Guide for Entrepreneurs on Business Model Improvement.


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This is a guide for entrepreneurs to examine and analyze their existing business models, and consequently to improve it. The in thing now is business model improvement for the 21st century vs strategy for the last 30 years.This lecture is for students of entrepreneurship elective at the MBA in Ateneo Graduate School of Business, a leading MBA school in the Philippines. It is being uploaded for the convenience of present and former students for the said elective.

Formerly, innovations in business have been skin deep: processes, products and strategy. But the markets, customers, and competitive landscape are rapidly changing. A new and faster model for business to be up to speed is badly needed by big and small business alike and/or a deeper and more analytical understanding of their business model.

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Guide for Entrepreneurs on Business Model Improvement.

  1. 1. Guide for entrepreneurs on business model improvement Adapting in the 21 st century
  2. 2. Business Model Innovation THE GRANDPARENT OF ALL INNOVATIONS
  3. 3. DEFINITION OF BUSINESS MODEL <ul><li>How a company does business </li></ul><ul><li>Covers the following: </li></ul><ul><li>. target customer </li></ul><ul><li>. Revenue/ cost </li></ul><ul><li>.main value proposition </li></ul><ul><li>> It also tells: </li></ul><ul><li>How mvp is communicated </li></ul><ul><li>How mvp is delivered </li></ul>
  4. 4. New trend among businesses <ul><li>According to Harvard Business Review: </li></ul><ul><li>> 7 out of l0 businesses will change their business models </li></ul><ul><li>>98% changed their business models </li></ul><ul><li>> for three decades, strategy was the “in” </li></ul><ul><li>thing; now its BM (business model) </li></ul>
  5. 5. Analogy <ul><li>Driving your old car up to 200 kmh? </li></ul>
  6. 6. But aren’t we doing that with our business using old tired models?
  7. 7. Focus of the 20 th century: <ul><li>Strategy </li></ul><ul><li>Process/manufacturing innovation </li></ul><ul><li>Marketing brand </li></ul><ul><li>Legal means/lobbying!!! </li></ul>
  8. 8. The new millenium requires better faster models!!!
  9. 9. A better model
  10. 10. The business model
  11. 11. Business model vs strategy vs tactics <ul><li>Business model – the car </li></ul><ul><li>Strategy – the accessories added to the </li></ul><ul><li>car </li></ul><ul><li>Tactics – how the car is driven </li></ul>
  12. 12. BM I
  13. 13. Compelling reasons for BMI <ul><li>Benefits : </li></ul><ul><li>l. Cost reduction – in 55 cases </li></ul><ul><li>2. Strategic flexibility – in 55 cases </li></ul><ul><li>3. Focus and specialization - 45 cases </li></ul><ul><li>4. Fully exploiting opportunities- 45 cases </li></ul><ul><li>5. Reduce risks -21 cases </li></ul><ul><li>6. Conversion of fixed cost to variable cost </li></ul>
  14. 14. Business Model Innovation Matters <ul><li>In the case of Apple, its stock prices </li></ul><ul><li>went up fourfold even surpassing that of Google. And just to think that </li></ul><ul><li>the drivers were iPod and iTunes! </li></ul>
  15. 15. Business model overview
  16. 16. Business model – another view
  17. 17. Another bm canvass
  18. 18. BM analysis using sticky notes
  19. 19. What,who, how, how much?
  20. 20. BM using the whiteboard
  21. 21. Social Entreprise BM
  22. 22. Four main areas of business model <ul><ul><li>Customers </li></ul></ul><ul><ul><li>Customer offering </li></ul></ul><ul><ul><li>Infrastructures </li></ul></ul><ul><ul><li>Financial viability </li></ul></ul>
  23. 23. Alex Osterwalder definition of BMI <ul><li>“ Creating value for customers and so ciety by replacing outmoded business </li></ul><ul><li>model due to processing competitive </li></ul><ul><li>and environmental pressures.” </li></ul>
  24. 24. Building Blocks of Business Model <ul><li>CUSTOMERS: </li></ul><ul><ul><li>Customer segments </li></ul></ul><ul><ul><li>Channels </li></ul></ul><ul><ul><li>Relationships </li></ul></ul><ul><li>INFRASTRUCTURES: </li></ul><ul><ul><li>Key processes </li></ul></ul><ul><ul><li>Key partners </li></ul></ul><ul><ul><li>Key resources </li></ul></ul><ul><li>FINANCIAL VIABILITY </li></ul><ul><li>- Revenue </li></ul><ul><li>- Cost </li></ul><ul><li>CUSTOMER VALUE PROPOSITION </li></ul>
  25. 25. BMI “ Seizing White Space ” by Mark Johnson <ul><li>Range of potential activities not currently addressed by the present BM. </li></ul><ul><li>Four areas must be clearly defined: </li></ul><ul><ul><li>Customer value proposition </li></ul></ul><ul><ul><li>Profit formula </li></ul></ul><ul><ul><li>Key resources </li></ul></ul><ul><ul><li>Key processes </li></ul></ul>
