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Business models and ecosystems


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Business models and ecosystems

  1. 1. Designing Business Models (& Business Ecosystems) Michael Weiss Carleton University TIM Program michael_weiss@carleton.caSlide 1 Lead to Win
  2. 2. Objective • Upon completion of this session, you will know about: – Building blocks of a business model – Modeling a business ecosystem • And you will be able to: – Create a model of your business and your ecosystemSlide 2 Lead to Win
  3. 3. Agenda 1. Modeling your business 2. Common business models 3. Modeling your ecosystem 4. Key lessonsSlide 3 Lead to Win
  4. 4. 1. Modeling your business • What is a business model?Slide 4 Lead to Win
  5. 5. 1. Modeling your business • What is a business model?Slide 5 Lead to Win
  6. 6. Business model frameworks • Business model frameworks – Provide a shared vocabulary and structure for describing and comparing business models – Aim to be intuitive, yet comprehensive enough to capture the nuances of business operations and strategy • Examples of business model frameworks – Four-box framework (Johnson, 2010) – Six-function framework (Chesbrough & Rosenbloom, 2002) – Four-factor framework (Muegge, 2012) – Business model canvas (Osterwalder & Pigneur, 2010) Read the article on Business Model Discovery in the TIM Review, 6 Lead to Win
  7. 7. Comparison (1) Four-box framework: Six-function framework: Seizing the White Space Open Innovation 1) Customer value proposition 1) Value proposition 2) Profit formula 2) Market segment 3) Key resources 3) Value chain 4) Key processes 4) Cost structure/profit potential 5) Value network 6) Competitive strategySlide 7 Lead to Win
  8. 8. Comparison (2) Nine building blocks: Four-factor framework: Business Model Canvas Business Model Discovery 1) Customer segments 1) Importance (pain point) 2) Value propositions 2) Stakeholder value propositions 3) Channels 3) Profit formula 4) Customer relationships 4) Capabilities (these include resources and processes) 5) Revenue streams 6) Key resources 7) Key activities 8) Key partnerships 9) Cost structureSlide 8 Lead to Win
  9. 9. Business model canvas Key partners Key activities Value Customer Customer proposition relationships segments Key Channels resources Cost structure Revenue streamsSlide 9 Lead to Win
  10. 10. Guiding questions (1) Offer • What value do your deliver to the customer? • Value • What customer problem are you solving? proposition • Which jobs are you helping them get done? • Which customer segments do you serve? What products and services do you offer to each? Customers • Who are you creating value for? • Customer • How do you segment your market and which segments segment (“niche”) do you focus on initially? • Customer • How do you acquire, keep, and grow your customer base (customer relationships)? relationships • How do you reach those customers? • ChannelsSlide 10 Lead to Win
  11. 11. Guiding questions (2) Profit Formula • What value are customers willing to pay for? • Revenue • What revenue streams do you have, and how streams much does each stream contribute? • Cost structure • What are your most are most expensive? activities/resources important costs? Which • Is your business model cost- or value-driven? Infrastructure • What resources/activities are required in order to deliver the value to the customer? • Key resources • Examine your distribution channels, customer relationships, and revenue streams! • Key activities • Who are your key suppliers and partners (eg • Key partners intermediaries, complementors)? • Which resources/activities do you acquire?Slide 11 Lead to Win
  12. 12. Business model canvas tools • Most common way of using the canvas is the paper version: describe your business model in 15 min – A PDF version of the canvas can be downloaded here: http:// • There are various online tools that support editing and collaboration of business model canvases – A Google Docs version is here: how-create-business-model (go to File | Make a copy...) • There are also mobile apps that help you capture and share your business model designs – – (a LTW company!)Slide 12 Lead to Win
  13. 13. 2. Common business models • Examples of using the canvas – One-time sales model – Subscription model – Multi-sided platform model – Freemium model • Legend – Flow of value to customers V – Flow of value to company $Slide 13 Lead to Win
  14. 14. One-time sales model Design ld an d bui pro duct rs er Supplie Value Custo m ion t pro posit segmen rs Eng inee t & sales Interne IP Sales force Pro duct Hu man Pro duct es develo p ment reso urc salesSlide 14 Lead to Win
  15. 15. Subscription model Design an d bui ld Access y ser vice capabilit er d Custo m eg Clo u segmen t r pro vi de e rs Access Develo p nt/ to conte Ser vice ser vice hosting Salaries d ng Ser vice eg Clo u Ba se Recurri ment fee fee fee develo p costSlide 15 Lead to Win
