Business Model Canvas & Competition Flashcards
Definition: Business Model
Definition: Customer Segments
A business model describes the rationale of how an organization
creates, delivers, and captures value.
Definition: Business Model Canvas – Customer Segment S04 F10
Definition: Customer Segments
The customer segments define the different groups of people or
organizations an enterprise aims to reach and serbe.
Customer groups represent separate 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 profitability
* They are willing to pay for different aspects of your offer
Definition: Business Model Canvas – Value Proposition
Elements that contribute to customer value creation
Value Proposition describes the bundle of products and services that
create value for a specific customer segment through a distinct mix of
elements.
Values may be:
* Quantitative
(e.g., price)
* Qualitative
(e.g., design, customer experience)
Elements that contribute to customer value creation
- Newness
- Performance
- Customization
- “Getting the job done”
- Design
- Brand/Status
- Price
- Cost reduction
- Risk reduction
- Accessibility
- Convenience/Usability
Definition: Business Model Canvas – Channels
Communication vs. Sales (Distribution) Channels
Channels: Communication vs. Sales (Distribution) Channels
Channels describe
* how a company communicates with and
* reaches its customer segments
to deliver a value proposition. Both Channels are contain
Customer Touch Points
and play an important role in the customer experience.
Communication Channels:
Communication Channels allow
* raising awareness among customers about a
company’s products and services
* creating interest
* creating preference
* helping customers evaluate a company’s value proposition
Communication drives Customers down the Funnel S13 F10
Distribution (Sales) Channels
Distributions Channels allow
* customers to purchase
specific products and services
* deliver a value proposition
to customers
Both channel types overlap in functions
S15 F10
Definition: Business Model Canvas – Customer Relationships
Definition Customer Relationships
Customer Relationships describes the types of relations a company
establishes with specific Customer Segments.
They may be driven by the following motivations:
* Customer acquisition
* Customer migration
* Customer retention (upselling, cross-selling)
* Customer reacquisition
Definition: Business Model Canvas – Revenue Streams
Revenue Streams represent the cash a company generates from each
Customer Segment. Costs must be subtracted from revenues to create
earnings.
A business model can involve two types of Revenue Streams:
1. Transaction revenues:
One-time customer payment
2. Recurring revenues:
Ongoing payments, either by delivering a Value Proposition
or providing post-purchase customer support
Ways to generate Revenue Streams
* Asset sale
* Usage fee
* Subscription fees
* Lending/Renting/Leasing
* Licensing
* Brokerage fees
* Advertising
Definition: Business Model Canvas – Key Resources
Definition Key Resources
Key Resources describe the most important assets required to make a
business model work.
Key Resources may be:
* Owned
* Leased by company
* Acquired from key partners
Key Resource Categories
* Tangible and Intangible Assets
* Technology / Machines
* Financial
* Intellectual / Human / Capabilities
* Working Capital
Definition: Business Model Canvas – Key Activities
Definition Key Activities
Key Activities describe the most important things a company must do
to make its business model work.
Categories:
* Production
* Problem Solving
* Platform/Network
Definition: Business Model Canvas – Key Partners
Definition Key Partnerships
Key Partnerships describe the network of suppliers and partners that
make the business model work. There are four different types of
partnerships:
1. Strategic alliances between non-competitors
2. Cooperation: strategic partnerships between competitors
3. Joint ventures to develop new businesses
4. Buyer-supplier relationships to assure reliable supplies
Motivation to create Partnerships
* Optimization and economy of scale
* Reduction of risk and uncertainty
* Acquisition of particular resources and activities
Definition: Business Model Canvas – Cost Structure
Definition Cost Structure
Cost Structure describes all costs incurred to operate a business model.
Classes of cost structures:
* Cost-driven vs Value-driven
* Fix vs Variable costs
* Type of Costs (Staff, Equipment, etc.)
Work with the Canvas
- Plot the Canvas on A Poster
- Put The Poster on the Wall
- Sketch out your Business Model
Epicenters of Business Model Innovation
Epicenters of Business Model Innovation (I)
* Resource –Driven
* Offer-Driven
* Customer-Driven
* Finance-Driven
* Multiple-Epicenter-Driven
Resource-Driven:
Resource-Driven innovations originate from an
organization‘s existing infrastructure or partnerships
to expand or transform the business model.
Offer-Driven:
Offer-Driven innovations create new value
propositions that affect other business model
building blocks.
