Q2: Business Models (pre-final) Flashcards
About Amazon
- Launched in 1995 as the “Earth’s biggest bookstore”
- Has expanded its operations over 22 years and is now a leader in cloud computing, offers grocery delivery services, and produces Emmy Award-winning television series.
About video game industry
- Undergone significant changes in the last few decades with the advent of multiplayer and online gaming.
- Companies like Electronic Arts and Activision have adapted their business models to capture the new opportunities presented by these trends.
About Kodak
- It’s downfall serves as a cautionary tale for organizations that focus solely on existing revenue streams.
- Despite leading in film and camera sales, Kodak ignored the potential of digital cameras created by their own engineer, leading to bankruptcy.
About Mars
- Initially a candy business, expanded into pet food and acquired pet hospitals.
- In 2017, Mars bought VCA, which owns about 800 animal hospitals, for $7.7 billion.
What was the primary technological breakthrough of FriCSo?
FriCSo developed a technology that reduced friction by over 15,000%.
Why is friction a problem in mechanical systems?
Friction reduces power, leads to overheating, and causes wear, breakdown, and seizure in moving parts.
What industries would benefit from FriCSo’s technology?
Industries with products and applications involving moving parts, such as machine manufacturing, automobiles, and shipbuilding.
What are the key considerations when selecting a business model for FriCSo?
The key considerations include the set of activities, resources, capabilities, capital expenditures, pricing, margins, customers, and competitors.
What are the three potential business models for FriCSo?
1) Becoming a machine manufacturer, 2) Operating a job-shop for surface treatment, 3) Operating as an R&D firm licensing technology.
How does the choice of business model affect FriCSo’s operations?
It influences capital expenditures, pricing, margins, customers, competitors, and overall performance potential.
What was the critical question for FriCSo when choosing a business model?
Which business model would allow them to survive and thrive, rather than just creating incremental value?
Why is the choice of business model crucial for general managers?
It helps prepare the firm for the future and can be difficult to change once established due to inertia and resistance to change.
What are the implications of not changing the business model when needed?
Failure to change can lead to missed opportunities and inability to adapt to new challenges.
What is the significance of FriCSo’s technological breakthrough?
FriCSo’s technology reduced friction by over 15,000%, addressing friction’s negative impacts on mechanical systems.
Why is friction a critical issue in mechanical systems?
Friction reduces power, causes overheating, and leads to wear, breakdown, and seizure in moving parts.
What question arises when considering how to commercialize FriCSo’s technology?
What business model would allow the company to embed itself in the industry ecosystem and successfully commercialize the technology?
What factors are influenced by the choice of business model?
The choice affects activities, resources, capabilities, capital expenditures, pricing, margins, customers, and competitors.
What is the critical question for FriCSo when selecting a business model?
Which business model will allow them to survive and thrive, rather than just creating incremental value?
What do entrepreneurs and general managers often overlook when designing their business model?
They often overlook the design of their business model, focusing instead on conventional strategic choices such as market segments and competition.
Why is the design of a business model often viewed as a given by managers?
Managers tend to accept received business model templates in their industry without questioning them, which leads to mental blind spots.
What is the challenge with thinking in terms of business models?
Business models are activity-system-level constructs, and people are not used to thinking in terms of activities or organizational systems.
Why do managers often focus on product-market strategy instead of business model design?
It’s easier for the human brain to focus on what is cognitively familiar, such as product-market strategies within well-established business models.
What happened when executives of car manufacturers reacted to Tesla’s entry into the industry?
They focused on their product portfolios and considered adding new hybrid or electric models rather than questioning their business models holistically.
How did Elon Musk approach Tesla’s innovation strategy differently?
Musk adopted a broader perspective, taking inspiration from Apple and incorporating aspects of Apple’s business model, such as store placement in high-end malls.
What is the danger of not questioning the received business model?
Not questioning the business model can lead to failure, as seen with Polaroid, which was unable to imagine new business models despite being early in the digital camera market.
What led to Polaroid’s bankruptcy in 2001?
Polaroid failed to capture a large enough market share in the digital camera business and could not adapt its business model to the digital age.
What mindset should managers and employees adopt to innovate at the business model level?
They should adopt a business model mindset, considering creative new ways to engage with stakeholders to conceive, produce, deliver, and consume products and services.
Schemas
In psychological research, this well-known phenomenon is captured by the notions “mental models,” “cognitive frames,” or “schemas.” In this chapter, we use these terms interchangeably.
Cognitive structures that represent knowledge about a concept or type of stimulus, including its attributes and the relations among attributes”. They refer to “people’s theories and concepts of the world”
For example, “Tesla was at first underestimated by Ford, where many employees dismissed the new entrant as a minor niche player with an eccentric leader”
What is a mindset according to Merriam-Webster’s dictionary?
A mindset is a mental attitude or inclination, or a fixed state of mind, closely linked with human cognition.
How is a mindset related to cognitive frames?
A mindset determines the cognitive frames people use to organize and interpret incoming information based on available memory.
What is the impact of a mindset on perception?
A mindset determines what we expect to perceive and what we are prepared to perceive, which can lead to analytical blind spots.
What happens if managers focus only on the product or process level?
They may not attribute business problems to the business model or seek business model solutions for opportunities.
What does the case of Polaroid show about being stuck on a particular business model?
Being stuck on a fixed business model can prevent managers from capitalizing on new technologies or emerging customer needs.
What is the importance of a business model mindset in organizations?
A business model mindset helps individuals consider the firm’s entire activity system (What, How, Who, Why) as a solution to business problems or opportunities.
What do individuals with a business model mindset do differently?
They think proactively and holistically about ‘how to do business’ and do not just focus on familiar units like the product or sales.
What is the relationship between problems and opportunities for founders and entrepreneurial managers?
For founders and entrepreneurial managers, problems and opportunities are two sides of the same coin, both representing aspects of business dynamics.
How can a business model mindset help managers understand changes in the business environment?
A business model mindset helps managers better understand and react to changes, especially when these changes involve the development of new business models like Uber or Airbnb.
What is the significance of being ‘out-Ubered’?
Being ‘out-Ubered’ refers to the fear of being surpassed by innovative competitors, particularly those with disruptive business models.
What role does a business model mindset play in confronting environmental changes?
A business model mindset acts as a cognitive frame, helping managers adapt to changes by acquiring, assimilating, and reconfiguring knowledge and resources.
What are some implications of using a business model mindset in change management?
A business model mindset helps make better decisions in change management and improves the ability to explain the need for business model-related changes to others, thereby gaining their support.
Can a business model mindset be developed?
Yes, a business model mindset is an attitude or inclination that can be developed and sharpened by managers to improve their own mindset and that of their team and organization members.
What is a common challenge with mindsets?
Mindsets are sticky and difficult to alter because they simplify complex realities, filter out noisy information, and facilitate connections with existing knowledge.
Why are mindsets self-fulfilling?
Mindsets tend to ignore discrepant information and fill gaps with typical data, making them self-reinforcing and resistant to revision.
What is the first mindset trap?
The first trap is focusing on the product, technology, or process as a source of innovation instead of considering the business model, requiring a more system-level, holistic perspective.
What is the second mindset trap?
The second trap is taking the business model as a ‘given’ and following a dominant template, such as the prevailing business model in an industry, without realizing the business model can and should be subject to change.
What does the first mindset trap involve?
