business model 5

8/12/2019 Business Model 5

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Business model

Skate to where the money will be, notwhere it is now - Christiansen


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What is entrepreneurship?

Entrepreneurship is the propensity of mind\

to take calculated risks with confidence to

achieve a pre-determined business objective.


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Objectives

To highlight the importance of Business

Model as a pre-requisite to Business plan

writing

Understand the components of Business

Model

How to use Osterwalder Business ModelCanvas and generate revenue for their

business


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What is a Business Model?

A business model describes the rationale of how an

organization creates, delivers, and captures value.

The business model is like a blueprint for a strategy

to be implemented through organizational structures,processes, and systems.


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Four main areas of a Business

For Whom ? What ?

How ?

What is the Outcome/Returns ?


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The Business Model Canvas

Book on Business Model Generation

By Alex Osterwalder and Yves Pigneur


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KeyPartners

KeyActivities

ValueProposition

CustomerRelationships

CustomerSegments

Key Resources Channels

Cost

Structure

Revenue

Streams

The Business Model Canvas

Source: Business Model Generation,

Alex Osterwalder and Yves Pigneur


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The building blocks 1

Customer Segments

An organization needs to understand who is their target

customer. They may serve one or several CustomerSegments.

For whom are we creating value?


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Customer Segments

For whom are we creating value?

Who are our most important customers?


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Customer groups represent separate

segments if:

Their needs require and justify a distinct offer.

They are reached through different distributionchannels.

They require different types of relationships.

They have substantially different profitability.

They are willing to pay for different aspects of the

offer.


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Different Customer Segments

Mass Market

Niche Market Segmented

Diversified

Mul ti-sided platforms (or multi-sided markets)


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Value PropositionsIt seeks to solve customer problems and satisfy customer

needs with a bundle of benefits.

What value do we deliver to the customer?

Which one of our customers problems are we helping

to solve?

Which customer needs are we satisfying?

What bundles of products and services are we

offering to each Customer Segment?


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Value PropositionsA Value Propositions creates value for a

customer segment through a distinct mix of

elements catering to that segments needs.

Values can be quantitative (eg. Price, speed

of service) or qualitative (eg. Design,

customer experience).


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Value Propositions

Elements from the following non-exhaustive list can contribute to

customer value creation:

Newness , Performance

Customization, Getting the job done

Design, Brand/status

Price, Cost reduction

Risk reduction

Accessibility

Convenience/usability


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Channels

Value propositions are delivered to

customers through communication, distribution, and saleschannels.

Through which Channels are Customer Segments

to be reached?

Can the Channels be integrated?

Which ones work best?

Which ones are the most cost-efficient?


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Channels

Channels describes how a company

communicates with and reaches its

Customer Segments to deliver a

Value Proposition.


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Channels

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?

How are we integrating them with customer routines?


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Channels

Channels have five distinct phases. Each channel can

cover some or all of these phases. We can distinguish

between direct Channels and indirect ones, as well as

between owned Channels and partner Channels.

Finding the right mix of Channels to satisfy how

customers want to be reached is crucial in bringing a

Value Proposition to market.

An organization can choose between reaching its

customers through its own Channels, through partner

Channels, or through a mix of both.


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Channels

Owned channels can be direct, such as an

in-house sales force or a Web site, or they

can be indirect, such as retail stores ownedor operated by the organization. Partner

Channels are indirect and span a whole

range of options, such as wholesale andretail distribution.


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Channel Types Channel Phases

OWN D

irect

Sales force1.

Awareness

How do we

raise

awareness

about ourcompanys

products

and

services?

2.

Evaluation

How do we

help

customers

evaluateour

organizatio

ns

Value

Proposition

?

3.

Purchase

How do we

allow

customers

to

purchase

specific

products

and

services?

4.

Delivery

How do we

deliver a

Value

Proposition

to

customers?

5.

After

sales

How do we

provide

post-

purchase

customer

support?

