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Business Innovation 1 > Patterns, Short Version (Pattern Cards) > Flashcards

Patterns, Short Version (Pattern Cards) Flashcards

1
Q

Add-on

A

The core offering is priced competitively, but there are numerous extras that drive the final price up. In the end, the customer pays more than they initially assumed. Customers benefit from a variable offer which they can adapt to their specific needs.

WHAT? VALUE?

Examples:
SAP, Ryanair

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2
Q

Affiliation

A

The focus lies on supporting others to sell products and directly benefiting from successful transactions. Affiliates usually profit from some kind of pay-per-sale or pay-per-display compensation. The company, on the other side, is able to gain access to a more diverse potential customer base, without additional active sales or marketing efforts.

VALUE? HOW?

Examples:
Uber, Amazon Affiliate Program (Place Links to amazon products)

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3
Q

Aikido

A

Aikido is a Japanese martial art in which the strength of an attacker is used against him. As a business model. Aikido allows a company to offer something diametrically opposed to the image and mindset of the competition. This new value proposition attracts customers who prefer ideas or concepts opposed to the mainstream.

WHAT? VALUE?

Examples:
The Body Shop, Nintendo Wii

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4
Q

Auction

A

Auctioning means selling a product or service to the highest bidder. The final price is achieved when a particular end time of the auction is reached or when no higher offers are received. This allows the company to sell to those customers who are willing to pay the highest price. This customer benefits from the opportunity to influence the price of a product and pay its value.

WHAT? VALUE?

Examples:
Ebay, Google AdWords

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5
Q

Barter

A

Barter is a method of exchange in which goods are given away to customers without the transaction of actual money. In return, they provide something of value to the sponsoring organization. The exchange does not have to show any direct connection and is valued differently by each party.

WHAT? VALUE?

Examples:
Miles&More (Lufthansa), Sponsoring

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6
Q

Cash machine

A

In the cash machine concept, the customer pays upfront for the products sold to the customer before the company is able to cover the associated expenses. This results in increased liquidity which can be used to amortize debt or to fund investments in other areas.

VALUE? HOW?

Examples:
Paypal, Dell

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7
Q

Cross selling

A

In this model, services or products from a formerly excluded branch are added to the offerings, thus leveraging existing key skills and resources. In retail especially, companies can easily provide additional products and offerings that are not linked to the main branch on which they were previously focused. Thus, additional revenue can be generated with relatively few changes to the existing infrastructure and assets, since more potential customers needs are met.

WHAT? VALUE? HOW?

Examples:
Shell Bistro, IKEA

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8
Q

Crowdfunding

A

A product, project or entire start-up is financed by a crowd of investors who wish to support the underlying idea, typically via the Internet. If a critical mass is achieved, the idea will be realized and investors receive special benefits, usually proportionate to the amount of money they provided.

VALUE? HOW?

Examples:
Oculus (VR headset), General Electric Appliances (Opal Nugget Ice Maker with Indiegogo)

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9
Q

Crowdsourcing

A

The solution of a task or problem is adopted by an anonymous crowd, typically via the Internet. Contributors receive a small reward or have the chance to win a prize if their solution is chosen for production or sale. Customer interaction and inclusion can foster a positive relationship with a company, and subsequently increase sales.

VALUE? HOW?

Examples:
Wikipedia, Hyperloop Pod Competition (SpaceX)

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10
Q

Customer loyalty

A

Customers and their loyalty are retained by providing them value beyond the actual product or service itself, ie through incentive-based programs. The goal is to increase loyalty by creating an emotional relationship or simply rewarding it with special offers. Customers are voluntarily bound to the company, which protects future revenue.

WHAT? VALUE?

Examples:
Amazon Prime, Delta (frequent flier program)

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11
Q

Digitalization

A

This pattern relies on the ability to turn existing products or services into digital variants, thus offering advantages over tangible products, eg easier and faster distribution. Ideally, the digitalization of a product or service is realized without harnessing the value proposition which is offered to the customer.

WHAT? WHO? VALUE? HOW?

Examples:
Hotmail, Amazon Kindle

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12
Q

Direct selling

A

Direct selling is where a company’s products are not sold through intermediary channels, but are available directly from the manufacturer or service provider. This way, the company skips the retail margin and any additional costs associated with the intermediates. These savings can be forwarded to the customer, while a standardized sales experience can be established. Additionally, the close contact can intensify the relationship with the customer base.

WHAT? VALUE? HOW?

