Inside-Out Pattern
VP Some R&D outputs that are unusable internally—for strategic or operational reasons—may be of high value to organizations in other industries.
R$ By enabling others to exploit unused internal ideas, a company adds “easy” additional revenue streams.
KA Organizations with substantial internal R&D operations typically possess much unutilized knowledge, technology, and intellectual property. Due to sharp focus on core businesses, some of these otherwise valuable intellectual assets sit idle. Such businesses are good candidates for an “inside-out“ open business model.
Patterns Overview
Unbundling Business Models
CONTEXT (BEFORE)
An integrated model combines infrastructure management, product innovation, and Customer Relationships under one roof.
CHALLENGE
Costs are too high.
Several conflicting organizational cultures are combined in a single entity, resulting in undesirable trade-offs.
SOLUTION (AFTER)
The business is unbundled into three separate but complementary models dealing with
• Infrastructure management
• Product innovation
• Customer relationships
RATIONALE
IT and management tool improvements allow separating and coordinating different business models at lower cost, thus eliminating undesirable trade-offs.
EXAMPLES
Private Banking
Mobile Telco
The Long Tail
CONTEXT (BEFORE)
The Value Proposition targets only the most profitable clients.
CHALLENGE
Targeting less profitable segments with specific Value Propositions is too costly.
SOLUTION (AFTER)
The new or additional Value Proposition targets a large number of historically less profitable, niche Customer Segments—which in aggregate are profitable.
RATIONALE
IT and operations management improvements allow delivering tailored Value Propositions to a very large number of new customers at low cost.
EXAMPLES
Publishing Industry (Lulu.com)
LEGO
Multi-Sided Platforms
CONTEXT (BEFORE)
One Value Proposition targets one Customer Segment.
CHALLENGE
Enterprise fails to acquire potential new customers who are interested in gaining access to a company’s existing customer base (e.g. game developers who want to reach console users)
SOLUTION (AFTER)
A Value Proposition “giving access” to a company’s existing Customer Segment is added (e.g. a game console manufacturer provides software developers with access to its users)
RATIONALE
An intermediary operating a platform between two or more Customer Segments adds Revenue Streams to the initial model.
EXAMPLES
Google Video game consoles from Nintendo, Sony, Microsoft
Apple
iPod, iTunes, iPhone
FREE as a Business Model
CONTEXT (BEFORE)
A high-value, high-cost Value Proposition is offered to paying customers only.
CHALLENGE
The high price dissuades customers.
SOLUTION (AFTER)
Several Value Propositions are offered to different Customer Segments with different Revenue Streams, one of them being free- of-charge (or very low cost).
RATIONALE
Non-paying Customer Segments are subsidized by paying customers in order to attract the maximum number of users.
EXAMPLES
Advertising and newspapers
Metro
Flickr
Open Source
Red Hat
Skype (versus Telco)
Gillette
Razor and blades
Open Business Models
CONTEXT (BEFORE)
R&D Resources and Key Activities are concentrated in-house:
• Ideas are invented “inside” only
• Results are exploited “inside” only
CHALLENGE
R&D is costly and/or productivity is falling.
SOLUTION (AFTER)
Internal R&D Resources and Activities are leveraged by utilizing outside partners.
Internal R&D results are transformed into a Value Proposition and offered to interested Customer Segments.
RATIONALE
Acquiring R&D from external sources can be less expensive, resulting in faster time-to-market. Unexploited innovations have the potential to bring in more revenue when sold outside.
EXAMPLES
Procter & Gamble GlaxoSmithKline Innocentive
