In this video, we will focus on two examples of game changing value propositions, an older one and a more recent one. It is interesting to use older examples to illustrate business model innovation, just to make the point that this type of innovation existed before the advent of the Internet. Remember the framework presented in the previous video? This framework combines price on the x-axis with the value perceived by customers on the y-axis. This allowed us to distinguish: cost leadership, high-end differentiation and low-end differentiation. Then, there is this upper-left part of the framework. Here, the value proposition looks very appealing since it combines both a lower price and a higher perceived value. How interesting! This is a game changing value proposition. This value proposition is so appealing to the client that the conventional rules of the game in the industry are disrupted. Let's look at some examples, here's the first. This is what bus stops looked like 40 years ago. Public transportation companies preferred to invest in buses, rather than in bus stops. But then a company introduced a game changing strategy. This company was JC Decaux and they offered a very appealing value proposition to public transportation companies. They offered them designful bus stops for free! Not only did JC Decaux install them, but they also maintained them for free, cleaning them and replacing any broken parts. This was an extreme game changing value proposition for public transportation companies, who happily agreed to enter into a 5 or 10 year contract with JC Decaux, since they didn’t have any risks or anything to lose! So, the value proposition is very attractive for the public transportation company. They get designful bus stops for free, which is definitely a game changing strategy! However, this value proposition doesn’t bring any revenue to JC Decaux. Do you know where the revenue of this company comes from? They are paid through the ads posted on the bus stops. This is how they generate revenue. So, JC Decaux has several customers: the using customer, that is, myself when I am waiting for the bus; the decision-making customer, that is, the transportation company, and finally, the paying customer, the company posting the ad. This is a good example of an interesting avenue for innovation, that we will discuss later on: the decoupling of the using and the paying customer. A lot of internet-based business models rely on this scheme. Think about how Facebook or Google are making money. But again, the JC Decaux example is very interesting because it shows that this decoupling can exist outside of the Internet. What usually happens when a game changing business model is introduced is that this new business model becomes the reference offer in the new market that the new business model has created. By creating the new business model of ad-financed bus stops, JC Decaux has created a new market and it has become the reference offer in this new market. Let me now give you another example of a game changing strategy. Let’s come back to our framework and apply it to the car industry. Think about it for a second and try to find an example of a high-end differentiation in the car industry. Here, you probably thought about BMW, Lexus or Mercedes, or of the more recent Tesla, the high end, electric sport cars. Those are all examples of high-end differentiation, the price is higher than the reference offer, but the perceived value is also much higher. Now try to think about a low-end differentiation, still in the car industry. Here, you will probably think about Logan, the low-cost brand of Renault, but also the Tata Nano, the worlds cheapest car, produced in India. So now pause the video and think about what could be a game changing strategy in the car industry. Remember, we are looking for a value proposition with a lower price, and a higher perceived value. There is a hint, don’t look for a car anymore... Think about the usage of the car. Think about it, even if you use your car for two hours a day, This still means that your car is in the parking lot for over 90% of the time. Isn’t that crazy? You have to pay even when you don’t use it, for parking? So here comes the game changing strategy: car sharing companies such as Blablacar, Zipcar and Drive Now by BMW. BlaBlaCar is a carpooling website, and drivers post spots available in their car on the Internet and passengers purchase them online. Zipcar and Drive Now are car sharing companies: members pay an annual subscription fee and can reserve a car by hour or by day. Note Zipcar’s tagline: "wheels when you want them". Actually, you don’t want a car anymore, you want wheels that take you where you want when you need it! Overall, the cost of driving the car is much lower, since you pay by the hour, and the perceived value is better since you don’t have to bother about parking or maintenance. So those 2 examples are a good illustration of a game changing strategy. Of course, if you are a car lover, if you love to drive your BMW or your Porsche, you will probably not be attracted by Zipcar, Drive Now or Blablacar. Or, if you live in the middle of nowhere, you will probably still need a car. But the idea here is that if this game changing value proposition is attractive to a big enough segment, then it can be a successful business model. It is not killing the conventional car industry, but it can be disruptive since less customers may consider buying a car. They are becoming reference offers in a new industry. But here we see the limit of this framework. The perceived value is very generic, and would need to be more detailed if we want to understand why some consumers would trade their own car for car sharing. This is exactly what we will do in the next video, in which we will talk about an interesting tool to decipher the perceived value. It is called the value curve.