Example:
Nestle Nespresso, Dell

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13
Q

E-Commerce

A

Traditional products or services are delivered through online channels only, thus removing costs associated with running a physical branch infrastructure. Customers benefit from higher availability and convenience, while the company is able to integrate its sales and distribution with other internal processes.

WHAT? VALUE? HOW?

Examples:
Alibaba, Amazon

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14
Q

Experience selling

A

The value of a product or service is increased with the customer experience offered with it. This opens the door for higher customer demand and commensurate increase in prices charged. This means that the customer experience must be adapted accordingly, eg by attuning promotion, shop, etc.

WHAT? VALUE? HOW?

Examples:
Starbucks, Red Bull

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15
Q

Flatrate

A

In this model, a single fixed fee for a product or service is charged, regardless of actual usage or time restrictions of the consumption. The user benefits from a simple cost structure while the company benefits from a constant revenue stream.

WHAT? VALUE?

Examples:
Netflix, Vodafone

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16
Q

Fractionalized ownership

A

Fractionalized ownership describes the sharing of a certain asset class among a group of owners. Typically, the asset is rather capital intensive but only needed on an occasional basis. While the customer does benefit from the rights he has as an owner, he does not have to provide the entire capital alone.

WHAT? WHO? VALUE? HOW?

Examples:
Mobility Carsharing, NetJets

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17
Q

Franchising

A

The franchisor owns the brand name, products and corporate identity, and these are licensed to independent franchises who carry the risk of local operations. Revenue is generated as part of the franchisees’ revenue and orders. The franchisees benefit from the usage of well known brands, know-how and support.

WHAT? VALUE? HOW?

Examples:
McDonald’s, Marriott International

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18
Q

Freemium

A

The basic version of an offering is given away for free, with the hope of eventually persuading the customers to pay for the premium version later on. The free offering is able to attract the highest amount of customers possible for the company. The generally smaller amount of paying “premium customers” generate the revenue, which also cross-finances the free offering.

WHAT? VALUE?

Examples:
DropBox, Spotify

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19
Q

From push-to-pull

A

This pattern describes the strategy of a company to decentralize, which adds flexibility to the company’s processes in order to be more customer-focused. To quickly and flexibly respond to new customer needs, any part of the value chain - including production or even research and development - can be affected.

WHAT? HOW?

Examples:
Zara, Toyota

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20
Q

Guaranteed availability

A

Within this model, the availability of a product or service is guaranteed, resulting in almost zero downtime. The customer can use the offering as required, which minimizes losses resulting from downtime. The company uses expertise and economies of scale to lower operation costs and achieve these availability levels.

WHAT? VALUE? HOW?

Examples:
Hilti Fleet Management (guaranteed repairment/replacement), IBM (maintaining computer infrastructure of customers)

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21
Q

Hidden revenue

A

The logic that the user is responsible for the income of the business is abandoned. Instead, the main source of revenue comes from a third party, which cross-finances whatever free or low-priced offering attracts the users. A very common case of this model is financing through advertisement, where the attracted customers are valuable to the advertisers who func the offering. This concept facilitates the idea of “separation between revenue and customer”.

WHAT? WHO? VALUE? HOW?

Examples:
Google, JCDecaux (“street furniture”)

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22
Q

Ingredient branding

A

Ingredient branding describes the specific selection of an ingredient, component, and brand originating from a specific supplier, which will be included in another product. This product is then additionally branded and advertised with the ingredient product, collectively adding value for the customer. This additionally projects the positive brand associations and properties onto the product, and can increase attractiveness of the end product.

WHAT? HOW?

Examples:
Intel Inside (high quality processors), Teflon

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23
Q

Integrator

A

An integrator is in command of the bulk of steps in the value-adding process. The control of all resources and capabilities in terms of value creation lies with the company. Efficiency gains, economies of scope, and low dependencies from suppliers result in a decrease of costs and can increase the stability of the value creation.

VALUE? HOW?

Examples:
Exxon Mobil (oil and gas corporation), Zara

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24
Q

Layer Player

A

A layer player is a specialized company limited to the provision of one value-adding step for different value chains. This step is typically offered within a variety of independent markets and branches. The company benefits from economies of scale and often produces more efficiently. Further, the established special expertise can result in a higher quality process.

WHAT? HOW?

Examples:
Paypal (only online payment in e-commerce), TRUSTe (data privacy management services)

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25
Q

Leverage customer data

A

New value is created by collecting customer data and preparing it in beneficial ways for internal usage or interested third parties. Revenues are generated by either selling this data directly to others or leveraging it for own purposes, ie to increase the effectiveness of advertisements.

VALUE? HOW?