It involves getting trapped in the wrong ‘level of analysis’ by focusing too narrowly on products, technologies, or processes rather than the broader business model.
What does the second mindset trap involve?
It involves failing to recognize that a business model is a variable that can change and should not be taken as a fixed template, even if it’s dominant in the industry.
What is the level-of-analysis mindset trap?
The level-of-analysis trap occurs when managers focus on individual components of the business model rather than considering the business model as a whole.
What happens when managers are stuck in the level-of-analysis trap?
They have difficulty ‘unlearning’ old models and adopting new ones, resulting in incremental improvements rather than a fundamental overhaul of the business model.
What is the importance of Gestalt cognitive processes in business model design?
Gestalt cognitive processes highlight that recognizing the whole business model is different from focusing on individual parts, which is crucial for effective business model innovation.
What are the three aspects of the level-of-analysis mindset trap?
1) Failure to pay attention to fundamental business logic, 2) Failure to consider long-term trends in markets and technologies, 3) Failure to think strategically about the business model.
What happened to Thomas Cook due to their level-of-analysis trap?
Thomas Cook failed to innovate its business model in response to digital disruption, clinging to its traditional approach, which led to its bankruptcy in 2019.
How did Thomas Cook’s restructuring efforts contribute to its downfall?
The restructuring helped entrench the company’s core business model, instead of prompting a more holistic change that could have addressed growing digital competition.
What fundamental vulnerability did Thomas Cook face in 2017?
Thomas Cook’s reliance on booking capacity in advance left it vulnerable when bookings did not meet expectations, forcing the company to offer margin-eroding discounts.
What was the ultimate consequence of Thomas Cook’s failure to innovate?
Thomas Cook declared bankruptcy in 2019, stranding half a million holidaymakers worldwide due to its inability to adapt to changing market conditions.
What are realized business models?
Realized business models refer to actual activities embedded in procedures, contracts, relationships, and tacit routines.
What is the relationship between realized and cognitive business models?
There is a reinforcing relationship between realized and cognitive business models, where the structure of the business model is imprinted in firms through both structural and cognitive paths.
How are business models shaped in new ventures?
In new ventures, important characteristics of business models are shaped during the sensitive period of early founding and can persist despite subsequent environmental changes.
Why is the founders’ mindset important in the early stages of a business?
The founders’ mindset is crucial because it influences the characteristics of the business model that will persist over time, even when external factors change.
What makes business models difficult to change?
Business models are difficult to change due to path dependencies, dominant logics, cognitive limitations, and resistance to change.
How did Polaroid’s dominant logic affect its ability to innovate?
Polaroid’s dominant logic of making money from consumables rather than hardware created cognitive inertia, which discouraged innovation in the digital imaging market.
What was the consequence of Polaroid’s cognitive inertia?
Polaroid executives discouraged R&D efforts inconsistent with the traditional business model, preventing the company from developing capabilities to enter the digital imaging market.
How did Polaroid’s approach to digital imaging differ from the managers involved with it?
Managers directly involved with digital imaging developed a more adaptive understanding of the competitive landscape, but the broader company stuck to the traditional business model.
What alternative business model could Polaroid have pursued in the 1990s?
Polaroid could have adopted a low-cost/high-quantity hardware production model to better compete in the digital imaging market.
What is cognition in the context of business models?
Cognition refers to the set of processes through which human beings engage in intellectual activities such as thinking, reasoning, and remembering, which enable behavior.
What is meant by ‘knowledge structure’?
‘Knowledge structure’ refers to the structural relationships among the various components of the knowledge stored and processed in our brains.
How does cognition relate to business model design and innovation?
Cognition influences business model design by shaping the knowledge and thought processes that enable business model change and innovation.
What is the relationship between business models and cognition?
Business models can be viewed as cognitive structures, and cognition serves as an antecedent to business model design and implementation, particularly in promoting change and innovation.
What is cognition in the context of business models?
Cognition is the set of processes through which human beings engage in intellectual activities like thinking, reasoning, and remembering, which precede and enable human behavior.
What does the term ‘knowledge structure’ refer to?
‘Knowledge structure’ refers to the structural relationships among the components of knowledge stored and processed in the brain.
What distinguishes business models as cognitive structures?
Business models are considered cognitive structures, with cognition serving as an antecedent that influences business model design and implementation, particularly in fostering change and innovation.
What design themes can business models be characterized by?
Business models can be characterized by design themes such as novelty, lock-in, complementarities, and efficiency.
systems thinking
A mindset that “recognizes the interrelatedness of things” and is increasingly relevant in the Big Data era.
What are the two cognitive practices involved in highly innovative business models?
industry-spanning search and complex system thinking.
What is industry-spanning search?
Industry-spanning search occurs when managers actively search outside their industry for inspiration to develop novel business models.
What is the opposite of industry-spanning search?
The opposite is industry-focused search, where managers copy successful elements from within their own industry to improve efficiency, without increasing novelty.
How does complex system thinking promote business model innovation?
By facilitating better information processing and a holistic understanding of where novelty lies in the system, complex system thinking helps in creating innovative business models.
What is the opposite of complex system thinking?
The opposite is internal efficiency thinking, which focuses on cost control and operational efficiency, often leading to incremental rather than radical innovation.
How does power influence business model innovation?
Power, defined as unilateral control over resources, enables key decision-makers to implement business model innovations, especially when combined with industry-spanning search and complex system thinking.
What happens when decision-making is decentralized in business model innovation?
When decision-making is decentralized and involves many team members, radical proposals are often filtered out in favor of consensus, reducing the degree of business model innovation.
What are the two generative cognitive processes used to design innovative business models?
The two generative cognitive processes are analogical reasoning and conceptual combination.
What are the steps involved in analogical reasoning and conceptual combination?
1) Identification of a source model, 2) Comparison with the target model, 3) Integration of elements from the source model, 4) Modification of elements to fit the target model.
What is analogical reasoning in business model innovation?
Analogical reasoning involves choosing a source model from one domain and using it to create novelty in another domain through comparison at the system level.
Can you give an example of analogical reasoning?
Tesla used Apple Computers as an analogy to position its electric motors relative to internal combustion engines in the auto industry. Aravind Eye Hospital used McDonald’s as an analogy for standardizing cataract surgeries.
What subprocesses are used in analogical reasoning?
The subprocesses in analogical reasoning are stretching (applying an analogy to a new context), bending (modifying firm activities to better fit the analogy), and positioning (using stretching and bending to develop a competitive position).
What is conceptual combination in business model innovation?
Conceptual combination involves comparing one or more source models with a target model, focusing on differences to generate new ideas for modifying or creating an entirely new business model.
Can you give an example of conceptual combination?
Howard Schultz combined the concepts of specialty coffee retailer, café, office, and gallery to create the core of Starbucks’ business model.
How does conceptual combination differ from analogical reasoning?
Unlike analogical reasoning, conceptual combination relies more on comparisons of specific features of source models while keeping the whole in mind.
What was the important feature created through conceptual combination for Starbucks?
The important feature was ‘displaying a unique ambiance,’ created by combining elements from various models, such as offering coffee accessories, aestheticizing the coffee experience, and providing a comfortable work environment.
Stretching:
Applying an analogy to a new context, even in cases when
there are significant differences with the old context or source model (hence the analogy must be “stretched”’).
Bending:
Bending: Changing firm activities to better fit the analogy invoked through stretching. This creates better correspondence between the target and source domains. The bending process focuses on changing the context of the analogy rather than the analogy itself.
