Designing Business Models for theNigerian MarketQuaking Aspens
Quaking Aspens2OutlineWhat are Business Models (BMs)?Understanding the Nigerian MarketThe Business Model CanvasBM Design T...
Quaking Aspens3CreditsAlexander Osterwalder (Ph.d) | www.BusinessModelGeneration.com
Quaking Aspens4
Quaking Aspens5Classwork: Mobile-App Business Model?www.businessmodelgeneration.comCost structure Revenue streamsKey resou...
Quaking Aspens6What are Business Models?
Quaking Aspens7What are Models?
Quaking Aspens8A Model is a simplified version of somethingWhat are Models?Models improve our understanding of real world ...
Quaking Aspens9What is this?
Quaking Aspens10Understanding Nigerian Market
Quaking Aspens● Economic growth averaged 7.4% annually over pastdecade, driven by the non-oil sector (i.e.telecommunicatio...
Quaking Aspens12Nigerian Market Analysis: Macro-Economic OverviewHigh economic growth rate– Nigeria’s economic growth has ...
Quaking Aspens13Nigerian Market Analysis: The Nigerian ConsumerAnalysis of Consumer Buying Patterns, 2015 est. (N’b)5,9741...
Quaking Aspens14Nigerian Market Analysis: The Nigerian ConsumerLoyalty to BrandPerceived quality ofproductsPerceived value...
Quaking Aspens15• A review of the Hofstedes Cultural Dimension scores for Nigeria reveals:Nigerian Market Analysis: The Ni...
Quaking Aspens16Growing Internet Population− Highest in Africa, currently at 26% of population and growing rapidly− Few ar...
Quaking Aspens17Nigerian Business Models: Key ConsiderationsNavigating Regulatory Environment− Need for proper understandi...
Quaking Aspens18The Business Model Canvas
Quaking Aspens19The Business Model Canvas
Quaking Aspens20The Business Model Canvas
Quaking Aspens21The Business Model Canvas
Quaking Aspens22
Quaking Aspens23Block 1: Customer Segments (CS)Defines the different groups of people or organizationsan enterprise aims t...
Quaking Aspens24
Quaking Aspens25Block 2: Value Proposition (VP)Newness• Satisfy an entirely new set of needsthat customers previously didn...
Quaking Aspens26Block 2: Value Proposition (VP) cont’dDescribes the bundle of products and services thatcreate value for a...
Quaking Aspens27
Quaking Aspens28Block 3: Channels (CH)Describes how a company communicates with andreaches its Customer Segments to delive...
Quaking Aspens29
Quaking Aspens30Block 4: Customer Relationships (CR)Describes the types of relationships a companyestablishes with specifi...
Quaking Aspens31
Quaking Aspens32Block 5: Revenue Streams (RS)Represents the cash a company generates fromeach Customer SegmentAsset sale• ...
Quaking Aspens33
Quaking Aspens34Block 6: Key Resources (KR)Describes the most important assets required tomake a business model workIt all...
Quaking Aspens35
Quaking Aspens36Block 7: Key Activities (KA)Describes the most important things a companymust do to make its business mode...
Quaking Aspens37
Quaking Aspens38Block 8: Key Partners (KP)Describes the network of suppliers and partners thatmake the business model work...
Quaking Aspens39
Quaking Aspens40Block 9: Cost Structure (C$)Describes all costs incurred to operate a businessmodelCost-driven• Focus on m...
Quaking Aspens41The Business Model
Quaking Aspens42The Business ModelKeyPartnersKeyResourcesKeyActivities
Quaking Aspens43The Business Model
Quaking Aspens44The Business Model CanvasCost Side Value Side
Quaking Aspens45BM Design Tools
Quaking Aspens46Design Tools: Empathy MapIdentify CustomerSegmentsSelect A PromisingSegmentDefine CustomerProfileUse Empat...
Quaking Aspens47Design Tools: IdeationMore like Brainstorming?
Quaking Aspens48Design Tools: OthersIdeation VisualizingScenarios Prototyping
Quaking Aspens49Design Tools: What is this?
Quaking Aspens50Design Tools: What is this?
Quaking Aspens51Evaluating Your Business Model
Quaking Aspens52Evaluating Your Business Model
Quaking Aspens53Business Modeling Process
Quaking Aspens54These are main objectives of business model innovationModeling ObjectivesSatisfy market: Fulfill an unansw...
Quaking Aspens55Business Modeling Objectives: Challenges► Finding the right model► Testing the model before a full-scale l...
