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Business Model Generation

This presentation will give you deep insight into the nature of business models. It describes traditional and bleeding-edge models and their dynamics, innovation techniques, how to position your model within an intensely competitive landscape, and how to lead the redesign of your own organization’s business model.

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BUSINESS MODEL GENERATION
Alaa Moustafa
Business Development Manager, eSpace
facebook.com/alaa.moustafa
Twitter.com/alaamoustafa
10/28/2013

Business Model Generation

1
eSpace Profile

10/28/2013

Business Model Generation

2
Agenda
•
•
•
•
•

Business Model vs. Business Plan
Business Model Canvas
Business Models Patterns
Business Model Design
Business Model Design Process

Ref: Business Model Generation
10/28/2013

Business Model Generation

5
Business Model
How an organization
creates, delivers, and
captures value from
customer.

10/28/2013

Vs.

Business Plan
A formal statement
of a set of business
goals, and how to
reach those goals

Business Model Generation

6
BUSINESS MODEL CANVAS
A shared language for describing, visualizing, assessing, and changing
business models.

10/28/2013

Business Model Generation

7
Business Model Canvas

How
can you

10/28/2013

DESCRIBE
DISCUSS
DESIGN
your
CHALLENGE Business
IMPROVE
Model?
INNOVATE
CHOOSE
Business Model Generation