Positioning:
Utilizing stretching and bending as a source of differen-
tiation and to develop a competitive position in the market.
How do firms’ perceptions of business model issues affect innovation?
Firms’ perceptions of business model issues as threats can lead to rigidity and prevent business model innovation, while framing them as opportunities can motivate change and promote innovation.
What happens when issues are framed as threats?
Framing issues as threats leads to rigidity, restricted information processing, and reduced flexibility, as power and influence become more concentrated at higher levels of the corporate hierarchy.
What happens when issues are framed as opportunities?
Framing issues as opportunities is associated with positive outcomes and expectations of gain, which can overcome inertia and promote business model innovation.
What are the two types of inertia that can hinder business model change?
The two types of inertia are resource rigidity (failure to change resource investment patterns) and routine rigidity (failure to change organizational processes that use resources).
How did opportunity framing affect the traditional print media industry’s response to digital technologies?
Opportunity framing was necessary but insufficient to trigger an adaptive response to digital media; it did not overcome resource rigidity on its own.
What did threat framing contribute to the response of traditional print media?
Threat framing motivated a forceful response that increased firms’ resource commitment to experimenting with new business models, but it led to rigid, top-down efforts to replicate content online.
How did routine rigidity manifest in the newspaper industry’s response to digital media?
Routine rigidity occurred when newspaper firms replicated content online without developing new sources of revenue, reflecting a narrow scope in their response.
How did physical separation contribute to the success of digital initiatives in traditional newspapers?
Physical separation of digital initiatives from the parent company helped decouple the threat perception in the parent organization from the opportunity perception in the digital venture, enabling innovation.
How do threat and opportunity framing coexist at the corporate level?
At the corporate level, both threat and opportunity framing coexist and are cognitively integrated by members of the top management team, enabling business model change and innovation.
What are the two categories of actions to strengthen business model mindsets?
The two categories are managerial leadership actions to foster employees’ business model mindset and actions to foster one’s own business model mindset.
Why is shifting to a business model mindset not intuitive for some employees?
Employees, especially in R&D, often focus on product and technology-related issues, making the shift to a business model mindset less intuitive.
How can management facilitate a shift to a business model mindset?
Management can facilitate the shift by clearly communicating the importance of business models, sending awareness-enhancing messages, and providing specific training.
What example is given of a CEO supporting a business model mindset?
Volkmar Denner, CEO of Bosch, emphasized that product innovations alone won’t ensure the company’s success, advocating for a focus on new types of business models.
What are the three long-term strategic actions to foster a business model mindset?
The three long-term strategic actions are employee selection, memorable mentoring, and role modeling.
Can you give an example of mentoring that fosters a business model mindset?
The founder of a European healthcare startup organized regular meetings encouraging employees to share examples from other industries, which helped the team think creatively about business model challenges.
What impact can memorable mentoring have on employees?
Memorable mentoring can have a lasting influence on employees’ thinking, as it shapes their approach to problem-solving and encourages them to embrace a business model mindset.
What is role modeling in the context of fostering a business model mindset?
Role modeling occurs when leaders display behaviors that inspire employees, such as showing interest in business model issues and being open to new ideas, even without direct interaction or teaching.
How can role modeling help foster a business model mindset?
Role modeling allows employees to learn by observing the behaviors and thinking of their leaders, enabling them to assimilate business model-oriented practices and adopt similar approaches.
What is the difference between mentoring and role modeling?
Mentoring is a purposeful interaction to teach something specific, while role modeling is more passive, where employees learn through observation of the leader’s actions and behaviors.
Anticipating:
Ways to Foster One’s Own Business Model Mindset
Exploring future business model concepts. Anticipat- ing ideally allows a manager to implement business model innovations far enough in advance that the firm can maintain its competitive posi- tion. At the same time, managers should not be overreliant on formal strategic foresight tools, which can invite complacency about an inher- ently unknown future. This is a fine line between thinking enough about future possibilities, and not becoming mentally “stuck” in static (imagined) scenarios.
Distancing:
Ways to Foster One’s Own Business Model Mindset
Gaining perspective about the current business model through nurturing an “outside-in” perspective. When engaged in the everyday business of a firm, it can be easy to lose sight of the bigger picture; however, it is important to keep a distance in order to have a holistic view of the business model. This can be achieved by stepping away from this for a certain amount of time, for example through participating in a strategy workshop. Another way to achieve distancing is by leveraging the view of a firm outsider (external hires or outside advisors, for example), or of existing employees who have been working at the “periphery” of the firm and therefore have a broader perspective.
Abstracting:
Ways to Foster One’s Own Business Model Mindset
Restating business models in conceptual terms. Once a manager has been able to step back and achieve distancing, it is easier to think about the business model in abstract and generalizable terms. This can be helpful in identifying and applying elements of an existing business model to a new domain, or vice versa. However, it is also a balance, because being too abstract (and oversimplifying) can lead one to ignore important elements tied to the underlying context of an existing business model.
Reframing:
Generating new perspectives and new business model alternatives. new Once possibilities be considered. distancing or Firms flexibility, “strategic that and abstracting frames” have strong for the have been business achieved, model can communication processes, consistency in approaching change, and multiple diverse perspectives can more easily consider and reframe their business model. In firms that lack this flexibility, however, it often takes a crisis before alternatives are considered.
Attention-enhancing efforts can be further accentuated through
Consciously considering the targets of attention that are closely related to the business model level of analysis, such as the dominant industry logic, or distant business methods.
Why are realized business models difficult to change?
Realized business models are difficult to change due to inertial forces and corresponding cognitive representations that managers often accept without critically considering alternatives.
What is the danger of not questioning an existing business model?
Not questioning an existing business model can endanger a firm’s survival, as seen in the case of Polaroid, which failed to innovate its business model in the face of digital disruption.
What is a business model mindset?
A business model mindset is a state of mind, attitude, or inclination that helps someone consider the firm’s entire activity system as a solution for business problems or opportunities.
How can a business model mindset help in understanding industry changes?
A business model mindset helps managers think proactively and holistically about how to do business, preparing them for changes in their industry or business environment.
What are some of the mindset traps that impede business model innovation?
Two common mindset traps are: 1) Focusing on the wrong level of analysis, such as product or technology innovation rather than the business model, and 2) Following the dominant business model template in the industry without considering redesign.
Why is thinking holistically about business models challenging?
Thinking holistically about business models is not easy because it is not something managers are used to doing, but it can be taught, learned, and developed.
What is the first mindset trap that impedes business model innovation?
The first trap is focusing on product, technology, or process innovation rather than the broader business model, which involves the entire activity system.
What is the second mindset trap that impedes business model innovation?
The second trap is adhering to the dominant business model template in the industry without recognizing that the business model can and should be redesigned.
about Zopa
first peer-to-peer online lender, was born in the UK
business model innovation is
when the firm changes its activity system so that the new system is novel for
the firm and possibly also in the product-market spaces in which it competes. - in book
For
startups, the term business model innovation often refers to
the introduction
of a business model that is novel (in terms of its content and/or structure and/or
governance and/or value logic) to the product-market space in which the firm
competes.
Established firms like Ford or IBM, however, may not have such
high hurdles and often label a business model change an innovation
when it is
simply new to their firm; it does not necessarily have to be
new to the world or even to their industry.
To
determine whether a business model is innovative or not, two questions
need to be addressed.