Quaking Aspens56Business Modeling Challenges: Solution
Quaking AspensAdapt andmodify thebusinessmodel inresponse tomarketreactionImplement thebusinessmodelprototype inthe fieldG...
Quaking Aspens58Classwork
Quaking Aspens59Case Study: Mobile-App Business Modelwww.businessmodelgeneration.comCost structure Revenue streamsKey reso...
Quaking Aspens60Comments | Concerns | Questions
Quaking Aspens61Quaking Aspens is a social enterprise focused on providing businesssolutions to high-potential SMEs in Afr...
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FFB Designing Business Models for the Nigerian Market

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FFB Designing Business Models for the Nigerian Market

  1. 1. Designing Business Models for theNigerian MarketQuaking Aspens
  2. 2. Quaking Aspens2OutlineWhat are Business Models (BMs)?Understanding the Nigerian MarketThe Business Model CanvasBM Design ToolsBusiness Modeling ProcessBM Classwork
  3. 3. Quaking Aspens3CreditsAlexander Osterwalder (Ph.d) | www.BusinessModelGeneration.com
  4. 4. Quaking Aspens4
  5. 5. Quaking Aspens5Classwork: Mobile-App Business Model?www.businessmodelgeneration.comCost structure Revenue streamsKey resourcesKey activitiesKey partnersValue propositionCostumer relationshipsCostumer segmentsChannelsTextText
  6. 6. Quaking Aspens6What are Business Models?
  7. 7. Quaking Aspens7What are Models?
  8. 8. Quaking Aspens8A Model is a simplified version of somethingWhat are Models?Models improve our understanding of real world objects and eliminateunimportant detailsA Business Model describes the rationale of how an organizationcreates, delivers, and captures value.”Create Deliver Capture
  9. 9. Quaking Aspens9What is this?
  10. 10. Quaking Aspens10Understanding Nigerian Market
  11. 11. Quaking Aspens● Economic growth averaged 7.4% annually over pastdecade, driven by the non-oil sector (i.e.telecommunications, construction, wholesale and retailtrade, hotel and restaurant services, manufacturing andagriculture).● Government expected to reach target inflation of <10% in2013.● Economic growth has not cut poverty nor created necessaryjobs. About two thirds of the population live on <US$1 perday and unemployment rate is about 24%, up from 21.1%.● Unemployment in the 15-24 age group, about 40%%; for25-44 years, about 25%.● Informal economy account for a large proportion ofemployment.PEST AnalysisPolitical Economic● Relatively stablepolitical climate.● Violence in theNorth by extremistgroups is greatestsource of concerns● Corruption levelsremain high,undermining snail-paced economicreforms● Growth expected to besustained● Private and informalsector employs 80% ofeconomy● Access to and high costof finance remain majorconstraint● Dilapidated state ofinfrastructure● Over-dependence on oilSocial Technological● Indicators on healthand educationremain weak● Expanding middleclass● Relatively highyouth population● Still high poverty● Increasingly successfultelecoms sector● Increase in mobiletelephony, internetusage, and e-commerce● Trends point towardsembrace of technologyto drive growthSelected Economic Indicators 2010 2011 2012 2013pReal GDP growth 7.8 6.7 6.9 6.6Real GDP per capita growth 5.3 4.1 4.4 4.1CPI inflation 13.7 10.2 10.1 8.4Source: World Bank Database, Economist Intelligence Unit, AfricaEconomic OutlookMajor Sectors (by contribution to GDP)Agriculture: 35%; Mining and Quarrying: 34%;Wholesale & Retail: 16%; Finance, Retail Estate &Business Services: 6.3%; Manufacturing: 2%0.02.04.06.08.010.012.0Real GDP growth (%)Western Africa - RealGDP growth (%)Africa - Real GDPgrowth (%)11Nigerian Market Analysis: Macro-Economic Overview
  12. 12. Quaking Aspens12Nigerian Market Analysis: Macro-Economic OverviewHigh economic growth rate– Nigeria’s economic growth has averaged about 7.4% annually over the past decade– Growth remained robust in 2011 at 6.9%, driven by the non-oil sector; 6.9% projected for 2012Exponential population growth– Population of about 158 million, represents large consumer market (72% of population < 30 years)– Excellent regional distribution of eight “anchor” cities, each with populations exceeding one millionUrbanization and the rise of the middle income earner– About 74.2 million Nigerians currently live in urban areas, with urbanization progressing at ~3.5% p.a.– By 2020 more than 70% of Nigerians are projected to live in cities– Growth in the number of emerging middle income earners/consumers with disposable incomeEncouraging environment for foreign investment– Though Nigeria ranked 137th in the World Bank’s “Ease of Doing Business Index,” certain strategic movesby the government to encourage foreign participation.– High recipient of FDI in Africa– Organizations in new industries can obtain pioneer status granting tax exemptions for first 3-5 yearsSource: World Bank, Ciuci Consulting
