Business Models - Definition, Building Blocks, Innovation
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Business Models - Definition, Building Blocks, Innovation

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An introduction to business models and business model innovation.

An introduction to business models and business model innovation.

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  • Full Name Full Name Comment goes here.
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  • Once again, thank you! The Value Proposition Canvas put me straight into the mindset of my clients - helping me to see my services as solutions to their existing needs. I know that is what business is about, but this VPC changed my thinking. Instead of seeing my position as a business needing to attract clients, I now see it as a business needing to be equipped to meet the needs of an existing market. It may not seem like a significant shift, but it is.
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  • Louise, thank you so much for the recognition, I'd extremely glad the presentation helped you.

    I think your initiative to have business models as an integral part of the business is great. I believe businesses should constantly try to improve their business model and find new ways of creating value.

    However, as we all know, innovation is not an easy job but there are models that can help. The strategy canvas is a good way to come up with new products but there are others as well.
    I want to recommend you a tool that should help in shaping the value proposition and achieving product-market fit.

    The value proposition canvas http://www.businessmodelgeneration.com/downloads/value_proposition_canvas.pdf

    I'm glad you enjoyed my presentation and I wish you best of luck in all your endeavours!
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  • This is the best summary of the business model/Osterwalder 9 pillars I have seen. Slide Number 3 exactly summarises my frustration with my research - and now I feel relieved instead of stupid! I love the way you used the 'sticky notes' to transfer the learning to the business model canvas (Slide 18). I am conscious of the need to make my business model an integral part of my business mindset, and not just an empty - but 'impressive' business phrase. Thank you for simplifying the process - and allowing me to clarify exactly how I need to approach the business model canvas - and my business mindset.
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Business Models - Definition, Building Blocks, Innovation Business Models - Definition, Building Blocks, Innovation Presentation Transcript