First, is the activity system novel in any of its key
dimensions (What, How, Who, Why)? And second, for whom is it novel?
Hilti is
power tool manufacturer based in lichtenstein
changes that do not constitute BMI:
(i) modified activities or exchanges; modifying an activity by making it faster, cheaper, or higher quality
is not a business model innovation.
(ii) product or service innovations; modification of an exchange mechanism among activities,
such as an upgrade in a firm’s communication system, which allows for bet-
ter coordination among activities.
(iii) corporate venturing.
Corporate venturing
business-building initiatives taken in those [established] firms.
lever
svertas
The content of a business model refers to
the selection of activities to be
performed. eg.Bancolombia, Offering micro-
finance, or “financial services to households and micro-enterprises that are
excluded from traditional commercial banking services,”’” required adopt-
ing activities beyond those of a traditional retail bank.
Business Model Structure Innovation
describes how the activities are linked,
in
other words the sequencing of activities and the exchange mechanisms
among the linked activities. - eg. pokemon go
Business Model Governance Innovation
Franchising, for example, Because of their smaller size, these franchises (7-eleven) did not face the same regulations as larger stores.” Suzuki was an early adopter of what was then
a
novel type of activity system governance (new to Japan, but not to the
rest of the world) specifically in the area of convenience store retailing.
Business Model Value Logic Innovation
for eg. the switch from
transaction-based to subscription-based pricing
Measuring Business Model Innovation - Quantitative Measures
seek to numerically capture the innovativeness of a business model. This is not straightforward, because business model innovation 1s essentially a qualitative phenomenon. First, analysts write answers to questions in text format. They then apply a scale (e.g., “strongly agree”) based on their understanding of the firm’s business model. These responses are coded into standardized scores (e.g., 1 for “strongly agree”). Finally, the individual scores are aggregated into an overall score using specific weights, creating a quantitative measure of the business model’s innovation.
Measuring Business Model Innovation - Qualitative Measures
Qualitative measures of business model innovation are often an early step before quantitative ones but require in-depth understanding and time-consuming data collection from sources like interviews, observations, firm documents, and archival data. The data is analyzed to assess innovation across key dimensions: content (new activities), governance (new participants), structure (new links), and value logic (new revenue models). Firms innovating in all areas show broad innovation scope, with those surpassing industry peers demonstrating higher novelty.
Granovetter social network theory
Pros of Business Model Innovation
First, it complements other forms of innovation. Second, it does
not usually require large upfront investment (e.g., into developing techno- logical expertise and capabilities) aka Low Capital Expenditure . Third, it can serve as an effective barrier to an imitation. Finally, business model innovation can be a disruptive force in industry.
economies of scale
masinės gamybos ekonominiai privalumai
Israeli entrepreneur Shai Agassi’s Better Place,
The founder had envisioned providing heavily subsidized electric cars, with users paying a variable monthly fee to have their electric car batteries quickly swapped out at a network of automated stations — eliminating the need to wait for a battery to charge.
Better Place failed due to several key issues. Firstly, the company underestimated the costs of building its electric car fleet and charging network. Secondly, customers didn’t embrace the offering, and the company needed rapid, widespread adoption to sustain its revenue model. Before shutting down, Better Place had sold under 1,500 cars.
Additionally, it struggled to convince important partners about the legitimacy of its business model. Renault, the sole car supplier, exited the partnership when Better Place failed to deliver high-volume sales. This, along with the difficulty in persuading other car manufacturers to join, contributed to the company’s bankruptcy.
Business model innovations are hard to protect legally. T/F
TRUE.
Although business method patents exist in the U.S. (but not in Europe), they are difficult to enforce. With the exception of natural monopolies such as social networks (in so, 2019, Facebook had a market share of 67%), most markets addressed by business model innovators present low barriers to entry.
The risk of imitation by competitors increases in these 3 situations:
(i) the more attractive the business model innovation is in terms of its market potential;
(ii) the more legitimate the innovation is in the eyes of customers, regulators, and other ecosystem players; and
(iii) the more loosely coupled the underlying activity system is.
incumbents
the holder of an office or post. - valdantieji
retaliate
atsakyti tuo pačiu
Risk of Path Dependency
once a company adopts a certain model, it becomes harder to change over time. This is especially true if the business model involves a tightly connected system of activities, which are more difficult to modify compared to a loosely connected system.
Business model innovation entails several distinct benefits
for the innovating focal firm.
First, it complements other types of innovation. Second, a novel business model (for example, a digitally-powered business model) can be cost-effective. Third, business model innovation can serve as an effective barrier to imitation. Finally, business model innovation can create a new market or allow a company to uncover new opportunities in existing ones. In some cases, it can lead to industry-wide disruption.
Business model innovation also has downsides…
The greatest risk is that the business will fail.
Second key risk is the lack of protection from imitation by incumbents. Companies introducing business model innovations also need high legitimacy, which may be harder for new ventures to achieve. The robustness and stability of the business model is furthermore partially dependent on the sustained alignment of incentives among all stakeholders. As the complexity of a business model increases, so does the risk to its viability. Another risk to a
new business model is the possibility that path dependencies become entrenched.
To conceive of possible business model innovations, we suggest that entrepreneurial leaders and managers ask themselves the following six key questions:
What perceived customer needs can be satisfied through the new model design?
What novel activities are needed to satisfy these perceived needs?
How could the required activities be linked to each other in novel ways?
Who should perform each of the activities that are part of the business model (e.g., the focal firm or a partner), and what novel governance arrangements could enable this structure?
How can value be created in novel ways through the business model for each of the participants?
What novel revenue model fits with the firm’s business model to appropriate part of the total value it helps create?
The message to managers is the following:
when you innovate, look at the forest, not the trees — and
get the overall design of your activity system right before optimizing the details.
How to foster your own business model mindse
Anticipating
Distancing
Abstracting
Reframing
Leadership Actions as in ways to foster bmi mindset too
Employee selection
Memorable mentoring
Role modelling
Cognitive Underpinnings of (Innovating) Business Models:
Analogical reasoning and conceptual combination
t/f value creation does not ensure value appropriation for the firm
true
4 aspects (drivers) Business Model Designs is likely to CREATE VALUE
- Novelty
- Lock-ins
- Complementarities
- Efficiency
Business model innovation often begins with the question:
“What customer need will the new business model address?”
P2P
peer-to-peer
acronym
DESIGN
design drivers include internal factors, or constraints (which we refer to as Deployable resources), the focal firm’s External environment, Stakeholders’ activities, Incumbents’ templates, Goals to create and capture value, and the perceived Needs of customers).
What Is Design?
“thought of as an integrated and disciplined innovation process that builds creative insight from deep knowl-edge.”’
Typical domains for the application of design include architecture, fashion, engineering, software, and medicine.
business model
design involves
the conceptualization of a boundary-spanning activity sys-
tem that includes the mechanisms that connect these interdependent activ-
ities and the identification of the parties that carry out each of the activities
within the system.
Product design
centered
on identifying a set of interdependent physical components and features that
characterize the firm’s offerings to its clients.
At the organization level, design often refers to
process of grouping
activities, roles, or positions in the organization to effectively (and possibly
in
new ways) coordinate the interdependencies that exist.
At the business
model level, design can be conceived as
the particular (and possibly novel)
configuration of activities enabled by business model stakeholders and the
resources they deploy.
design
works particularly well for problems that can be characterized as
“wicked.”
