The Network Multiplier - A 2.5 Day Program
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The document outlines an agenda and curriculum for a Wharton Fellows program focusing on business model innovation and network multipliers, led by Yoram Wind and Barry Libert. It emphasizes the importance of challenging mental models and adapting business strategies to leverage digital technologies and dormant networks. Key lessons include identifying and transforming business models, understanding the implications of empowered consumers, and engaging in adaptive experimentation for organizational growth.
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• Challenges
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The Network Multiplier - A 2.5 Day Program
- 1. Yoram (Jerry) Wind The Lauder Professor and Professor of Marke9ng Director, SEI Center for Advanced Studies in Management Academic Director, Wharton Fellows Program windj@wharton.upenn.edu Presented to Wharton Fellows Jerry Wind, SEI Director Barry Libert, SEI Senior Fellow October 29-‐31st. 2014 1 copyright, OpenMaVers, LLC
- 2. The material in this curriculum is the property of Wharton’s SEI Center and OpenMa<ers, LLC and shall not be reproduced and/or distributed without our express authorizaDon 2 copyright, OpenMaVers, LLC NOTICE
- 3. Agenda for Wednesday evening, 10/29/2014 5:00-‐7:00pm I. Wayfair 7:00-‐7:30pm Travel 7:30-‐9:00pm II. Introduc0on, dinner, ini0al design of a supply network, group presenta0ons and discussion 3 copyright, OpenMaVers, LLC
- 4. 8:00-‐8:30am I. Introduc0on: Key challenges facing the par0cipants 8:30-‐9:30am II. Iden0fying and challenging your mental models 9:30 -‐9:45am Break-‐out Teams: Iden9fying and challenging the mental model underlying your business and revenue models 9:45-‐10:00am Break 10:00-‐10:15am III. Business models, Mul0pliers, and innova0on 11:15-‐11:30am Break-‐out Teams: Iden9fying your business models 11:30-‐12:00pm Group reports and discussion 12:00-‐1:00pm Lunch 1:00-‐2:00pm V. Transforming your business model to achieve the Network Mul0plier 2:00-‐2:15pm Break-‐out Teams: Transforming your business models 2:15-‐2:45pm Group reports and discussion 2:45-‐3:30pm VI. Reflec0ons and ac0on plans 3:30-‐6:30pm FIELD TRIP: Acquia 6:30-‐9:00pm FIELD TRIP: The Media Lab -‐-‐ Andrew Lippman Agenda for Thursday, 10/30/2014 4 copyright, OpenMaVers, LLC
- 5. Agenda for Friday, 10/31/2014 8:00-‐9:00am I. Adap0ve experimenta0on and designing and organiza0onal architecture for network orchestra0on 9:30-‐12:00pm FIELD TRIP: Kayak 12:00-‐3:00pm FIELD TRIP: Berklee 3:00-‐4:00pm IV. Break-‐out Teams: Group and individual plans for a network experiment 4:00-‐5:00pm V. Presenta0on of plans and discussion 5:00-‐6:00pm VI. Final reflec0ons and conclusion 5 copyright, OpenMaVers, LLC
- 6. Summary thoughts 1 Key premise: Digital technologies together with new mental models drive new business models 2 Best pracDces: Every organizaDon has dormant networks that they can acDvate to drive value 3 (Really 4) steps: To drive value in today’s digital and networked age 6 copyright, OpenMaVers, LLC
- 7. Lessons from Wayfair Wednesday evening, 10/29/2014 A U.S.-‐based mul9na9onal e-‐commerce company. The company began selling furniture online in 2002, and now sells many other home furnishings, luggage, toys, and pet items. Year founded 2002 # employees 2,000 Market cap $2B Revenue $1.1B Mul9plier 1.94x Profit margin -‐5.29% Business model Asset Builder Fast facts 7 copyright, OpenMaVers, LLC
- 8. IniDal design of a supply network 8 copyright, OpenMaVers, LLC
- 9. It’s Thursday 9 copyright, OpenMaVers, LLC
- 10. I. Key challenges facing the parDcipants 10 copyright, OpenMaVers, LLC
- 11. A. Advances in Science, Technology, and Biology C. Broad Changes in the Business and regulatory Environment B. Emergence of the empowered Consumer, employee and investor And do your challenges reflect… 11 copyright, OpenMaVers, LLC
- 12. A. Advances in science and technology, such as… social networks… cloud… internet of things… home ecosystem of the future… wearable compuDng… Vigo – Human energy gauge MIT Human Dynamics Lab starts publishing in 1990 Nike+ FuelBand arDficial intelligence… Why Google is Involved in Deep Learning Mobile… personalized medicine... 12 copyright, OpenMaVers, LLC
- 13. B. Emergence of empowered consumers & B2B customers Converging on Communi0es: Let me be a part of it Converging on Channels: I want to call, click and visit Converging on Compe00ve Value: Give me more for my money Converging on Choice: Give me tools to make beSer decisions Converging on Customeriza0on and Personaliza0on: Make it mine Source: Wind and Mahajan, Convergence Marke9ng, Financial Times/Pren9ce Hall, 2001 more skep7cal than ever before 13 copyright, OpenMaVers, LLC
- 14. C. Other changes in the business environment • The changing global markets • Challenges facing socie9es • The changing regulatory environment • The changing compe99ve environment • The increasing importance of networks • The global risks [and opportuni9es] landscape 14 copyright, OpenMaVers, LLC
- 15. What are the implicaDons of all these challenges? 15 copyright, OpenMaVers, LLC ?
