Business models - fashion industry

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This PowerPoint was presented at the 2012 Summer School on Fashion Management at the University of Antwerp. The lecture explains the concept of business models from a theoretical point of view, and illustrates this with an example from the fashion industry.


<ul><li>1.Business models in fashionTheory &amp; practiceAugust 28th 2012 Walter van</li></ul> <p>2. Agenda1. Innovation2. Business models - theory What are business models? Business model creation3. Business models - practice Application of a business model4. Q&amp;A 3. Innovation 4. InnovationInnovation is the process and outcome of creating somethingnew, which is also of valueSchumpeter (1934) argued that innovation comes aboutthrough new combinations made by an entrepreneur 5. Innovation A new product A new process Opening of new market New sources of supply A new business model 6. good ideas are widelydistributed, nobody has a monopoly on innovation Prof. Henry Chesbrough, Berkeley 7. BusinessModelsWhat are they? 8. Business modelsExamplesEasyJet / SouthWest Airlines no frills: low cost, direct flights without(free) extrasGillette razor and blades: low (no) margin on razor; high margin onbladesDell built-to-order: choose the components of your pc beforeproduction startsFarmville / Spotify freemium: Basic service is free, added servicesare offered for premium pricing There is more to it than just a catchy name 9. Business models Every organization has a business model Many definitions / many approaches Interpretation:The core logic by which a firm creates, delivers and captures value Role: to unlock the value potential embedded in (new) technologies/products/innovations and converting it into market outcomes 10. A business model is a logical story explainingwho your customers are, what they value, and how you will make economic returns in providing them that value Prof. Joan Magretta, Harvard Business School 11. Value? What values do we pursue as a company? What value/benefit do we create, and for whom? How do we create this value? How do we transform value into money? 12. Business models create valueThe business model creates value not technology or a product itselfproduct/technology Xvalue/utility creates enables business model defines business strategy 13. Business model components Value creation Why does your business exist? Companys unique value proposition Value delivery How can you deliver the value to the customer Value capture Whether &amp; how can you make money now and in futureinternal processes+ profit formula+ value chain and organization organizationnetworkconsumer 14. Business model innovation Value creation innovation we offer a better value proposition for an existing or new problem Value delivery innovation we reconfigure the value chain so that a better value proposition and value delivery emerges Value capture innovation we change the revenue mix and thereby create a better value proposition 15. Side noteBusiness plans, business strategy &amp; business modelsOften used interchangeableHowever: different conceptsBusiness plan: statement of a set of business goals + how to attainthemBusiness strategy: combined choices of how to competeBusiness model: operationalization of the business strategy choice 16. Value propositionValue Proposition Identify the customer pain or problem Indicate how the product addresses that problem Quantify the value of the product from the customers perspectiveUnderstanding value is KEY! Generally wholly unrelated to your cost base What is the value of an MacBook? What is the value of a (luxury) clothing item? 17. Well, I know we are in a commodity market where the price is key, but Ibelieve we can sell the good for 10x asmuch as before 18. Value propositionFashion and quality at the best priceInstant fashionOther fashion brands? 19. Business model creationTwo important concepts: Business models consist of a set of Choices and Consequences Business models are a variation of the Value Chain 20. Business model creationChoices &amp; consequences - Casadesus-Masanell &amp; Ricart (2010)What parts are business models made of? The concrete choices made by management about how the organization must operate, and The consequences of these choices 21. Business model creationChoices &amp; consequencesChoices Consequences PoliciesFlexibleAssetsRigid Governance Business modelA business model is a reflection of the firms realized choices 22. Business model creationValue chainEvery business model is avariation on a companysvalue chain (Magretta, 2002)The business modelencompasses the pattern ofthe firms economicexchanges with externalparties (Zott &amp; Amit, 2008) 23. Business model creationValue chainValue creation is a networked processBusiness models span across firm boundariesIt involves a complex, interconnected set of exchange relationships andactivities among multiple players 24. Business model creationValue chainWhere does your business sit in the value chain? Do you need support/partnership/technology? Can you go direct-to-customer?If you are reliant on others, how will you capture your part of the valuecreated? And build lasting relations? 25. Business model creationValue delivery and capture: customersIdentify the specific group of customers (aka market segment) youwill targetUnderstand that different market segments have different needs,preferences and purchasing criteriaUnderstand the value that they desireCreate an optimal delivery system of that valueQuantify, quantify, quantify 26. Business model creationValue captureHow is revenue generated?One-off purchase?Subscriptions?Freemium model?Advertising?How does that tie back to the value chain?What is your cost structure? How does that tie back to the value chain? 27. Business model creationDiscovery, learning, and adaptationStart with a provisional business modelValidate; then revalidate and revise The right business model is rarely apparent early on entrepreneurs/managers who are well positioned and can learn and adjust are more likely to succeed 28. Business modelsSome conclusionsTo be a source of competitive advantage, a business model must bemore than just a logical way of doing businessA model must be honed to meet particular customer needs andrequires deep understanding of the customer/consumer and theirvaluesIt must be constantly revalidated and adjustedDesigning a business (model) is a creative act! 29. CaseExampleFragileNathalie Vleeschouwer 30. Case exampleNathalie VleeschouwerFashion designer from AntwerpFemale entrepreneur of the year 2011Main brand: Fragile Maternity fashion 31. Fragile delivers contemporary fashion that enables pregnant women to feelcomfortable, free, and attractive 32. FragileValue creation Product:High fashion for pregnant womenHigh quality fabrics specificallyChosen for sensitive skinsDurable productsCut and shape adjusted for pregnant shapeBut also wearable afterwards 33. FragileValue creation Personal contact:High emphasis on personal contactWith boutiques and suppliers/producersEstablishes goodwillEstablishes calm / steady relations 34. FragileValue deliveryMaternity BoutiquesFlagship storesProvide a unique experienceProvide a complete offering of maternity products 35. FragileValue capture Standard sales formatBut in addition: Durability leads to cast-offs Word of mouth Many request for non-maternity clothingSecond line: Nathalie Vleeschouwer 36. Nathalie Vleeschouwer line Builds on good name designer Builds on style Fragile Builds on previous customer base Attracts regular and maternity boutiques 37. Nathalie VleeschouwerSome choices (and consequences)Clear initial choice for maternity high fashionUntapped market, possibility for personal contact with retailChoice for a complete offering maternity wear Supports and enables delivery of value propositionChoice for as much local production as possible Fast, convenient, goodwill 38. Nathalie Vleeschouwer business model 39. Q&amp;A 40. OPENING MINDSTO IMPACTTHE WORLD Slides and references available </p>