m&e 2014 session 8 business model bb

8/18/2019 M&E 2014 Session 8 Business Model BB

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www.bradford.ac.uk/managem

Developing the idea andconstructing the Business Model


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Session Outline

• Review•

Developing Ideas• Researching & Evaluating Opportunities• Market Failures


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Y o u I d e a s

C o n c e p t s V a l u e

Entrepreneurial Process

E n h a n c e

Explore

E v a l u a

t e

Experiment / Execute


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Creating and exploring the opportunit

!o" does the opportunitcreate ne" value#!o" is it di$$erent#

Exploring theopportunit

%ho are the customers&suppliers& partners#

%hat are theirexpectations#

Is it an idea oropportunit #

%hat is theopportunit #

"h # "ho $or# ho" torealise it# "here#

"hen# scale#

Demand#Innovation#

'easi(ilit #)ttraction#


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Dra"ing a pro(lem/opportunit map

OPPO*+,-I+Y

Pro(lem

Causes

E$$ects

.ains

%hoCosts

%here&

"hen &ho"

*ae 01123


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+ime "asted ( missed appointments

Every year, many hours are wasted by people toturn or appointments with pro essionals whosetime is at a premium and costed by the hour! "hisespecially a ects doctors in the #$ %ational ealth'ervice, where it is estimated to cost ()*+million ayear, but it is also e perienced in other pro ession

such as law, accounting, and consultancy!


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Pro(lem map o$ 4timesaver5 pro(lem o$ people $ailingto 6eep appointments& e7g7 in -!S

+ime saver

Pro(lem

Causes

E$$ects

.ains

%ho

Costs

%here&"hen &ho"

People $ail to 6eep pre(oo6ed appointments

People dont thin6 it matters

,na(le to advise cancellation

+heir needs change

Ma (e late8running

9ittle or no cost to them

Missed appointments

+ime "asted

!ave to (e re8arranged

Client needs not met

Over8(oo6ing aims to reduce impact

+ime (ased on :;1/hour min

?1/"ee6& :;111/ ear minper person

Cause@ client

)$$ected@ pro$essional

Intermediar @receptionist or secretar

9ess do"ntime

More productive use o$ timePredicta(le "or6load

Meet more client needs

-o $ixed pattern

-osts %&'()*+m!.year

E,tra waiting time

Decision maker/practice manager

*ae 01123


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)! Introducing or raising charges or missedappointments

+! -on irming appointments by email.te t

0! Downgrading or dropping clients who missedmore than two appointments1! In orming clients about the negative e ects o

missed appointments

+ime Saver 8 Options


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+ime saver

Solution

!o" it "ill"or6

*esources

%h it "ill"or6

%ho

Disadvantages

.ains

)utomated diar s stem toma6e A monitor appointments

Con$irms appointment toclient ( text& email or auto phone call

*eBuires response ( client

O$$ers rearrangement or cancel optio

Can (e internet or intranet ena(led

Ma6es client responsi(le

*eminds client.ives options

Saves


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%hat is a Business Model#

• Model – 2 model is a plan or diagram that is used to make or

describe something!• 3usiness Model

– 2 irm4s business model is its plan or diagram or howit competes, uses its resources, structures itsrelationships, inter aces with customers, and createsvalue to sustain itsel on the basis o the pro its it

generates! – "he term 5business model6 is used to include all the

activities that de ine how a irm competes in themarketplace!


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• ) description o$ ho" our compan "ill intends tocreate value in the mar6et place& It includes the thatuni ue com(ination o$ products& services& image& anddistri(ution that our compan carries $or"ard7 It alsoincludes the underl ing organisation o$ people& and theoperational in$rastructure that the use to accomplish

their "or67

aplan 01123 Patterns o$ Entrepreneurship

• ) (usiness model is the "a that a compan applies6no"ledge to capture value7

IBM de$inition to conve the concept o$ (usiness modelinnovation to its executives7

De$ining the Business Model


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7eople

8rowing the venture to achieve asustainable business

Forming the organisation and launch

"he business case

3usiness propositionInitial ideas

Feasibility study and 9usti ication o the plan

3usiness modelOwner MotivationsOwnership etc Identi y income and cost streams,Operations and market connection

modi y

+he Start ,p Stages

9o"e 011?3


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!o" Business Models Emerge

"he :alue -hain


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Dell v 4+raditional5 Business Model

