Introduction to Business Models Flashcards
What is a business model?
A business model is a model of the business that describes, in stylized form, how management intends to create and deliver value for its customers and in turn extract some of that value as revenue.
What makes up a business model?
- Product/Service
- The Market
- The Economic Engine which enables the business to meet its profitability and growth objectives.
How does the Business Model represent management’s thinking?
- How and at what cost the business will create value and deliver it to its customers,
- How it will get paid, and
- What is the logic that will enable it to meet its objectives?
Value-creation model
(what are four questions you would ask?)
• Who are your customers? • How does the offering create differentiated value for these customers (value proposition)? • What is the value chain for the offering, and what parts of the value chain does your business participate in? • What are your go-to-market and market development strategies?
Profit model
(What are four questions you would need to be able to answer?)
- What are your sources of revenue?
- What is your cost structure?
- What is your unit economics?
- What are your key drivers of profitability?
Logic Model
What is your business goal?
Why (and how) will your business meet this goal?
What the first step in business model analysis and why?
identification of the target customers and the offering that will create differentiated value for them.
Why? to attract customers and make a profit, the offering has to be better than the competition on some dimension.
What is value discipline?
The source of differentiated value for a business.
Name the 4 value discipline archtypes
Operational excellence
Product/Service Innovation (leadership)
Customer intimacy
Value-chain coordination
What is Operational Excellence?
Operationally excellent businesses minimize the delivered cost of the products or services they offer customers.
NOTE: While they may price their products or services competitively, they also strive to reduce the intangible costs borne by their customers as the product or service is delivered to them.
How does Walmart demonstrate Operational Excellence?
- It sells a large variety of quality merchandise at lower prices than most competitors
- Its stores sells prodcuts that are available
- They have friendly customer service
How does Walmart deliver on the intangible costs that their customers struggle with?
By providing ‘under-banked’ customers with financial services such reloadable cash cards and by providing incentives for savings.
https://www.abcactionnews.com/money/consumer/dont-waste-your-money/yes-walmart-now-wants-to-be-your-bank
What is Product/Service Innovation
Where innovators seek to invent and deliver the best products and services for their customers by focusing on product performance, user experience or available options.
Customer Intimacy
These types of businesses deliver best total solutions by tailoring their products or services to satisfy unique, or highly-targeted, customer needs.
Key word: Granular down to a single customer
What elements are central to Customer Intimacy?
The creation of continuous learning relationship with its customers
Must initiate explicit or implict dialogues with them, capture information about their behaviors and preferences and use that information to customize products, services, content and context to fine definitions of customer segments.