- 16. II. IdenDfy and challenge your mental models 16 copyright, OpenMaVers, LLC
- 17. To drive value, you have to challenge and change your… Mental models 17 copyright, OpenMaVers, LLC
- 18. à What are mental models? Let’s consider… What just happened? Robbery at Knifepoint Updated March 11, 2013 8:55am 18 copyright, OpenMaVers, LLC
- 19. The reality of the situaDon did not change, our mental model did! Our beliefs, actudes, feelings and behaviors are driven by our Mental Models, not reality. 19 copyright, OpenMaVers, LLC
- 20. Mental Models What is a mental model? Mental model From Wikipedia, the free encyclopedia A mental model is an explana9on of someone’s thought process about how something works in the real world. It is a representa9on of the surrounding world, the rela9onships between its various parts and a person’s intui9ve percep9on about his or her own acts and their consequences. Mental models can help shape behavior and set an approach to solving problems (akin to a personal algorithm) and doing tasks. 20 copyright, OpenMaVers, LLC
- 21. Challenging your mental models Inner City Alterna7ve Medicine Roger Bannister breaks the 4 Minute Mile on May 6, 1954 Source: Gallup Daily, April 2014 hVp://www.gallup.com/poll/poli9cs.aspx 21 copyright, OpenMaVers, LLC
- 22. What is common to these innovaDons? Napster Samsung SGH-‐E760 $2000 Car MIT’s Media Lab $100 laptop Apple iPad Microsoft Xbox 360 Kinect Google Glasses They changed the mental models of their industries. 22 copyright, OpenMaVers, LLC
- 23. Mental models and leadership over the ages Power Emo9onal Intellectual Network Technology Time 23 copyright, OpenMaVers, LLC
- 24. Four examples of mental and leadership models 24 copyright, OpenMaVers, LLC
- 25. The key points: “Without changing our pa<ern of thought, we will not be able to solve the problems we created with our current pa<ern of thought.” -‐ Albert Einstein • Mental Models are cri7cal. 25 copyright, OpenMaVers, LLC
- 26. III. InnovaDve business models and their market MulDpliers 26 copyright, OpenMaVers, LLC
- 27. Business models are driven by mental models What is a business model? 27 copyright, OpenMaVers, LLC
- 28. Different ages, different business models Industrial revolution -‐ 1800 Services revolution -‐ 1975 Information revolution -‐ 1990 Network revolution -‐ 2010 Technology Time 28 copyright, OpenMaVers, LLC
- 29. Different business models scale differently exponential algebraic growth arithmetic growth geometric growth Time Growth 29 copyright, OpenMaVers, LLC
- 30. Business models scale with different marginal costs Network Facilitators Technology Facilitators Service Facilitators Asset Facilitators The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. make many, sell many make one, sell many hire one, sell one make one, sell one zero marginal cost low marginal cost medium marginal cost high marginal cost 30 copyright, OpenMaVers, LLC
- 31. The four business models… Network Orchestrator Technology Creator Service Provider Asset Builder Digital divide 31 copyright, OpenMaVers, LLC
- 32. …and their Revenue MulDpliers 4 Network Orchestrator Technology Creator 8 1 Service Provider Asset Builder 2 Digital divide 32 copyright, OpenMaVers, LLC
- 33. 4 Network Orchestrator Technology Creator 8 1 Service Provider Asset Builder 2 Examples of companies Credit card companies Stock exchanges Social Networks Biotech Software Pharmaceutical Retails Industrials Manufacturing Consultants Financial Services Insurance Digital divide 33 copyright, OpenMaVers, LLC
- 34. Why “8” type business models are criDcal Networks Services Assets Technology 8 Business that are 8’s scale using other people’s money, intelligence and relationships, creating less need for capital and more future opportunity for open innovation in a flat world Digital divide 34 copyright, OpenMaVers, LLC
- 35. Exercise: What type of business model are you? 4 Network Orchestrator Technology Creator 8 1 Service Provider Asset Builder 2 Investment Tangible Intangible Orienta9on External Internal 35 copyright, OpenMaVers, LLC
- 36. IV. IdenDfy your dormant networks 36 copyright, OpenMaVers, LLC
