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Lecture 3 - Business Model


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Lecture 3 of the New Venture Creation series.

Published in: Business, Economy & Finance
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Lecture 3 - Business Model

  1. 1. Business  Models   The  Thought  Process  Behind  Building  Your  Business  Model  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  2. 2. In  the  first  2  lectures,  we  have   covered  the  basics  of  what   entrepreneurship  is  like  in  Pakistan   and  how  to  idea  proof  your   venture.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  3. 3. While  building  on  the  right  idea  is   essential  to  the  success  of  your   venture,  getting  the  model  right  is   critical.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  4. 4. Did  you  know  that  80%  of   businesses  are  started  without  a   business  plan?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  5. 5. Without  a  business  plan,  you  don’t   have  a  guidebook  that  will  show   you  –  or  anyone  else  –  what  your   business  is  about  to  do  and  why  it’s   important.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  6. 6. A  business  plan  is  essential,  but   how  do  you  write  a  business  plan   that  works?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  7. 7. Business  Model  Canvas   Mapping  Your  Business  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  8. 8. At  emagine,  we  like  to  use  a  tool   called  the  Business  Model  Canvas.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  9. 9. Develop  a  simple  1  page  document   that  could  be  used  by   entrepreneurs  to  develop  their   business  models  accurately  and   efficiently.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  10. 10. http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  11. 11. The  Canvas  is  comprehensive.  It   highlights  all  the  key  areas  that   matter  to  successful  business   model  generation  and  eliminates   everything  else.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  12. 12. We  are  going  to  dig  deep  into  this   canvas  so  that  you  can  effectively   use  it  to  develop  your  business   model  and  then  use  it  to  write  your   business  plan.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  13. 13. The  Business  Model  &  It’s  Importance  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  14. 14. The  first  question  you  are  going  to  ask   is  –       What  is  a  business  model?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  15. 15. Now,  there  are  multiple  definitions   of  what  makes  up  a  business   model  depending  on  who  you  talk   to,  their  level  of  education/ experience  and  what  they  do  for  a   living.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  16. 16. But  essentially,  a  business  model:     Describes  the  rationale  of  how  an   organization  creates,  delivers,  and   captures  value.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  17. 17. Confused?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  18. 18. A  business  model  is  the  reason  that   you  do  what  you  do,  why  you  do  it,   and  how  you  expect  to  make   money  from  it.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  19. 19. When  you  get  this  wrong,  your   entire  business  plan  is  weak  and   can  easily  be  turned  down  by   investors,  but  more  importantly  –  it   won’t  give  you  the  guidance  you   need  to  run  your  business.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  20. 20. So  let’s  break  this  down…  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  21. 21. The  9  Building  Blocks   The  Logic  of  How  a  Company  Makes  Money  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  22. 22. To  build  an  effective  business   model,  we  believe  that  there  are  9   basic  building  blocks  that  must  be   addressed.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  23. 23. These  9  building  blocks  cover  4   main  areas:     Customers      Offer   Infrastructure    Financial  Viability  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  24. 24. These  9  building  blocks  give  us  the   blueprint  for  our  strategy  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  25. 25. So  what  are  the  9  building   blocks?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  26. 26. http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  27. 27. And  they  all  fit  together  like  this…  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  28. 28. http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  29. 29. http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  30. 30. http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  31. 31. Block  1  –  Customer  Segments  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  32. 32. Defines  the  different   groups  of  people  or   organizations  a   venture  aims  to  reach   and  serve.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  33. 33. Customers  are  the   heart  of  the  business   model  and  without   them,  no  business   can  survive.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  34. 34. A  company  may   group  them  into   different  segments:     Common  Needs   Common  Behaviors  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  35. 35. You  can  also  have   multiple  Customer   Segments  within  1   business  model  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  36. 36. But  you  must  decide   on  who  your   customers  are  when   developing  the   business  model.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  37. 37. Needs  require  and  justify  a   distinct  offer     Reached  through  different   distribution  channels     Require  different  types  of   relationships  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  38. 38. Substantially  different   profitabilities     Willing  to  pay  for  different   aspects  of  an  offer  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  39. 39. The  Different  Segments  of  Customers   Businesses  focused  on  mass  markets  don’t  distinguish  between  different  Mass   Customer  Segments  –  they  focus  on  one  large  group  with  broadly  similar  Market   needs  and  problems.   Businesses  targeting  niche  markets  cater  to  very  specific,  specialized  Niche   Customer  Segments.  Value  Propositions,  Distribution  Channels  and  Market   Customer  Relationships  are  all  tailored  to  the  specific  requirements  of   the  market   Some  businesses  distinguish  between  market  segments  with  slightly   different  needs  and  problems.  The  segments  have  similar  but  varying  Segmented   needs  and  problems  which  affect  Value  Proposition,  Distribution   Channels,  Customer  Relationships  and  Revenue  Streams.   Businesses  with  diversified  customers  serve  two  or  more  unrelated  Diversified   Customer  Segments  with  very  different  needs  and  problems.  Multi-­‐sided   Businesses  that  serve  two  or  more  independent  Customer  Segments.   http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  40. 40. Block  2  –  The  Value  Proposition  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  41. 41. Describes  the  bundle   of  products  and   services  that  create   value  for  a  specific   Customer  Segment  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  42. 42. It’s  the  reason  why   customers  turn  to   one  company  over   another  –  because  it   solves  the  problem  or   satisfies  the  need.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  43. 43. The  Value  Proposition   is  an  aggregation,  or   bundle,  of  benefits   that  a  company   offers  customers.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  44. 44. Some  can  be   innovative   representing  a  new   or  disruptive  offer.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  45. 45. Others  can  be   similar  to  existing   market  offers,  with   added  features   and  attributes.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  46. 46. What  value  do  we  deliver  to  the  customer?     Which  one  of  our  customer’s  problems  are   we  helping  to  solve?     Which  customer  needs  are  we  satisfying?     What  bundles  of  products/services  are  we   offering  each  Customer  Segment?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  47. 47. Value  can  be  created  by  simply   helping  a  customer  get  certain  jobs   done.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  48. 48. But  the  value  proposition  is  determined   through  specific  things:     Design              Brand/Status   Price                Cost  Reduction   Accessibility          Ease  of  Use   Convenience  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  49. 49. We  will  continue  this  lecture  in  2   weeks  when  we  move  back  to  our   3  hour  format.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled