Many start-ups experience enormous popularity and runaway growth, but only a few go on to become stable giants. What separates them from the pack? They all go through a developmental stage called extrapolation, say three business school professors. This stage isn't part of traditional organizational theory, which holds that businesses begin in exploration mode (testing out hypotheses about how they'll solve problems and learning whether people will pay for their solutions) and then move into exploitation mode (as growth slows and they fine-tune their business models to sharpen their advantage). But between those two well-known stages is the crucial extrapolation stage. During it, a company both explores and exploits. And most significantly, it works to ensure that each new customer brings in additional revenue while incurring only marginal cost-the secret to lasting, profitable growth. A new enterprise needs multiple strengths to navigate this phase-such as a proven monetization approach, a strong go-to-market strategy, network and density effects, and capital. It also must systematically identify and remove internal business-model constraints on growth that could prevent it from achieving scale.
The case "Wild Herbs Grow Tall - Mastering Structural Change in Lusatia" describes how entrepreneur Christina Grätz carves out a niche in the re-cultivation of landscapes in post-mining areas in her native region of Lusatia in Eastern Germany. After having established a thriving B2B business with wild herbs, she explores the possibility of entering the B2C market with a new business line. After several iterations and pivoting, she and her partners set up an online platform for direct web-based sales of organic herbal salts. However, the new company shows a lackluster performance - potentially due to the lack of experience in the online B2B marketing strategy.
The case "Wild Herbs Grow Tall - Mastering Structural Change in Lusatia" describes how entrepreneur Christina Grätz carves out a niche in the re-cultivation of landscapes in post-mining areas in her native region of Lusatia in Eastern Germany. After having established a thriving B2B business with wild herbs, she explores the possibility of entering the B2C market with a new business line. After several iterations and pivoting, she and her partners set up an online platform for direct web-based sales of organic herbal salts. However, the new company shows a lackluster performance - potentially due to the lack of experience in the online B2B marketing strategy.
Launched in East Africa, M-KOPA is an innovative pay-as-you-go solar system that provides reliable energy to low-income households. To serve these customers profitably, M-KOPA's solution relies on digital innovation and the integrated adaptation of every element business model, including a new profit model akin to the data-driven platform models of the likes of Amazon and Tencent. The founders' challenge was how best to continue growing their for-profit business in the face of new competition, while staying true to M-KOPA's social mission and values.
In recent years, "design thinking"has become popular in many industries as established companies have tried to apply designers'problem-solving techniques to corporate innovation processes. Key elements of the design thinking methodology include fast iterations; early and frequent interaction with customers; agile process design with less hierarchy; and a learning-by-doing approach that involves building prototypes and creating mock-ups of any kind as early as possible in the process. Over the past seven years, the authors have helped more than 20 companies pursue more than 50 design thinking initiatives and have found that such initiatives rarely proceed according to the textbook model. Innovation, they note, is an inherently messy process that conflicts in many ways with established companies'processes, structures, and corporate cultures. For example, they note, many established companies punish failure, which discourages the risk-taking design thinking requires. What's more, the design thinking methodology calls for egalitarian, self-organized teams, but this isn't how most large companies work. In fact, the design thinking teams the authors studied tended to have clear process and project owners, usually senior managers who often supervised 12 to 15 design thinking projects at a time. The authors argue that companies need to take five steps to take full advantage of the potential of design thinking. They recommend that companies (1) encourage top managers to champion design thinking initiatives, (2) balance intuitive and analytical thinking on design thinking teams, (3) set ground rules that give design thinking teams the autonomy they need to function well, (4) integrate design thinking into the company's product development processes, and (5) focus on learning rather than on profits as metrics for design thinking projects.
Launched in early 2005, Zopa is a peer-to-peer online brokerage that couples British residents who want to lend with those who want to borrow. The company represents a new business model in the retail financial services industry, and since Zopa is not technically a bank and does not lend money itself, the capital requirements to run the business are relatively small. Compared to a traditional full service bank Zopa concentrates on only a few steps of the value chain. This case study provides an overview of how Zopa, a value innovator, has developed a unique position in the market through an innovative business model. This case enables students to develop a good understanding of the elements of a value innovation and how technologies have the potential to shake up an established industry structure and its key players. Students also get to discuss the sustainability of competitive advantage in a business in which network effects play an important role. Finally, the case can be used to address the topic of how incumbent firms should respond to innovative new business models.