Customer Driven:
Customer-Driven innovations are based on customer
needs, facilitated access, or increased covenience.
Like all innovations emerging from a single epicenter,
they affect other business model building blocks.
Finance-Driven:
Innovations driven by new revenue streams, pricings
mechanisms, or reduced cost structures that affect
other business building blocks.
Multiple-Epicenter-Driven:
Innovations driven by multiple epicenters can have significant impact
on several other building blocks.
Shift Your Perspective!
Organization-centric business model design
* What can we sell customers?
* How can we reach customers most efficiently?
* What relationships do we need to establish with customers?
* How can we make money from our customers?
Customer-centric business model design
* What job(s) do(es) our customers need to get done and how can
we help?
* What are our customer‘s aspirations and how can we help him/her
live up to them?
* How do our customers prefer to be addressed?
* How do we, as an enterprise, best fit into their routines?
* What relationship do our customers expect us to establish with
them?
* For what value(s) are customers truly willing to pay?
Extended Business Model Canvas (Overview)
eBMC (1): A Value Proposition is always linked to a Customer
Segment
eBMC (2): Customer Life Cycle from Acquisition to Winback
eBMC (3): Product Characteristics & Pricing tied to Value Proposition
eBMC (4): Communication Channels – How to get & keep customers
eBMC (5): Distribution Channels – Where to buy your
product?
eBMC (6): Key Activities, Key Resources, and Key Partners
s39-41 F10
eBMC (1): A Value Proposition is always linked to a Customer
Segment
A Value Proposition is always tied
to a Customer Segment
* Revenue Streams are per
Customer Segment
* Each Customer Segment goes
through a Customer Lifecycle
(CLC)
* Each Customer (segment) may
have a unique Customer Value
(CLV)
eBMC (2): Customer Life Cycle from Acquisition to Winback
- Each Customer Segment
progresses through the CLC - You need Communication Channel
Invest to get Customers into the
CLC
eBMC (3): Product Characteristics & Pricing tied to Value Proposition
- Product Characteristics are derived from
Value Propositions - Pricing matches the Value captured
through Product Characteristics mirroring
the Value Proposition of that Customer
Segment - Each Product creates a separate Revenue
Stream for each Customer Segment, even
if product may be the same, but
marketing approach is different (e.g.,
different sales channel)
eBMC (4): Communication Channels – How to get & keep customers
- You need to make prospects of
each Customer Segment aware
of your Innovation - You need a strong reason/
positioning/advantage to make
them like and consider your
innovation (Value Proposition!) - More customers try, only a
fraction turns regular customer - THIS costs lots of $$$ = invest
eBMC (5): Distribution Channels – Where to buy your
product?
- We need to distinguish distribution
from communication channels. In
digital era, channels may serve
both functions, but those are
different marketing activities - Developing sales channels is a
costly marketing investment. - So Comm & distribution channels
result in costs – they drive sales in
a nonlinear and dynamic fashion
eBMC (6): Key Activities, Key Resources, and Key Partners
- Key activities are the ones that link to the
strategically important capabilities we
need to master - Key Resources are any Assets that we
intend to employ to leverage our
innovation - Both result in cost positions (develop or
buy) - Key Partners may help to lower such costs
by taking over capabilities or providing
assets. - However, this may create strategic
dependencies we do not like ;-).
Types of Market Structure & Competition
Determinants of Market Structure
Market Positioning & Tiers
S46 F10
Determinants of Market Structure
- Economies of Scale:
If output is done on such a large scale that unit
costs drop low. - Nature of Product:
If the products offered are homogeneous, it lies in
a perfect competition market. If it is unique and
has no other substitute, it creates a monopoly. - Entry Barriers:
The profitability of a product invites competition. Market runs on the rule ‘survival of the fittest’
where weak firms exit and strong ones survive. - The mobility of Goods:
Easy transportation ensures uniform prices by different sellers. - Government Intervention:
Some markets are indirectly controlled by the
government: heavy taxes, regulation, etc.
Market Positioning & Tiers
- Premium Brands
- National Brands
- Budget Brands
In most markets also: - Private Label Premium
- Private Label
- Private Label Discount
Market Positioning & Tiers – Link to Pricing
S50-51 F10
Positioning Strategy (we did that in Strategy)
- Competitor positioning analysis
- Determine your uniqueness by comparing to competitors
- Determine your current market position
- Develop a positioning strategy (Branding; Marketing Mix)