Barringer 011?3

'orecasts demand

O(tains su(components $rom suppliers

Ma6es (asic component

)ssem(les complete PC

Ships PCs to retailer

PCs sit on retailer5s shel$ until sold

Stores PCs in "arehouse

In hands o$ consumer

Customer order via phone or internet

Instantl contact manu$acturers& vie"order in$ormation A ship parts

Dell assem(les computer $rom parts asthe arrive and maintains C*M

In hands o$ consumer

Customer is shipped PC via courier

+raditional Manu$acturer

e7g3 !P or IBM

Dell


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3usiness Models E amples

3ait and hook 9o" margin (asic product "ith highmargin re$ill& eg ra or and (lades& mo(ilephone and air time& computer printer andcartridges

;%o rills4 airlines Yield management processes to maximiserevenue $rom a $light& using $lexi(lepricing& rather than rel ing on a $ixed seatprice at South %est )ir& eas Fet and* anair

Online retailing Eas purchasing on line "ith customisedrecommendations at )ma on

On line auctions Organiser ta6es percentage $romadvertiser and completed deal& eg eBaand Bet$air

9o"e 011?3

Examples o$ Business Model Brea6points

"""7en7"i6ipedia7org/"i6i/BusinessGmodel

http://www.en.wikipedia.org/wiki/Business_modelhttp://www.en.wikipedia.org/wiki/Business_model


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•


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-ustomer demographics

@Early adopters/ ighly a luentwith disposable income

@ ; #rban emales4@ )AB01 yrs@ Cikely acebook and "witter

users@ * kB+ k users. city@) B ) users.deal.city

3ene it to customers

@Deep discounts@Discover services.merchandise

that they didn4t know o @ 2ccess to newservices.merchandise

o 1 smaller ;side deals4 inaddition to main deal

o Deal personali ation basedon voluntary disclosure opre erences

o Deals divvied up by ?I7 code

.*O,PO- C,S+OME*S


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3est 'uited 3usinesses

@ igh i ed cost businesses@ igh customer ac>uisition cost@ 3usiness thriving on repeat customers!@ Rice #niversity study/

@ ** success ul@ E amples/ li estyle businesses,

e!g! spas GA+ success ulH,sailing, restaurants G Asuccess ulH, education

$ey Merchant Economics

@ Revenue/ "ypically retains othe deal minus credit card ees

@ Redemption rate/ JA@ Incremental spending/ 8ap

e pectation that customers willspend more than 9ust K , likelyupward o KL to K) once in thestore

@ Repeat customers/ ++ repeat

business

8roupon proposition/ 8uaranteed revenue and large number o new customers!

$ey Issues "oday@ Cong waiting times to be eatured B competition and introduction o side deals@ Cearning curve in structuring a deal Gtoo many responsesN too many discount

shopper, redemption over coupon li e timeH

ME*C!)-+ OBSE*V)+IO-S


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Customer .roup

ProFected.ro"th

Sales Yr 0 H Yr H

Varia(le Costs Per customer3

+otal H

Customer Bene$its

Sales

Income

+otal H

'ixed Costs'inance Costs

Premises& 'acilities& Insurance& Salaries& Other 'ixed Costs7

+otal H

+otal [email protected] Pro$it@

-et Pro$it (e$ore tax@

.ross Pro$it Margin@

-et Pro$it Margin@

Brea6even Sales@

Business Model +emplate


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Evaluating Business Models

• 2re the assumptions and in ormation onwhich the model is based realistic andreliable= E!g! -ustomer ac>uisition and sales

growthH• 2re i ed costs kept as low as possible=• 2t what point is breakBeven reached=• 2re the gross and net pro it levels realistic and

attractive=


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) simple (usiness model

P*OJEC+ED .*O%+!

.ain 11 customers/ ear inears 08

9ose 011&111 $inancing o$ I+s stem H :0;&111

Premises& $acilities& insurance H :0K&111Salaries 0 people3 H :K1&111+otal $ixed costs H :N0&111

S)9ES I-COME011 customers in ear >

:01&111L :0< month average tra$$ic H :?1&111

+otal incomeH :>;1&111

V)*I)B9E COS+SMar6eting costs :>11 to attract each

customer H :01&111Varia(le costs :1&111

+otal varia(le costs H : 1&111

+otal costs@ :>00&111.ross pro$it@ :>


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Importance o$ a Business Model

aving a clearly articulated business model

is important because it does the ollowing/

• 'erves as an ongoing e tension o easibility analysis! 2 business model continually asks the >uestion, 5Does this business make sense=6•

Focuses attention on how all the elements o a business it together andconstitute a working whole!

• Describes why the network o participants needed to make a businessidea viable are willing to work together!

• 2rticulates a company4s core logic to all stakeholders, including theirm4s employees!


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m&e 2014 session 8 business model bb

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