In 2008 Joe Justice saw the announcement for the Progressive Insurance X Prize-a $10 million prize aimed at the (im)possibility to build a 100 miles per gallon (mpg) car to road-legal safety specifications. Joe persuaded his wife to use their college grad savings of $5,000 to pay the registration fee. He started the work alone but blogged about what he was doing and what he was learning. Through social networking tools like Facebook and WordPress bloggers who shared his interest learned about his project. Some of these people joined Joe in his endeavor to tackle the challenge. Only three months later, Wikispeed had been formed. It counted 44 members in four countries, and had a functioning prototype which was entered in the X Prize competition. In 2010 they came in 10th in the mainstream class, outrunning more than one hundred other cars from well-funded companies and universities around the world. Following the press reaction to the success of team Wikispeed in 2011 they were invited to showcase their concept car at the Detroit auto show, the largest motor show in the world. Their car, the SGT01, was put on display in Cobo Hall right next to Ford and Chevrolet. Wikispeed was contacted by more than a hundred people who were interested in joining the team as well as in ordering the prototype. By 2013, more than five hundred people had joined team Wikispeed. They had also sold nine prototypes. The immediate issue of the case study is the decision whether the team should use a pair of existing axles, cut and welded them together to the right length for the next iteration of their prototype or develop their own pair of axles from scratch. More fundamentally, this case study looks at the way team Wikispeed used tools from the world of software development, such as modularity, which they call object-oriented architecture, scrum, and extreme manufacturing (XM) to organize their innovation efforts.
The case is set in February 2008. Stefan Tammler, head of the chassis systems control division (CC) of Robert Bosch GmbH (Bosch), has to make a decision about the location for the development of the new anti-lock braking system (ABS) for the low-price vehicle (LPV) segment. The case begins with a short introduction outlining the situation. It gives a detailed background on Bosch, especially the chassis systems control division. The main part of the case focuses on the global product development strategy, highlighting especially the two development sites in Suzhou, China, and Yokohama, Japan. Furthermore, the Chinese car market is described in detail, with special emphasis on the LPV segment.
The case is set in November 2007. Matthias Rebellius, head of the business unit Fire Safety and Security Products, has to make a decision about the China strategy for the fire systems unit. Siemens has a very strong position globally in fire systems. Especially in developed markets, in the so-called M1 segments, Siemens is often number one or two. But worldwide and especially in China, the so-called M2 and M3 markets (Siemens terminology) had strong growth, but Siemens was not very well positioned in these segments of the market. The case begins with a short introduction outlining the situation. It then gives a detailed background on Siemens, especially the operating division Building Technologies (BT), and within BT the business unit Fire Safety & Security Products (FS). The case illustrates that the BT division was mainly active in mature, developed markets with slow growth rates. At the same time, there was an aggressive goal of achieving annual growth rates of more than five percent with an EBIT margin of 7 to 10%.
By operating in war zones, urban slums, and deep rural areas, companies could not only achieve growth and profits, but could also improve the economic and social conditions of these impoverished regions. Yet how can a company operate in areas with unstable security, poor infrastructure, and little or no formal legal frameworks in place? To do so successfully, companies need to go beyond transactional alliances or legalistic business partnerships with local partners. Instead, they need to develop community buy-in and long-term personal relationships based on trust with "unorthodox" local inhabitants-the ones offering them security and protection rather than technology and business assets. Such deep social embeddedness is not cost-free. To prevent it from derailing their success, companies need to nurture and grow their local partners beyond their specific needs.
On September 15 and 16, 2008, the British artist Damien Hirst broke all rules of the art market. He bypassed conventional distribution channels - dealers and gallery owners - by directly partnering with Sotheby's auction house - and with their help successfully sold more than 200 pieces of his works. Sotheby's auctioned art works which were less than two years old, which was another break from tradition. Hirst earned more than £110 million from the auction - in the midst of a global economic crisis and on the same day that the Lehman Brothers Investment house collapsed.
Slowly but surely, modern managers are realizing that the complex situations they face cannot be approached in a routine manner. Indeed, the quest for creative solutions has become pervasive. But for creativity to truly add value to an organization, managers must first understand its core principles. In this article the authors define those principles, which include personal creativity, process creativity and collective creativity. They also highlight the critical role that imagination, inspiration and intuition still have to play in modern business.
