Lecture Notes on Business Models and Innovation

Low-Key Threatening and Persuasion

The information presented in the last domain is generally more impactful, making it easier for the audience to consider change. This involves subtly suggesting that the status quo is at risk, implying that change is necessary to avoid losing out.

Business Model Canvas Analysis

Participants submitted three business model canvases:

  1. Team-level canvas

  2. Competitor analysis canvas

  3. Own business model canvas (a refined version of canvas one)

Activity: Canvas Review

  • Teams reviewed Canvas 3 to identify the best additions or revisions to incorporate into the final presentation.

  • Teams analyzed Canvas 2 (competitor analysis) to understand the competitive landscape.

  • The aim was to identify key improvements and understand competitor dynamics.

Team Discussion and Improvement

Teams selected the best improvements from individual Canvas 3 submissions to enhance their original Canvas 1. This involved strategically picking elements from different team members' ideas rather than adopting a single person's canvas entirely.

Competitor Analysis Dynamics

By combining all Canvas 2 submissions, a comprehensive view of the competitor dynamics was achieved. This provides insights into the strategies and positioning of major competitors.

Internal Use of Business Model Canvas

The business model canvas is primarily for internal use as a dashboard. It allows for parameter adjustments (e.g., adding new customer segments) and helps understand the interconnectedness of various elements (channels, costs, revenue streams).

  • Caution: The business model canvas should not be presented directly in the final presentation as it lacks detailed information about the product and its features.

Final Presentation Structure: Essential Lego Blocks

The final presentation should include specific elements, but the order and additional content can be tailored to fit the story.

  1. Problematization: Identify a problem that people need to solve and frame it as a necessity, not just a want. This involves understanding what people desire and presenting it back to them as a critical need.

  2. Fitting Solution and MVP: Present the Minimum Viable Product (MVP) and key features. Share team members' MVPs within team discussions, and select the best one efficiently.

  3. MVP Feedback: Gather feedback on the MVP from potential users (classmates, family, etc.). Assess whether users like the product, what they appreciate, and if they would pay for it. Also, identify any issues or areas for improvement.

  4. Market Size: Quantify the market size in terms of user numbers and dollar value. Use statistics and socio-economic indexes from reliable sources.

  5. Competitor Analysis (Canvas 2):

    • Combine all competitor canvases to identify similarities and unique elements.

    • Use Cartesian coordinates to plot competitors based on key factors (e.g., price vs. product selection) to identify market gaps.

    • Alternatively, use a tabular format to compare features across competitors, highlighting advantages.

      \begin{tabular}{|c|c|c|c|c|} \hline & \textbf{You} & \textbf{Competitor A} & \textbf{Competitor B} & \textbf{Competitor C} \ \hline \textbf{Pricing} & Best & & & \ \hline \textbf{Product Selection} & Best & & & \ \hline \textbf{Free Trial} & Best & & & \ \hline \textbf{Premium Features} & Best & & & \ \hline \end{tabular}

  6. Generative AI Integration: Explore how current commercial AI can improve features. Also, consider the negative externalities of AI (hallucinations, biases) and potential countermeasures.

  7. Sustainable Competitive Advantage: Highlight team resources and capabilities, focusing on valuable, rare, inimitable, and non-substitutable aspects (VRIN framework). Emphasize rarity, even in weak points.

Grading Criteria for Presentation

  1. Problem/solution fit.

Presentation Details

  • 10-minute presentation with a 5-minute Q&A session.

  • This checklist is meant to help students prepare for their final presentations. It includes guidelines, tips, and best practices on how to structure the presentations effectively.

Innovation and Externalities

Innovation involves both technical feasibility and economic viability (commercialization). It extends beyond new products to include new methods of production, market openings, supplier identification, and organizational structures.

Types of Innovation

  1. Incremental Innovation:

    • Small changes or improvements to existing products or services.

    • Targets existing markets with existing technology.

    • Example: Next generation of the iPhone with slightly better specs.

  2. Radical Innovation:

    • Entirely new products or services that are significantly different.

    • May involve a completely new product category.

    • Example: Apple Vision Pro.

  3. Disruptive Innovation:

    • Targets existing markets with new technology.

    • Disrupts the existing market dynamics.

    • Example: Wireless chargers for smartphones.

  4. Architectural Innovation:

    • Targets new markets using existing technology.

    • Combines existing technologies to create new market opportunities.

    • Example: Mobile chargers combined with wireless charging.

\begin{array}{|c|c|c|} \hline & \textbf{Existing Technology} & \textbf{New Technology} \ \hline \textbf{Existing Market} & \text{Incremental Innovation} & \text{Disruptive Innovation} \ \hline \textbf{New Market} & \text{Architectural Innovation} & \text{Radical Innovation} \ \hline \end{array}

Case Studies of Innovation

  1. Theranos (Elizabeth Holmes):

    • Initially claimed as a disruptive innovation (better product in an existing market).

    • Later found to be false due to non-existent technology.

  2. 23andMe:

    • Genetic mapping service.

    • Considered a radical innovation at the time due to breakthrough technology.

  3. Lockheed Martin’s Hybrid Airship (P-791):

    • Architectural innovation combining existing technologies.

    • Failed due to unclear market definition.

  4. DJI Drones:

    • Architectural innovation creating a civilian market for drone technology.

Negative Externalities of Innovation

  • Consider potential unintended and undesirable user scenarios when developing new products or features.

Drones and Negative Externalities Examples

  1. Dresden, Germany (2015): A drone approached Angela Merkel at a political convention, highlighting security breaches.

  2. White House Incident: A government employee lost control of a drone, which flew into the White House.

  3. Tokyo Incident: A drone containing soil from Fukushima flew near the Prime Minister’s residence as a protest.

Negative Externalities of AI

Perverse Incentives

A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the intentions of its designers.

Example: AI recommending starting a business without considering the low success rate.

Bias Amplification

AI systems trained on biased data can intensify existing biases in decision-making.

Data Transparency

Lack of data transparency in AI training can lead to constant hallucinations and compliance issues.