Business model canvas 2013

Business Models
Serdar Temiz,
temiz@kth.se
ME2603 Entrepreneurship 6.0 credits
Serdar Temiz temiz@kth.se 2013

About me
• Master in ICT Entrepreneurship
• SSES Alumni
• Previously Software Developer/ Project
Manager
• PhD Candidate at Indek KTH
• Business/ Project developer/adviser for
private companies
• www.Opensweden.net

In reallity...
• Life long learner and a do-er

This presentation
• Not about a specific business idea
• About business processes
• About business model innovation
• It is pretty long
• Feel free to fall asleep, interrupt
or leave
• I hope you know all this already.
• If not, I really think it can give you
a lot

Why should I listen to you?
• Do not listen me!
IT IS YOUR RESPONSIBILITY TO
QUESTION ALL ASSUMPTIONS. MINE,
YOURS, EXPERTS.

Recap: What is Entepreneurship?
The process of coordinating resources to
exploit or take advantage of opportunities
that exists in the market or are created by
innovation in an attempt to create value.
(Brown, 1994)

Where Entepreneur Jumps in?
product /
service
need/
expectation

Some Questions
• Who is your customer?
• What is Innovation
• Why it matters

Invention vs Innovation
Business Plan vs Business Model

There are many inventions, but far fewer
innovations.
An invention is a novel idea
Innovation is the commercialization of that
novel idea

FORTUNE 500
• “Two thirds of the original 1955 list was gone
within three decades” William Shanklin*
• The rate at which large American companies left
the Fortune 500 increased four times between
1970 and 1990 a change of almost 50% from the
1999 Fortune 500 to the 2009 Fortune 500
John Micklethwait & Adrian* Wooldridge,
• *(cited in Dane Stangler and Sam Arbesman WHAT DOES FORTUNE 500
TURNOVER MEAN
)

Turnover Rate in Fortuna 500
• Dane Stangler and Sam Arbesman WHAT DOES FORTUNE 500 TURNOVER MEAN

Types of Innovation
1. Technology innovation
2. Process innovation
3. Product & service innovation
4. Business Model innovation

Process innovation
• Implementation of a new or significantly improved
production or delivery method
• Ford Car Production
• Dell Computers

Technology innovation
• 3D printing
• Touch screen
• You name it.

Product & service innovation
• Customer Support & Communication via FB–
airbaltic
• Facebook itself

Business Model Innovation
• Why is it important?

Why business models matter?
Joan Magretta
• Who is the customer and what does the customer
value?
• How do we make money from the business?
• How can we deliver value to the customer at an
appropriate cost?
• Writing a new story
• A better way than existing alternatives
• Making the number add up
• Tweaking on the fly based on feedback

Business Model Warfare
Langdon Morris
• Business mortality is high
• Technology innovation by itself has rarely
been sufficient to ensure the future.
• Similar products and services
• Advantages resulting from a successful
business models are fleeting. Models need to
be continuously reviewed and updated when
necessary

Operating Margin Growth in Excess of
Competitive Peers
[Source: IBM, CEOs are expanding the innovation horizon: important implications for CIOs]
Compound annual growth rate over five years

Benefits Cited by Business Model Innovators
% of responders
Source: IBM, Global CEDO Study 2006

How Business Models Emerge
(1 of 3)
– The value chain is the string of activities that moves a
product from the raw material stage, through manufacturing
and distribution, and ultimately to the end user.
• Primary activities are directly concerned with the
creation or delivery of a product or service.
• Support activities help to improve the effectiveness or
efficiency of primary activities
Raw Material
Value Chain
Primary &
Secondary
Activities +
Margin
Product /
Service

(2 of 3)
The Value Chain (again)
"Competitive Advan tage: Creating andSustaining superior Performance" (1985).

(3 of 3)
• The Value Chain (continued)
– Entrepreneurs look at the value chain of a product or a
service to pinpoint where the value chain can be made
more effective or to spot where additional “value” can be
added.
• This type of analysis may focus on (1) a single primary activity of
the value chain (such as marketing and sales), (2) the interface
between one stage of the value chain and another (such as the
interface between operations and outgoing logistics), or (3) one of
the support activities (such as human resource management).

Business Models Generation
Alexander Osterwalder
• “A business model describes the rationale of
how anorganization creates, delivers,and
captures value.”

A business Model is..
• The business model is a strategic plan to be
implemented through organizational
structures, processes, and systems in order to
need customer needs.