Examples:
Facebook, Google AdWords

26
Q

License

A

Efforts are focused on developing intellectual property that can be licensed to other manufacturers. This model, therefore, does not rely on the realization and utilization of knowledge in the form of products, but attempts to transform these intangible goods into money. This allows a company to focus on research and development. It also allows the provision of knowledge, which would otherwise be left unused and potentially be valuable to third parties.

VALUE? HOW?

Examples:
IBM, TV Sports

27
Q

Lock-in

A

Customers are locked into a vendor’s world of products and services. Using another vendor is impossible without incurring substantial switching costs, protecting the company from losing customers. This lock-in is either generated by technological mechanisms or substantial interdependencies of products or services.

VALUE? HOW?

Examples:
Gillette, Microsoft

28
Q

Long tail

A

Instead of concentrating on blockbusters, the main bulk of revenues is generated through a “long tail” of niche products. Individually, these neither demand high volumes, nor allow for a high margin. If a vast variety of these products are offered in sufficient amounts, the small scale profits can add up to a significant amount.

WHAT? VALUE? HOW?

Examples:
iTunes/App Store, Amazon Store

29
Q

Make more of it

A

Know-how and other available assets existing in the company are not only used to build own products, but also offered to other companies. Slack resources, therefore, can be used to create additional revenue besides that which is generated directly from the core value proposition in the company.

WHAT? VALUE? HOW?

Examples:
Festo Didactic (automation specialist), Porsche Consulting

30
Q

Mass customization

A

Customizing products through mass production once seemed to be an impossible endeavor. The approach of modular products and production systems has enabled the efficient individualization of products. As a consequence, individual customer needs can be met within mass production circumstances and competitive prices.

WHAT? VALUE? HOW?

Examples:
Miadidas, Dell

31
Q

No frills

A

Value creation focuses on what is necessary to deliver the core value proposition of a product or service, typically as basic as possible. Cost savings are shared with the customer, usually resulting in a customer base with lower purchasing power or purchasing willingness.

WHAT? WHO? VALUE? HOW?

Examples:
Aldi, Ryanair

32
Q

Open business model

A

In open business models, collaboration with partners in the ecosystem becomes a central source of value creation. Companies pursuing an open business model actively search for novel ways of working together with suppliers, customers or complementors to open and extend their business.

VALUE? HOW?

Examples:
Valve Corporation (digital video game distribution platform Steam), Proctor & Gamble (Connect + Develop program)

33
Q

Open Source

A

In software engineering, the source code of a software product is not kept proprietary, bus it freely accessible for anyone. Generally, this could be applied for any technology details of any product. Others can contribute to the product, bus also use it free as a sole user. Money is typically earned with services that are complementary to the product, such as consulting and support.

WHAT? VALUE? HOW?

Examples:
Local Motors (design network for cars), Linux (service agreements and complementary software for Linux)

34
Q

Orchestrator

A

Within this model, the company’s focus is on the core competencies in the value chain. The other value chain segments are outsourced and actively coordinated. This allows the company to reduce costs and benefit from the supplier’s economies of scale. Also, the focus on core competencies can increase performance.

VALUE? HOW?

Examples:
Nike, Uber

35
Q

Pay per use

A

In this model, the actual usage of a service or product is metered. The customer pays on the basis of what they effectively consumes. The company is able to attract customers that want to benefit from the additional flexibility, which they are willing to pay higher prices for.

WHAT? VALUE?

Examples:
Car2Go, Rolls-Royce Turbines (power by the hour scheme)

36
Q

Pay what you want

A

The buyer pays any desired amount for a given commodity, sometimes even zero. In some cases, a minimum floor price may be set, and/or a suggested price may be indicated as guidance for the buyer. The customer is allowed to influence the price, while the seller benefits from higher numbers of attracted customers, since the individual’s willingness to pay is met. Based on the existence of social norms and morales, this is only rarely exploited, which makes it suitable to attract new customers.

WHAT? VALUE?

Examples:
Radiohead (band, album “in Rainbows”), Wikipedia Donation

37
Q

Peer-to-peer

A

This model is based on a cooperation that specializes in mediating between individuals belonging to a homogeneous group. It is often abbreviated as P2P. The company offers a meeting point, ie an online database and communication service, that connects these individuals. These could include offering personal objects for rent, providing certain products or services, or the sharing of information and experiences.

WHAT? VALUE? HOW?

