Business Model Generation


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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.

Published in: Business, Technology

Business Model Generation

  1. 1. BUSINESS MODEL GENERATION Alaa Moustafa Business Development Manager, eSpace 10/28/2013 Business Model Generation 1
  2. 2. eSpace Profile 10/28/2013 Business Model Generation 2
  3. 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. 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. 5. BUSINESS MODEL CANVAS A shared language for describing, visualizing, assessing, and changing business models. 10/28/2013 Business Model Generation 7
  6. 6. Business Model Canvas How can you 10/28/2013 DESCRIBE DISCUSS DESIGN your CHALLENGE Business IMPROVE Model? INNOVATE CHOOSE Business Model Generation 8
  7. 7. Business Model Canvas 10/28/2013 Business Model Generation 9
  8. 8. 1. Customer Segments (CS) 10/28/2013 Business Model Generation 10
  9. 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 $100,000) 10/28/2013 Business Model Generation 11
  10. 10. 2. Value Proposition (VP) 10/28/2013 Business Model Generation 12
  11. 11. 2. Value Proposition (VP) • The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment. • Examples: - Newness (Cell Phones) - Performance (Faster PCs ) - Customization (Custom Software Dev.) - Cost Reduction (CRM Applications) - Price (Lower Price) 10/28/2013 Business Model Generation 13
  12. 12. 3. Channels (CH) 10/28/2013 Business Model Generation 14
  13. 13. 3. Channels (CH) • The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. • Channels Phases: Awareness 10/28/2013 Evaluation Purchase Business Model Generation Delivery After Sales 15
  14. 14. 4. Customer Relationships (CR) 10/28/2013 Business Model Generation 16
  15. 15. 4. Customer Relationships (CR) • The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. • Customer relationships may be driven by the following motivations: – Customer acquisition – Customer retention – Boosting sales (upselling) 10/28/2013 Business Model Generation 17
  16. 16. 5. Revenue Streams (R$) 10/28/2013 Business Model Generation 18
  17. 17. 5. Revenue Streams (R$) • The Revenue Streams Building Block represents the cash a company generates from each Customer Segment. A business model can involve two different types of Revenue Streams: – Transaction revenues – Recurring revenues • Way to generate Revenue: - Asset Sale - Licensing 10/28/2013 - Usage Fee - Advertising - Subscription Fees Business Model Generation - Renting/Leasing 19
  18. 18. 6. Key Resources (KR) 10/28/2013 Business Model Generation 20
  19. 19. 6. Key Resources (KR) • The Key Resources Building Block describes the most important assets required to make a business model work • Key Resources can be categorized as follows: - Physical (Buildings – Machines – Point of Sale System) - Financial (Cash – financial guarantees) - Human Resources - Intellectual (Brands – Customer Databases) 10/28/2013 Business Model Generation 21
  20. 20. 7. Key Activities (KA) 10/28/2013 Business Model Generation 22
  21. 21. 7. Key Activities (KA) • The Key Activities Building Block describes the most important things a company must do to make its business model work • Key Activities can be categorized as follows: - Production (Manufacturing firms) - Problem Solving (Hospitals) - Platform/Network (Visa Card) 10/28/2013 Business Model Generation 23
  22. 22. 8. Key Partnerships (KP) 10/28/2013 Business Model Generation 24
  23. 23. 8. Key Partnerships (KP) • The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work. • Reasons for creating Partnerships: - Optimization and economy of scale - Reduction of risk and uncertainty - Acquisition of particular resources and activities 10/28/2013 Business Model Generation 25
  24. 24. 9. Cost Structure (C$) 10/28/2013 Business Model Generation 26
  25. 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. 26. Business Model Canvas Template Free and easy tool to design, discuss and share your business model 10/28/2013 Business Model Generation 28
  27. 27. 10/28/2013 Business Model Generation 29
  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. 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. 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. 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. 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 10/28/2013 Business Model Generation 34
  33. 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: –’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. 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. 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. 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. 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. 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. 39. Business Model Design Customer Insights Ideation Visual Thinking Prototyping Storytelling 10/28/2013 Business Model Generation 41
  40. 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. 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. 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. 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. 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. 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. 46. Business Model Design Process Mobilize Understand Design Implement Manage 10/28/2013 Business Model Generation 48
  47. 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. 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. 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. 50. 4. Implement • Implement the business model prototype in the field • Implementing Activities: – Communicate & Involve – Execute 10/28/2013 Business Model Generation 52
  51. 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. 52. ANY QUESTIONS? Thanks for your time. Alaa Moustafa Business Development Manager, eSpace 10/28/2013 Business Model Generation 54