Deployable Resources (D) and External Environment (E)
Deployable resources, which are also known as internal constraints, concern availability of human and capital resources and capabilities that can be deployed to enable activities.
External constraints refer to the conditions imposed on the business model designer by the focal firm’s external environment, including its competitive market and its technological ecosystem. It also includes the macroeconomic (e.g., interest rates), legal, socio-political, regulatory, and
cultural environment in which the business model will be embedded; these are therefore also often referred to as “environmental constraints.”
Must be valuable, rare, difficult to imitate and hard to substitute -VRIN
whether a company has enough resources or not can be
internal
constraints for the business model designer.
The technological ecosystem of a firm is part of its
external environ-
ment.
undergirded
provide support or a firm basis for
enabling technologies
Big data analytics
Mobile channels
Social media
Cloud computing
AI
Machine learning
Blockchain
Internet of things
Autonomous cars
5G
Big data analytics:
Big data analytics “examines large amounts of data to
uncover hidden patterns, correlations and other insights.”
cloud computing is
“the delivery of computing ser-
vices — including servers, storage, databases, networking, software, ana-
lytics,
and intelligence — over the internet (‘the cloud’) to offer faster
innovation, flexible resources, and economies of scale.”
machine learning
is just a thing-labeler, taking your description of
something and telling you what label it should get.”?” It enables auto-
mated customer service chatbots, or “virtuous cycles,”
Blockchain:
BITCOIN, Blockchains are a more secure method for record keeping, which is centralized rather than distributed.”
The Internet of Things
: Broadly, the Internet of Things refers to “ev-
erything connected to the internet but it is increasingly being used to
define objects that ‘talk’ to each other.””
Stakeholders’ Activities (S)
This concept refers both to collab-
oration with partners during the design process, and to collaboration as a
defining characteristic of the resulting business model design.
calls for shifting the focus beyond the focal
firm’s boundaries. It alerts business model designers to the advantages of
proactively incorporating and leveraging resources and capabilities that
exist within the focal firm’s ecosystem.
When designing a business model, there are two key decisions:
Which activities should be included? This step considers whether activities complement each other and reinforce a specific goal. For example, should a peer-to-peer lending platform include a credit risk assessment of borrowers?
Who should perform these activities? Once activities are chosen, it must be decided whether the company or its partners, vendors, or other stakeholders should handle them. For instance, should the platform manage credit risk assessments, or leave it to the lenders?
Different stakeholders (like banks, credit data firms, or payment processors) can perform different activities, creating various ways to design the business model.
Zopa described the
task of putting together the firm’s activity system as
value engineering:
Incumbents’ Templates (I)
designers routinely draw on existing templates.* aka the established business models)
Default solutions often
foster efficiency at the expense of novelty.
people tend to follow the dominant, efficient design)
Goals (G) and Needs (N) of Customers
the “goal” design driver is often closely linked with customer (or, more generally, stakeholder) needs.
Main goal of the firm is to FULFILL NEEDS of its CUSTOMERS
But equally important to FULFILL NEEDS of OTHER STAKEHOLDERS – both internal and external !!!
* Thus, BM design should ensure value creation forall AND value appropriation for the firm
By adopting a total value perspective, business model
designers integrate the resource, i.e., supply and demand sides of the business model. By taking into account the interests of others, they also increase the opportunity cost of breaking away from the focal firm’s business model and enhance the commitment of business model stakeholders.
aptly
taikliai
mindfulness
“state of active awareness characterized by
the continual creation and refinement of categories, an openness to new in-
formation, and a willingness to view contexts from multiple perspectives.”°
Robust
tvirtas, stiprus
Legitimacy refers to
“a
generalized perception or assumption that the actions of an entity are desir-
able,
proper, or appropriate within some socially constructed systems of
norms, beliefs, and definitions.”°
Robust business model innova-
tions are those that
are both legitimate and do not lend themselves easily to imitation.
how do you reduce the likelihood of imitation of legitimate business model content
One way is by generating incompatibilities
with incumbents’ existing business models.
Two, business model designers need to make legitimate structural elements visible, while keeping novel elements that may lack legitimacy less visible.
Business model structure refers to
how activities are linked both within the firm and across its boundaries, 1.e., with its external partners (How).
Business model structure is generally more difficult to identify for competitors than business model content (What) or governance (Who).
Designing Robust Business Model Governance (Who)
how to be more legit (who dimension)
Strong relationships with legitimate, and perhaps prominent,
partners indicate that the focal firm has earned a positive evaluation from experienced and influential actors, signaling legitimacy to other participants.°
the skill levels of entrepreneurs vary, and that engaging in skillful “symbolic management” or providing appealing visions for the future, such as adopting “anti-leader positioning,” might help to
win over partners, especially in the case of new
firms.
Internal constraints are the
resources and capabilities a firm has for various activities.
du papildomi dalykai kaip darant bmodels
mindfulness ir robusteness
kai pradedi kurti nauja bm esi in 2 stages called
ideate ir iterate, BMIJmplement veliau atsiranda
three distinct entrepreneurial processes FOR CONVERTING
BM DESIGNS INTO PRACTICE
discovery-driven planning and effectuation (main dr. Saras D. Sarasvathy She wanted to answer the question: How do “Entrepreneurs think”?) - scholars kalba daug
in practice - lean startup
discovery-driven planning and effectuation, lean startup - Together with the design process introduced in Chapter 6, they constitute a
“process tool kit”
The first of 3 entrepreneurial processes is discovery- driven planning (DDP),
tackles the inherent uncertainty around designing an innovative new business model by proposing a framework for identifying and testing crucial assumptions.
discovery-driven planning consists of six interrelated steps:
framing, benchmarking, specification of deliverables, testing of
assumptions, managing to milestones, and parsimony.
Framing (step one)
asks the entrepreneurial managers to define long-term
success by asking a series of questions.
framing in DDP corresponds to the “goal” design driver in the business model design process.
Benchmarking
Benchmarking (step two) asks the entrepreneurial manager to peg the key revenue and cost metrics (e.g., from the reverse income statement) against the market, and against the firms with the most comparable business models.
It entails the identification of what we called “templates” and benchmarking against them.
Specification of Deliverables
3rd.
it involves being clear and specific
about the operational requirements of the various activities
What dimension.
At this stage, key assumptions are made that should be carefully documented in a Key Assumptions Checklist.
Testing, Milestones, Parsimony
These steps, which refer conceptual to the careful use of
steps resources and a reluctance to make large upfront
expenditures, are most powerful when they are combined with each other. Key assumptions about the business model (identified in step three) should be tested (step four) early on in the business development process at milestones (or checkpoints, step five) that have been preselected or even
created because they allow for maximum learning at the lowest possible cost (step six).
Business model assumptions are made about the design elements of the activity system, namely about the
What, How, Who, and Why dimensions
Key Assumptions Checklist. Examples include:
Key activities can be performed at a reasonable cost (What?)
We can get sufficient and reliable real-time information at low cost from our customers about their (changing) preferences, and we can feed this information into our production system so that new products can be designed rapidly (How?)
We will be able to partner with the government to certify our services (Who?) Customers will accept a subscription-based model for ordering basic items (Why?)
The business model ensures that new product designs that correspond to new customer needs are available in less than ten business days (system-level property)
Parallel Play
overall it resembles the ways in which preschool-aged children
discover new things about the world by engaging in play.’ Rather than competing with their peers when playing, young children take an active interest in others around them and often mimic what they are doing. They also test different toys before choosing a favorite.
refines the discovery-driven planning method for
developing a business model by suggesting more than one alternative for largely initially commitment-free staged experimentation first, and then by leaving the business model deliberately under-specified once a particular option has been chosen.