  26. 26. BMI Boston Consulting Group <ul><li>OPERATING MODEL </li></ul><ul><ul><li>Value chain </li></ul></ul><ul><ul><li>Organization </li></ul></ul><ul><ul><li>Cost model </li></ul></ul><ul><li>VALUE PROPOSITION </li></ul><ul><ul><li>Target segments </li></ul></ul><ul><ul><li>Product offering </li></ul></ul><ul><ul><li>Revenue model </li></ul></ul>
  27. 27. Harvard Business School on BMI <ul><li>Authors: Clayton Christensen, Mark </li></ul><ul><li>Johnson of Innosight, 2008 and 20ll </li></ul><ul><li>FOUR MAJOR BM BLOCKS </li></ul><ul><li>Customer value proposition </li></ul><ul><li>Profit formula </li></ul><ul><li>Key resources </li></ul><ul><li>Key processes </li></ul>
  28. 28. Clayton Christensen - HBS
  29. 29. Steps in BMI <ul><li>Visualize </li></ul><ul><li>Assess </li></ul><ul><li>Renew </li></ul><ul><li>Plan </li></ul><ul><li>Implement </li></ul>
  30. 30. BMI Exercise <ul><li>Have a business model in front of you. </li></ul><ul><li>Have your team and officers discuss and </li></ul><ul><li>clarify your present MVP, PTM, Channels, Customer bonding etc. </li></ul><ul><li>Using sticky paper, post the same at the </li></ul><ul><li>at the BM canvass; use green for your </li></ul><ul><li>strength (or mark with+) and pink/yellow </li></ul><ul><li>for weakness. </li></ul><ul><li>4. Using ERRC method, innovate your BM </li></ul>
  31. 31. BMI Vs Other Management Tools <ul><li>Brand management- cosmetic changes in the 4 ps o marketing may not be enough to sustain the sales/business. The BM is the platform </li></ul><ul><li>Business Plan- is merely a promise and may not address mismatch between co and customer value perception and/or lack of accomplishment of the job (MVP) </li></ul>
  32. 32. Criticism vs. Ideo <ul><li>Design and creativity- Ideo produced the design for I tunes and Kindle. But its other novelty products such as its work shopping cart did not add value nor changed the industry. </li></ul><ul><li>Technology - Google grew on existing technology. It did not reinvent the technology </li></ul>
  33. 33. Contrarian view vs BPO <ul><li>American Apparel decided not to outsource its clothing at China @ $4.00/hr but instead used expensive $40.00/hr US labor. Why? </li></ul>
  34. 34. Business Model Innovation covers more <ul><li>The backbone of strategy has been marketing: development, penetration, product development and manufacturing process. </li></ul><ul><li>Strategy also covers divestment and business liquidation! </li></ul>
  35. 35. Liquidation as a Strategy
  36. 36. Mostly Marketing/Brand Strategies
  37. 37. 10 New Business Models <ul><li>Localized low cost producer </li></ul><ul><li>One-of-experience </li></ul><ul><li>Beyond advertising model </li></ul><ul><li>Markets are conversation </li></ul><ul><li>Low budget innovation </li></ul><ul><li>Community funded </li></ul><ul><li>Sustainability focused </li></ul><ul><li>Twisted freemium </li></ul><ul><li>Unlimited niches </li></ul><ul><li>In crowd business model </li></ul><ul><li>Go to: http// new-business-models-for-the-decade </li></ul>
  38. 38. Total Innovation from BMI <ul><li>New PTM- new customers? Who are the non customers that may be reached by your exististing channels? </li></ul><ul><li>Can you offer new value to existing </li></ul><ul><li>customers? </li></ul><ul><li>What can be done to your existing </li></ul><ul><li>infrastructures to serve your </li></ul><ul><li>existing customers? New ones? </li></ul>
  39. 39. Examples: <ul><li>Cloud computing from Amazon </li></ul><ul><li>Use of UPS tracking system to assist </li></ul><ul><li>Ford track cars in transit </li></ul><ul><li>Bounty Fresh putting up Chooks to Go </li></ul>
  40. 40. Innovation in channels <ul><li>The old channels – in house or BPO </li></ul><ul><li>Direct to the customers, or retail outlets </li></ul><ul><li>Media platforms: above the line below the line or social media? SEO? </li></ul>
  41. 41. Other innovation areas in BM <ul><li>Key partners </li></ul><ul><li>Key resources </li></ul><ul><li>Value chain configuration </li></ul><ul><li>New costs </li></ul><ul><li>New profits </li></ul>
  42. 42. Can you now innovate your current business model? Can you now create a new model from ground up?
  43. 43. THANK YOU! [email_address]
  44. 44. acknowledgement <ul><li>The pictures and photographs are from google images </li></ul><ul><li>The primary sources of ideas on business model have been cited in the slides </li></ul>