- 37. Networks are all around you NETWORK CATEGORY POSSIBLE VALUE PROVIDED Customers • Increased loyalty/brand awareness • Data assets about customer profile or ac9vity • Marke9ng or product ideas Employees • New product and marke9ng ideas • Opera9onal improvements • Expert support – both internal and external Suppliers and Partners • Improved market/compe9tor awareness • More efficient rela9onships • New sales and marke9ng channels Investors • Sugges9ons to improve valua9on • Market awareness • Crowd funding solu9ons – e.g. new sources Communi9es (geographic, business, etc.) • Source new employees • Understand local poli9cs/news as it affects company • Advocacy and support 37 copyright, OpenMaVers, LLC
- 38. Customers 1 2 3 4 5 6 7 8 9 10 Employees 1 2 3 4 5 6 7 8 9 10 Suppliers 1 2 3 4 5 6 7 8 9 10 Distributors 1 2 3 4 5 6 7 8 9 10 Partners 1 2 3 4 5 6 7 8 9 10 Investors 1 2 3 4 5 6 7 8 9 10 Communi9es 1 2 3 4 5 6 7 8 9 10 Other 1 2 3 4 5 6 7 8 9 10 Not at all valuable Extremely valuable What networks do you have and how do you acDvate them? 38 copyright, OpenMaVers, LLC
- 39. V. Transform your business to achieve the MulDplier Effect 39 copyright, OpenMaVers, LLC
- 40. What can you do to transform your business or organizaDon to benefit from the Network MulDplier? ? 40 copyright, OpenMaVers, LLC
- 41. First, think like an investor: Diversify Assets Services Technology Networks Allocate at least 10% to building your networks! 41 copyright, OpenMaVers, LLC
- 42. Potential network assets 1. Choose your most valuable network to start 2. Add a technology platform 3. Recruit early members with content and value 4. Expand by sharing rewards with participants Consumer networks Employee networks Supplier networks Other networks Take CARE: 4 steps to acDvaDng your networks 42 copyright, OpenMaVers, LLC
- 43. Case study: Nike+ Select a network: runners who want to log runs Create incen9ves to par9cipate: ability share runs with social groups (pride and recogni9on) Seed the network with content: mo9va9on and training advice Connect the network: Wireless devices, apps, and integra9on with Facebook 1: Choose the network 4. Expand with incen9ves 3. Recruit members with value 2. Add technology 43 copyright, OpenMaVers, LLC
- 44. Case study: AT&T Select a network: employees Create incen9ves to par9cipate: Recogni9on of peers, face9me with leaders Seed the network: ask managers and leaders to par9cipate Connect the network: Online plarorm to propose and vote on ideas 1: Choose the network 4. Expand with incen9ves 3. Recruit members with value 2. Add technology 44 copyright, OpenMaVers, LLC
- 45. Case study: Nest thermostat Select a network: high-‐end thermostat users Create incen9ves to par9cipate: Improved energy efficiency through big data analysis Seed the network: begin with public data about temperatures and energy uses Connect the network: Internet networked devices 1: Choose the network 4. Expand with incen9ves 3. Recruit members with value 2. Add technology 45 copyright, OpenMaVers, LLC
- 46. Exercise: Create a new network asset Select a network to develop. Look for one that is large, ac9ve, underserved, and aware of your company Create incen9ves for par9cipants to begin adding content themselves. Incen9ves could be recogni9on or shared revenus Seed the network with content, informa9on, and products in order to grow awareness and membership. Use a technological solu9on to connect the network. Begin with something inexpensive and quick to implement. Discuss the following steps for a high poten9al network 1: Choose the network 4. Expand with incen9ves 3. Recruit members with value 2. Add technology 46 copyright, OpenMaVers, LLC
- 47. What will your network experiments be? • • • • • • • 47 copyright, OpenMaVers, LLC
- 48. VI. ReflecDons and acDon plans 48 copyright, OpenMaVers, LLC
- 49. Lessons from Acquia Friday 10/31/2014 A sosware-‐as-‐a-‐service company providing products, services, and technical support for open-‐source web content management plarorm Drupal. Acquia is financed by venture capital. Fast facts Year founded 2007 # employees 500 Enterprise customers 3,800 Total investment $118.6M Revenue Est. $70M Mul9plier unknown Business model Network Orchestratorer 49 copyright, OpenMaVers, LLC