8

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Business Model Generation

  • 1. BUSINESS MODEL GENERATION Alaa Moustafa Business Development Manager, eSpace facebook.com/alaa.moustafa Twitter.com/alaamoustafa 10/28/2013 Business Model Generation 1
  • 3. Agenda • • • • • Business Model vs. Business Plan Business Model Canvas Business Models Patterns Business Model Design Business Model Design Process Ref: Business Model Generation 10/28/2013 Business Model Generation 5
  • 4. Business Model How an organization creates, delivers, and captures value from customer. 10/28/2013 Vs. Business Plan A formal statement of a set of business goals, and how to reach those goals Business Model Generation 6
  • 5. BUSINESS MODEL CANVAS A shared language for describing, visualizing, assessing, and changing business models. 10/28/2013 Business Model Generation 7
  • 6. Business Model Canvas How can you 10/28/2013 DESCRIBE DISCUSS DESIGN your CHALLENGE Business IMPROVE Model? INNOVATE CHOOSE Business Model Generation 8
  • 8. 1. Customer Segments (CS) 10/28/2013 Business Model Generation 10
  • 9. 1. Customer Segments (CS) • The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve. • Examples: - Mass Market - Niche Market (Car parts Manufactures) - Diversified (Amazon) - Multisided (Credit Card: Holders & Merchants) - Segmented (Banking Customer over $100,000) 10/28/2013 Business Model Generation 11
  • 10. 2. Value Proposition (VP) 10/28/2013 Business Model Generation 12
  • 11. 2. Value Proposition (VP) • The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment. • Examples: - Newness (Cell Phones) - Performance (Faster PCs ) - Customization (Custom Software Dev.) - Cost Reduction (CRM Applications) - Price (Lower Price) 10/28/2013 Business Model Generation 13
  • 13. 3. Channels (CH) • The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. • Channels Phases: Awareness 10/28/2013 Evaluation Purchase Business Model Generation Delivery After Sales 15
  • 14. 4. Customer Relationships (CR) 10/28/2013 Business Model Generation 16
  • 15. 4. Customer Relationships (CR) • The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. • Customer relationships may be driven by the following motivations: – Customer acquisition – Customer retention – Boosting sales (upselling) 10/28/2013 Business Model Generation 17
  • 16. 5. Revenue Streams (R$) 10/28/2013 Business Model Generation 18
  • 17. 5. Revenue Streams (R$) • The Revenue Streams Building Block represents the cash a company generates from each Customer Segment. A business model can involve two different types of Revenue Streams: – Transaction revenues – Recurring revenues • Way to generate Revenue: - Asset Sale - Licensing 10/28/2013 - Usage Fee - Advertising - Subscription Fees Business Model Generation - Renting/Leasing 19
  • 18. 6. Key Resources (KR) 10/28/2013 Business Model Generation 20
  • 19. 6. Key Resources (KR) • The Key Resources Building Block describes the most important assets required to make a business model work • Key Resources can be categorized as follows: - Physical (Buildings – Machines – Point of Sale System) - Financial (Cash – financial guarantees) - Human Resources - Intellectual (Brands – Customer Databases) 10/28/2013 Business Model Generation 21
  • 20. 7. Key Activities (KA) 10/28/2013 Business Model Generation 22
  • 21. 7. Key Activities (KA) • The Key Activities Building Block describes the most important things a company must do to make its business model work • Key Activities can be categorized as follows: - Production (Manufacturing firms) - Problem Solving (Hospitals) - Platform/Network (Visa Card) 10/28/2013 Business Model Generation 23
  • 22. 8. Key Partnerships (KP) 10/28/2013 Business Model Generation 24
  • 23. 8. Key Partnerships (KP) • The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work. • Reasons for creating Partnerships: - Optimization and economy of scale - Reduction of risk and uncertainty - Acquisition of particular resources and activities 10/28/2013 Business Model Generation 25
  • 24. 9. Cost Structure (C$) 10/28/2013 Business Model Generation 26
  • 25. 9. Cost Structure (C$) • The Cost Structure describes all costs incurred to operate a business model. There are two Classes Cost Structures: – Cost Driven – Value Driven • Cost Structure Characteristics: - Fixed Costs (Salaries – Rents – etc.) - Variable Costs (Depends on the produced service like Music Festival) - Economies of Scale (Larger companies benefit from lower bulk purchase rates) - Economies of Scope (Same marketing activities may support multiple products) 10/28/2013 Business Model Generation 27
  • 26. Business Model Canvas Template http://www.canvanizer.com Free and easy tool to design, discuss and share your business model 10/28/2013 Business Model Generation 28
  • 28. BUSINESS MODELS PATTERNS Classification for business models with similar characteristics, similar arrangements of business model Building Blocks, or similar behaviors. 10/28/2013 Business Model Generation 30
  • 29. Business Models Patterns Un-Bundling Business Models The Long Tail Multi-sided Platforms FREE as a Business Model Open Business Models 10/28/2013 Business Model Generation 31
  • 30. Un-Bundling Business Models • The concept of the “unbundled” corporation holds that there are three fundamentally different types of businesses • The three types may co-exist within a single corporation, but ideally they are “unbundled” into separate entities in order to avoid conflicts or undesirable trade-offs • Business Types – Customer Relationship Businesses – Product Innovation Businesses – Infrastructure Businesses • Examples: Private Banking Industry and Mobile Telecom Industry 10/28/2013 Business Model Generation 32
  • 31. Un-Bundling Business Model Example: The Mobile Teleco • Traditionally Mobile telecommunication competed on network quality. • They realize that their key asset is no longer the network—it is their brand and their Customer Relationships. • What they did in: – Telecos have outsourced operation and maintenance to equipment manufacturers. – Teleco can sharpen its focus on branding and segmenting customers and services. – Telecos work with multiple third-parties that assure a constant supply of new technologies, services, and media content such as mapping, games, video, and music 10/28/2013 Business Model Generation 33
