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Business models


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This is a summary of the five business models presented in Business Model Generation.
These models are: Un-bundled, long tail, multi-sided, free and open.

Have also included a quick intro to Treacy and Wiersema from their 1993 HBR article.

Reference: Osterwalder, A. & Pigneur, Y., 2010. Business Model Generation. Hoboken, N.J: John Wiley & Sons.

Published in: Business, Technology

Business models

  1. 1. Business Models inBusiness Model Generation (2010)
  2. 2. Unbundling Business Model
  3. 3. Marc Singer & John Hagel III developed the concept in 1999.
  4. 4. Previous work (HBR, 1993) by Michael Treacy and Fred Wiersema
  5. 5. Treacy and Wiersema came up with the concept of concentrating on one of three value disciplines:- Operational Excellence- Product Leadership- Customer Intimacy
  6. 6. Unbundling the corporationThis concept highlights that most companies todayare an unnatural bundle of three very different typesof businesses:• infrastructure management businesses• customer relationship businesses• product innovation and commercialization.Each of these businesses has very different economics,skill-sets and cultures.Hence, companies should unbundle them.
  7. 7. Separate the business as each of the three businesses need different requirements.Trade-offs and conflicts can be minimised through separation. Osterwalder, A. & Pigneur, Y, 2010: 58
  8. 8. Product Customer Relationship Infrastructure Innovation Management ManagementEconomics High cost of customer Early market entry enables High fixed costs make large acquisition makes it charging premium prices and volumes essential to achieve imperative to gain large wallet acquiring large market share; low unit costs; economies of share; economies of scope speed is key scale are key are keyCulture Battle for talent; low barriers Battle for scope; rapid Battle for scale; rapid to entry; many small players consolidation; a few big consolidation; a few big thrive players dominate players dominateCompetition Highly service orientated; Cost focused; stresses Employee centred; coddling customer-comes-first standardization, predictability, the creative stars mentality and efficiency Hagel, J. & Singer, M. (1999) in Osterwalder, A. & Pigneur, Y, 2010: 59
  9. 9. Examples:- Johnson & Johnson (Acuvue) Product Innovation- Charles Tyrwhitt Customer Relationship- Private Banking Infrastructure
  10. 10. Long Tail Business Model
  11. 11. by Chris Anderson (2004) Concept was first applied to the media industry
  12. 12. traditional business model =sell lots of units of a small numberof hit products.long tail = sell lots of smaller unitsof greater number of products.
  13. 13. Units Mass market Long tail Products
  14. 14. Examples:• eBay• Lulu• Buckingham English (failed?)
  15. 15. Multi-sided Platform
  16. 16. Multi-sided platforms work by bringing together two or more distinct but interdependent groups of customers.Osterwalder, A. & Pigneur, Y, 2010: 78
  17. 17. Key questions are: Can we attract sufficient numbers of customers for each side of the platform? Which side is more price sensitive? Can that side be enticed by a subsidized offer? Will the other side of the platform generate sufficient revenues to cover the subsidies?Osterwalder, A. & Pigneur, Y, 2010: 79
  18. 18. Sample of Multi-sided Businesses
  19. 19. Examples:• Metro (newspaper)• Aps• Google
  20. 20. Chris Anderson (again) Free: The Future of a Radical Price (2008) Free!Why $0.00 is the Future of Business (2008) Both in Wired Magazine
  21. 21. Podcast onKnowledge @ Wharton in 2009
  22. 22. Three free models to consider: 1) free offer = based on multi-sided platforms2) freemium = free basic services with optional premium services 3) bait and hook = free / inexpensive initial offerlures customers into repeat purchases Osterwalder, A. & Pigneur, Y, 2010: 90
  23. 23. Examples:• Metro / Lady Nights multi-sided• Economist free + premium• Vistaprint ‘free’ offers
  24. 24. Open Business Models
  25. 25. Main thinker on topic: Henry Chesbrough
  26. 26. Open is reliant on collaboration.Enterprise Inside-out Enterprise Outside-in
  27. 27. Osterwalder, A. & Pigneur, Y, 2010: 111 Principles of Innovation Closed Open We need to work with smart people The smart people in our field work for us. both inside and outside our company. To profit from R&D, we must discover it, External R&D can create significant value: & ship it ourselves. internal R&D is needed to claim some portion of that.If we conduct most of the best research in the industry We don’t have to originate the research we will win. to benefit from it. If we create most of the best ideas in the industry, If we make the best use of internal and external ideas, we will win. we will win. We should profit from others’ use of our innovations, We should control our innovation process, and we should buy others’ (IP) whenever it advances so that competitors don’t profit from our ideas. our own research.
  28. 28. Examples:• Proctor & Gamble Pharma• GlaxoSmithKline• Business Model Generation• Bionicbuzz
  29. 29. ReferencesEvans, D.S. (2003) Managing the Maze of Multisided Markets [www]. Strategy + Business, # 32. pp. 1-5Available from: [Accessed 07/01/12].Hagel, J. & Singer, M. (2000) Unbundling the Corporation. The McKinsey Quarterly, #3. pp. 148-161Available from: [Accessed 07/01/12].knowledge@wharton, (n.d.) How About Free? The Price Point That Is Turning Industries on Their Heads [www]Wharton University of Pennsylvania.Available from: [Accessed 07/01/12].n.n. (n.d.) Business Models and Open Innovation. MunkholmPlusRisgaard.Weblog [Online] 10th October 2011.Available from:[Accessed 07/01/11].Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation. Hoboken, N.J.: John Wiley & Sons Inc.Osterwalder, A. (n.d.) Podcast with John Hagel, Co-Chairman of the Deloitte Center for Edge Innovation.Business Model Alchemist. Weblog [Online] 25th January 2008.Available from:[Accessed 07/01/12] [sic].Treacy, M. & Wiersema, F. (1993) Customer Intimacy and Other Value Disciplines [www]Harvard Business Review, (January/February), pp. 83-93.Available from: [Accessed 07/01/12]