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INTRODUCTION TO BUSINESS MODEL

INTRODUCTION TO BUSINESS MODEL. By Assoc. Prof. Dr. Amran Rasli. The new business environment. Highly competitive (due to economic, societal, legal and technological factors) Quick and sometimes unpredictable change The need for more production, faster and with fewer resources.

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INTRODUCTION TO BUSINESS MODEL

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  1. INTRODUCTION TO BUSINESS MODEL By Assoc. Prof. Dr. Amran Rasli

  2. The new business environment • Highly competitive (due to economic, societal, legal and technological factors) • Quick and sometimes unpredictable change • The need for more production, faster and with fewer resources

  3. The new business environment • Huber (2003) “new business environment created due to accelerated advances in science” • This advances creates scientific knowledge • This scientific knowledge feeds on itself resulting in more and more technology • Rapid growth in technology results in a large variety of more complex systems.

  4. The new business environment • Therefore the business environment is characterized by: • A more turbulent environment ( more business problems and opportunity) • Stronger competition • Frequent decision making by organizations • Large scope for decisions considerations (market, competition, political and global) • More information/knowledge needed for decisions

  5. change is the process by which the future invades our lives -> Alvin Toffler

  6. tell me something about innovation

  7. types of innovation?

  8. technology innovation

  9. process innovation

  10. product & service innovation

  11. business model innovation

  12. four rings of innovation business model innovation product & service innovation process innovation technology innovation

  13. “Business model innovation matters” and it is a top priority of CEOs

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

  15. Benefits Cited by Business Model Innovators percent of respondents [Source: IBM, Global CEO Study 2006]

  16. So what is a business model?

  17. business model framework INFRASTRUCTURE OFFER CUSTOMER PARTNER NETWORK CUSTOMER RELATIONSHIPS CORE CAPABILITIES VALUE PROPOSITION CUSTOMER SEGMENTS ACTIVITY CONFIGURATION DISTRIBUTION CHANNELS COST STRUCTURE REVENUE STREAMS FINANCE a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams [Osterwalder (2004) The Business Model Ontology]

  18. business model framework INFRASTRUCTURE OFFER CUSTOMER PARTNER NETWORK CUSTOMER RELATIONSHIPS CORE CAPABILITIES VALUE PROPOSITION CUSTOMER SEGMENTS ACTIVITY CONFIGURATION DISTRIBUTION CHANNELS COST STRUCTURE REVENUE STREAMS FINANCE a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams [Osterwalder (2004) The Business Model Ontology]

  19. Value • Value is created anytime an action is taken for which the benefit exceeds the cost or anytime an action is prevented for which the cost exceeds the benefit

  20. Dynamic Markets Impact Value • Many reasons for market changes: • Changes in preferences • Costs • Technology • Politics

  21. Forces Driving Value • Innovation • Incentives for innovation depend on how much value can be created and how much of it the innovator captures • Replication • Replication of successful ideas ultimately erodes profit from these ideas and returns most value created to the customer

  22. What’s my business model? • Most common options • Sell service • License technology • Sell product • Key issues • Who owns key complementary assets? (market power?) • Appropriability of value? Enforcement of patent protection? • Suggested reading: • David Teece (1986) “Profiting from Technological Innovation,” Research Policy • Ed Roberts (2003) “The Product Market and the Market for ‘Ideas’: Commercialization Strategies for Technological Entrepreneurs,” Research Policy

  23. The Importance of CAs Complementary assets are those assets that can be used by a firm: to either effectively enter a particular selection system as one of the selected or prevent rivals from doing so, as well as to either effectively prevent rivals or allow itself to engage in competitive imitation of the product characteristics for which the relevant selectors have defined a set of criteria. Canon, for example, combines its core-competencies in optics, imaging and microprocessor controls with diverse complementary assets in order to succeed in markets as differennt as copiers, laser printer, cameras and scanners

  24. Proposed Venture • How & where the business acquires cash from customers • How it uses the cash • How product and services flow from suppliers & the firm to clients • How does the firm connects (sales & marketing) with the customer

  25. Business Model Components • Articulate the value proposition • Describe the customer’s problem • How does the product address the problem • Value of the product from customers perspective • Identify the Market Segment • Group of customers to target • Different groups have different needs

  26. Business Model Components • Value Chain Structure • Firm’s position & activities in the value chain • How does the firm capture part of the value it creates • Define the cost structure & profit potential • How is revenue generated (sales, leasing,subscription) • Cost structure • Target profit margins

  27. Business Model Components • Position in the Value Network • Competitors • Complementors • Formulate the Competitive Strategy • How will the company develop a sustainable competitive advantage • What’s the hook?

  28. Business Model Viability • What is the business model? • How will you capture the value your business creates • Or more simply…how will your business operate and make money • Has revenue generation been described in enough detail to support later financial projections? • Have the appropriate costs been identified and distinguished between fixed and variable? • Are the required resources (e.g., materials, workforce composition, etc.) and relationships (e.g., suppliers, distributors) well understood? • Are regulatory and environmental issues are well understood? At the end of the workshop series, you'll be able to answer the most important question: is my idea a viable business opportunity?

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