Web sales

Indire

ct

Own stores

PARTNER

Partner Stores

Wholesaler


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Customer RelationshipsCustomer relationships are established and maintained with

each Customer Segment. They deeply influence the overall

customer experience.

What type of relationship does each of our customers

want?

Segments expect us to establish and maintain with them?

Which ones have we established?

How are they integrated with the rest of our business

model?

How costly are they?



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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?


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Customer RelationshipsA company should clarify the type of relationship it

wants to establish with each Customer Segment.

Relationships can range from personal toautomated. Customer relationships may be driven

by the following motivations:

Customer acquisitionCustomer retention

Boosting sales (Up selling)


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Customer Relationships

We can distinguish between several categories ofCustomer Relationships, which may co-exist in a

companysrelationship with a particular Customer

Segment: Personal assistance

Dedicated personal assistance

Self-service

Automated services

Communities

Co-creation


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Key Resources

Key resources are the assets required to offer and deliver

the previously described elements.

What key resources are required for the valueproposition?

Does it depend on distribution channel, customer

relationship

or revenue streams?



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Key Resources

Every business model requires Key Resources.

These resources allow an enterprise to create and offer a

Value Proposition, reach markets, maintain relationships

with Customer Segments, and earn revenues.

Different Key Resources are needed depending on the type

of business model.

A microchip manufacturer requires capital-intensive

production facilities, whereas a microchip designer focuses

more on human resources. Key resources can be physical, financial, intellectual, or

human.

Key resources can be owned or leased by the company or

acquired from key partners.


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Key Resources

Key Resources can be categorized as

follows:

Physical

Intellectual

Human

Financial


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Key ActivitiesKey activities are the most important actions a company

must take to operate successfully.

What Key Activities do our Value Propositions

require? Our Distribution Channels?

Customer Relationships?

Revenue streams?



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Key Activities

We can distinguish between four different types of

partnerships:

1. Strategic alliances between non-competitors

2. Co-opetition: Strategic partnerships between competitors

3. Joint ventures to develop new businesses

4. Buyer-supplier relationships to assure reliable supplies


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Key Activities

Every business model calls for a number of Key Activities.

These are the most important actions a company must take to

operate successfully.

They are required to create and offer a Value Proposition, reach

markets, maintain Customer Relationships, and earn revenues.

Key Activities will differ depending on business model type.

For software maker Microsoft, Key Activities include software

development.

For PC manufacturer Dell, Key Activities include supply chain

management.

For consultancy McKinsey, Key Activities include problem

solving.


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Key Activities are categorised as:

Production

Problem solving

Platform / Networking


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Key Partnerships

The key partnerships describes the network of suppliers

and partners (to acquire resource or reduce risk) that makethe business model work.

Who are our Key Partners?

Who are our key suppliers?

Which Key Resources are we acquiring from

partners?

Which Key Activities do partners perform?



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Key Partnerships

It is useful to distinguish between three

motivations for creating partnerships: Optimization and economy of scale

Reduction of risk and Uncertainty

Acquisition of particular resourcesand activities


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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?


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Cost Structure

Naturally enough, costs should be minimized in every

business model. But low Cost Structures are more important

to some business models than to others.

Therefore it can be useful to distinguish between two broad

classes of business model Cost Structures:

Cost-driven and value-driven

Many business models fall in between these two

extremes


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Revenue StreamsRevenue streams result from value propositions successfully

offered to customers.

For what value are our customers really willing to

pay?

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?



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Revenue StreamsFor what value are our customers really willing to pay?

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?


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Revenue Streams

A business model can involve two different

types of Revenue Streams:

Transaction revenues resulting from one-

time customer payments

Recurring revenues resulting from ongoing

payments to either deliver a Value

Proposition to customers or provide post-

purchase customer support


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Revenue StreamsThere are several ways to generate Revenue Streams:

Asset sale

Usage fee

Subscription fees

Lending/Renting/Leasing

Licensing

Brokerage fees

Advertising


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Thank You

business model 5

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