What's interesting is one of the comments that came through during the session is how do you sell to management the idea of selling fewer tires to change the model? Which leads to another question. Is it important for companies to sometimes compromise on the goal by first understanding the customer experience?

Yeah. So I think more than compromising is being open to seeing how you can create more value, ultimately also capture more value for your business in the long run. You know, my experience working with lots of different companies is that it's hard enough to create a new, to create a startup. Right. If you're an entrepreneur, you know this, it's very difficult. Figuring out what customers want and so on is difficult. But what I see with large companies especially is that the biggest resistance comes from insights, because you're starting to figure out a new way of approaching things, changing a market. And at the same time you have this big legacy organization that realizes that this is going to put everything upside down. So there's a lot of, of resistance by the big organization towards the startup effort. So if you're a CEO, more than compromising, I think the more positive way of looking at this is starting to see how you can craft some experiments and play with that and monitor these experiments as something that could become something interesting for the future.

Do you think good ideas in businesses can get lost because companies give up too early before really finding the business model that actually works?

Yes, I think so. Definitely. Same kind of, you know, I guess, comment as. Just for the question before there's, you know, large companies are not designed to nurture ideas so bad and good ideas, but how to nurture good ideas, it takes a different approach than running the business. We talk a lot about with the strategizer community, but these two sides of what you should be good at if you're a big company, one side is, you know, is about exploiting the business. You know, you have a running business, you need to do a good job at that. You don't want to undermine it. But at the same time, you need to have one side of the organization focusing on exploring the future. And so playing these two games in parallel with a different set of rules, different people, and figuring out the connections between the two, I think is an art that, you know, companies are.

Are.

Trying to do and I think that's the right thing moving forward.

Here's an interesting one Regarding your comments on the Circular Economy do you see any challenges for companies in using the Business Model Canvas for transitioning to a circular economy?

I think the so what the Business Model Canvas very good at is to show you the ways to map the strategy of your of your business if you and you know, you don't want too complex a canvas to try and do all of these different things. So what I think would work well and maybe doing another post or is to look at how you can use the Business Model Canvas in conjunction with some other frameworks that have been developed into for the circular economy. You know, life cycle flows and things like that. What I think will be interesting is how you can translate this kind of view of the environment and societal view as well into your strategy within the organization. That connection here I think is what makes the Circular Economy work for a business. And yeah, I think that's something maybe we can explore visually for one of the next ones.

On the session. And just wanted to remind audiences that the exclusive offer to webinar attendees is on the screen at the moment. If you're listening in in the next 48 hours you can get 15% off our master's Bundle, which is both the Mastering Business Models and Mastering Value Proposition Design courses. Simply go to strategizer.com training courses and when you make the purchase of the Master's Bundle, Type in Sept Webinar 2017 as the Coupon code. I will be sending this out in the email that goes that will come out to you in the next 24 hours in order to claim your coupon, but to also get the replay. So Greg, I want to thank you for taking the time to join us today. Thanks so much for everybody who came in. I'm sorry we couldn't get to all the questions, but maybe Greg that could be potential for future blog posts.

Thanks and thanks everyone.

Awesome. Good night everybody.

Bye bye.