Lecture 1 Digital Transformation & Business Models

Question 1

How does a business model describes how a company creates, captures, and delivers value? (7)

Answer 1

1. Articulates the VALUE PROPOSITION (i.e., the value created for users by an offering based on technology);
2. Identifies a MARKET SEGMENT and specify the revenue generation mechanism (i.e., users to whom
   technology is useful and for what purpose);
3. Details the REVENUE MECHANISM(s) by which the firm will be paid for the offering;
4. Defines the structure of the VALUE CHAIN required to create and distribute the offering and
   complementary assets needed to support position in the chain;
5. Estimates the COST STRUCTURE and PROFIT POTENTIAL (given value proposition and value chain structure);
6. Describes the POSITION FIRM WITHIN VALUE NETWORK linking suppliers and customers (incl.
   identifying potential complementors and competitors); and
7. Formulates the COMPETITIVE STRATEGY by which the innovating firm will gain and hold advantage over
   rivals.

Question 2

How do “Strategy” and “Business Model” relate to each other?

Answer 2

“Put succinctly, business model refers to the logic of the firm, the way it operates and how it creates value
for its stakeholders. Strategy refers to the choice of business model through which the firm will compete in
the marketplace.”

Question 3

For E-Commerce: What is Disintermediation?

Answer 3

Eliminate intermediaries (wholesaler, retailer) and pocket/save the cost+margins from them.

• Direct customer contact: transaction info, cross selling -> innovation
• One goal, one organization, one margin -> cost, price & profitability
• Challenge: marketing and distribution