Paradox of Entrepreneurship
need to be aware that such commitment may entail significant opportunity costs, by putting the venture on a distinct path and thereby possibly foreclosing other business model options down the road
5 Effectuation principles
Leveraging resources at hand,
Keeping in mind affordable loss (Find ‘first customer’ with minimum expenditure of resources. So my market research would actually be hands-on actual selling”),
Building partnerships,
Leveraging unexpected contingencies (“Turn surprises into profits” vs. “avoid surprises as much as possible”),
Controlling the near future
Discovery-driven planning is based on two main premises.
The first premise is that managers know what they do not know
(and hence what they need to test). The second premise is that they already have a pretty good idea of the market opportunity (a.k.a. customer needs) and possible solutions (specifically, business models) to address it.
concomitant
acompanying
Effectuation
denotes a logic of entrepreneurial action that starts with a
focus on means. Means are the resources that entrepreneurial managers and business model designers have at hand, and can use for imagining different effects, or possible ends toward which the resources can be deployed.
Effectuation encourages the active involvement of partners in order to leverage their complementary resources and capabilities.
Effectuation, in summary, could be characterized as a “low risk,
low return” search strategy.
“unknown
unknowns”
Sometimes, uncertainty is so severe that possible outcomes, let alone the associated probabilities, cannot be identified. where things cannot be anticipated or expected.
this part of the business model
external value creation architecture.
In terms of business model development, effectuation lends itself particularly well to crafting boundary-spanning activities (i.e., those that are not internal to the focal firm).
contingencies
a future event or circumstance which is possible but cannot be predicted with certainty
nascent
besiformuojantis
Effectuation also has limitations.
First, it is largely driven by coincidence and trial-and-error. For example, “whoever first buys … becomes by definition the first target customer.”
Second, action implies commitment, and so the Paradox of Entrepreneurship mentioned earlier can apply.
Lean Startup
is anchored on the observation that entrepreneurs’
subjective perception of a business model opportunity may be very different from a validated one.
encourages entrepreneurs to explicitly formulate a series of empirically testable hypotheses about the opportunity, then test these hypotheses by conducting deliberate experiments in a lean, or non-wasteful, fashion.
AKA hypothesis-driven entrepreneurship.
Test out business opportunities in a “lean” way
* Lean = fast + frugal
Minimum Viable Product – Version of a productwith just enough features to be usable by early customers who can then provide feedback forfuture product development
Minimum Viable BM - Involves testing out the “What, How, Who, Why framework” in the “leanest” way
The goal of the lean startup is to
shorten product development and rapidly discover a viable business model.
The notion of “lean” refers to the method’s focus on avoiding unnecessary resources and waste, and points to the roots of the concept in the lean manufacturing movement, with its emphasis on streamlined production systems.
Although it is primarily aimed at startup firms, the lean startup method has also been suggested for use in established firms to build new business models and even entire new businesses.
Based on the test outcomes, a decision needs to be made about whether to persevere (i.e., continue with the same business model), pivot (i.e., change the model), or perish (i.e., abandon the business model). If the choice is to continue, the next set of business model hypotheses needs to be tested. In case of a pivot, the process will start again from the beginning. Thus, lean startup is an empirical, structured, and orderly search process for a viable business model.
MVBM
minimum viable business model
MVP
minimum viable product
Lean Startup Business Model Development: Pros
it does not waste resources unnecessarily; speeds up development time; and proceeds in a rational, systematic manner that can be easily understood and communicated to others.
there is a high likelihood that a viable business model will
actually developed due to the close interaction and consultation with customers and other business model stakeholders.
**Two associated benefits are:
Reduced market risk: Customer and stakeholder feedback
Reduced capital expenditure (CapEx) and initial funding needs:
Emphasis on cheap experimentation - reduces
the need for large amounts of project funding. It encourages delaying CapEx to bring the business model to life, until these costs cannot be avoided any further.
One company that applied the lean startup methodology in its early stages is
Dropbox
capex
capital expenditure - money invested by a company to acquire or upgrade fixed, physical or nonconsumable assets
Value creation drivers of a BM are used to
evaluate the innovativeness of
the Business Model
limitations of lean startup that mirror some of
disadvantages
Cost of experimentation: the fixed cost of experimentation is often greater than zero, especially in the later stages of business model development.
Disclosure of strategically important information: Performing
market-based tests and getting feedback implies disclosing
information about the business model that may be strategically relevant. This could foster imitation by rivals.
Cost of damaged reputation: Not all experiments that are conducted are viewed positively. Customers who are used to receiving near-perfect services may be negatively surprised.
Noisy signals: The testing of hypotheses may yield noisy signals instead of clear and unequivocal learning insights.
Cost of organizational change: If the outcome suggests a new model that requires changing an existing one ir viska kas su tuo ateina - this may be costly — both financially and in terms of the motivation, time, and attention.
Stickiness
Loyalty,
personalization,
community
(reviews)
Can lean startup methodology be used by
established firms?
Yes
“What” to consider while designing your BM ?
D-E-S-I-G-N; Mindfulness; Robustness
“When” to design new BMs ?
Existing solutions too expensive/complicated, new technology, shifting basis of competition etc
lock-in
makes a customer dependent on a vendor for products, unable to use another vendor without substantial switching costs
Lock-in can be manifested as switching costs, or as network externalities that derive from the structure, content, and/or governance of the activity system.
Click & Mortar model
incorporates both online and offline channels, usually combining a website and a physical store
Rural Spark 4 Pillars
The first is the product; just the technique. Relatively expensive in local terms, but for that we offer the possibility of paying in installments.
To exclude the risk that the end customer does not pay, we offer our second pillar: Pay-As-You-Go.
With our third pillar—financing—we offer the cheapest capital in Africa they can get.
As a fourth pillar, we offer distribution parties technical and service-oriented support. For this purpose, we have local employees in our offices at the various parties. They are our eyes and ears and offer technical support and after-sales services, which they also use to increase local knowledge of solar products.”
Rural Sparks revenue model
First of all for our users: they generate energy, but not just for themselves and their family. They also sell energy to their fellow villagers and thus become an ‘entrepreneur’.
These ‘Local Energy Suppliers’ can provide energy to around 12 to 20 households.
For these end-users the energy costs of a LED lamp are lower than that of a kerosene lamp. Additionally, there is a profit margin for our distribution partner, which is often a local party with access to rural areas in India.
Finally, there’s a profit margin on the supplied service for Rural Spark as well. This enables us to scale up the network and to continue to add new functionalities.
Circumstances that drive the design of
new BM
Existing products/solutions too expensive or
complicated for some people
Opportunity to exploit newly available/tested
technology
Shifting basis of competition & fending off low-
end disruptors
What is design? (slides simple)
- Design is a mindset/discipline/method
- Design = Process + Human-centric + Creative
problem-solving
AutoScout24 offers consumers, car dealers, and other cooperation partners in the automotive, finance, and insurance industries
a comprehensive marketplace platform for trading cars, motorcycles, caravans, and utility vehicles online
“How” to go from DESIGN to REALITY?
DDP, Effectuation & Lean Start up
Triple layered approach to
DESIGNING BMs focus on
ENVIRONMENTAL and
SOCIAL value as well
The marketing literature suggests that the value proposition to customers.
