Johnson et al (2008)

Question 1

What are the main argument of Johnson et al (2008)

Answer 1

• Radical products rarely emerge in steady-state structures and established businesses
• New products usually need radically new business models, i.e. resources, processes, offerings, value propositions
• Problem can be managed by;
• Understand your existing BM at a granular level so that you are in position to reinvent it
• And Come up with a great way to help people get an important job done

Question 2

What are the two solutions of Johnson et al (2008) in order to make business model innovations

Answer 2

It’s possible to transcend the problem, if you can:

• Understand your existing model at a granular level – you can reinvent it
• Come up with a great way to help people get an important job done.

Question 3

How does Johnson et al suggest you to know when to develop the business model or when to create a new one?

Answer 3

1. Develop a strong customer value proposition
2. Construct a **profit formula **
3. Compare the new model to the current one

Question 4

According to Johnson et al (2008), what are the four elements of a Business Model? How are they intertwined?

Answer 4

1. Value proposition
2. Profit Formula
3. Key Resources
4. Key Processes

• 1 & 2 define value for customer & firm, while 3 & 4 describe how that value will be delivered.
• Profit formula is affected by (and affects) all others.
• Value proposition is affected by (and affects) only profit formula.
• Key processes is affected by (and affects) Profit formula and Key resources.
• Key resources are affected by (and affects) Key processes and Profit formula

Question 5

When should you change the existing business model, according to Johnson et al (2008)

Answer 5

Only when changes to all four components (Value proposition, Profit formula, Key resources and Key processes) are needed

Question 6

What are the five strategic circumstances requiring BM innovation?

(Johnson et al, 2008)

Answer 6

• Opportunities to address large groups of customers
• Capitalise on new technology
• New ”jobs-to-be-done” opportunities
• The need to fend off low-end disrupters
• Avoid commoditisation

Question 7

What does Johnson et al (2008) mean by Value Proposition? Give examples!

Answer 7

* Target customer
* Job to be done
* Offering

IKEA example:
* The common man
* With limited resources
* With lack of time

Question 8

What does Johnson et al (2008) mean by Profit formula? Give examples!

Answer 8

• Revenue model (price x volume)
• Cost structure (direct, indirect, scale advantage, synergy)
• Margin model (profit at each sell)
• Resource velocity (stock, capital, fixed assets)

IKEA example:
* Large scale, radical outsourcing, easy replication
* Urban yet not central/expensive
* Tough on suppliers, price/quality

Question 9

What does Johnson et al (2008) mean by Key Resources? Give examples!

Answer 9

• People
• Technology and equipment
• Information
• Channels and alliances
• Brands

IKEA example:
* Mean with money
* ”Sufficient” asset base
* Strong and thought through channel management

Question 10

What does Johnson et al (2008) mean by Key Processes? Give examples!

Answer 10

• Processes (value chains)
• Control (rules and metrics)
• Norms

IKEA example:
* Short value chain
* Design, procurement, store/stock
* Presumably tough on a variety of control mechanisms
* Norms: quite strong on ”money” and efficiency