1: Business Models Flashcards
3 components that must be covered by any BM def:
- Value Proposition = Nutzenversprechen zum Kunden
- Value Creation n Delivery = how you produce n distribute the VP
- Value Capture = how you monetize
A BM describes… (in 3 verbs)
how a Co Creates, Captures n Delivers value.
business models: summary
It describes the main logic of a company’s business activities.
A BM articulates…
…a value proposition for customers, or more VPs for various types of customers… by answering 4 Qs.
4 Qs defining a BM, w their As?
- what is product? & how to position it?
- VALUE PROPOSITION
- Who is target customer?
- MARKET SEGMENT(S)
- How to create Value proposition? & how to produce it? & how to config supply chain? 4 As:
- VALUE CHAIN structure n support assets for creation n distribution
- COST STRUCTURE n profit potential
- firm POSITIONS WITHIN VALUE NETWORK linking suppliers to customers
- COMPETITIVE STRATEGY for advantage vs rivals
- How to generate revenue?
- REVENUE MECHANISM
value proposition =
The value proposition describes the benefits a firm promises to deliver its customers.
BM canvas (3+1+3)+2elements:
key partners
key activities + key resources COST STRUCTURE
Value proposition
Cust. rel. n sales + channels REVENUE STREAM
Cust segment
What is BM innovation?
Change of at least 2 of 4 dimensions of BM
Egs: Ikea, Tomtom, eBay
How does BM innovation happen most frequently?
90% via recombination, creative imitation of BM elements. Only 10% of innovators create totally new BMs.
4 i steps how BM innovation can be done
STRUCTURED PROCESS: iNiDiNtiMpl
- initiation = analyse curr BM
- ideation = challenge n compare thru analogies w other BMs, eg 55 patterns, but w/o reinventing the wheel
- integration = check BM consistency, ie examine the 4 BM Qs for org fit
- implementation (-> careful iterative cycles, w focus on 3 success factors n 5 pitfalls)
3 BM success factors (2+1)
data:
1- get qualitative data
2- get quantitative data
soft factors:
3- pay attention to soft factors
5 BM innovation rules to avoid pitfalls 3+2
approach rules:
1- overcome “not invented here” syndrome
2- try only 1 new BM at a time
3- don’t focus on short term Key Performance Indicators
other people:
4- have Mgmt commitment
5- communicate clearly
(1+)3 main strategies to innovate BMs:
1- create (rare)
+ c.tr.l:
2- combine
3- transfer
4- leverage
BM innovation iterative cycle in 3 steps?
1- create new BM
2- build pilot
3- test pilot
GO TO 1-
Why do established Cos lose edge?
Too busy serving curr clients:
Today’s success is enemy of tomorrow’s
The 3 myths on innovation n reality
MYTHS Innovation requires:
1- totally new ideas (eg Apple, Amazon, EBay)
2- big budgets (eg Cisco vs AT&T)
3- great tech… good but neither enough nor essential (Google, Amazon, EBay)
REALITY: Innovators recombine (reinvent BM thru learning from others) while pioneers often die
Why do most innovation attempts fail?
70% attempts fail due to mismanaged soft factors,
thru Mgmt misbehaviour n org resistance
Why innovation needed?
Key factor to stay competitive n defeat path dependency
How does innovation happen in a market? in 3 bursts
In 3 bursts, on:
1- product
2- process
3- BM
Unicorn? def in 2 numbers
Co founded < 5Y, valued > 1 bln
How IT has been driving BM innovation, in 3 phases
Since 1995 w internet: boom of driving new BMs based on IT
- since 1995 w Internet as new biz infrastructure
- since 2005 w web2.0, ie users add value
- now w Internet of things: things add value
Business trends created by IT: 3
CI.RS.A:
1- Customer Integration (processing own transactions)
2- Runtime Services (contact after sales to notify, retain, upsell…)
3- Analytics to analyse n measure behaviour
Pattern 2-sided market…
w 2 properties
- is market w 2 or more types of clients different n interdependent, eg StaffFinder
- has big network externalities
- is natural monopoly in each labour market region
MY EXTRA: 1- Digitisation <> 2 Digitalisation
1- moving info from non-digital to digital medium
2- restructuring a domain of social life around digital communication n media infrastructure
Big benefit of digitisation is…
eliminating “media breaks”
dominant design:
def=
associated with…
- Dominant design describes the main traits of an offering, which emerged as standards and thus are expected by customers.
- associated with peak of product, process, BM innovation.
Breakeven point (simplified) = as an equation w 3 quantities
Revenues - (fixed + variable costs) = 0
Most important diff bw CAPEX n OPEX costs for digital Cos?
While CAPEX describes upfront costs, OPEX describes on-going costs
CAPEX vs OPEX def.
costs f setup (eg f a plant) vs running costs f operating it
“SW is eating the world” 8 Examples
- train tickets vending machines
- personal trainers
- secretaries
- physical models vs simulations
- engine (emissions, performance) mgmt
- maps
- books
- watches …
SW 1.0 vs 2.0 : 3+2 dims of chg + 1 Q
- PHILLS?***
- distribution:*
- *I**nstalled on premises > software as a service
- *P**orting > platform independence
- *L**ong release cycles > daily
- ops:*
- *H**igh operation costs > low
- *L**ow scalability > high
- open Q:*
- *S**ecurity: still high w encryption?
4=2+2 factors to create VP:
int:
VALUE CHAIN structure n support assets for creation n distribution
COST STRUCTURE n profit potential
ext:
firm POSITIONS WITHIN VALUE NETWORK linking suppliers to customers
COMPETITIVE STRATEGY for advantage vs rivals
