Business Models and Model Businesses

1. Business Models and Model Businesses October 6, 2011

2. Business Model defined (BMG) • “A business model describes the rationale of how an organization creates, delivers, and captures value.”

3. 9 Building Blocks • Customer segments • Value propositions • Channels • Customer relationships • Revenue streams • Key resources • Key activities • Key partnerships • Cost structure

4. 1. Customer segments • No customers = no survival • Customer groups represent several segments if: • Their needs require and justify a distinct offer • They are reached through different distribution channels • They require different types of relationships • They have substantially different profitabilities • They are willing to pay for different aspects of the offer

5. For whom are we creating value? • Mass markets: value proposition, distribution channels, and customer relationships all focus on one large group of customers • Niche market: cater to specific, specialized customer segments • Segmented: customers have slightly different problems and needs • Diversified: serve at least two unrelated customer segments

6. 2. Value propositions • Solves a customer problem or satisfies a customer need • The reason why customers choose one company over another • How? • Newness • Performance • Customization • Design • Price • Brand / status • Convenience

7. 3. Channels • Communication, distribution, and sales – the “customer touch points” that influence the customer experience • Channels… • Raise awareness about company’s products and services • Help customers evaluate value proposition • Let customers buy specific products / services • Let the business deliver its value proposition to customers • Provide post-purchase customer support

8. 4. Customer relationships • How the business interacts with each of its distinct customer segments • Examples: • Personal assistance • Dedicated personal assistance • Self-service • Automated services • Communities • Co-creation

9. 5. Revenue streams • The cash a business generates from each customer segment • Two types: • Transaction revenues from one-time customer payments • Recurring revenues from ongoing payments (value proposition delivery or post-purchase support)

10. 6. Key resources • Physical • Financial • Intellectual • Human • Can be owned, leased, or borrowed from key partners

11. 7. Key activities • Most important things a business does to make its business model work • Categories • Production • Problem solving • Platform / network

12. 8. Key partnerships • Network of suppliers and partners that make the business model work • Strategic alliances (partnerships with non-competitors) • Coopetition (partnerships with competitors) • Joint ventures to develop new businesses • Buyer-supplier relationships for reliable supplies

13. 9. Cost structure • All costs incurred to operate the business model • Approaches: • Cost-driven • Value-driven • Characteristics • Fixed versus variable costs • Economies of scale and scope