Simple Business Model
Value
Proposition
Revenue
Model
Production
Model
Delivery
Model

Simple Business ModelValueProposition
10 RevenueModel
10
ProductionModel
10
DeliveryModel
10

Forces affecting the business model
• Customer needs
• Competition
• Technological change
• Social change
• Legal environment

Pivoting
• Changing important part of business model
• - can be simple: chancing pricing
• -can be complex: target customer, user needs
change, feature set changes, new distribution
channel

Basic Business Model Map
Product/Service
Ecosytem
Customer
EcoSystem
Finance
Value

• Who is customer
• How do you reach customer
• What is your value proposition /USP
• How to you communicate customer
• What are your resources
• What is your enviromental costs/benefits
• What are your key activities
• What are your key partners
• How do you make money?

There are different type of Business Model Maps

• Henry Chesbrough & Richard Rosenbloom

intacam's Business Model MapperTM

Mark JohnsonSerdar Temiz temiz@kth.se 2013

Business Model Canvas

The 9 building blocks for Business Model Canvas
1. Customer Segments
2. Value proposition
3. Channels
4. Customer Relationships
5. Revenue Streams
6. Key Resource
7. Key Activities
8. Key Partnerships
9. Cost Structure

1. Customer Segment
• For whom are we creating value?
• Who are our most important customers?
• Customer Segments
– Mass Market
– Niche market
– Segmented - related customer segments: frequent
flier program, bank customers with big assets
– Diversified: Unrelated customer segments: Amazon
– Multi sided: free newspaper-readers and advertisers

Find a Customer-I
• Why?
• Who is your customer?
Grave, School, hospital, apotek, free
newspaper
• Can everyone be your customer?
• "people who want to buy a flat,"
• "anyone needs job"
• “Everyone who goes to university”

Find a Customer-II
• Find a customer for solving a pain
• Use the Customer Profile
• Describe who is making purchasing decision?
IT ? Operations Group? Management?
• Make sure they are happy
• Market is important but
-do not only think market
• Billion dollar market does not start in few
minutes

Q’s for Customer
IDENTIFIABLE – what distinguishes them?
MEASURABLE – how many belong to your target
segment?
REACHABLE – how to reach, communicate with each
segment
WILLING– do they want it?
ABLE– they want but can they afford it?

Q’s for Customer - Macro Level
• Population size
• Population character
• Disposable income levels
• Educational background
• Primary languages
• Infrastructure
• Regulations
• Political affiliation
• And so on…

Keep In Mind -Paradox
• Customer is important but you can not give all
they want
• Learn to stay No,
• Learn to focus
• Learn to ”change and adopt”
• They may not know what they want: buying
process is mysterious

2.Value Proposition
• a bundle that meets that meets a customer's
needs or solve his/her problem.
• benefits can be tangible and intangible
• Reason why customers pick one business or
another.
• can be
– innovative, new disruptive offer
– similar to existing offers but just added feature or
attribute in some sort of way

Q’s to answer – Value Proposition
• What pain do we solve for customer?
• What do we deliver for customer?
• What value do we develop for customer
• Which need of customer do we satisfy?

Some Elements that may add to value
• newness
• customization
• getting job done
• support
• price
• design
• status/ brand
• Accessibility
• risk deduction
• usability

2. Value Proposition - Q’s to answer –
• What pain do we solve for customer?
• What do we deliver for customer?
• What value do we develop for customer
• Which need of customer do we satisfy?

3. Channels
• Awareness of products
and services,
Evaluation of value
proposition, Purchase,
Delivery, After sales
• Direct: Brick and
mortal stores,
websales, sales force
• Indirect: wholesales
partner stores,
Value
Proposition
Customer
Segment

3. Channels- Qs
• Through which Channels do our Customer
Segments want to be reached?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones work best?
• Which ones are most cost-efficient?

4. Customer Relations
• Customer
acquisition
• Customer
retention
• Boosting
sales
(upselling)
Value
Proposition
Customer
Segment

Example Customer Services
Can you give some example companies?
• (Dedicated)Personal assistance
• Self Service
• Community
• Co-creation
• Automated

4. Customer Relationships
• What type of relationship does each of
our Customer Segments expect us to
establish and maintain with them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of
our business model?

5. Revenue Streams
• For what value are our customers really willing
to pay?
• One time/ recurring?
• For what do they currently pay?
• How are they currently paying?
• How would they prefer to pay?
• How much does each Revenue Stream
contribute to overall revenues?

5.Revenue Streams
•ChannelsValue
Proposition
Customer
Segment
• Asset sale
• Usage fee: use more, pay more
• Subscription: monthly, yearly
• Leasing/Lending/Renting
• Licensing: patents, license fee
• Brokerage fees
• Advertising
Fixed
pricing
Dynamic
pricing

5.Revenue Streams
Fixed
pricingDynamic
pricing
• List price
• Product feature
dependent
• Customer segment
dependent
• Volume dependent
• Yield management : hotels,
airlines
• Real-time-market :supply
and demand
• Auctions Price
• Negotiation

6. Key Resources
Value
Proposit
ion
physical
financial
intellectual
human
Key resources can be owned or leased by the
company or acquired from key partners.

