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Thanks to Alex Osterwalder

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Business model Business model Presentation Transcript

  • By : Aidin Salamzadeh Teacher : Professor Zarei Fall 2009 Faculty of Entrepreneurship , University of Tehran
  • Author(s) Definition(s) Hawkins A description of the commercial relationship between a business enterprise (2001) and the products and/or services it provides in the market. Amit & Zott "A business model depicts the content, structure, and governance of (2001) transactions designed so as to create value through the exploitation of business opportunities" Gill(2000) A business model embodies the logic underlying the operation of business organizations . It should enable one to understand and predict ”how a business company is organized, what it sells, how it delivers products and services, how it adds value” Pigneur An architecture of a firm and its network of partners for creating, marketing (2000) and delivering value and relationship capital to one or several segments of customers in order to generate profitable and sustainable revenue streams. Timmers as architecture for the product, service and information flows, (1998) including a description of the various business actors and their roles; a description of the potential benefits for the various business actors; and a description of the sources of revenues Venkatraman a coordinated plan to design strategy along three vectors: customer & Henderson interaction, asset configuration, and knowledge leverage. (1998) Faculty of Entrepreneurship , University of Tehran
  • Author(s) Definition(s) Alexander A business model is nothing else than a representation of how an Osterwalder organization makes (or intends to make) money. This can be nicely (2009) described through the 9 building blocks illustrated in our graphical illustration that we mention it as "business model canvas“. Afuah (2004) the set of activities which a firm performs, how it performs them, and when it performs them so as to offer its customers benefits they want and to earn a profit Shafer & Smith reviewing relevant literature and classifying different definitions (2004) categorized the business model components that were cited twice or more. The resulting affinity diagram identified four major categories: strategic choices, creating value, capturing value, and the value network. Thompson & "A company's business model deals with the revenue-cost-profit Strick (2003) economies of its strategy" Krishnamurthy “A business model is a path to a company’s profitability”. (2003) Saloner (2001) a strategy that has a reasonable probability of succeeding if well executed. Faculty of Entrepreneurship , University of Tehran
  • Business Logic Today • Problem: Interpretation of •Positioning strategy •Objectives & goals • Result: Re-inventing strategy •Communication of strategy Information & Planning level Communication Strategy Technology (ICT) pressure ? Implementation e-Business level Business processes Processes e-Business Technology layer Faculty of Entrepreneurship , University of Tehran
  • Business Logic Tomorrow Conceptual architecture of a business strategy Information & Communication Planning level Technology (ICT) Strategy pressure Architectural e-Business level Business opportunities & Model change Implementation e-Business level Business processes Processes e-Business Technology layer Faculty of Entrepreneurship , University of Tehran
  • What is a Business Model anyway?  A business model is not a description of a complex social system itself with all its actors, relations and processes. Instead it describes the logic of a “business system” for creating value, that lies behind the actual processes. Strategy  A business model is the conceptual and Business Impact architectural implementation of a business strategy and represents the Business foundation for Model the implementation of business processes Business Processes Faculty of Entrepreneurship , University of Tehran
  • Conceptualization Conceptualizations of business models try to formalize informal descriptions into building blocks and their relationships . While many different conceptualizations exist, Osterwalder proposed a synthesis of different conceptualizations into a single reference model based on the similarities of a large range of models, and constitutes a business model design template which allows enterprises to describe their business model: Faculty of Entrepreneurship , University of Tehran
  • Osterwalder Conceptualization Business model design template: Nine building blocks and their relationships, Osterwalder Faculty of Entrepreneurship , University of Tehran
  • 4 parts to the business model Part 1- The offering – this is what the business produces and sells  Value proposition: The value proposition is a description of the products and services the business offers and why customers will be compelled to buy them. The value proposition describes the problem the customers are experiencing and how the products and services being offered will help solve that problem. It describes how the features and characteristics of the products and services will contribute to the solution of the customers’ problem. Faculty of Entrepreneurship , University of Tehran