“explains the relationship among the performance of the product, the fulfillment of the customers’ needs and the total cost to the customer over the customer relationship life cycle.”
it reflects the net benefits that customers receive from a focal firm’s attempts to address their needs.
An early definition links the value proposition to focal firm strategy and performance by observing that
“behind any winning strategy must stand a superior value proposition — a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits.” - Scholars who suggest that the realized value proposition to customers (which they refer to as value created for customers) equals the customer’s willingness to pay, minus the price paid for the product or service.’
definition of a service according to the OECD
“Services are outputs produced to order and which cannot be traded separately from their production. Services are not separate entities over which ownership rights can be established. They cannot be traded separately from their production.”
A
value proposition is a
hypothesis formulated by a focal firm about how much
value it creates for a stakeholder by way of providing tangible as well as intangible benefits that fulfill the stakeholder’s needs, net of any costs that the stakeholder incurs and/or perceives.
Are value proposituons objective or subjective
subjective.
For example, a busy top executive will place a different value on rapid order delivery than a retired employee. They are based on subjective assumptions that the firm’s managers make about the subjective utility functions’ of the focal various stakeholders.
aggretate
added together
Four “value-based” strategies have been identified in simple model.
The first way is to increase the willingness-to-buy of
customers of the firm (i.e., a classic differentiation approach). The second way is to lower the opportunity cost of suppliers The third way is to lower willingness-to-pay of customers for competing firms’ products (such by creating switching costs). Finally, the fourth way is to increase the opportunity costs to suppliers of working with other firms (such as through creating switching costs for suppliers).’°
novelty driver
adoption of new activities (content), new ways of linking the activities (structure), new ways of governing the activities (governance), and/or new ways to monetize the activity system by the focal firm (value logic).
The NICE Value Drivers
Novelty (The novelty value driver can be captured by the focal firm through first-mover advantage, for example, and defended through switching costs.)
lock-In (it can appear as switching costs or network externalities)
Complementarities (when bundling activities within a business model enhances the overall value (compared to adding up the value of each item separately)
Efficiency (captures how the design of the activity system reduces transaction costs; this is especially clear with digital business models that benefit from high efficiency at a relatively
low cost.)
mindshare
consumer awareness of a product or brand, typically as opposed to market share.l
ways in which customer retention can be enabled by a business model.
First, loyalty programs.
Second, firms can develop a dominant proprietary design standard for business processes, products, and services (e.g., Amazon’s patented shopping cart).
Third, firms can establish a trusting relationship with customers, such as by offering them transaction safety and reliability guaranteed by independent and highly credible third parties.
proprietary
- nuosavybės
- patentuotas
In the context of a business model, network externalities are present when
the value created for customers increases with the size of the customer base. Consider, for example, messaging application WhatsApp. Each WhatsApp user benefits from a larger number of WhatsApp users.
Complementarities
are present whenever bundling activities within a sys-
tem provides more value than running activities separately.?!
click-and-mortar
a type of business model that incorporates both online and offline channels, usually combining a website and a physical store.
Efficiency-centered design refers to
refers to the ways in which firms aim at
achieving greater efficiency through the design of their activity systems.
An
efficiency-centered activity system aims at
reducing transaction costs.
information technology leads to a
reduction of the costs of coordinating and executing activities.
The business model’s value creation, from which its value propositions are derived, lays the foundations for the focal firm’s value appropriation in two ways:
First, by codetermining the overall total value created, which is the upper limit to the focal firm’s value appropriation.
Second, the business model also influences the focal firm’s bargaining power vis-a-vis other business model stakeholders.
The greater the total value that is created by the business model, the greater the focal firm’s potential bargaining power, and the greater the amount of value that the focal firm may be able to appropriate.
vis-à-vis
atžvilgiu
accrue
- sukaupti
- įgyti
The focal firm is the innovator,
and its business model is
the locus of innovation. on average, an increase in business model novelty will not decrease the focal entrepreneurial firm’s ex-post bargaining power relative to other business model stakeholders.
we suggest that the value proposition of a business model is separate from, but complementary to,
the value proposition of a product. While the value proposition of a service may not be as easy to distinguish from that of the associated business model, together, the two make up the total value proposition to the customer, in the same way that the value proposition of a product complements the value proposition of a business model.
Business Model Innovation Happens at which system level
Activity System Level
Articulate
aiskiai istarti
Three Key Techniques for Articulating a Business Model
Storytelling: Explaining at a high level how the business model works.
Dimension Elaboration: Describing each element of the business model in detail.
Activity Mapping: Creating a visual chart showing the firm’s key activities and how they are connected.
A business model story is a narrative based on the
value chain, encompassing all activities involved in creating and delivering value
Joan Magretta defines business models as
“stories that explain how enterprises work”, with clear characters (Who), motivations (Why), and a plot (What, How).
Two Key Conditions for a “Good Story” (Magretta), what doe sit help to do?
Condition 1: Incentive Compatibility
All stakeholders must find the value proposition compelling enough to “play along.”
Condition 2: Profitability
The story must end with value creation and appropriation for the focal firm.
To evaluate whether a business model is plausible and viable.
Helps articulate how value is created and captured.
to evaluate the External environment, Stakeholders’ activities, and
Deployable resources, there are two important tools at the disposal of man-
agers:
environmental PEST scanning, and resource and capability scanning.
Structure of an Activity Map:
Boxes represent key activities (What) – each described with a verb (e.g., “deliver,” “process,” “design”).
Arrows between boxes illustrate the links and sequencing (How) – showing how activities are interconnected.
Colors indicate Who performs each activity:
e.g., green = focal firm, yellow = customers, red shades = different suppliers.
design
antecedents =
DESIGN DRIVERS
What Makes a Powerful Problem Statement?
(i) Be centered on stakeholders, especially customers, not the focal firm.
(ii) Reflect human-centered thinking, considering customer goals, needs, desires, and motivations.
(iii) Address a meaningful and important issue for the customer.
(iv) Be ambitious yet feasible, i.e., solvable in a way that makes economic sense.
to identify Incumbents’ templates, they can draw inspiration from
incumbent
business model templates (even from very different industries).
to identify the Goals and Needs of
customers, managers can
formulate a problem statement or a questionnaire.
frugal
kuklus, taupus
PEST Analysis:
Political: Government policies, trade regulations, taxes, tariffs, and political stability.
Economic: Macroeconomic indicators such as interest rates, inflation, exchange rates, and recession risks.
Social: Demographics, cultural values, workplace and lifestyle trends (e.g., preferences of millennials, Gen X, Gen Z).
Technological: The role, maturity, and adoption level of technologies relevant to the business model ecosystem.
Five Forces Industry Analysis:
by Michael Porter, the Five Forces Analysis examines:
Power of Customers: Can buyers drive prices down or demand more value?
Power of Suppliers: Can suppliers influence costs or availability of inputs?
Barriers to Entry: How easy is it for new competitors to enter the industry?
Threat of Substitutes: Are there alternative products/services that could replace yours?
Competitive Rivalry: How intense is the competition among existing players?
Resources and Capabilities can come from…
The focal firm itself (internally controlled or owned).
External partners or stakeholders.
Combining Five Forces, PEST, and capability scanning gives designers a comprehensive understanding of both theTwo-Step Capability Scanning Process:
Step 1: Inventory current internal capabilities and resources.
