Understanding Business Models

1. Understanding Business Models Key Learning Objectives for Chapter 1: Understand the concept of a business model Learn how to analyze the three components of a business model – strategy, capabilities, and value – through a business model audit Understand the different ways that business models can evolve and recognize potential drivers of business model evolution

2. 1990 年代末期，由於 Internet 的快速崛起，造成了 dot.com 的氾濫 • 泡沫化  no sustainable profits • Uses “jump-on-the-ball” approach to formulate strategy • Business model 被譏笑為 “half-baked plan” • 但是 Business model 真的這麼不堪嗎？

3. Business Model Framework and Definition

4. Successful strategies define how a company plans to achieve a distinctive and unique position that “woos customers from established players or draws new customers into the market”. • 在 Free Business Models 中的吉利刮鬍刀的興起 • freebie marketing (wiki) • 其他範例？ • Capabilities enable a company to execute current strategy while also providing a platform for future growth. They define the resources needed to execute strategy and, in doing so, define the cost model of an organization. • IT 部門就是花錢的單位？ • IT 部門的成本/獲利模式為何？

5. Value defines “what that move is worth” • The financial returns for business owners and investors • Stock price and market value. • 價值一定是有形的？ • 中興大學承接教育部教育雲資料中心 • 中興大學推動個資保護 • 討論議題： • 想一下您的組織的價值為何？ • 若是公家機構呢？教育單位（學校）？公益團體呢？ • IT部門的獲利模式？ • 把IT部門當做企業來經營，CIO各有所表

6. Analyzing Strategy • Michael Porter (1996): Competitive strategy is about being different. It is about deliberately choosing a different position and set of activities that enable you to deliver unique value. • Strategy: a series of choices that determine the opportunities you pursue and the market potential of those opportunities. • involves choices concerning products to sell, markets to enter, and ways a company differentiates its offerings from other alternatives • 以 Toyota 引進 RAV4 為例

7. Analyzing Strategy • These choices define strategic positioning (定位) along four key dimensions: • Market positioning • Product positioning • Business network positioning • Boundary positioning

8. Analyzing Strategy • Market positioning determines the choice of customers to serve, the needs and expectations that will be met, and the channels that will be used to reached those customers. • 可以是全部、或者是部分 • 一家茶農想要進入電商來擴大營運，請回答上列問題 • 電腦大廠想要進入手機事業，… • 購物頻道想要擴大銷售並進入直播，… • 電信公司想要擴大市佔率並提出新的產品設計，… • 公司想要砸重資導入 ERP，請回答上列問題（導入 ERP 是目的（strategy?）？還是手段（capability?）？）

9. Analyzing Strategy • Product positioning determines the products and services to offer, the features of those offerings, and the price that will be charged. • 當市場定位已經完成之後，這些因素的考量就受到一定的規範 • 持續討論： • 一家茶農想要進入電商來擴大營運，請回答上列問題 • 電腦大廠想要進入手機事業，請回答上列問題 • 電信公司想要擴大市佔率並提出新的產品設計，…

10. Analyzing Strategy • Business network positioning determines the role an organization plays and the activities it performs within an extended network of suppliers, producers, distributors, and partners. • 一家茶農想要進入電商來擴大營運，請回答上列問題 • 電腦大廠想要進入手機事業，請回答上列問題 • 電信公司想要擴大市佔率並提出新的產品設計，… • Boundary positioning determines markets, products, and businesses that will NOT be pursued.

11. Analyzing Strategy • 有了好的 Strategy 就夠了！？ • Copy 啊！山寨版？（新聞：將 iPhone 6 reset 之後，發現 reset 時出現 Android 的小綠人） • 申請專利或者建立高門檻 • 策略或者能力： • App 化，to be or not to be.（興大 vs. 高鐵） • 新生報到資訊化服務 （興大 vs. 機場報到） • 需要檢視是否能夠“持續”（sustainable） • 進行 Strategy audit • 沒有好的策略就註定失敗？

12. A business model strategy audit includes analysis in the following 4 areas: • examine the current situation systematically and in its entirely. • Access Business Context • Analyze Customers • Analyze Competitors and Substitutes • Access the Business Network

13. Access Business Context (ie. 分析外在環境) • Examine industry and competitive dynamics and consider relevant demographic, economic, political, regulatory, and societal factors that influence (or could influence) the business. • Identify key trends that will either positively or negatively impact the industry and any disruptors (technology, regulatory changes, etc.) that could be a source of opportunity or threat. • Identify specific opportunities to pursue (or NOT)