  • Business Models –Definition, BuildingBlocks, InnovationRemus Tomatomaremus@gmail.com@RemusTomahttp://ro.linkedin.com/in/remustoma
  • Are they right?!   “…today, business models are one of the most sloppy used terms in business; they are often stretched to mean everything and end up meaning nothing” (Magretta, 2002)!   “…a business model is like the old saying about teenage sex: everyone talks about it all the time; everyone boasts about how well he or she is doing it; everyone thinks everyone else is doing it; almost no one really is;” (TechCrunch, 2011) @RemusToma* http://tcrn.ch/P9MWpT
  • Apparently so… A recent study (Zott et al. 2010) showed that out of 103 business model publications: •  37% don’t define the concept at all •  44% define the model but without overlaps •  The rest…quote others @RemusToma
  • Why should we know what a Business Model is?!   To know what the heck we’re talking about with investors!   To helps focus your start-up/company employees!   To give you a framework to think about your business!   To obtain a shared understanding!   To obtain a shared language!   To be able to innovate and create great Business Models @RemusToma
  • So, what is a Business Model?!   The business model is a diagram that escribes the logic behind how your business functions.OR!   “A business model describes the rationale of how an organization creates, delivers, and captures value” (Ostervalder & Pigneur, 2009:14)!   So, the business model comprises of several elements: product/ service, distribution, customers, financial viability Delivers Value Company Customer (value (value creator) receiver) Captures Value @RemusToma
  • What are the components of a Business Model?!   9 building blocks (Osterwalder & Pigneur 2002): Pillar Business Model Block The Product Value Proposition Customer Segment The Customer Distribution Channel Customer Relationship Key Resources Infrastructure Management Key Activities Key Partnerships Revenue Streams Financial Aspects Cost Structure @RemusToma
  • Building Netflix’s Business Model!   Netflix allows renting an unlimited number of movies, for an unlimited period of time, choosing from a huge variety of movies, in exchange for a monthly payment, and deliver them through a convenient and fast mail delivery. @RemusToma
  • 1. Customer Segment !   Who are you creating value for? Who are the customers that you wish to reach and serve? Who are your most important customers? !   Identify customer needs and desires and segment the market !   Most common market segmentation techniques of users with common needs: !   By geography !   By demographics (age, sex, income, occupation, etc.)Netflix Segmentation:   By personality, lifestyle, social class, interests. ! !   By behavior – how they use the product, brand loyalty, etc. Avid movie explorers !   Etc.that prefer convenient delivery @RemusToma
  • 2. Value proposition!   The product/service that is useful for your customer segments -> why customers love you!   Answers the question: what value do I deliver? Which problems or needs are we solving/satisfying?!   Value is what the customer gets for what he gives2, but can be influenced by: !   Performance !   Customization Netflix VP: !   Design  !   Brand/status Providing high- !   Price diversity, unlimited !   Etc. movie rentals through post office @RemusToma
  • 3. Distribution Channel!   How do you communicate and deliver the product/ service!   Different options, different trade-offs Netflix Distribution: Channel Types The USPS Sales force Direct Owned Web sales Owned Store Indirect Partner Stores Partner Wholesaler @RemusToma
  • 4. Customer Relationship!   Chose the relationship type, based on your customer segment!   Types of relationships: !   Personal assistance Netflix customer relationship: !   Dedicated personal assistance !   Self-service Automated movie !   Automated services recommendations based on client reviews !   Co-creation @RemusToma
  • 5. Key Resources!   What resources do I need for my business to function?!   Types of key resources: !   Physical: buildings, machines, etc. !   Intellectual: brands, patents, copyrights, customer databases !   Human !   Financial Netflix resources: - Patented recommendation system - Efficient employees @RemusToma
  • 6. Key Activities!   What key activities does our business require in order to function?!   E.g. production, design, finding solutions, etc. Netflix activities: -  Internet recommendations -  Inventory management through queue analysis @RemusToma
  • 7. Key Partnerships!   What suppliers and partners does my business need to work?!   Why should you do a partnership? !   Obtain resources !   Economies of scale !   Reduce risk Netflix partnerships: -  Indie Producers -  Mainstream producers -  USPS Distribution @RemusToma
  • 8. Revenue Streams!   How will your business make money?!   What kind of revenue systems can you use? !   One time sales: Starcraft 2 !   Recurrent sales: !   Usage fee – sim card telecom operators, Datasift !   Subscription fees: SocialBro Netflix revenues: !   Renting: Rent a car !   Licensing: Google Maps for iPhone L Monthly subscription !   Brokerage fees – AirBnB fees !   Advertising: Google!   How do you set the price? Three foundations: !   Costs – lowest price you can set !   Competition – undifferentiated products [gas] !   Value to customer – !   Dynamic pricing - Wizzair @RemusToma
  • 9. Cost Structure!   Types of costs: !   Fixed costs: rent, !   Variable costs: energy, fuel, groceries (restaurants) !   Economies of scale: decrease with volume - !   Economies of scope: diversity leads to lower costs Netflix costs: -  USPS delivery Costs -  Customer acquisition costs @RemusToma
