Business Models
Discussion: What do you know about what a "business model" is? Say Yyou describe an idea you have and a friend asks you, what's the business model? What is your answer?
Intro
- Term’s definition is not set in concrete (as usual)
- Blueprint for how a business will function
- Describe how a business will creates, delivers and captures value
- Incorporates the product, value proposition, the pricing, the growth model and more
- In a way this is the final deliverable for the term project :)
Building Blocks of a business model
Background of the Business Model Canvas
(based on Business Model Generation and follow on research, books and tools)
- Here is the: Business Model Canvas
- One way to structure strategic planning, analysis
- Checklist helps cover all the bases when designing a business model
- Handy if have one of several possibilities that you are examining
- Note that a single business might operate based on two different models (but it’s more complex to do that and usually not the right way to go.)
Customer Segments (for whom)
- What customer or groups of customers?
- And who are the most important ones?
- A segment is distinct if you can identify a set of customers require a different:
- offer
- channels
- relationships
- payment models
- Examples: Mass market? Niche market? Segment of larger market? Two sided market?
- Note that you might be going after more than one!
Value Proposition (the offer)
- Important: Teams will use Value Proposition Canvas to analyze this in more depth!
- What problem do we solve for the customer?
- What product/service do we deliver to the customer?
- How do we do that compared to what they do today?
- There’s more than “solving a totally new problem/needs”
- More common is that there’s the old way, and then there’s our improvement on it
- Examples: performance, customization, convenience, price, status, safety, etc.
Revenue Streams (or pricing model)
- Per customer segment/offer, who pays and what do they pay for?
- How do you set and adjust the price?
- Examples: simple purchase; usage fee (“pay by the drink”); subscription; licensing; in-“game”-purchases; lending or leasing;
Cost Structure
- ‘Simply’ all the costs needed to run the businss model
- Fixed costs, per-unit variable costs, per-employee variable costs
- Based on Key resources, key activities and key partnerships
Channels (How do I reach customers?)
- How do you reach a customer? How do they want to be reached?
- Are you able to reach them in that way?
- You need to figure out how to: generate awareness, allow evaluation, enable purchase, deliver the product, provide after sales follow up
- Examples: Web site, Direct Sales, Reseller web site (e.g. Amazon), Stores, Wholesaler, social media
- Why? Major cost driver
Partnerships
- What outside entities do you have to establish trust with for your model to work?
- Suppliers? Resellers? Distributors? Maybe a web distributor like Amazon? Maybe Apple, because they have to approve your app. Are you licensing something from a partner?
Customer Relationships (ongoing)
- What kind of ongoing relationship does your customer want with you?
- Examples: personal email; self-service support site; face-to-face; online community; co-creation
- Why? Key part of the value proposition; also a major cost driver.
Resources (What do you need for success)
- Go a level deeper than just “money”. Identify all the things you will need
- For example: expertise (we need a bigdata person), IP (we need to license music), physical (we will need a shop floor to do assembly.)
(Top) Activities (To do list)
- This might seem obvious but it’s worth calling out, because it’s so ‘obvious’
- Examples: software development; packaging and shipping; manufacturing; support; marketing; manufacturing; licensing; etc.
Conclusions - Business Model Canvas
- It’s purpose is to help you consider and address all the pieces of your business model
- Is it a business or a hobby? Business includes much more than just the product
- Gives you a way to partition the work, and present the results
In Class Team Activity
- With your teammates discuss the Business Model Canvas
- For your chosen product (or your most likely chosen product)
- Analyze and write down in bullets the following “boxes”
- Value Proposition
- Customer Segments
- Key Partners
- Submit to Moodle as a pdf or a LEGIBLE picture of your written notes
Thank you. Questions?
(random Image from picsum.photos)