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Business models - fashion industry
 

Business models - fashion industry

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This PowerPoint was presented at the 2012 Summer School on Fashion Management at the University of Antwerp. The lecture explains the concept of business models from a theoretical point of view, and ...

This PowerPoint was presented at the 2012 Summer School on Fashion Management at the University of Antwerp. The lecture explains the concept of business models from a theoretical point of view, and illustrates this with an example from the fashion industry.

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    Business models - fashion industry Business models - fashion industry Presentation Transcript

    • Business models in fashionTheory & practiceAugust 28th 2012 – Walter van Andelwalter.vanandel@ams.ac.be
    • Agenda1. Innovation2. Business models - theory What are business models? Business model creation3. Business models - practice Application of a business model4. Q&A
    • Innovation
    • InnovationInnovation is the process and outcome of creating somethingnew, which is also of valueSchumpeter (1934) argued that innovation comes aboutthrough new combinations made by an entrepreneur
    • Innovation A new product A new process Opening of new market New sources of supply A new business model
    • good ideas are widelydistributed, nobody has a monopoly on innovation Prof. Henry Chesbrough, Berkeley
    • BusinessModelsWhat are they?
    • Business modelsExamples EasyJet / SouthWest Airlines no frills: low cost, direct flights without (free) extras Gillette razor and blades: low (no) margin on razor; high margin on blades Dell built-to-order: choose the components of your pc before production starts Farmville / Spotify “freemium”: Basic service is free, added services are offered for premium pricing There is more to it than just a catchy name…
    • Business models Every organization has a business model Many definitions / many approaches Interpretation: The core logic by which a firm creates, delivers and captures value Role: to unlock the value potential embedded in (new) technologies/products/innovations and converting it into market outcomes
    • A business model is a logical story explainingwho your customers are, what they value, and how you will make economic returns in providing them that value Prof. Joan Magretta, Harvard Business School
    • Value? What values do we pursue as a company? What value/benefit do we create, and for whom? How do we create this value? How do we transform value into money?
    • Business models create valueThe business model creates value not technology or a product itselfproduct/technology X value/utility creates enables business model defines business strategy
    • Business model components Value creation Why does your business exist? Company’s unique value proposition Value delivery How can you deliver the value to the customer Value capture Whether & how can you make money now and in futureinternal processes + profit formula + value chain and organization organization network consumer
    • Business model innovation Value creation innovation we offer a better value proposition for an existing or new problem Value delivery innovation we reconfigure the value chain so that a better value proposition and value delivery emerges Value capture innovation we change the revenue mix and thereby create a better value proposition
    • Side note…Business plans, business strategy & business models Often used interchangeable However: different concepts Business plan: statement of a set of business goals + how to attain them Business strategy: combined choices of how to compete Business model: operationalization of the business strategy choice
    • Value propositionValue Proposition Identify the customer ‘pain’ or problem Indicate how the product addresses that problem Quantify the ‘value’ of the product from the customer’s perspectiveUnderstanding ‘value’ is KEY! Generally wholly unrelated to your cost base What is the value of an MacBook? What is the value of a (luxury) clothing item?
    • Well, I know we are in a commodity market where the price is key, but Ibelieve we can sell the good for 10x as much as before
    • Value propositionFashion and quality at the best priceInstant fashionOther fashion brands?
    • Business model creationTwo important concepts: Business models consist of a set of Choices and Consequences Business models are a variation of the Value Chain
    • Business model creationChoices & consequences - Casadesus-Masanell & Ricart (2010)What ‘parts’ are business models made of? The concrete choices made by management about how the organization must operate, and The consequences of these choices
    • Business model creationChoices & consequences Choices Consequences Policies Flexible Assets Rigid Governance Business modelA business model is a reflection of the firm’s realized choices
    • Business model creationValue chain Every business model is a variation on a company’s value chain (Magretta, 2002) The business model encompasses the pattern of the firm’s economic exchanges with external parties (Zott & Amit, 2008)
    • Business model creationValue chain Value creation is a networked process Business models span across firm boundaries It involves a complex, interconnected set of exchange relationships and activities among multiple players
    • Business model creationValue chain Where does your business sit in the value chain? Do you need support/partnership/technology? Can you go direct-to-customer? If you are reliant on others, how will you capture your part of the value created? And build lasting relations?
    • Business model creationValue delivery and capture: customers Identify the specific group of customers (aka ‘market segment’) you will target Understand that different market segments have different needs, preferences and purchasing criteria Understand the value that they desire Create an optimal delivery system of that value Quantify, quantify, quantify
    • Business model creationValue capture How is revenue generated? One-off purchase? Subscriptions? ‘Freemium’ model? Advertising? How does that tie back to the value chain? What is your cost structure? How does that tie back to the value chain?
    • Business model creationDiscovery, learning, and adaptation Start with a provisional business model Validate; then revalidate and revise The “right” business model is rarely apparent early on… entrepreneurs/managers who are well positioned and can learn and adjust are more likely to succeed
    • Business modelsSome conclusions To be a source of competitive advantage, a business model must be more than just a ‘logical’ way of doing business A model must be honed to meet particular customer needs and requires deep understanding of the customer/consumer and their values It must be constantly revalidated and adjusted Designing a business (model) is a creative act!
    • CaseExampleFragileNathalie Vleeschouwer
    • Case exampleNathalie Vleeschouwer Fashion designer from Antwerp Female entrepreneur of the year 2011 Main brand: Fragile Maternity fashion
    • Fragile delivers contemporary fashion that enables pregnant women to feel comfortable, free, and attractive
    • FragileValue creation Product: High fashion for pregnant women High quality fabrics specifically Chosen for sensitive skins Durable products Cut and shape adjusted for pregnant shape But also wearable afterwards
    • FragileValue creation Personal contact: High emphasis on personal contact With boutiques and suppliers/producers Establishes goodwill Establishes calm / steady relations
    • FragileValue delivery Maternity Boutiques Flagship stores Provide a unique experience Provide a complete offering of maternity products
    • FragileValue capture Standard sales formatBut in addition: Durability leads to cast-offs Word of mouth Many request for non-maternity clothing Second line: Nathalie Vleeschouwer
    • Nathalie Vleeschouwer line Builds on good name designer Builds on style Fragile Builds on previous customer base Attracts regular and maternity boutiques
    • Nathalie VleeschouwerSome choices (and consequences) Clear initial choice for maternity high fashion Untapped market, possibility for personal contact with retail Choice for a complete offering maternity wear Supports and enables delivery of value proposition Choice for as much local production as possible Fast, convenient, goodwill
    • Nathalie Vleeschouwer – business model
    • Q&A
    • OPENING MINDS TO IMPACT THE WORLD Slides and references available on:www.waltervanandel.com/fashionmanagement