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Definition of Business Model A business model is a conceptual tool containing a set of objects,concepts and their relationships with the objective to express thebusiness logic of a specific firm. Osterwalder, A., Pigneur, Y., and Tucci, C. L., “CLARIFYING BUSINESS MODELS: ORIGINS,PRESENT, AND FUTURE OF THE CONCEPT,” Communications of the Association for Information Systems, 15, May 2005. 3
What a Business Model Describe A business model describes the rationale of how an organization creates, delivers, and captures value - economic, social, or other forms of value. 4 http://en.wikipedia.org/wiki/Business_model
Definition of Business Model The term business model is thus used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies. 5 http://en.wikipedia.org/wiki/Business_model
Value proposition The proposed value bundled and then offered to potential value recipients. Sometimes hard to tell. 16 Alma-Tadema: Courtship the Proposal
Value proposition Is Google’s value proposition its search? And its recipients customers? Only its products and services?
Google’s Value No! It provides user data to "upstream" application developers 18
Google’s Value Recipients Only its customers? No! users (a very large number of value propositions, often provided for free) network partners (revenues in return for relevant ads on their sites) Developers Employees, Google owners, etc. Other business, libraries, authors – the world! 19
Google’s Value Source Only its revenue? No! create momentum for a new technology – cloud computing 20
The functions of a business model Identify a market segment The entire world as a segment? Define the structure of the value chain (or canvas) 21
Long Tail Business Model 24 Click Me! The Long Tail Eats the Head
Business Model Example – Xerox Rental Market segment – corporate and government Value proposition – high quality copies at a low monthly lease rate Value chain elements – entire copier system including supplies Cost & margin – modest profit on equipment, high on supplies Value network position – first mover, not require or pursue partners Competitive strategy – technical product quality and capability 25
Business Model Example – 3Com Market segment – corporate PC Value proposition – file and printer sharing between PCs Value chain elements – focus on Ethernet protocol and add-on boards Cost & margin – high volume low cost Value network position – set IEEE 802 (LAN/MAN) standard Competitive strategy – compete on standard and new channels 26