  16. 16. Multi-sided platform model k er Develo p Value Networ Custo m ain ion effect segmen t & maint pro posit platfor m #1 #1 er Platfor m Value Custo m t pro posit ion segmen #2 #2 Platfor m Revenue Revenue ment develo p flo w #1 flo w #2 & mgmtSlide 16 Lead to Win
  17. 17. Freemium model Develo p Free ba sic Large ain base of & maint ser vice platfor m e rs free us ase Platfor m Premiu m Small b g ser vice of payin users Fixe d Cost of Cost of Free ba sic Pai d costs free premiu m ser vice premiu m ser vice ser vice ser viceSlide 17 Lead to Win
  18. 18. FixMyStreet.comSlide 18 Lead to Win
  19. 19. canvas Develo p ls urce & maint ain re d Referra Resi den ts Open so ize Empowe co m mun ity platforCusto m m citizens (platfor m) platfor m ts urce d City Resi den Open so Re duce Web & s (reports ) platfor m costs mobile a pp Co uncil ation Sales Platfor m Custo miz ment Free Ser vice develo p access fees & mgmtSlide 19 Lead to Win
  20. 20. 3. Modeling your ecosystem • Strategy traditionally focused on execution • Execution focus is on developing value proposition, operations, and monitoring competition • Creates a blind spot that hides dependencies • Wide-lens perspective: expand your focus to your entire ecosystem (partners and environment) • Delivery of your value proposition depends on your ability to align your strategy with your partnersSlide 20 Lead to Win
  21. 21. Ecosystem risks • Co-innovation risk: who else needs to innovate in order to your innovation to succeed? – Success of an innovation depends on complementors (technology, procedure, or organization) – Help your weakest complementor to succeed • Adoption chain risk: who else needs to adopt your innovation before end-consumers can assess it? – Uncertainty of market success increases with number of intermediaries that must adopt innovation – Identify bottleneck partner in adoption chain and either i) subsidize them, ii) focus on a niche and provide exclusivity, or iii) circumvent them via an alternative pathSlide 21 Lead to Win
  22. 22. Value blueprint • Value blueprint is about constructing a picture of your entire ecosystem at the start • Judge risk of all required ecosystem elements as red (show stopper), yellow, or green • Need to move a cohort of partners in the same direction: need to reassign value captured to the weakest link in your ecosystem • Value blueprint is a map that makes your ecosystem and dependencies explicitSlide 22 Lead to Win
  23. 23. What a value blueprint shows • End customer (who ultimately adopts?) • Your own project (what do you need to deliver?) • Suppliers (what inputs do you need?) • Intermediaries (what stands between you and your end customer? who touches your offer?) • Complementors (what else is required before each intermediary adopts the offer & moves forward?) • Co-innovation and adoption chain risksSlide 23 Lead to Win
  24. 24. Value blueprint (template) Supplier 1 You Intermediary End Supplier 2 Customer Supplier 3 Supplier to Complementor 1 Complementor Supplier to Complementor 1 24 Supplier to Complementor 2 Complementor 2Slide 24 Lead to Win
  25. 25. Battle of e-readers: Sony vs Amazon • Sony and Amazon built ecosystems using the same pieces (e-books, e-readers, publishers, store, ...) • Sony’s competence was in hardware, left a blind spot wrt the dependencies on content providers E-Ink Screen Other Sony End Retailers Components Reader Customer Sony DRM Connectivity Sony vis USB Authors Publishers ConnectSlide 25 Lead to Win
  26. 26. Amazon’s Kindle ecosystem • Amazon was well-positioned in the e-book ecosystem, but its expertise was not in hardware • Different from Sony, Amazon played the role of an integrator, delivering a whole customer solution Connectivity via wireless Amazon Amazon End Kindle .com Customer Amazon DRM Authors PublishersSlide 26 Lead to Win
  27. 27. Leadership prism • Tool to assess benefit to each actor in the value blueprint: surplus = relative benefit – cost Relative Cost Surplus benefit Partner A Partner B Partner C Value proposition Partner D Partner E Partner FSlide 27 Lead to Win
  28. 28. 4. Key lessons • Business model canvas allows you to test your assumptions about your business • Value blueprint and leadership prism allow you to model your role in a business ecosystem • Business model canvas gives you your customer value, unique advantage, and financials • Value blueprint and leadership prisms allow you to articulate the value for your partnersSlide 28 Lead to Win
  29. 29. Further readings • Johnson, M. (2010), Seizing the White Space: Business Model Innovation for Growth and Renewal, Harvard Business Press • Osterwalder, A. & Pigneur, Y. (2010), Business Model Generation, John Wiley & Sons • Muegge, S. (2012), Business model discovery by technology entrepreneurs, April, TIM Review • Adner, R. (2012), The Wide Lens, Portfolio/PenguinSlide 29 Lead to Win
  30. 30. Highly recommended • If you enjoyed this presentation, you may like these articles on technology entrepreneurship … 30 Lead to Win