- 50. Lessons from The Media Lab The MIT Media Lab is an interdisciplinary research laboratory at the MassachuseVs Ins9tute of Technology devoted to projects at the convergence of technology, mul9media, sciences, art and design. As of 2014, it has diversified its research into neurobiology, biologically-‐inspired fabrica9on, socially-‐ engaging robots, emo9ve compu9ng, bionics, and hyperinstruments. The One Laptop per Child (OLPC) was one of the notable research efforts which grew out of the Media Lab. Fast facts Year founded 1985 Faculty & principal inves9gators 28 Graduate students 146 Current projects 350+ Annual opera9ng budget $45M 50 copyright, OpenMaVers, LLC
- 51. It’s Friday 51 copyright, OpenMaVers, LLC
- 52. II. IdenDfy and challenge your mental models We cannot solve our problems with the same thinking we used when we created them. 52 copyright, OpenMaVers, LLC
- 53. The new theory of the firm 53 copyright, OpenMaVers, LLC
- 54. BeneBits of Experimentation: 1. Learning & Better Decisions 2. Forces Measurement 3. Enhances Innovation 4. Fosters an Innovative Culture 5. Confuses the Competition Response x $ Response x $ ½x 2x X X X -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ Have you adopted the adap-ve experimenta-on philosophy? And what have you learned from the natural experiments occurring around you? I.A. AdapDve experiment Others? 54 copyright, OpenMaVers, LLC
- 55. -‐ Vision -‐ Objec9ves -‐ Value Proposi9on -‐ Business Models -‐ Strategies Cultures & Values People & Competence Value Crea9on & Network Orchestra9on Processes Ownership, Governance, Structure, & Network Orchestra9on Resources Technology Facili9es Metrics / Dashboard The Organiza9onal and Network Stakeholders Customers Employees Shareholders Partners Suppliers Government Communi9es Other How will you go about crea0ng a Crea0ve Culture and Architecture? Address the key challenges of: • Aligning rewards and incen9ves • Balancing short and long term perspec9ves and resources • Groom and support champions • Balancing growth of core business with experimenta9on with breakthrough innova9on • Bridging the internal and external silos • Other? I.B. Design an OrganizaDonal Architecture & Network OrchestraDon 55 copyright, OpenMaVers, LLC
- 56. IdenDfy and overcome obstacles to implementaDon 56 copyright, OpenMaVers, LLC
- 57. Lessons from Kayak KAYAK is a travel search engine operated by the KAYAK Sosware Corpora9on. KAYAK's products are available in more than 20 languages. The company also runs travel search engines checkfelix and swoodoo. KAYAK was acquired by The Priceline Group on November 8, 2012. Year founded 2004 Acquisi9on by Priceline 2012 Acquisi9on price $1.8B Revenue at acquisi9on $300M (2012) Mul9plier at acquisi9on 6x Profit margin -‐5.29% Business model Network Orchestrator Fast facts 57 copyright, OpenMaVers, LLC
- 58. Lessons from Berklee The largest independent college of contemporary music in the world. Known primarily as the world's foremost ins9tute for the study of jazz and modern American music, it also offers college-‐level courses in a wide range of contemporary and historic styles, including rock, flamenco, hip hop, reggae, salsa, and bluegrass. Year founded 1945 Campus enrollment 4,200 students Online enrollment 5,000 students Tui9on & fees revenue ~$180M Total revenue (incl. grants) ~$200M Fast facts 58 copyright, OpenMaVers, LLC
- 59. IV. Individual or group plans to transform your organizaDon to a Network OrganizaDon 59 copyright, OpenMaVers, LLC
- 60. AcDvate your most valuable asset: your networks Networks 60 copyright, OpenMaVers, LLC
- 61. Four steps to create your network mulDplier effect Orient Assess Act Measure Understand your current business and mental models Inventory all your Networks and other intangible assets Allocate capital to your networks and take small steps to insure success Add network-‐ focused key performance indicators (KPIs) to your financial repor9ng 61 copyright, OpenMaVers, LLC
- 62. Mental models drive business model rewards BEST PRACTICES Drive Business Models What Leaders believe and do How leaders measure success How leaders invest capital Mental Models 62 copyright, OpenMaVers, LLC
- 63. Today’s leaders allocate capital to technology & networks BEST PRACTICES Network(Orchestrator( Technology( Creator( Asset( Builder( Service(Provider( 63 copyright, OpenMaVers, LLC
- 64. Asset Builder: Using assets to manufacture cars BEST PRACTICES 1 General Motors 64 copyright, OpenMaVers, LLC