  • 4 parts to the business model Part 2- Infrastructure– This is the part of the business that creates expenses. This part describes the basic facilities, skills, manpower, partnerships, and production process needed to exploit the business opportunity.  Core capabilities: The capabilities and core competencies necessary to operate the business. This includes land, facilities, equipment, personnel and their required skills needed to produce the products or services described in the value proposition.  Partner network: The business alliances needed to operate the business. Most businesses need alliances, agreements, licenses, or other third party assistance (legal, accounting, insurance, security, etc.) which are usually purchased from specialized service providers.  Value configuration: The process by which the products or services are produced and presented to the customer. The value configuration describes how the materials, supplies, and other required resources will be obtained and transformed into usable products or services and how they will be made available to buyers. It describes the process that will be used to produce the products and services described in the value proposition. Faculty of Entrepreneurship , University of Tehran
  • 4 parts to the business model Part 3- Customers– this is the part of the business that generates revenue.  Target customer: The demographics, purchasing patterns, and location of the potential buyers of the products described in the value proposition.  Distribution channel: The means by which the business delivers products and services to customers. This includes the business's marketing and distribution strategy.  Customer relationships: The process of interacting with the business’s customers. It includes communicating, selling, supporting, and assisting customers purchase and use the business’s products or services. Faculty of Entrepreneurship , University of Tehran
  • 4 parts to the business model Part 4- Finances – this is the part of the business that determines its financial performance and profit  Investment: The investment needed to obtain the facilities, equipment, and working capital to begin or sustain operations. This should include an itemization of these expenses and sources of financing to obtain these funds and when they will be required.  Cost structure: The expenses required to produce the products or services described in the value proposition. It should include an itemization of the expenses required by expense category and the assumptions made to estimate these expenses.  Revenue: The income a business receives from the sales of its products or services. This includes sales volume and revenue projections and the assumptions and logic used to make these projections.  Profit, return on investment, and cash flow. Faculty of Entrepreneurship , University of Tehran
  • Six Components of the Business Model Henry Chesbrough and Richard S. Rosenbloom , Harvard Business School Faculty of Entrepreneurship , University of Tehran
  • Value Proposition • A description of the customer problem • The solution that addresses the problem • The value of this solution from the customer's perspective Faculty of Entrepreneurship , University of Tehran
  • Market Segment • Recognizing that different market segments have different needs • Sometimes the potential of an innovation is unlocked only when a different market segment is targeted Faculty of Entrepreneurship , University of Tehran
  • Value Chain Structure • The firm's position in the value chain • Activities in the value chain • How the firm will capture part of the value that it creates in the chain. Faculty of Entrepreneurship , University of Tehran
  • Revenue Generation and Margins • How revenue is generated  (sales, leasing, subscription, support, etc.) • The cost structure • Target profit margins. Faculty of Entrepreneurship , University of Tehran
  • Position in the Value Network • Identification of competitors • Identification complementors • Identify network effects that can be utilized to deliver more value to the customer • linking suppliers and customers Faculty of Entrepreneurship , University of Tehran
  • Competitive Strategy • How will the company attempt to develop a sustainable competitive advantage? • How will it use that advantage to improve the enterprise's competitive position in the market? Faculty of Entrepreneurship , University of Tehran
  • Business Model vs. Strategy Henry Chesbrough and Richard S. Rosenbloom Business Model Strategy Value creation and how it will be Building a sustainable competitive captured by the firm advantage An architecture for converting Delivering the business value to the innovation to economic value for shareholders business(business value) Assumes a limited environmental Depends on a more complex analysis knowledge that requires more certainty in the knowledge of the environment Faculty of Entrepreneurship , University of Tehran