6. Key Resources
• What Key Resources do our Value
Propositions require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue Streams?
• What physical resources, intellectual,
human, financial resources do we have?

7. Key Activities
• What Key Activities do our Value Propositions
require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue streams?
• Production- Microsoft
• Problem Solving: Mc Kinsey
• Network/Platform: Facebook, ebay, Visa

8. Key Partnerships
Why Partnership?
– reduce cost,
– Reduction of risk and uncertainty: Blu Ray Tech.
– Acquisition of particular resources and activities:
Nokia Windows, HTC phones
• Strategic alliances between non-competitors
• Coopetition: strategic partnerships between
competitors
• Joint ventures to develop new businesses
• Buyer-supplier relationships to assure reliable
supplies

8. Key Partnerships -II
• Who are our Key Partners?
• Who are our Key suppliers?
• Which Key Resources are we acquiring from
partners?
• Which Key Activities do partners perform?

9. Cost Structure-I
• Business model Cost Structures:
cost-driven
minimizing
costs
wherever
possible value-driven
Premium
Value
Propositions
and a high
degree of
personalized
service

9. Cost Structure-II
• Cost Structure Characteristics:
• minimizing costs wherever possibleFixed costs
• Premium Value Propositions and a high
degree of personalized serviceVariable costs
• average cost per unit to fall as output
risesThe same Distribution
Economies of
scale
• Channels for different products and
servicesmay support multiple products.
Economy of
Scope

9. Cost Structure
• What are the most important costs inherent in
our business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

In Total

Problems with this canvas?

Spotify Business Model

Business Model Canvas – Spotify- September 2013
Key Partners Key Activities Value Propositions
• .
Customer
Relationships
Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Serdar Temiz Stockholm-Sweden
Listeners• Legal music for free or
minimum payment
• Be social when you listen
• Music based on mood
• Automated service
• self service (FAQ)
• Community forum
• Customer Service
• Awareness at social media
• Mobile application
• Desktop application
• Spotify.com
Advertisers
• self service : on learning
how ads are located in
the spotify etc.
• personal assistance: to
put ad, advertisers
should get in touch
directly
• Targeted advertisement-
• commercials between
songs: make listeners sure
to listen
• Awareness with social media
partners (fb, msn)
• Customer center representative
• Keep technology up and
running
• Adding more music,
label, artists to Spotify
offering
• Launching Spotify in
different countries
• Music,
• Server,
• Brand
• Employees
• Labels,
• aggregators (e.g merlin
network )
• Facebook
• License fee
• Salaries
• Technology cost
• Subscription of unlimited and premium customers,
• Advertisement revenue

• Are we done?

Key Partners Key Activities Value Propositions
• .
Customer
Relationships
Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Serdar Temiz Stockholm-Sweden
Listeners• Legal music for free or
minimum payment
• Automated service
• Community forum
• Spotify.com
Advertisers
how ads are located in
the spotify etc.
• personal assistance: to
put ad, advertisers
should get in touch
directly
• Targeted advertisement-
• commercials between
songs: make listeners sure
to listen
• Awareness with social media
partners (fb, msn)
• Customer center representative
running
offering
different countries
• Music,
• Server,
• Brand
• Employees
• Labels,
• aggregators (e.g merlin
network )
• Facebook
• License fee
• Salaries
• Technology cost
Developers
• developer.spotify.com/
• physical meetups
Can add music to their code
????

Key Partners
• Labels,
• aggregators (e.g
merlin network )
• Facebook
Key Activities
running
offering
different countries
(currently only in
Sweden, Norway,
Finland, the UK, France,
Spain, the Netherlands
and the US )
Value Propositions
• Legal music for free or
minimum payment
• Targeted
advertisement-
• commercials
between songs:
make listeners
sure to listen
• Can add music to their
code.
Customer
Relationships
• Automated
service
• Community forum
how ads are located in the
spotify etc.
• personal assistance: to put
ad, advertisers should get
in touch directly
Customer Segments
Listeners
Advertisers
Developers
Key Resources
• Music,
• Server,
• Brand
• Employees
Channels
• Spotify.com
• Awareness with social
media partners (fb, msn)
• Customer center
representative
• developer.spotify.com/
• physical meetups
Cost Structure
• License fee
• Salaries
• Technology cost
Revenue Streams
StartupAcademy.se Stockholm-Sweden

Facebook’s Canvas?

iTune’s Canvas

Twitter’s Canvass

Thank you
Serdar Temiz
temiz@kth.se

Business model canvas 2013

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