Examples:
Kickstarter, Airbnb

38
Q

Performance-based contracting

A

A product’s price is not based upon its physical value, but on the performance or valuable outcome it delivers, in the form of a service. Special expertise and economies of scale result in lower production and maintenance costs of a product, which can be forwarded to the customer. Extreme variants of this model are represented by different operation schemes in which the product remains the property of, and is operated by, the company.

WHAT? VALUE? HOW?

Examples:
Xerox (printer supplier), Phillips Lighting (clients make payments on the actual savings generated by the LED lights)

39
Q

Razor and blade

A

The basic product is cheap, or given away for free. The consumables that are needed to use or operate it, on the other side, are expensive and sold at high margins. The initial product’s price lowers the customer’s barriers to purchase, while the following recurring sales cross-finance it. Usually these products are technologically bound to each other to further enhance this effect.

WHAT? VALUE? HOW?

Examples:
Hewlett-Packard (inkjet printer), Gillette

40
Q

Rent instead of buy

A

The customer does not buy a product, but instead rents it. This lowers the capital typically needed to gain access to the product. The company itself benefits from higher profits on each product, as it is paid for the duration of the rental period. Both parties benefit from higher efficiency in product utilization as time of non-usage, which unnecessarily binds capital, is reduced on each product.

WHAT? VALUE?

Examples:
Liebherr (equipment manufacturer), Xerox (photocopier manufacturer)

41
Q

Revenue sharing

A

Revenue sharing refers to firms’ practice of sharing revenues with their stakeholders, such as complementors or even rivals. Thus, in this business model, advantageous properties are merged to create symbiotic effects in which additional profits are shared with partners participating in the extended value creation. One party is able to obtain a share of revenue from another that benefits from increased value for its customer base.

WHAT? VALUE?

Examples:
Uber, App Store

42
Q

Reverse engineering

A

This pattern refers to obtaining a competitor’s product, taking it apart and using this information to produce a similar or compatible product. Because no huge investment in research or development is necessary, these products can be offered at a lower price than the original product.

WHAT? VALUE? HOW?

Examples:
Gourmesso Coffee Capsules (can be used with Nespresso machines), Zalando (clone of Zappos)

43
Q

Reverse innovation

A

Simple and inexpensive products that were developed in and for emerging markets are also sold in industrial countries. The term “reverse” refers to the fact that new products are typically developed in industrial countries and are then adapted to fit emerging market needs.

WHAT? HOW?

Examples:
Renault Dacia Logan, Nokia (Nokia 1100)

44
Q

Robin Hood

A

The same product or service is provided to “the rich” at a much higher price than to “the poor”. Thus, the main bulk of profits are generated from the rich customer base. Serving “the poor” is not profitable per se, but creates economies of scale which other providers cannot achieve. Additionally, it has a positive effect on the company’s image.

WHAT? WHO? VALUE?

Examples:
TOMS Shoes (company donates for each shoes sold another pair to an impoverished person), One Laptop per Child (also One for One policy)

45
Q

Self-service

A

A part of the value creation is handed over to the customer in exchange for a lower price of the service or product. This is particularly suited for process steps that add relatively low perceived value for the customer, but cause high costs. Customers benefit from efficiency and time savings, while putting in their own effort. This can also increase efficiency, because in some cases the customer can execute a value-adding step quicker and more effectively than the company.

WHAT? VALUE? HOW?

Examples:
IKEA, McDonald’s

46
Q

Shop-in-shop

A

Instead of opening new branches, a partner is chosen whose branches can profit from integrating the company’s offerings in a way that imitates a small shop within another shop (a win-win situation). The hosting store can benefit from more attracted customers and is able to gain constant revenue from the hosted shop in the form of rent. The hosted company gains access to cheaper resources such as space, location or workforce.

WHAT? VALUE? HOW?

Examples:
Tchibo (located in supermarkets), Bosch (retails spaces within other stores)

47
Q

Solution provider

A

A service provider offers total coverage of products and services in a particular domain, consolidated via a single point of contact. Special know-how is given to a customer in order to increase their performance. By becoming a full service provider, a company can prevent revenue losses by extending their service and adding it to the product. Additionally, close contact with the customer allows great insight to customer habits and needs which can be used to improve the products and services.

WHAT? VALUE? HOW?

Examples:
TetraPak, SAP

48
Q

Subscription

A

The customer pays a regular fee, typically on a monthly or annual basis, in order to gain access to a product or service. While customers usually benefit from lower usage costs and general service availability, the company generates a more steady income stream.

WHAT? VALUE?

Examples:
Blacksocks, Netflix

49
Q

Supermarket

A

A company sells a large variety of readily available products and accessories under one roof. Generally, the assortment of products is large but the prices are kept low. More customers are drawn due to the great range on offer, while economies of scope yield advantages for the company.

