RyanAir managed to introduce a business model innovation in the heavy regulated airline industry. The value proposition is to provide low budget travels with significantly lower air fares. To deliver this value proposition in a profitable way, RyanAir uses key processes like short haul flights, a standard fleet, low commissions to travel agencies, contract management with secondary airports and neighbouring communities, no meals, tough negotiations, high-powered incentives, word of mouth advertising, an economies of scale. It also uses key resources such as a standardized fleet of 737s, a non-unionized workforce and spartan headquarters.
Based in Germany, the company was founded in 2002 and offers an online platform for private individuals and commercial organizations to design, buy and sell creative and personalized apparel. Basically, users are equipped with an online toolkit which allows them to create and upload designs which can be placed on a variety of garments, including T-shirts. The toolkit generates a piece of HTML code which the designer can then embed in his/her own web site. The code displays the designs and links to an interface where people can purchase the apparel. Spreadshirt handles all of the back-end functions, such as manufacturing, payment and after-sales support. The designer can choose to take a commission in addition to the price charged by Spreadshirt. Each time a purchase is made, Spreadshirt transfers the commission to the designer's account. Compared to the traditional business model of apparel manufacturers, Spreadshirt’s model differs in two very important ways: First, the new product development process is outsourced to the ‘crowd’ of Spreadshirt users. Second, the company’s users can participate in Spreadshirt’s success by becoming “entrepreneurs” themselves and selling their own designs to other Spreadshirt users. With this business model, Spreadshirt has become one of the fastest-growing companies in Germany. In 2007, the company had a total of 260 employees, and its annual revenues totaled some EURO 20 million. More than 300,000 Internet users have become Spreadshirt shop partners, contributing significantly to the company’s rapid growth
Apple has developed the App Store platform, which is centered around a software toolkit provided for the iPhone, iPod touch, and iPad. The App Store provides new customer value propositions as it allows users to screen, download and develop new applications. After the first month, App Store sales came to about $30 million, and by January 2010 more than ten billion applications had been downloaded from the platform. According to Apple CEO Steve Jobs, this business model provides Apple with a sustainable competitive advantage: “Three billion applications downloaded in less than 18 months—this is like nothing we’ve ever seen before. […] and we see no signs of the competition catching up anytime soon.” The applications in the App Store are mainly developed by firms or independent software developers. By January 2011 already ten billion applications were downloaded from the App Store.
The value proposition of the iPod is to make downloading digital music easy and convenient. The business model combines hardware, software and services. The approach works like Gillette’s famous blades-and-razor model in reverse. Apple gives away the “blades” (low margin iTunes music) to lock in purchase of the razor (the high margin iPod). Since the introduction of the iTunes Store, individual songs were all sold for the same price with no subscription fee (in contrast to most existing online music stores at the time of introduction, which charged a monthly fee for access to their catalog). Music in the store is in the Advanced Audio Coding (AAC) format. As of the January 2009, Apple has announced that all music in iTunes will be available without digital rights management, and encoded at the higher-quality rate.
One of Google's value proposition for companies is to provide more effective and efficient advertising on the web. Google’s primary source of income is AdWords, a pay-per-click advertising platform used by businesses worldwide. AdWords offers pay-per-click (PPC) advertising, and site-targeted advertising for text, banner, and rich-media ads. The AdWords program includes local, national, and international distribution. Advertisers select the words that should trigger their ads and the maximum amount they will pay per click. When a user searches on Google, ads for relevant words are shown as "sponsored links" on the right side of the screen, and sometimes above the main search results. The ordering of the paid-for listings depends on other advertisers' bids and the "quality score" of all ads shown for a given search. The quality score is calculated by historical click-through rates, relevance of an advertiser's ad text and keywords, an advertiser's account history, and other relevance factors as determined by Google.
Hilti reinvented its business model by capitalizing on a game-changing opportunity to increase profitability by turning products into a service. Rather than selling tools (at lower and lower prices) the company is selling a “just the tool-you-need-when-you-need-it, no-repair-or-storage-hassles” service. The company thus transformed its customer value proposition from selling industrial and professional power tools and accessories towards leasing a comprehensive fleet of tools to increase contractors’ on-site productivity. This induced a change in the profit formula from low margins and high inventory turnover towards higher margins and monthly payments for tool maintenance, repair, and replacement. Additionally, leasing requires new resources and processes – a strong direct-sales approach, contract management, new people, more robust IT systems for inventory management and repair, and other new technologies to develop, design and price the appropriate packages (Johnson et al, 2008).
Dell was one of the pioneers in selling computers over the Internet. The company has emerged as one of the leading players in the PC industry through its direct selling model. Dell's build-to-order format has got a big boost with the arrival of the Internet. The company has maintained momentum in a rapidly commoditising industry, where most other players are still struggling. As a cost leader, Dell has concentrated on activities where it can add most value and on market segments where profits are highest. Dell has ensured that customer service is not diluted in the process of cutting costs. Many players in the PC industry have attempted to replicate Dell's business model but failed. It is Dell's disciplined execution that has driven Dell's success.