Business model defined

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Overview of a Business Model which is different than a Business Plan and is in many ways more useful.

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Business model defined

  1. 1. The Business Model is the Battle Plan for your Business Strategy Matthew Waymire 702-279-0831 [email_address]
  2. 2. Business Model Defined <ul><li>A business model describes the rationale of how an organization creates, delivers, and captures value </li></ul><ul><ul><li>economic, </li></ul></ul><ul><ul><li>social, </li></ul></ul><ul><ul><li>or other forms of value </li></ul></ul><ul><li>The process of business model construction is part of business strategy . </li></ul>
  3. 3. Further on Business Models <ul><li>Whenever a business is established, it always either explicitly or implicitly employs a particular business model: </li></ul><ul><ul><li>that describes the the way in which the value: </li></ul></ul><ul><ul><ul><li>Is created, </li></ul></ul></ul><ul><ul><ul><li>Is delivered, and </li></ul></ul></ul><ul><ul><ul><li>Is captured. </li></ul></ul></ul><ul><li>The essence of a business model is that it defines the manner by which the business enterprise: </li></ul><ul><ul><ul><li>delivers value to customers, </li></ul></ul></ul><ul><ul><ul><li>entices customers to pay for value, and </li></ul></ul></ul><ul><ul><ul><li>converts those payments to profit: T </li></ul></ul></ul><ul><li>Thus it reflects management’s hypothesis about: </li></ul><ul><ul><li>what customers want, </li></ul></ul><ul><ul><li>how they want it, and </li></ul></ul><ul><ul><li>how an enterprise can organize to: </li></ul></ul><ul><ul><ul><li>best meet those needs, </li></ul></ul></ul><ul><ul><ul><li>get paid for doing so, and </li></ul></ul></ul><ul><ul><ul><li>make a profit </li></ul></ul></ul>
  4. 4. 6 Main Areas of a Business to Be Addressed in the Business Model <ul><li>Customers </li></ul><ul><ul><li>Who are they? </li></ul></ul><ul><ul><li>What do they want? </li></ul></ul><ul><li>Production </li></ul><ul><li>Offer </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Features </li></ul></ul><ul><ul><li>Payment </li></ul></ul><ul><li>Infrastructure </li></ul><ul><li>Financial Viability </li></ul><ul><ul><li>Is this profitable? </li></ul></ul><ul><ul><ul><li>Theoretically </li></ul></ul></ul><ul><ul><ul><li>Actually </li></ul></ul></ul><ul><li>Reporting/Monitoring </li></ul><ul><ul><li>Are we tracking in real time the right metrics to Manage our company? </li></ul></ul>
  5. 5. The Business Model is the Battle Plan for: Business Strategy <ul><li>Business Strategy deals with initiatives </li></ul><ul><ul><li>involving utilization of resources , </li></ul></ul><ul><ul><li>Enhancement of the business against their external environments. </li></ul></ul><ul><ul><li>It entails specifying the organization 's </li></ul></ul><ul><ul><ul><li>mission , (beliefs) </li></ul></ul></ul><ul><ul><ul><li>vision (guesses about the future) and </li></ul></ul></ul><ul><ul><ul><li>objectives, </li></ul></ul></ul><ul><ul><li>By: </li></ul></ul><ul><ul><ul><li>Developing policies and plans, </li></ul></ul></ul><ul><ul><ul><ul><li>often in terms of projects and programs, </li></ul></ul></ul></ul><ul><ul><ul><li>allocating resources to implement the policies and plans, projects and programs. </li></ul></ul></ul><ul><ul><ul><li>Giving orders (direction) to line managers </li></ul></ul></ul><ul><ul><li>A Dashboard/Balanced Scorecard is often used to evaluate the overall performance of the business and its progress towards objectives. </li></ul></ul>
  6. 6. Stakeholders <ul><li>Business Strategy needs to start with stakeholders’ expectations and use a modified balanced scorecard which includes all stakeholders. </li></ul>
  7. 7. Stakeholders
  8. 8. Stakeholders
  9. 9. Balanced Scorecard (Dashboard) <ul><li>The basic idea in creating the scorecard was to integrate: </li></ul><ul><ul><li>financial and </li></ul></ul><ul><ul><li>non-financial metrics </li></ul></ul><ul><li>into a single system </li></ul><ul><li>in which they did not compete with one another for management airtime.  </li></ul><ul><li>Prior to this the financial and non-financial results were reviewed in separate meeting agenda items.  Whichever came first on the agenda was perceived as the higher priority.  </li></ul><ul><li>By combining them this unproductive tension was greatly reduced </li></ul>
  10. 10. A Score Card
  11. 11. Scorecard
  12. 12. Scorecard/Dashboard
  13. 13. Business Strategy <ul><li>Strategic management provides overall direction to the enterprise </li></ul><ul><li>In the field of business administration it is useful to talk about &quot;strategic alignment&quot; between the organization and its environment or &quot;strategic consistency.&quot; </li></ul><ul><li>&quot;there is strategic consistency when the actions of an organization are consistent with the expectations of management, </li></ul><ul><li>and these in turn are with the market and the context.&quot; </li></ul><ul><li>Strategic management includes not only the management team but can also include the Board of Directors and other stakeholders of the organization. </li></ul>
  14. 14. Strategic Management <ul><li>Strategic management is an ongoing process that </li></ul><ul><ul><li>evaluates ( 1. To ascertain or fix the value or worth of 2. To examine and judge carefully) ; and </li></ul></ul><ul><ul><li>controls and directs ( exercises authoritative or dominating influence over) ; the businesses in which the company is involved; </li></ul></ul><ul><ul><li>assesses its competitors and </li></ul></ul><ul><ul><li>sets goals and strategies to: </li></ul></ul><ul><ul><ul><li>meet all existing and potential competitors; </li></ul></ul></ul><ul><ul><ul><li>Maintain and expand profitability </li></ul></ul></ul><ul><ul><li>reassesses i.e. regularly to determine: </li></ul></ul><ul><ul><ul><li>how it has been implemented and </li></ul></ul></ul><ul><ul><ul><li>whether it has succeeded or </li></ul></ul></ul><ul><ul><ul><li>needs replacement by a new strategy to meet: </li></ul></ul></ul><ul><ul><ul><ul><li>changed circumstances, </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>new technology, </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>new competitors, a </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>new economic environment., or </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>a new social, financial, or political environment.” </li></ul></ul></ul></ul></ul><ul><li>Lamb, Robert, Boyden Competitive strategic management , Englewood Cliffs, NJ: Prentice-Hall, 1984 </li></ul>
  15. 15. Building Blocks of Business Model <ul><li>The value proposition of what is offered to the market; </li></ul><ul><li>The segment (s) of clients that are addressed by the value proposition; </li></ul><ul><li>The communication and distribution channels to reach clients and offer them the value proposition; </li></ul><ul><li>The relationships established with clients; </li></ul><ul><li>The key resources needed to make the business model possible; </li></ul><ul><li>The key activities necessary to implement the business model; </li></ul><ul><li>The key partners and their motivations to participate in the business model; </li></ul><ul><li>The revenue streams generated by the business model (constituting the revenue model); </li></ul><ul><li>The cost structure resulting from the business model. </li></ul>
  16. 17. Another Business Model Model

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