Lesson 8 – Building a new digital business model

Topic 1 – Defining “new business model” What is a Business Model?

“A business model is a high-level plan for profitably operating a particular business in a specific marketplace.” Investopedia (February 2020)

“A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts.” Wikipedia (February 2020)

“A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies.” FourWeekMBA (February 2020)

It differs from a Target Operating Model, which describes how people, processes and technologies are harnessed and organized to execute on the business model.

2 Value Chain Innovation versus New Business Models

Lesson Implementing value chain innovations 4.8

Lesson Building new digital business models 5.8

Building new business models Differences of: ▪ Scope: • Value chain innovations typically only involve one element of the value chain • New business models typically involve multiple elements of the value chain (and in lessons 5.1 to 5.7 we’ve seen examples in Platforms, Microinsurance, On-demand and Connected Insurance, Comparison Sites, and Peer-to-Peer) ▪ Ambition: • Value chain innovations are about improving today • New business models are about reinventing tomorrow 3 Are any New Digital Business Models left to invent?

With all the examples we’ve looked at in previous lessons, you might wonder whether there are any new digital business models for insurance that haven’t already been invented. Some big players certainly think so:

• 2016: Google Compare • 2018: “ considers • AppleCare+ with Theft and Loss • 2018: Investment in Applied offering home insurance”2 • 2019: Apple partners with Systems • 2019: Haven Healthcare on Attain3 • “We will definitely be looking for launches (with JPMorgan Chase • 2019: “Apple is in talks with additional investments in the and ) private Medicare plans”4 insurance technology space.”1

Notes: 1. https://www.insurancejournal.com/news/national/2018/10/19/505093.htm 2. https://www.theinformation.com/articles/amazon-considers-offering-home-insurance 3. https://www.attainbyaetna.com/ 4. https://www.cnbc.com/2019/01/15/apple-talking-to-private-medicare-plans-about-subsidizing-apple-watch.html 4 Who will invent the New Digital Business Models?

There is no need to When the claim hits, worry, while big tech and the insured is left companies have the dealing with a phone right to get into person, the benefits insurance, they are of using a real live not doing a good job agent will win the at it. day.

Most people need an We heard this 20 agent to explain and years ago when the examine their needs talk was about banks for insurance. entering insurance.

5 A “standard” for documenting New Business Models The Business Model Canvas was developed by Alexander Osterwalder and, helped along by his firm Strategyzer, has gained widespread acceptance.

6 The Business Model Canvas - Video

Business Model Canvas Explained Strategyzer

TDI viewing Tip; Worth watching it all. Duration: 2.5 minutes Video Link

Possible discussion points for Weekly Clinic / Things to think about

• Is it really possible to capture the key points of a business model on just one page? • Do you thing the relative sizes of the boxes makes sense? • Are there any boxes you would add?

7 Video Source : Strategyzer via YouTube: Business Model Canvas Explained The 9 elements of The Business Model Canvas

To recap the video: • Customer Segments – The people / organisations for whom you are creating value • Value Propositions – The bundles of products and services creating value for each customer segment • Channels – Touchpoints through which you interact with customers and deliver value • Customer Relationships – The types of relationships you are establishing • Revenue Streams – Pricing mechanisms you are using to capture value for your business • Key Resources – Mechanisms for creating, delivering and capturing value • Key Activities – What you really need to be able to perform well • Key Partnerships – Who can help provide leverage to your business model • Cost Structure – The costs of delivering everything described already

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