  • The Business Model and the Business Plan The business model is the centerpiece of the business plan but is not the entire business plan. The business plan should include additional information such as:  Administrative information  Company name and address  Company phone number including area code  Email address, URL, and Logo if applicable  Names, titles, addresses, and phone numbers of the owners or corporate officers  Month and year in which this business plan is issued  Name of the business plan preparer  Date when business was started or estimated start date Faculty of Entrepreneurship , University of Tehran
  • The business model and the business plan-cont’d  Purpose of the business and why it should be successful.  Business objectives – what the company wants to accomplish (market share, sales volume, revenue, return on investment, etc)  The marketing plan.  The competitive strategy describing how a sustainable competitive advantage will be obtained.  Management, the people who will manage the company and their experience.  Personnel plan describing the number and skills of the employees and how they will be hired and compensated.  A schedule describing when investment funds will be needed and for what purpose, the sources of these funds and how they will be repaid.  Annual revenue, expense, and cash flow projections and assumptions upon which they are based, and critical milestones that will define progress and results.  Three year pro forma income statements, balance sheets, and cash flow statements. Faculty of Entrepreneurship , University of Tehran
  • Case Study Business model design template: Nine building blocks and their relationships, Osterwalder Faculty of Entrepreneurship , University of Tehran
  • Faculty of Entrepreneurship , University of Tehran
  • Case Study Henry Chesbrough and Richard S. Rosenbloom , Harvard Business School Faculty of Entrepreneurship , University of Tehran
  • Faculty of Entrepreneurship , University of Tehran
  • References and further readings  Afuah, A. 2004, Business models: A Strategic Management Approach, McGraw-Hill, Irwin.  Afuah, A. & C.L. Tucci 2001, Internet Business Models and Strategies, McGraw-Hill, Irwin.  Amit, R. & C. Zott 2004, Business Strategy and Business Model: Extending the Strategy-Structure-Performance Paradigm, Strategic Management Journal, 22, 493-520.  Brandenburger, AM. & H. Struart 1996, Value-based Business Strategy, Journal of Economics and management strategy, pp. 5-25.  Hamermesh, RG. & P. W. Marshall 2006, Building a Business Model and Strategy: How they Work Together, Harvard business School Press.  Hart, Myra M. & Victoria W. Winston & Kristin J. Leib 2004, Mavens and Moguls: Creating a New Business Model, Harvard Business Review.  Lambert, S. 2003, A Review of Electronic Commerce Literature to Determine the Meaning of the Term ‘Business Model’, School of Commerce Research Paper Series, London.  Magretta, Joan 2002, Why Business Models Matter, Harvard Business Review.  Mintzberg, H. 1994, The Rise and fall of Strategic Planning, Free Press, New York.  Porter, M. E. 1985, Competitive advantage: Creating and Sustaining Superior Performance, Free Press, New York.  Saloner, G. Shepard & J. Podolny 2001, Strategic Management, John Wiley & Sons, London.  Shafer, S. & H. Smith & J. Linder (2005), The Power of Business Models, Business horizon, Elsevier, Vol. 48, pp. 199-207.  Simon, H. 1997, The New Science of Management Decision. Prentice-Hall, Englewood Cliffs, New Jersey.  Stabell, CB. & O. D. Fieldstad 1998, Configuring Value for Competitive Advantage: on Chains, Shops and Networks, Strategic Management Journal, Vol. 19, pp. 413-437.  Thompson, J. D. 1967, Organization in action. McGraw-Hill, Irwin.  Timmers, P. 1998, Business Models for Electronic Markets, Electronic Markets 8, 3-8.  Venkatraman V. & J. C. Henderson 1998, Real Strategies for Virtual Organization, Sloan Management Review, Vol. 40, No. 1, pp. 33-48.  The Business Model Ontology - A Proposition In A Design Science Approach, Thesis by Alexander Osterwalder , 2004  Gill, H.: The Case for Enterprise Business Model Management. DM Review ,2000  Hawkins R. The “Business Model” as a Research Problem in Electronic Commerce. STAR (Socioeconomic Trends Assessment for the digital Revolution) IST Project, Issue Report No. 4, SPRU –Science and Technology Policy Research, 2001  Pigneur Y. The E-business Model Handbook. HEC Working Paper ,2000  Chesbrough, Henry and Richard S. Rosenbloom, , 2000. “The Dual-Edged Role of the Business Model in Leveraging Corporate Technology Investments,” in NIST Report GCR 00-787, Managing Technical Risk – Understanding Private Sector Decision Making on Early Stage Technology-based Projects, Lewis Branscomb, principal investigator Faculty of Entrepreneurship , University of Tehran