  • 32. The Long Tail • Long tail business models are about selling less of more. • They focus on offering a large number of niche products, each of which sells relatively infrequently. • Examples: Youtube, Facebook and Lulu.com 10/28/2013 Business Model Generation 34
  • 33. The Long Tail Example: Books Publishing Industry • Old Model: – The traditional book publishing model is built on a process of selection whereby publishers screen many authors and select those that seem most likely to achieve minimum sales targets. • New Model: – Lulu.com’s business model is based on helping niche and amateur authors bring their work to market. – It eliminates traditional entry barriers by providing authors the tools to craft, print, and distribute their work through an online marketplace. 10/28/2013 Business Model Generation 35
  • 34. Multi-sided Platforms • Multi-sided platforms bring together two or more distinct but interdependent groups of customers. • The platform creates value by facilitating interactions between the different groups. • Examples: Visa, Google and eBay 10/28/2013 Business Model Generation 36
  • 35. Multi-sided Platforms Example: Google's Business Model • The heart of Google’s business model is its Value Proposition of providing extremely targeted text advertising globally over the web. • The model only works, though, if many people use Google’s search engine. • The more people Google reaches, the more ads it can display and the greater the value created for advertisers. 10/28/2013 Business Model Generation 37
  • 36. FREE as a Business Model • In the free business model at least one substantial Customer Segment is able to continuously benefit from a free-of-charge offer. • Non-paying customers are financed by another part of the business model or by another Customer Segment. • Examples: Flickr, Youtube, Skype and Google 10/28/2013 Business Model Generation 38
  • 37. FREE as a Business Model Example: Newspapers Publishing Model • One industry crumbling under the impact of FREE is newspaper publishing. • Traditionally, newspapers and magazines relied on revenues from three sources: newsstand sales, subscription fees, and advertising. 10/28/2013 Business Model Generation 39
  • 38. BUSINESS MODEL DESIGN The techniques and tools from the world of design that can help you design better and more innovative business models. 10/28/2013 Business Model Generation 40
  • 39. Business Model Design Customer Insights Ideation Visual Thinking Prototyping Storytelling 10/28/2013 Business Model Generation 41
  • 40. 1. Customer Insights • Good business model design views the business model through customers‘ eyes, an approach that can lead to the discovery of completely new opportunities. • Successful innovation requires a deep understanding of customers, including environment, daily routines, concerns, and aspirations. 10/28/2013 Business Model Generation 42
  • 41. 2. Ideation • What’s needed is a creative process for generating a large number of business model ideas and successfully isolating the best ones. This process is called ideation. • We can distinguish four epicenters of business model innovation: – – – – 10/28/2013 Resource-driven Offer-driven Customer-driven Finance-driven Business Model Generation 43
  • 42. 3. Visual Thinking • By visual thinking we mean using visual tools such as pictures, sketches and diagrams to construct and discuss meaning. • Business models are complex concepts, it is difficult to truly understand a model without sketching it out. 10/28/2013 Business Model Generation 44
  • 43. 4. Prototyping • Prototyping is a powerful tool for developing new, innovative business models. It makes abstract concepts tangible and facilitates the exploration of new ideas. • Prototyping comes from the design and engineering disciplines, where it is widely used for product design, architecture, and interaction design. 10/28/2013 Business Model Generation 45
  • 44. 5. Storytelling • Storytelling will help you effectively communicate what it is all about. Good stories engage listeners, so the story is the ideal tool to prepare for an in-depth discussion of a business model and its underlying logic. • Why Storytelling? – Introducing the New – Pitching to investors – Engaging Employees 10/28/2013 Business Model Generation 46
  • 45. BUSINESS MODEL DESIGN PROCESS The concepts and tools to simplify the task of setting up and executing a business model design initiative. 10/28/2013 Business Model Generation 47
  • 46. Business Model Design Process Mobilize Understand Design Implement Manage 10/28/2013 Business Model Generation 48
  • 47. 1. Mobilize • Prepare for a successful business model design project • Mobilizing Activities: – Frame project objectives – Test preliminary business ideas – Plan – Assemble team 10/28/2013 Business Model Generation 49
  • 48. 2. Understand • Research and analyze elements needed for the business model design effort • Understanding Activities: – Scan environment – Study potential customers – Interview experts – Research what has already been tried (e.g. examples of failures and their causes) – Collect ideas and opinions 10/28/2013 Business Model Generation 50
  • 49. 3. Design • Generate and test viable business model options, and select the best • Design Activities: – Brainstorm – Prototype – Test – Select 10/28/2013 Business Model Generation 51
  • 50. 4. Implement • Implement the business model prototype in the field • Implementing Activities: – Communicate & Involve – Execute 10/28/2013 Business Model Generation 52
  • 51. 5. Manage • Adapt and modify the business model in response to market reaction • Managing Activities: – Scan the environment – Continuously assess your business model – Rethink your business model – Align business models throughout the enterprise – Manage synergies or conflicts between models 10/28/2013 Business Model Generation 53
  • 52. ANY QUESTIONS? Thanks for your time. Alaa Moustafa Business Development Manager, eSpace facebook.com/alaa.moustafa Twitter.com/alaamoustafa 10/28/2013 Business Model Generation 54