  13. 13. Quaking Aspens13Nigerian Market Analysis: The Nigerian ConsumerAnalysis of Consumer Buying Patterns, 2015 est. (N’b)5,9741,090778637376 338865Food & Bev.59%Clothing &Footwear11%Health &Med. Serv.8%HouseholdGoods &Serv.6%AlcoholicBev. &Tobacco4%Comm.3%Misc. Goods& Serv.9%
  14. 14. Quaking Aspens14Nigerian Market Analysis: The Nigerian ConsumerLoyalty to BrandPerceived quality ofproductsPerceived valuerelative to priceNot necessarily drawnto particularmanufacturerReligiousNigeria is mostreligious country inthe world (90% ofpopulation confess toa form of religion)Consumers areinfluenced byreligious practicesPrice Sensitive70% of Nigerians livebelow the povertyline of US$1.25 a dayMostly price sensitiveInnovations revolvearound smallpackaging ofconsumablesDiscount retail storesmoving demand frominformal retail
  15. 15. Quaking Aspens15• A review of the Hofstedes Cultural Dimension scores for Nigeria reveals:Nigerian Market Analysis: The Nigerian ConsumerPower DistanceExistent hierarchies /class separateindividuals alongdivides (income,education, etc.)Businesses maysuccessfully adoptingmarket segmentation /product differentiationstrategiesIndividualismConsidered collectivisticsociety; people belongto and have long-termcommitment tosocieties, families,religious, or otherinstitutionsMass marketingapproach targeted atidentified niches may beadvisedMasculinity/FeminismMasculine society,individuals are drivenby competition,success, achievementRetail chains tookadvantage bypositioning stores atstatus locations,making themattractive to upwardlymobile middle/upper-class consumersUncertainty AvoidanceHigh preference foravoiding uncertaintyand preferring to makebulk purchasesespecially whenobserved economictrend show probableprice increase orscarcityLong Term OrientationNigerians have short-term orientationLittle propensity to save, intense pressure to show offsocial status usually geared towards achieving shortterm resultsHofstedes CulturalDimension
  16. 16. Quaking Aspens16Growing Internet Population− Highest in Africa, currently at 26% of population and growing rapidly− Few are active user of e-commerceE-Payment System Readiness− Growing use of credit/debit cards, e-funds transfer services, recharge cardsGrowing sophistication of computer use− More people now own smartphones, PCs and tablets. Sophistication expected to improveEnabling legislation and enforcement− Currently emerging: no enabling legislation− Other issues include data protection, privacy, legal evidence, jurisdiction, etc.Nigerian Market Analysis: E-Commerce ReadinessE-Commerce Delivery Infrastructure− Improving Internet access & infrastructure− Poor transport and supply chain networkBuyers Attitude to Ecommerce− Many people are unwilling due to risk of fraud− Younger population warming up to e-businessActivities of Current Market Players− More deals & other sites springing up− Key e-tailers include Jumia, Konga & DealDey
  17. 17. Quaking Aspens17Nigerian Business Models: Key ConsiderationsNavigating Regulatory Environment− Need for proper understanding of policies of government agencies. General policy formulation isunpredictable, need to be proactivityUnderstanding of Competitive Landscape− Competitive landscape is averagely positive, ecommerce models gaining maturity; need forgovernment support for enabling legislation and infrastructureHuman Capital− Recruiting skilled manpower is often an issue; need for extensive training programmes depending onbusiness strategyAccess to Financing− 70% of financing for businesses in Nigeria come from retained earnings; consider accessing cheaperexternal financing or patient, risk capital from investorsInfrastructural Gaps− Basic infrastructure is poor; need to allocate additional budgets− Need for proper understanding of supply chain/logistics infrastructure to support ecommerce model;more time and resources may be required than expectedGovernment Bureaucracy− Registration of business, regulatory approvals may take longer period than expected− Multiple layers of screening may be required
  18. 18. Quaking Aspens18The Business Model Canvas
  19. 19. Quaking Aspens19The Business Model Canvas
  20. 20. Quaking Aspens20The Business Model Canvas
  21. 21. Quaking Aspens21The Business Model Canvas
