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Business Model Generation
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Business Model Generation

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Business Model Generation

Business Model Generation
- What is it
- How to create one

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Business Model Generation Business Model Generation Presentation Transcript

  • Disruptive new business models are emblematic of our generation. Yetthey remain poorly understood, even as they transform competitive landscapes across industries.
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  • What is it then? Why are we here?Def_Business Model A business model describes the rationale of how an organization creates, delivers, and captures value
  • Create Deliver Capture VALUE for companies, clients, customers and society
  • Challenge:simple, relevant, understandable Shared Language
  • 9 blocks – Customer Segments, Value Proposition, Channels, CustomerRelationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships, Cost Structure Make Money Add Value
  • Customer Segments (CS) For whom are we creating value for? Who are our most important customers?- Core of any business model- Distinct segments with common needs, behaviours- Needs justify and require a distinct offer- Reached through different distribution channels- Require different type of relationships- Have substantially different profitabilities- Willing to pay for different aspects of the offer-Types:- Mass market (large group focus like consumer electronics)- Niche market (focused group/entity like car parts – supplier-buyer relation)- Segmented (slightly different needs and problems like banking)- Diversified (serving two unrelated customer segments with different needs and and problems like Amazon cloud)- Multi-sided markets (serving two or more interdependent customers like Credit card companies)
  • Customer Relationships (CR) What relation does each customer segment expect us to establish? How costly are they?- Types of relationships company establishes with customer segments- Motivation to have relationships (Acquisition, retention, sales)Categories of customer relationships:- Personal assistance- Dedicated personal assistance- Self service- Automated service- Communities/Boards- Co-creation content for consumption
  • Channels (CH) How do you want to reach out to your customers? How do we reach them now? Are our channels integrated? Which ones work best?- Interface to customers (communication, distribution, sales)- Raising awareness among customers about company’s products and services- providing post purchase support- Own channels (direct like website or indirect like retail stores), Partners (wholesale distribution, retail) or both- Partner channels have low margin but more reach- Own channels are costly but higher marginsChannel Phases:- Awareness – How do we tell the customer about our products- Evaluation – How do we evaluate customer satisfaction on our Value Proposition- Purchase – What purchase options do we present to the customer- Delivery - How do we deliver our service/product- After sales – How do we provide post purchase support
  • Value Proposition (VP) What do we deliver to our customer? What customer problem are we solving? What needs of theirs do we cater to?- Reason why one customer selects one company over another- Aggregation, or bundle, of benefits that a company offers to its customers- Can be quantitative (price, service delivery speed) or qualitative (design, experience)Factors that contribute to Value Proposition:- Newness (entirely new set of needs that customers previously didn’t perceive because there was no offering)- Performance (Improving existing service or product like in computing industry)- Customization (Tailoring product/service specific to individual customers like funds)- Getting the job done (helping customer to get certain job done like in airlines)- Design (innovative way of doing existing thing like electronic industry)- Brand/Status (simple act of using and displaying certain brand)- Price (Offering similar value for a lower price)- Cost reduction (reducing current cost of procurement or operation like cloud services)- Risk reduction (Reducing risks incured on buying products like guarantee )- Accessibility (Reaching customers with service or products that previously was not available like private jets)- Convenience/Usability (making things easier to use like digital content)
  • Key Activities (KA) What key activity our value proposition require? Distribution channels? Customer relationships?- Most important actions a company must take to operate successfullyDifferent categories:- Production (like in manufacturing)- Problem solving (consultancies, hospitals)- Platform Network (softwares, online platforms)
  • Key Resources (KR) What key resources do our Value Proposition require?- Assets that are required to make business workResources can be:- Physical (buildings, machines, vehicals, POS and distribution networks)- Intangible/Intellectual (brands, good will, proprietary knowledge, patents, customer database)- Human (knowledge intensive and creative industries like pharmaceutical companies)- Financial (financial guarantees, cash, credit, stock pool)
  • Key Partners (KP) Who are our key partners? Who are our suppliers? What do they do?- Network of suppliers and partners that make our business work- Alliance to expand, rediuce risk, optimize or acquire resourcesDifferent types:- Strategic alliances between non-competitors- Coopetition: Strategic partnerships between competitors- Joint ventures to develop or expand business- Buyer-Supplier relation to assure suppliesMotivation for partnership:- Optimization and economy of scale- Reduction of risk and uncertainty- Acquisition of particular resources and activities
  • Cost Structure (CoS) What are the costs inherent in our business? What is most expensive?- All costs incurred to operateClasses of cost structure:- Cost driven (minimizing costs where possible like easyJet)- Value driven (focus on value creation rather than reducing costs like luxury brands)Costs have following characteristics:- Fixed costs (the cost remains same despite the volume of service or product like rents , manufacturing facilities)- Variable costs (cost vary on volume of goods like in music festivals)- Economies of scale (as output expands, costs go down)- Economies of scope (cost advantages due to scope of operations – expansion)
  • Revenue Streams (RS) What value will our customers be willing to pay? What do they currently pay? How do they currently pay?- The cash company generates from each customer (ARPU)- Each revenue stream may have different pricing mechanism (fixed list, barganing, auctioning, market dependent, volumedependent, yield dependent)- Two types of streams (transaction revenues often one off and recurring revenues)Ways to generate:- Asset sale (selling ownership rights to physical products)- Usage fee (the more you use the more you pay like hotels, telecom operators)- Subscription fees (gym, online gaming, newspapers/magazines)- Lending/Renting/Leasing (granting temporary exclusive right of use like Hertz)- Licensing (giving customers permission to use IP rights like in media industry)- Brokage (intermediation services performed on behalf of two or more parties like rental agencies)- Advertising (fees from advertising particular service, product or brand like in-app adverts)Pricing ways:- Fixed menu pricing (based on static variables)- Dynamic pricing (changes due to market conditions)
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