  • The 9 building blocks: The Business Model Canvas Day Month Year No.Who are our Key Partners? What Key Activities do our Value Propositions require? What value do we deliver to the customer? What type of relationship does each of our Customer For whom are we creating value?Who are our key suppliers? Our Distribution Channels? Which one of our customer’s problems are we helping to solve? Segments expect us to establish and maintain with them? Who are our most important customers?Which Key Resources are we acquiring from partners? Customer Relationships? What bundles of products and services are we offering to each Customer Segment? Which ones have we established?Which Key Activities do partners perform? Revenue streams? Which customer needs are we satisfying? How are they integrated with the rest of our business model? How costly are they? How? What? Who? What Key Resources do our Value Propositions require? Through which Channels do our Customer Segments Our Distribution Channels? Customer Relationships? want to be reached? Revenue Streams? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines?What are the most important costs inherent in our business model? For what value are our customers really willing to pay?Which Key Resources are most expensive? For what do they currently pay?Which Key Activities are most expensive? How are they currently paying? How would they prefer to pay? How much? How much does each Revenue Stream contribute to overall revenues? This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. @RemusToma
  • Netflix’s Business Model Canvas Day Month Year No. Who are our Key Partners? What Key Activities do our Value Propositions require? What value do we deliver to the customer? Customer relationship: What type of relationship does each of our Customer For whom are we creating value? Activities: Who are our key suppliers? Our Distribution Channels? Which one of our customer’s problems are we helping to solve? Segments expect us to establish and maintain with them? Who are our most important customers? Which Key Resources are we acquiring from partners? Customer Relationships? What bundles of products and services are we offering to each Customer Segment? Which ones have we established? Which Key Activities do partners perform? Revenue streams? Which customer needs are we satisfying? How are they integrated with the rest of our business model? -  Internet recommendations How costly are they? Automated movie -  Inventory management recommendations through queue analysis based on client reviews VP: Partnerships:  Customers: Providing high--  Indie Producers diversity, Avid movie explorers that-  Mainstream producers What Key Resources do our Value Propositions require? Through which Channels do our Customer Segments unlimited movie Our Distribution Channels? Customer Relationships? want to be reached? prefer convenient delivery Revenue Streams? How are we reaching them now?-  USPS Distribution How are our Channels integrated? Which ones work best? Resources: rentals through Which ones are most cost-efficient? How are we integrating them with customer routines? - Patented post office Distribution: recommendation system The USPS - Efficient employees What are the most important costs inherent in our business model? Which Key Resources are most expensive? For what value are our customers really willing to pay? For what do they currently pay? Costs: Which Key Activities are most expensive? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? Revenues: -  USPS delivery Costs -  Customer acquisition costs Monthly subscription fees This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. @RemusToma
  • ‪Business Model Canvas Explained‬! http://www.youtube.com/watch?v=QoAOzMTLP5s @RemusToma
  • How to create great business models? The Process•  Before you start burning cash, make sure you got the right BM!1.  Start with the customer – your insight, idea, hidden need, etc.2.  Move from that and think of all the components of the business model3.  Sketch out your business model by using the canvas and see how everything links together4.  Co-create with other people, brainstorm, look for alternatives and improve your model5.  Your BM is just a set of hypotheses, TEST IT WITH CLIENTS!6.  Reiterate on their feedback until you are able to sell a minimum viable product (ideally) @RemusToma
  • Value Innovation – Cirque du Soleil!   Industry conditions: !   Long term declining industry !   Alternative entertainment options – video games !   Increased pressure from animal activists !   Entertainer supply was scarce!   Cirque du Soleil Result? !   Profits increased by 22x in 10 years !   More profits than the main competitors How did they do it? Certainly not technology… @RemusToma
  • Value Innovation – Red Ocean, Blue Ocean Strategy* Red Ocean Strategy Blue Ocean StrategyCompete in existing market space Create uncontested market spaceBeat the competition Make the competition irrelevantExploit the existing demand Create and capture new demandMake the value/cost trade-off Break the value/cost trade-offAlign the whole system of company Align the company’s system ofactivities with the strategic choice of activities to choose differentiationdifferentiation or low cost AND low costConditions for a Blue Ocean Strategy:•  Attract a new demand•  Offer more value for the customer•  Have a lower cost structure*Kim & Mauborgne (2004) @RemusToma
  • Value Innovation – Blue Ocean Strategy cont.Sounds awesome!!! But…how?!?1.  Look at a product or service2.  Identify the top most important features/attributes (what the customer really values)3.  Sketch out these attributes and their level of importance (strategy canvas) @RemusToma
  • Value Innovation – Blue Ocean Strategy cont.210 My product86420 Attribute 1 Attribute 2 Attribute 3 Attribute 4 Attribute 5 And then…. @RemusToma
  • Value Innovation – Blue Ocean Strategy cont. 3 Eliminate Raise Reduce Create @RemusToma
  • Netflix’s strategy canvas @RemusToma
  • Web Business Models*!   The Freemium Model – Offer a minimum product and charge for pro features ! Linkedin, SlideShare, etc.!   The Affiliate Model – Direct traffic, leads or sales to another website!   Subscription Model – pay a recurring fee to access the product!   Virtual Goods Model – selling virtual goods online in a game or website!   Advertising Model – high traffic websites sell ads for their traffic @RemusToma *http://bitly.com/A8kYr
  • That’s it!Q&A Thank you! @RemusToma
  • References!   Kim W.C. Mauborgne, R. 2004. Blue Ocean Strategy. Harvard Business Review, 82: 76-84.! Magretta, J. 2002. Why Business Models Matter. Harvard Business Review, 80(5): 86-92! Zott, C., Amit, R., & Massa, L. 2011. The business model: Recent developments and future research. Journal of Management, 37: 1019-1042.!   Osterwalder A, Pigneur Y. 2010 Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Switzerland: OSF.!   Osterwalder, A. Pigneur, Y. 2002, “An e-Business Model Ontology for Modeling e-Business,” Proceedings of the 15th Bled Electronic Commerce Conference Recommended future reading: Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Osterwalder A, Pigneur Y. 2010, http://businessmodelgeneration.com/book @RemusToma