Business model innovation is a complex process that requires skills, motivation, support and time. When we look for inspiring examples of business model innovations on the Internet, we usually find business cases like Netflix, Amazon, Uber or other giants that have successfully implemented new business models, and hence boosted their performance and market dominance.
Although those cases are worth reading, they are focused mainly on big players in particular markets, and they don’t account for the variety of situations where business model innovation is currently working. More specifically, those examples do not show how European companies, that are hidden champions in their domain, are succeeding in innovation.
In fact, achieving results from a business model innovation process is possible with proper guidance and resources. At BMI Lab we have helped businesses that are experienced in product innovation but new to business model innovation. We would like to introduce you to one such example: TICK, an innovative venture of Mibelle Group.
Looking for a new approach: the case of Mibelle Group
Mibelle Group is a full-service retail brand manufacturer, serving Switzerland's largest retailer, Migros. It is part of the Migros Group – a conglomerate of companies based in Switzerland, working in a wide range of fields and the third largest force in the European proprietary brand market. Hence, with about 1200 employees, Mibelle Group is neither a big international corporation nor a small company.
Mibelle Group is the result of a merger between Mifa AG and Mibelle AG and the integration of several companies in UK and France in 2012:
- Mifa AG began in the 1930s by offering washing powders and detergents as well as margarine, fats, and oils
- Mibelle AG, founded in the 1960s, specialized in the manufacturing of personal care and active ingredients for cosmetics
The company is familiar with product innovation, launching threenew products literally every single day. But of course, this kind of innovation is what we call incremental innovation. Although the company was not facing significant problems, their managers identified two issues that required attention:
- As a business focused mostly on production and distribution to big retailers, it lacked any close contact with end-customers. It was challenging for the company to understand what was happening in the market since its operations barely touched the people using their products.
- From the customer side, the company identified a real pain point: customers usually considered doing laundry a waste of time and resources. Mibelle could provide whatever product was needed to wash the clothes, but couldn’t solve customer needs regarding time and resource management.
Probably other companies would rely on their market position as producers, not worrying about the changes in the market and the customer's behavior regarding laundry. But Mibelle Group quickly understood that they needed to tackle this challenge, so they allocated some resources and started a business model innovation process with a clear goal: to engage with end-customers to actively prevent declining sales.
Innovation with a challenge-solving methodology
Mibelle Group asked BMI Lab in early 2015 to help them solve this challenge, using our business model innovation methodology. So, we guided them through the different phases of the Business Model Navigator process: initiation, ideation, and integration.
Once we introduced the managers to the methodology and challenges, we started an ideation process using BMI Pattern Cards, which resulted in nineteen business model ideas. Naturally, not all of them were followed up on. In several workshops with BMI Lab and the team of Mibelle Group we selected six that showed the most promise for development. After a process of filtering, consolidation, and integration, two ideas stood out. One of those two ideas was an idea named M Wash, a new service-based business model, targeting the end-customer, and launched as a new startup in late 2015. This business model eventually became TICK.
A new laundry service is born: TICK
TICK's value proposition is very clear: by providing an online laundry service, TICK offers its customers a very convenient solution for casual laundry, formal shirts, and blouses, as well as chemical purification.
The process works like this:
The customer registers online and fills the received laundry bag. After an initial pilot phase with their website, TICK launched a native iOS app in 2017 to make it even easier for customers to use their service.
Once the laundry bag is full, the customer enters a desired pick-up time and location, the delivery location and chooses other options online, such as detergent fragrances.
TICK picks up the laundry bag, processes the clothes following the client’s specifications, and delivers the packet whenever and wherever the client requests.
The service is highly customer-oriented: it has been purposely designed to satisfy those unsolved client pains regarding laundry, and it also offers some real benefits, saving its users time and resources. Moreover, TICK is guided by the principles of discretion, quality and sustainability to maintain a successful, long-lasting relationship with its customers. In the backend, TICK is leveraging the orchestrator business model pattern, relying on an extensive network of partners e.g. dry-cleaners, bike couriers.
TICK's launch to the market required some investment in marketing and advertisement, together with setting up the business operations and infrastructure needed to deliver the service. The customer acceptance of the service was highly positive, and TICK has been growing ever since. In fact, the ROI for the company was positive in many ways:
This business model concept has completely revolutionized the way Mibelle Group interacts with its customers. Now, the company has direct access to their preferences, gathering highly valuable data that could be used in the near future to develop new services and products, addressing those needs that would remain otherwise unidentified with the previous business model. This data creates a wide range of opportunities to create and capture new value.
There are also significant benefits on the financial side. With this new business model Mibelle Group can build up a totally new revenue stream, based not on selling commodities but valuable services, to a new range of customers.
But it also changes the way people do laundry. Building a long-lasting relationship with TICK means the company’s users no longer have to worry about doing laundry and purchasing detergent, giving them more freedom to better enjoy their leisure time.
Why did TICK succeed?
But one question is still unanswered. Why did the idea of TICK come to fruition, while 17 other ideas stalled? How can an established firm be innovative while most large companies have fundamental problems with innovation?
Mibelle Group is producing innovations on a daily basis, creating new home care products with new fragrances and new formulas for Migros and other retailers. TICK was more than a service innovation for Mibelle Group since it changed all dimensions of its classic business model. It changed the customer dimension (from B2B to B2C), offers a new value proposition, leverages partners in a new value chain, and earns money with a new revenue model (pay per bag instead of pay per KG).
Developing a new business model in an established company is a challenging task and it needs motivation, perseverance, stakeholder management and a lean startup approach.
From day one in the first workshop, one employee from Mifa AG, Joëlle, took on the responsibility for the project. Days after the workshop, when most employees were caught up in their daily chores, she continued working on the idea. She developed a free concierge MVP with a handful of customers to learn about customer preferences. When internal complaints arose over the fact that if Mibelle Group had direct customer contact it would violate the organizational structures and responsibilities within the Migros Group, Mibelle CEO Luigi Pedrocchi made a stand for the project and communicated its importance within the group.
In the meantime, Joëlle was fighting to get more resources and freedom. And she was successful. Instead of working from her office in Frenkendorf, she got the freedom to also co-work in Zürich, where she was able to connect and learn from other startups. After the insightful concierge MVP they ran a pilot program in a small part of Zurich that later was extended to a larger area. As of this writing, the service is available in Greater Zurich as well as in Basel.
The TICK case is an excellent example of business model innovation, and provides some valuable insights for innovators and managers:
You don’t need to be a giant of the Internet, e.g. an Amazon or a Google, to innovate your business model. The real hurdle is not the size of the company, but its commitment. Almost any company can do it, but we have to remove hesitation and tackle the challenge with confidence.
Business model innovation is not about technology or new products. In fact, Mibelle Group didn’t create anything new. They combined already existing digital technologies to create a new service.
Innovation in business models is useful when it addresses the unsolved problems of customers, and it captures value from that. We have to find the value that people are willing to pay for and make it real.
TICK teaches us that the ROI for innovation should be measured differently, and it can be positive, not just in finances, but also in the business strategy: innovation helps companies prepare for the future.