  22. 22. Quaking Aspens22
  23. 23. Quaking Aspens23Block 1: Customer Segments (CS)Defines the different groups of people or organizationsan enterprise aims to reach and serveMass market• Focus on one large group of customerswith broadly similar needs andproblems• Often found in consumer electronicsNiche market• Cater to specific, specialized CustomerSegments• Often found in supplier-buyerrelationshipsSegmented• Distinguish between market segmentswith slightly different needs andproblems• E.g. retail arm of a bankDiversified• Serves two unrelated segments withvery different needs and problems• E.g. from online retail to cloudcomputing (Amazon.com)Multi-sided platforms (or markets)• Two or more interdependent segments• Free online news and newspapercompany can leverage advertisers fortwo products
  24. 24. Quaking Aspens24
  25. 25. Quaking Aspens25Block 2: Value Proposition (VP)Newness• Satisfy an entirely new set of needsthat customers previously didn’tperceiveCustomization• Tailoring products and services tospecific needs of individual customer orSegments, recently through co-creation, mass customizationDesign• A product may stand out because ofsuperior design. In fashion andconsumer electronics, design can be aparticularly importantPerformance• Improving product or serviceperformanceGetting the job done• Provide value by helping customer getcertain jobs done. E.g. Rolls-Royceproviding maintenance serviceBrand/status• Value in the simple act of using anddisplaying a specific brand• Wearing a Rolex watch signifies wealthPrice• Offeringsimilar valueat a lowerprice tosatisfy price-sensitiveCustomerSegmentsDescribes the bundle of products and services thatcreate value for a specific Customer Segment
  26. 26. Quaking Aspens26Block 2: Value Proposition (VP) cont’dDescribes the bundle of products and services thatcreate value for a specific Customer SegmentCost reduction• Helping customers reduce costs• Salesforce.com sells a hosted CRMwhich relieves troubles of buying,installing CRM softwaresRisk reduction• Reducing risks when purchasingproducts or services. For Used carbuyer, one-year service guaranteereduces risk of post-purchase repairsAccessibility• Making products and services availableto customers who previously lackedaccessConvenience/usability• Making things more convenient oreasier to use• iPod and iTunes offered customersunprecedented convenience
  27. 27. Quaking Aspens27
  28. 28. Quaking Aspens28Block 3: Channels (CH)Describes how a company communicates with andreaches its Customer Segments to deliver a ValueProposition
  29. 29. Quaking Aspens29
  30. 30. Quaking Aspens30Block 4: Customer Relationships (CR)Describes the types of relationships a companyestablishes with specific Customer SegmentsPersonal assistance• Interaction with real customerrepresentative during sales process orafter purchase, onsite, point of sale,call centers, email, or other meansDedicated personal assistance• Involves dedicating a customerrepresentative to a clientSelf-service• Company provides all the necessarymeans for customers to helpthemselvesAutomated services• Mixes sophisticated form of self-servicewith automated processesCommunities• Use of user communities to becomemore involved with customers/prospects and to facilitate connectionsbetween community membersCo-creation• Involves co-creatingvalue withcustomers.• Invitingcustomers towrite reviews
  31. 31. Quaking Aspens31
  32. 32. Quaking Aspens32Block 5: Revenue Streams (RS)Represents the cash a company generates fromeach Customer SegmentAsset sale• Derived from selling ownership rightsto a physical productUsage fee• Generated by the use of a particularservice. The more service is used, themore customer paysSubscription fees• Generated by selling continuous accessto a serviceLending/Renting/Leasing• Created by temporarily grantingexclusive right to use a particular assetfor a fixed period in return for a feeLicensing• Generated by giving customerspermission to use protected intellectualproperty in exchange for licensing feesBrokerage fees• Derived from intermediation servicesperformed on behalf of two or morepartiesAdvertising• Results fromfees foradvertising aparticularproduct,service, orbrand
  33. 33. Quaking Aspens33
  34. 34. Quaking Aspens34Block 6: Key Resources (KR)Describes the most important assets required tomake a business model workIt allows the company offer its value propositionPhysical• Physical assets such as manufacturingfacilities, buildings, vehicles, machines,systems, point-of-sales systems, anddistribution networksIntellectual• Resources such as brands, proprietaryknowledge, patents and copyrights,partnerships, and customer databasesHuman• People are more prominent in certainbusiness models – competencerequiredFinancial• Need for financial resources and/orfinancial guarantees, such as cash,lines of credit, or stock option pool
