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Business Models

Business Models. Business Strategy The University of Winnipeg. Basis for this Lecture. Reinventing Your Business Model Mark W. Johnson, Clayton M Christensen, Henning Kagermann Harvard Business Review, December 2008 Business Model Generation preview Alexander Osterwalder, Yves Pigneur

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Business Models

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  1. BusinessModels Business Strategy The University of Winnipeg

  2. Basis for this Lecture • Reinventing Your Business Model • Mark W. Johnson, Clayton M Christensen, Henning Kagermann • Harvard Business Review, December 2008 • Business Model Generation preview • Alexander Osterwalder, Yves Pigneur • Self Published, 2009

  3. What is a Business Model? • “A business model describes the rationale of how an organization creates, delivers and captures value.” • Business Model Generation • Alexander Osterwalder, Yves Pigneur • Self Published, 2009 • Is this a new concept?

  4. Differences must bein terms of Activities • “Competitive Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” • Michael Porter, What is Strategy? • Harvard Business Review, November - December 1996

  5. Competitive Advantagerequires “fit” among activities • “Strategy is about combining activities” - Michael Porter, What is Strateg- - Harvard Business Review, November - December 1996 • For consistency with strategy • For mutual reinforcement • To optimize effort and mix of activities

  6. Elements of a Business Modelfrom Reinventing your Business Model • Customer Value Proposition • What value is created for whom? • Profit formula • How is some of this value captured for the business? • Key resources and processes • How is this value created and delivered?

  7. The 9 Building Blocksof a Business Modelfrom Business Model Generation Customer Segments Value Proposition Channels Customer Relationships Revenue Streams Key Resources Key Activities Key Partnerships Cost Structure

  8. Comparing models ofBusiness Models • Customer Segments • Value Proposition • Channels • Customer Relationships • Revenue Streams • Key Resources • Key Activities • Key Partnerships • Cost Structure • Customer Value Proposition • What value is created for whom? • Profit formula • How is (some of) this value captured? • Key resources and processes • How is this value created and delivered

  9. Combining models ofBusiness Models • Customer Value Proposition • Customer Segments, Value Proposition, Channels, Customer Relationships • Profit formula • Revenue Streams, Cost Structure • Key resources and processes • Key Resources, Activities, Partnerships

  10. Customer Value Proposition • Most important element by far • Creating a customer benefit by • Fulfilling a need, solving a problem • Do we start by identifying target customers to serve or by identifying a (presumed) value to create?

  11. Bases for CreatingIncremental Value • Fulfill needs better through enhanced • Performance, Customization, Cost-effectiveness • Solve (actual or potential) problems better through reducing customers’ • Costs, Risk, Inconvenience • Increase accessibility through improved • Availability, Pricing, Ease of use

  12. Creating Breakthrough Value Newness! Tap into latent demand! Fulfill a need, solve a problem that customers don’t even recognize they have

  13. Profit Formula • Revenue Streams • Price X Volume • What is the basis for pricing? • Cost Structure • Depends on resources, activities, partnerships • Fixed, Variable, Economies of scale / scope • Margin Structure • How much must each transaction net?

  14. Multi-sided Platforms (MSPs) Customer Value Propositions delivering potentially different types of value to two or more distinct customer segments Value to each segment depends on participation of the other segment(s) Related to Network Strategy

  15. Challenges of MSPs • On which customer(s) should the revenue streams be based? • How much should each side pay? • “Chicken and egg” dilemma • Value isn’t created unless / until there is meaningful participation on all sides.

  16. Delivering Value • Resources • Physical, Human, Intellectual, Financial • Own, lease or access through partners? • Activities • Which ones? In-house or outsourced? • Metrics to measure and motivate performance • Channels and Partners • Managing relationships; all must benefit

  17. Delivering MSP Value • Bases of customer-participants is analogous to a resource • Cannot be owned, but must be acquired • Platform management is a critical activity

  18. References • Reinventing Your Business Model • Mark W. Johnson, Clayton M Christensen, Henning Kagermann • Harvard Business Review, December 2008 • Business Model Generation preview • Alexander Osterwalder, Yves Pigneur • Self Published, 2009

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