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Making Business Model Innovation More of a (Data) Science

Discover how a scientific approach to innovation, using computer simulations and prescriptive models, can lead to enduring value and business model innovation. Follow the journey from Blockbuster to Netflix as an example.

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Making Business Model Innovation More of a (Data) Science

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  1. Making Business Model Innovation More of a (Data) Science • Jerry Overton • Data Scientist, Distinguished Engineer bit.ly/CSC-Strata

  2. Innovation:new stuff with enduring value. Blog: bit.ly/CSC-Strata

  3. Treating innovation as an art is not working. Blog: bit.ly/CSC-Strata

  4. We need a new innovation engine and better fuel. Blog: bit.ly/CSC-Strata

  5. The solution: computer simulation. Blog: bit.ly/CSC-Strata

  6. Innovation is actually a scientific problem

  7. We have to change the way we think of risk. Blog: bit.ly/CSC-Strata

  8. Step 1: Replace retrospective models. Blog: bit.ly/CSC-Strata

  9. Step 2: Build prescriptive models. Rv(Co) = Rv (Cs (Vp (Kp (Co) ) ) ) Operational Efficiency: Vp(Kp) + Rnd Market Potential: Rv(Cs) + Rnd What if I found a faster way to scoop the ice? What if customer lines get long? Partner Efficiency: Kp(Co) + Rnd Buyer Behavior: Cs(Vp) + Rnd What if my supplier runs low on lemons? What if it gets really hot? Blog: bit.ly/CSC-Strata

  10. Step 3: Believe in simple. Simple Models Complex Models Blog: bit.ly/CSC-Strata

  11. Let’s use a scientific approach to innovate at Blockbuster(Circa 1998)

  12. I built a simple prescriptive model. Blog: bit.ly/CSC-Strata

  13. Should we bother withvideo-by-mail? Blog: bit.ly/CSC-Strata

  14. 1999: Blockbuster is big. Simulations anticipate Blockbusters initial market leadership. Blog: bit.ly/CSC-Strata

  15. 1999: Netflix is small. Netflix at market entry is not a threat to Blockbuster at scale. Blog: bit.ly/CSC-Strata

  16. 2000: Netflix is not an obvious threat. Any signs of threat to Blockbuster is a very unlikely outlier. Blog: bit.ly/CSC-Strata

  17. But there is risk ahead. Blog: bit.ly/CSC-Strata

  18. 2002: Blockbuster’s margins fall. Blockbuster experiences the drop in profit predicted by simulation for 2003. Blog: bit.ly/CSC-Strata

  19. 2003: Netflix threat grows. Netflix posts its first profit. Blog: bit.ly/CSC-Strata

  20. 2004: The threat becomes obvious. Blockbuster launches competing service to Netflix. Blog: bit.ly/CSC-Strata

  21. Video-by-mail threat will be fatal. Blog: bit.ly/CSC-Strata

  22. 2005: Blockbuster begins reducing stores. Blockbuster reported a 29% loss Blog: bit.ly/CSC-Strata

  23. 2010: Blockbuster is bankrupt. Blockbuster files for bankruptcy. Blog: bit.ly/CSC-Strata

  24. We’ve found a meaningful innovation. Netflix offers to sell Blog: bit.ly/CSC-Strata

  25. That’s business model innovation as a (data) science. Blog: bit.ly/CSC-Strata

  26. The innovation machine is hungry! Twitter: @jerryaovertonEmail: joverton@csc.comLinkedIn: linkedin.com/in/jerryaoverton Blog: bit.ly/CSC-Strata Blog: bit.ly/CSC-Strata

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