Business Models (Tue Nov 14, lecture 20)

Homework due for today

Legend: :Participation :Early :PDF

  • Teams: Watch this brief video about the Business Model Canvas (by Alexander Osterwalter)
  • This assignment REQUIRES coordination among the team members even though it’s an individual deliverable. Believe me, it works better and quicker if you do it together face to face. But everyone will submit a separate assignment.
  • Watch the video and download and look at the Business Model Canvas Poster. Try to understand really what is meant by the term business model. Think about how that applies to your product. Think about what a business built around it would work. Osterwalter and his colleagues organize the business model space into nine building blocks which suggest a series of questions to think about in each block and start seeing the relationships between them.
  • Divide up the Business Model Canvas ‘building blocks’ among your team. There are nine such blocks on the poster. Each team member must do some more web research on the Osterwalter’s Business Model Canvas to supplement the small summary in the video. Together or separately discuss and brainstorm what goes into each block.
  • Deliverable: Your thoughts about “your block” as it pertains to your team’s term project, and response to key questions posed by the Business Model Canvas with respect to your block and your term project, as a pdf. Include your name and assignment.

Stage review Sessions and Showcase Day

Business Model

  • 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 value proposition, the pricing, the growth model and more
  • In a way this is the final deliverable for the term project :)

Background of the Business Model Canvas

(based on Business Model Generation and follow on research, books and tools)

  • One way to sructure 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.)
An interesting variant
  • Lean Canvas: Looks like a refinement of the Business Model Canvas, but very similar in concept. Worth a look.

Building Blocks of a business model

  • Customer Segments (for whom)
    • What customer or groups of customers?
    • And who are the most important ones?
    • What makes a distinct segment?
      • If a set of customers require: A different offer, different channels, different types of relationships, different payment models, etc
    • 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)
    • 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”
    • 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;
  • 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
  • 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.
  • (Key) 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.)
  • (Key) 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.
  • (Key) 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?
  • 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

Conclusions - Business Model Canvas

  • Assures that 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

Next Class