This case study provides a discussion of how Virgin Mobile, an innovative virtual mobile network operator, has developed a unique position in the UK market through unique positioning and strong business system fit. The first section of the case discussion focuses on the rather innovative Virgin Mobile's business model and strategy and the firm's underlying business activities that provided a uniquely differentiated positioning in the UK mobile telecommunications sector up until mid 2005. The second section explores how Virgin Mobile was able to achieve sustainable competitive advantage over the period from 1999 to 2005, but then turns to an analysis of how the firm's competitive advantage has been eroded by changes in regulation and a shift in the competitive environment.
This is a two part case study that explores Celtel Nigeria's innovative approach to serving the rural poor. Case A provides an overview of the mobile telecommunications market in Nigeria as of mid 2007, as well as detailed demographic and socioeconomic information. At the time of the case, Celtel Nigeria is the second largest mobile telecommunications company in the Nigerian market. The company has experienced considerable success in serving Nigeria's cities and larger towns, but has only recently shifted its attention to serving poorer consumers in rural areas - a massive but as of yet under tapped market. But this shift from urban to rural has not been easy, and although some 50% of Nigeria's population lives in rural regions the challenges of reaching them sometimes seem overwhelming. The absence of a reliable national electricity grid means that the company's rural telecommunications towers have to be run on diesel generators, resulting in high maintenance and diesel fuel costs. Theft and vandalism of expensive communications equipment and generators has emerged as a major concern, resulting in the need to employ full-time security guards on virtually every base station site outside of urban areas. At the end of case A, Celtel Nigeria's chief operating officer Lars Stork is pondering the challenges of bringing the benefits of mobile telecommunications to Nigeria's rural poor, setting the scene for analysis by students in suggesting potential route to market approaches for the company. Case B demonstrates how Celtel has been able to implement a highly innovative marketing strategy to serve low-income rural customers. At the heart of this marketing approach is what is called the Rural Acquisition Initiative (RAI), a micro-franchising model involving partnerships with local entrepreneurs.
This is a two part case study that explores Celtel Nigeria's innovative approach to serving the rural poor. Case A provides an overview of the mobile telecommunications market in Nigeria as of mid 2007, as well as detailed demographic and socioeconomic information. At the time of the case, Celtel Nigeria is the second largest mobile telecommunications company in the Nigerian market. The company has experienced considerable success in serving Nigeria's cities and larger towns, but has only recently shifted its attention to serving poorer consumers in rural areas - a massive but as of yet under tapped market. But this shift from urban to rural has not been easy, and although some 50% of Nigeria's population lives in rural regions the challenges of reaching them sometimes seem overwhelming. The absence of a reliable national electricity grid means that the company's rural telecommunications towers have to be run on diesel generators, resulting in high maintenance and diesel fuel costs. Theft and vandalism of expensive communications equipment and generators has emerged as a major concern, resulting in the need to employ full-time security guards on virtually every base station site outside of urban areas. At the end of case A, Celtel Nigeria's chief operating officer Lars Stork is pondering the challenges of bringing the benefits of mobile telecommunications to Nigeria's rural poor, setting the scene for analysis by students in suggesting potential route to market approaches for the company. Case B demonstrates how Celtel has been able to implement a highly innovative marketing strategy to serve low-income rural customers. At the heart of this marketing approach is what is called the Rural Acquisition Initiative (RAI), a micro-franchising model involving partnerships with local entrepreneurs.
Launched in early 2005, Zopa is a peer-to-peer online brokerage that couples British residents who want to lend with those who want to borrow. The company represents a new business model in the retail financial services industry, and since Zopa is not technically a bank and does not lend money itself, the capital requirements to run the business are relatively small. Compared to a traditional full service bank Zopa concentrates on only a few steps of the value chain. This case study provides an overview of the financial service industry, especially banks, in the UK in 2006 and how Zopa, a value innovator, has developed a unique position in the market through an innovative business model. Rich data especially on banking trends are given. Additional data on key players in the industry are supplied. This data will enable students to develop a good understanding of the elements of a value innovation and how technologies have the potential to shake up an established industry structure and its key players. A focus is on the concept of value innovation and sustainable competitive advantage. The case can also be used to address the topic of how incumbent firms should respond to innovative new business models.