15. Analyze Customers • Identify pressing problems customers face and evaluate how a company’s current products and services, as well as those under development, address those problems. • Market research • Internal customer information (ex. CRM) • Get a first-hand perspective by talking with observing customers • Whenever possible, involve them in designing and developing products and services. • iphone 和 android 消費者的差異？ • 7-11 和全家消費者的差異？ • 各式衛生紙使用者的差異

17. Analyze Competitors and Substitutes • Analyze alternatives customers have for meeting their needs • Which firms provide those alternatives? • What makes one company’s product or service offerings different from other offerings? Do these differences matter to customers? • How much are customers willing to pay? How do prices differ from one competitor to another? • Do competitors possess proprietary knowledge, assets, or intellectual property that serve as barriers to entry? • What market share do different competitors have and how are these shares changing over time? • Are there new entrants that offer radically different business models or offerings?

19. Access the Business Network • analyzing the network of suppliers, distributors, and other partners needed to execute strategy • What activities do different players perform and what are the relationships among the various players? • How powerful are individuals and organizations that control key activities, resources, or capabilities required to execute strategy? • How is the network organized? • shift from “value chain” to “value network” • ex. iPhone6 CPUs from both Samsung and TSMC

21. Business Network Relationships: • Transaction: Discrete exchange of goods, services, and payments; • Contract: Prior agreement governs exchange; and • Partnership: Shared goals and processes for achieving them

23. Business Network 討論議題： • HTC vs. Samsung • OLED 是必要的？ • HTC Desire HD 於 10/2010 發布 • Samsung Galaxy S 於 07/2010 發布 (採用 Super AMOLED) • Super AMOLED 容易造成烙印，但是沒想到大賣 • https://www.pcmag.com/feature/309047/samsung-s-smartphone-history-from-zero-to-galaxy-s4/6 • Apple and 台積電 vs. 三星

24. 策略討論議題： • 興大後花園（康河/康橋計畫）要不要推動岸線開發？ • 台灣好市多於 11/2017 第一次推出“黑色星期五”活動 • 這個策略的評論！

25. Successful strategies define how a company plans to achieve a distinctive and unique position that “woos customers from established players or draws new customers into the market”. • Capabilitiesenable a company to execute current strategy while also providing a platform for future growth. • Value defines “what that move is worth” • The financial returns for business owners and investors • Stock price and market value.

26. Capabilities • define the resources needed to execute strategy and, in doing so, define the cost model of an organization. • also define the assets of a firm and the efficiency with which those assets are used • 我的習慣：在規劃可能的策略時，相關的 capabilities 也一併進行評估

27. A business model capability audit includes analysis in the following 4 areas: • Analyze processes and infrastructure • Analyze people and partners • Analyze organization and culture • Evaluate leadership and governance

28. Analyze processes and infrastructure • It is helpful to begin the capability audit by extending the analysis of a company's business network through a more in-depth evaluation of core processes. • Analysis should address core processes that • Produce products; • Delivery services; • Acquire and serve customers • Manage relationships with key stakeholders • Deliver a continuous stream of new products, services, and innovation • Activities performed by a company and its suppliers, customers, and business partners

29. Analyze processes and infrastructure • Also, examine end-to-end support processes (ex. Human resource, payroll, etc.) • Do they enable efficient and effective strategy execution? • Do people and partners at all levels have the information needed to coordinate and control end-to-end processes and the infrastructure required to support them? • Are operations best in class in terms of speed, quality, cost, and productivity?

31. 討論下列 processes： • 中興大學的汽車進出入以及電子辨識系統 • 電商網站的購物與結帳流程 • 對於搶購（或者存貨有限）的商品，何時確認商品的歸屬？ • 放入購物車時 • 按下結帳按鈕時 • 完成（個人和財務）資訊後，按下完成按鈕時

32. Analyze people and partners • How easy or difficult is it to attract, develop, motivate, and retain expertise needed to carry out activities and coordinate and control operations? • Does the company have the reputation and image required to attract and retain top talent? • Do culture and incentives enable leaders to engage and inspire? • Have leaders developed clear performance targets, measurement systems, rewards, and punishments that ensure transparence and fairness?