WHAT? VALUE? HOW?

Examples:
The Home Depot, Amazon

50
Q

Target the poor

A

The product or service offering does not target the premium customer, but rather, the customer positioned at the base of the pyramid. Customers with lower purchasing power benefit from affordable products. The company generates small profits with each product sold, but benefits from the higher sales numbers that usually come with the scale of the customer base.

WHAT? WHO? VALUE? HOW?

Examples:
Grameen Bank (small scale loans with conditions), Tata Nano (low-cost Car for impoverished people in India)

51
Q

Trash-to-cash

A

User products are collected and either sold in other parts of the world or transformed into new products. The profit scheme is mainly based on low to no purchase prices. Resources costs for the company are almost eliminated and, at the same time, the supplier’s waste disposal is actually provided, or associated costs are reduced. This also addresses potential environmental awareness ideals that customers might have.

WHAT? VALUE? HOW?

Examples:
Freitag Lab, H&M Recycling Program

52
Q

Two-sided market

A

A two-sided market facilitates interactions between multiple interdependent groups of customers. The value of the platform increases as more groups or individual members use it. The two sides usually come from distinguished groups, eg businesses and private interest groups.

WHAT? WHO? VALUE? HOW?

Examples:
Diners Club (credit card company), TripAdvisor (serves customers and advertisers)

53
Q

Ultimate Luxury

A

This pattern describes the strategy of a company to offer customers high-end solutions in return for maximum purchase prices. Companies use high standards of quality or exclusive privileges in order to distinguish themselves from others and attract customers willing to pay for the “Ultimate Premium”. The necessary investments for these differentiations are met by the relatively high prices that can be achieved - which usually allows for very high margins.

WHAT? WHO? VALUE? HOW?

Examples:
Lamborghini, Pattek Phillipe (watch manufacturer)

54
Q

User designed

A

Within user manufacturing, a customer is both the manufacturer and the consumer. As an example, an online platform provides the customer with the necessary support in order to design and merchandise the product, eg product design software, manufacturing services or an online shop to sell the product. The customer benefits from the potential to realize entrepreneurial ideas without having to provide the required infrastructure. Revenue is then generated as part of the actual sales.

WHAT? WHO? VALUE? HOW?

Examples:
Lego Factory, Threadless (e-commerce website for custom designs on eg clothing)

55
Q

White label

A

A white label producer allows other companies to distribute its goods under their brands, so that it appears as if they are made by them. The same product or service is often sold by multiple marketers and under different brands. This way, the various customer segments can be satisfied with the same product.

WHAT? HOW?

Examples:
Richelieu Foods, Foxconn (components for Apple, Dell, Intel)

56
Q

Sensor as a Service

A

The use of sensors permits additional services for physical offerings, or wholly new independent services. It is not the sensor that generates the primary revenue, but the analysis of the data that the sensor creates. Possibilities for real-time information can further strengthen the value proposition.

WHAT? WHO? VALUE? HOW?

Examples:
Streetline (smart parking systems), Google Nest (self-learning thermostat)

57
Q

Virtualization

A

This pattern describes the imitation of a traditionally physical process in a virtual environment, eg a virtual workspace. The advantage for the customer is the ability to interact with the process from any location or device. In exchange, the customer pays for access to the virtual service.

WHAT? HOW?

Examples:
Amazon Workspaces (desktop into the cloud), DUFL (packs and virtually ships suitcase to travel destination).

58
Q

Object Self-Service

A

Through the use of sensors and inclusion in an IT-structure, an object can generate orders by itself. This makes fully automated processes like replenishment possible, and increases the speed of interaction with the object. The customer is locked in, giving rise to recurrent revenue.

WHAT? VALUE? HOW?

Examples:
Würth iBin, Felfel

59
Q

Object as Point of Sale

A

The point of sale of consumables moves to the point of consumption. This generates a stronger lock-in and results in higher customer retention. When the point of sale is shifted away from competing products, the customer becomes less sensitive to price.

HOW?

Examples:
Amazon Dash (ordering groceries), Ubitricity (billing when recharging electric vehicles)

60
Q

Prosumer

A

Companies enable customers to become producers themselves. The customer is integrated into the value chain and can profit from the resulting product, while the company has fewer investment costs for production and overhead. Since the consumer has a hand in production, the perceived value of the product increases.

WHAT? VALUE? HOW?

Examples:
Smart Grids (independent energy community), Blockchain (protocol of distributed ledger)

Business Innovation 1 (2 decks)

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