- 65. Service Provider: Using people to deliver services BEST PRACTICES 2 Accenture 65 copyright, OpenMaVers, LLC
- 66. Technology Creator: Changing the world through IP BEST PRACTICES 4 Salesforce.com 66 copyright, OpenMaVers, LLC
- 67. Network Orchestrator: ConnecDng people BEST PRACTICES 8 Facebook 67 copyright, OpenMaVers, LLC
- 68. Comparison: Amazon versus Best Buy BEST PRACTICES AmazonBest Buy 4 2 68 copyright, OpenMaVers, LLC
- 69. 0% 10% 30% 60% 10% 10% 20% 60% Lesson: Reallocate capital to align with today’s sources of value BEST PRACTICES Yesterday Today 69 copyright, OpenMaVers, LLC
- 70. Mental Model Business Model What leadership… • Believes is important • Has developed their own skills • Gives 9me and aVen9on • Measures and reports How a company… • Spends and makes money • Hires people and develops skills • Uses and leverages technologies • Engages with customers Drives • Enterprise value • Revenue growth • Profitability Value and performance Determines Result: Mental and business model connect to create results BEST PRACTICES 70 copyright, OpenMaVers, LLC
- 71. And have you considered the following implicaDons: Existing technology we currently use Existing technology we do not use New technology Existing market we currently serve Existing market we do not serve New market Exploration into new markets Exploration with new technologies New-category products Next- generation products for core markets Adjacent growth Improvements, extensions, variants, and cost reductions Knowledge of Technology KnowledgeofMarket 1. New mental models for making sense of the changing environment and for innovaDng your business model and strategies 3. Consumers as partners – co producers, co designers, co distributors, co marketers… 2. AcDvaDng your networks and taking the role of network orchestrator 4. Open innovaDon for all your key domains of acDviDes 5. AdapDve experimentaDon as the new strategic philosophy and lessons from natural experiments 6. Reallocate your pornolio resources to reflect the above 71 copyright, OpenMaVers, LLC
- 72. ReBlections and Action Plans ReflecDons and AcDon Plan 72 copyright, OpenMaVers, LLC
- 73. Summary thoughts 1 Key premise: Digital technologies together with new mental models drive new business models 2 Best pracDces: Every organizaDon has dormant networks that they can acDvate to drive value 3 (Really 4) steps: To drive value in today’s digital and networked age 73 copyright, OpenMaVers, LLC
- 74. Jerry Wind Director, SEI Center Wharton windj@wharton.upenn.edu www.linkedin.com/in/yoramwind Barry Libert CEO OpenMaVers barry@openmaVers.com hVp://www.linkedin.com/in/barrylibert Contact info
- 75. About DeloiSe DeloiVe refers to one or more of DeloiVe Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related en99es. DTTL and each of its member firms are legally separate and independent en99es. DTTL (also referred to as “DeloiVe Global”) does not provide services to clients. Please see www.deloiVe.com/about for a detailed descrip9on of DTTL and its member firms. Please see www.deloiVe.com/us/about for a detailed descrip9on of the legal structure of DeloiVe LLP and its subsidiaries. Certain services may not be available to aVest clients under the rules and regula9ons of public accoun9ng. 36 USC 220506 This presenta9on contains general informa9on only and OpenMaVers is not, by means of this presenta9on, rendering accoun9ng, business, financial, investment, legal, tax, or other professional advice or services. This presenta9on is not a subs9tute for such professional advice or services, nor should it be used as a basis for any decision or ac9on that may affect your business. Before making any decision or taking any ac9on that may affect your business, you should consult a qualified professional advisor. OpenMaVers shall not be responsible for any loss sustained by any person who relies on this presenta9on.
- 76. Yoram (Jerry) Wind The Lauder Professor and Professor of Marke9ng Director, SEI Center for Advanced Studies in Management Academic Director, Wharton Fellows Program windj@wharton.upenn.edu Barry Libert CEO, Open MaVers Senior Fellow, SEI Center for Advanced Studies in Management windj@wharton.upenn.edu Presented to Wharton Fellows Jerry Wind Barry Libert October 29-‐31st. 2014 76 copyright, OpenMaVers, LLC