  35. 35. Quaking Aspens35
  36. 36. Quaking Aspens36Block 7: Key Activities (KA)Describes the most important things a companymust do to make its business model workProduction• Designing, making, and delivering aproduct in substantial quantities,superior qualityProblem solving• Relate to coming up with new solutionsto individual customer problemsPlatform/network• Business models with a platform as aKey Resource are dominated byplatform or network related KeyActivities e.g. eBay
  37. 37. Quaking Aspens37
  38. 38. Quaking Aspens38Block 8: Key Partners (KP)Describes the network of suppliers and partners thatmake the business model workStrategic alliances• Between non-competitorsCompetition• Strategic partnerships betweencompetitorsJoint ventures• Develop new businessesBuyer-supplier relationships• Assure reliable supplies
  39. 39. Quaking Aspens39
  40. 40. Quaking Aspens40Block 9: Cost Structure (C$)Describes all costs incurred to operate a businessmodelCost-driven• Focus on minimizing costs whereverpossibleFixed costs• Remain the same despite the volume ofgoods or services producedEconomies of scale• Cost advantages resulting fromexpansionValue-driven• More focus on value creationVariable costs• Vary proportionally with the volume ofgoods or services producedEconomies of scope• Cost advantages resulting from largerscope of operations• One activity supporting multipleproducts
  41. 41. Quaking Aspens41The Business Model
  42. 42. Quaking Aspens42The Business ModelKeyPartnersKeyResourcesKeyActivities
  43. 43. Quaking Aspens43The Business Model
  44. 44. Quaking Aspens44The Business Model CanvasCost Side Value Side
  45. 45. Quaking Aspens45BM Design Tools
  46. 46. Quaking Aspens46Design Tools: Empathy MapIdentify CustomerSegmentsSelect A PromisingSegmentDefine CustomerProfileUse Empathy Map
  47. 47. Quaking Aspens47Design Tools: IdeationMore like Brainstorming?
  48. 48. Quaking Aspens48Design Tools: OthersIdeation VisualizingScenarios Prototyping
  49. 49. Quaking Aspens49Design Tools: What is this?
  50. 50. Quaking Aspens50Design Tools: What is this?
  51. 51. Quaking Aspens51Evaluating Your Business Model
  52. 52. Quaking Aspens52Evaluating Your Business Model
  53. 53. Quaking Aspens53Business Modeling Process
  54. 54. Quaking Aspens54These are main objectives of business model innovationModeling ObjectivesSatisfy market: Fulfill an unanswered market need (e.g. ccHub, Tata)1Bring to market: Bring a new technology, product, or service to market or exploitexisting intellectual property (e.g. Nespresso)2Improve market: Improve or disrupt an existing market (e.g. Bharti Airtel, Skype,Amazon.com retail)3Create market: Create an entirely new type of business (e.g. Google)3
  55. 55. Quaking Aspens55Business Modeling Objectives: Challenges► Finding the right model► Testing the model before a full-scale launch► Inducing the market to adopt the new model► Continuously adapting the model in response to market feedback► Managing uncertainty
  56. 56. Quaking Aspens56Business Modeling Challenges: Solution
  57. 57. Quaking AspensAdapt andmodify thebusinessmodel inresponse tomarketreactionImplement thebusinessmodelprototype inthe fieldGenerate andtest viablebusinessmodel options,and select thebestResearch andanalyzeelementsneeded for thebusinessmodel designeffortPrepare for asuccessfulbusinessmodel designproject57The Design ProcessMobilize Design Implement ManageUnderstand
  58. 58. Quaking Aspens58Classwork
  59. 59. Quaking Aspens59Case Study: Mobile-App Business Modelwww.businessmodelgeneration.comCost structure Revenue streamsKey resourcesKey activitiesKey partnersValue propositionCostumer relationshipsCostumer segmentsChannelsTextText
  60. 60. Quaking Aspens60Comments | Concerns | Questions
  61. 61. Quaking Aspens61Quaking Aspens is a social enterprise focused on providing businesssolutions to high-potential SMEs in Africa.Our focus is to embrace SME entrepreneurs as they aspire to attainefficiency, pursue new markets, visible growth, and profitability.Our teams are made up of experienced, multi-disciplinary professionalsfrom various fields in consulting.Michael OlorunninwoMichael.Phurtune@gmail.com | +234(0)8037199590May 2013
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