2. Business Models

Question 1

Business model canvas

Answer 1

A tool to set up/describe/assess a company’s way of doing business, i.e. how it creates, delivers and captures value.

Question 2

Building block of canvas 1) Customer segment

Answer 2

The different groups of people that the org aims to reach and serve. Ex. niche, mass, segmented, diversified, multi-sided platform, etc.

Question 3

Building block of canvas 2) Value proposition

Answer 3

Describes the products/services that create value for a specific customer segment. What problem are you soling?
Ex: newness, performance, customization, design, brand/status, price, cost/risk reduction, accessibility etc.

Question 4

Versioning:

Answer 4

Selling different versions of the same product to different segments –> to capture more of the consumer surplus.

Question 5

Building block of canvas 3) Channels:

Answer 5

The channels where the company communicates with its customers and delivers the VP.

Question 6

The 5 channel phases

Answer 6

1. Awareness
2. Evaluation
3. Purchase
4. Delivery
5. After sales

Question 7

Building block of canvas 4) Customer relationships:

Answer 7

The type of relationship you establish with each customer segment. Ex. personal assistance, self-service, automated services, co-creation etc.

Question 8

Building block of canvas 5) Revenue Streams:

Answer 8

The way the company generates cash. Must decide on both the right price and how to charge them. Ex. asset sale, usage fee, subscription fees, lending/leasing, licensing, brokerage fees, advertising, etc.

Question 9

Building block of canvas 6) Key Resources:

Answer 9

The most important assets you have/need to make the business model work. Can be either physical, intellectual, human or financial.

Question 10

Building block of canvas 7) Key activities:

Answer 10

The most important things a company must do to make tits business model work.
Ex. production, problem-solving, platform/network.

Question 11

Building block of canvas 8) Key Partnerships:

Answer 11

The network of suppliers and partners that are key for the operations to work. Types could be: strategic alliances, coopetition, JV, buyer-supplier etc.

Question 12

Building block of canvas 9) Cost Structure:

Answer 12

All the costs needed to make the BM work.

Different characteristics: fixed, variable, economy of scale, economy of scope.

Question 13

Three business model patterns (three fundamentally different types of doing business):

Answer 13

1. Customer relationship businesses
2. Product innovation businesses
3. Infrastructure businesses

–> different economic, competitive and cultural imperatives. May coexist in an org but ideally they are unbundled into separate entities to avoid conflicts and trade-offs.

Question 14

Describe the pattern “Customer relationship businesses”

Answer 14

The main aim is to find and acquire customers and develop relationships to them. Economies of scope is the key –> customization and intimate relationships. High service mentality.

Question 15

Describe the pattern “Product innovation businesses”

Answer 15

The main aim is to develop new and attractive products/services. Early market entry is important in order to charge premium prices and capture large market share. Speed is the key. Often low barriers to entry the market –> new/small players thrive. Battle for talent and employee centered culture.

Question 16

Describe the pattern “Infrastructure business”

Answer 16

The main aim is the develop platforms for repeating and high-volume offers and maintain them. High fixed costs –> large volume is important to achieve low unit costs. Economies of scale is the key. Few big players dominate market. Cost focused: standardization, predictability and efficiency.

Question 17

What is the business model pattern “The long tail”?

Answer 17

It’s about selling less of more. Offering a larger number of niche products, each of which sells relatively infrequently.

Question 18

What is the BM pattern “Multi-sided platforms”?

Answer 18

It’s about bringing two different groups of customers together that are more or less dependent on each other –> you as a platforms is the intermediary that organizes their interactions. The value creation comes from enabling their interaction in an easy way at low transaction costs.

Question 19

What is the hard thing/barrier to create a platform?

Answer 19

That its size is driven by network effects. Both groups will only join if the other group joins. So, it’s a chicken-egg-dilemma –> can solve by attracting one customer segment with a low-price value proposition. Ex AirBnb is free for customers to search on, but there is a fee for the property owners to advertise their offers.

Question 20

The implication of positive feedback loops in networks/platforms?

Answer 20

That we get winner-takes-all markets. Few dominant companies. Because everyone wants to join the largest network.

Question 21

FREE as business model

Answer 21

This is when businesses offer at least one customer group to take part for free. Ex. Linkedin. Revenues are instead made by charging the other group (companies in Linekdin’s case) or by advertisements (Google search). Or you can have a freemium strategy as Spotify - only charging those who wants the premium subscription.

Question 22

Bait and hook model /razor & blade.

Answer 22

When luring in the customers through an inexpensive first purchase that later leads to repeated purchases - Gilette.

Question 23

Two types of open business models

Answer 23

1. Outside-in: integrating external ideas into the company.

2. Inside-out - confronting external with ideas from the own company.