34. Analyze organization and culture • assess whether the organization design makes it easier or harder for people to make decisions and get work done • Have people been grouped into work units and do they have the accountability and decision-making authority needed to do their work, make decisions, and meet performance targets? • ex. 10萬元以下(或軟體、勞務)的採購等 • Are roles, responsibilities, and authority clear and are mechanisms in place for coordinating work across units? • include formal reporting relationships, steering committees, and liaison positions • Ex. 推動委員會、工作小組

35. Analyze organization and culture • Does the informal culture support or hinder individuals and groups as they attempt to fulfill their roles and responsibilities? • ex. 公開建議改進方案？ • Do shared vision and values enable people and partners to work together to achieve shared goals? • ex. 提升招生名額與素質？ • Does everyone understand the boundaries for decision making and action beyond which they must not cross? • Ex. 代為決行 vs. 授權

37. Evaluate leadership and governance • Effective leaders use governance structures and systems to balance the creativity and vision needed to set goals and prioritize investments with discipline needed to execute and deliver results. • Governance systems include strategic controls (scanning the environment, defining strategic position, setting goals, and prioritizing projects and investments); operating controls (defining short-term objectives and controlling current business operations and projects); effective risk management (identification and management of key risks); and effective development and management of the shared values and culture that guide decisions and actions.

38. Evaluate leadership and governance • Have leaders communicated a compelling and clear vision for the future that unites people and partners around common goals? • Do leaders at all levels balance creativity and innovation with disciplined execution? • Can they set goals and deliver results? • Are leaders well connected and have they demonstrated a track record of success? • Are there a high-performing board of directors and an executive team that closely monitor strategic and operating performance? • Do the board and executive team have systems in place to identify and manage risks while also ensuring that the organization’s culture and values guide decisions and behavior at all levels?

40. 討論議題： • 某單位因時間上的需求，而尋求外包。

41. Successful strategies define how a company plans to achieve a distinctive and unique position that “woos customers from established players or draws new customers into the market”. • Capabilities enable a company to execute current strategy while also providing a platform for future growth. They define the resources needed to execute strategy and, in doing so, define the cost model of an organization. • Valuedefines “what that move is worth” • The financial returns for business owners and investors • Stock price and market value.

42. Analysis of business value include • Most executives of publicly traded for-profit firms begin their analysis of business value by looking at company financials. These measures of economic value define the financial returns for business owners and investors, which, in turn, influence stock price and market value • Financial ratios such as the DuPont Formula (next page) • When the business environment is rapidly changing and highly uncertain, understanding the drivers of value creation is essential • Drivers identified during the strategy and capability audit.

43. Using the DuPont Formula to Deconstruct ROE

44. A business model value audit includes analysis in the following 3 areas: • Identify internal and external stakeholders • Identify business drivers and alignment • Develop the financial model and determine financing needs

45. Identify internal and external stakeholders • What do they require and what are they able to (or willing to) provide? • Can the company attract, retain, and motivate key customers and are these customers willing and able to pay? • How do the interests of other stakeholder groups (e.g. employees, partners, government, society) influence a company’s ability to attract and serve customers? • What are the objective and subjective benefits that each of the key stakeholders (or stakeholder groups) receive from doing business with the company?

46. Identify business drivers and alignment • SWOT analysis: What are the key opportunities and threats identified during the strategy audit? What are the key strengths and weaknesses identified during the capability audit? • From the SWOT analysis, identify key revenue, cost, and asset efficiency drivers and develop a business model dashboard that reflects linkages and alignment among various components.

47. Develop the financial model and determine financing needs • What assumptions have been made about the drivers of revenue, costs, and asset efficiency? • How much uncertainty is there in these assumptions? • How do changes in these assumptions based on best-case/worst-case scenarios change the economics of the business? • Translate the financial model into “values”. (e.g. In for-profit firms, calculate ROE, etc.) • How does the economic value delivered by a business relate to the market value expectations of stakeholders? • Are there any fatal flaws in the business model? If so, how should these problems be addressed?

48. Analyzing Business Model Linkages Are we creating sustainable advantage?

49. Evolving Business Models • There are four key approaches to evolving a business model • Enhance: Incremental improvements to an existing strategy or capability • Expand: Launch new product categories, enter new markets, or expand capability • Explore: Launch new businesses and build new capabilities • Exit: Exit a product or market or outsource a capability

50. Evolving the Amazon.com Business Model (1995-2000)