Step 2: Identify and assess external capabilities accessible via partnerships, alliances, or external environment and internal capacity.
Combining Five Forces, PEST, and capability scanning gives designers a comprehensive understanding of both the
external environment and internal capacity.
after preliminery feedback from visualising –>
Test-Assumption-Matrix (TAM)
highlights the key assump-
tions of a low-cost business model experiment.
The TAM is a tool used to document and track which assumptions will be tested and when.
It consists of a table with:
Rows: Represent the critical assumptions behind the business model.
Columns: Represent milestones or key events, such as customer visits or experiments, where assumptions will be tested.
Matrix Structure:
Checkmarks in the cells indicate which assumptions will be tested at each milestone.
Additional rows capture important details about each test:
Type of test (e.g., survey, prototype testing, focus group).
Expected costs for the test.
Parties involved and how they will participate.
Individuals responsible for executing the test.
Test timing and deadlines.
Expected outcomes of the test.
Realized outcomes after testing.
Key learnings from the test.
tool for for implementing
innovative business models
Business Model Canvas
brainstorming formats follow a set of rules
“generate ideas spontaneously,” “avoid discussing their merits,” “do not criticize, do not mention negatives,” “resist becoming committed to one idea,” and “record all ideas.”!
Team based brainstorming rounds, especially on new business models, offer a number
of advantages
Fostering a business model mindset within the organization.
Creating a sense of urgency and a common understanding about the importance of business model change.
Building an organizational memory of business model design solutions.
To the extent that business model stakeholders are involved in the brain- storming: getting them on board and encouraging them to endorse the new model.
Enhancing the skill set of participants involved in brainstorming, in particular for analyzing and designing new business models.
parsimony =
frugality
Given the budget constraints and the complexity of business model innovations, it may not be feasible to test the entire model, soooo
the focus should be on testing the most critical assumptions behind the model, known as key assumptions.
Business Model Canvas (BMC) is a visual tool developed by
Alex Osterwalder and Yves Pigneur to help translate a business model idea into a full-fledged business plan.
The BMC is a poster-sized graphic that visually organizes key elements of a business model.
Nine Key Components of the BMC:
Key Activities (KA): Core tasks the business performs to create value.
Key Resources (KR): Assets required to deliver value.
Key Partners (KP): Strategic relationships and external entities that help achieve business goals.
Value Propositions (VP): The products and services that create value for customers.
Customer Relationships (CR): How the business interacts with customers to maintain relationships.
Channels (CH): Ways through which the company delivers its products and services.
Customer Segments (CS): Different groups of people or organizations the business serves.
Cost Structure (C$): The costs associated with operating the business model.
Revenue Streams (R$): The sources of income generated by the business.
BMC covers major sections of a business plan:
Company Description (KA)
Products and Services (VP)
Marketing Plan (CR, CH, CS)
Operational Plan (KR, KP)
Management and Organization (KR)
Strategy (KA, KR, KP, CS)
Financial Plan (C$, R$)
What the Canvas Does Not Address:
Environmental analysis (market, competitor analysis)
Risk analysis
Implementation roadmap
Detailed financial spreadsheets and their assumptions
These elements can be added in a subsequent step if needed.
Why is reflected in the following fields:
Value Proposition (VP): The value offered to customers.
Cost Structure (C$): The costs involved in delivering the value.
Revenue Streams (R$): The income generated from the value created.
How is partially addressed by the following:
Channels (CH): How the value is delivered to customers.
Customer Relationships (CR): How the company interacts with its customers.
Business Model Innovation Strategy:
The process follows this logical sequence:
Business Model: Defining the What, How, Who, and Why.
Canvas: Filling out key elements (KA, KR, KP, VP, CR, CH, CS, R$, C$).
Business Plan: Developing a full business plan based on the Canvas.
Are traditional evaluation methods (e.g., net present value (NPV), multiples, or breakeven analysis) applicable to bm annalysis
Not directly - no
Two features of Haier’s business model transformation stand out.
First,
Haier
fundamentally transformed its business model while keeping its
existing scope largely intact (i.e., manufacturing household appliances).
Second, Haier innovated its business
model in tandem with its internal organizational structure and manage-
ment system, which created enormous complexity (from many interrelated
moving parts) and challenges in creating fit among the various systems:
business model-business and corporate strategy-organization.
Key Points: Haier and Suning.com’s Business Model Transformations
Haier’s Transformation Challenges:
Conflicting Activities: Haier faced internal conflicts between its old business model focused on standardization (e.g., forecasting demand through product development) and the new focus on mass customization (e.g., market-specific research and prospecting).
Incentive Misalignment: The old incentive system, based on wholesale numbers, was inconsistent with the new customer-centric model, which incentivized salespeople based on retail numbers and customer satisfaction.
Organizational Structure Issues: The integration of new business model elements, like e-commerce, into the old organizational structure hindered the e-commerce unit’s ability to gain necessary resources and support. The e-commerce division’s progress was stunted by its repeated restructuring within the company.
Employee Behavioral Constraints:
Haier faced behavioral inertia, as employees accustomed to the old system of standardization were reluctant to adopt the new practices. When confronted with challenges in the new system, they often reverted to old, familiar methods.
Suning.com’s Successful Transition:
Dual Business Model: Suning.com successfully combined offline retail with online e-commerce, creating a dual business model. It leveraged its established position in traditional retail while expanding into the online-to-offline (O2O) model.
Growth: Suning’s online business grew by 64.45% in 2018, contributing to a dominant market position with total annual revenues of $86 billion in 2019.
Strategy: Suning.com demonstrates how an “old economy” retailer can use its existing strengths to successfully compete in the “new economy” of e-commerce.
Primary Barriers: Internal Fit:
The chief barriers to business model change in established firms are often rooted in resistance to change and organizational inertia.
Internal fit refers to how well the new business model aligns with the existing structures, cultures, and routines within the firm.
Resistance to change is a significant challenge because employees and management are often comfortable with the old system and processes.
Organizational inertia can prevent the adoption of new practices, with employees being reluctant to break away from established routines even when new activities are required.
Key Questions in BMI Implementation
Internal Organization Fit,
External Ecosystem Fit, Strategic Fit
Creating Internal Fit: Reasons for Resistance to Change
Lack of Familiarity: Employees may not understand the new business model or perceive it as illegitimate.
Cannibalization of Existing Business: The new model may pose a threat to the firm’s core business, potentially undermining existing revenue streams.
Career Threats and Envy: Employees may feel that the new model threatens their career progression or spark envy among peers.
Doubts About Efficiency: There may be uncertainty about whether the new business model will be more efficient or profitable.
Uncertainty About Scalability: There could be concerns about whether the new model will scale effectively or generate future profitability.
Dual Business Models:
In many cases, an established firm will not replace its old business model immediately but will operate dual business models for a period of time.
For example, a car manufacturer like BMW may also run a car-sharing business (e.g., Share Now) alongside its traditional operations.
Root Causes of Organizational Inertia:
Path Dependencies:
Past investments in assets, capabilities, routines, relationships, and contracts create strong path dependencies, making it difficult to redeploy or unwind these investments.
Managers tend to favor decisions that align with the established business model, often allocating resources to what has been proven profitable in the past, which disproportionately favors the old model.
Organizational Culture:
An organizational culture that does not encourage experimentation with new business models, and is even characterized by a fear of failure, contributes to inertia.
The culture may resist change, and employees may fear the risks associated with failing in new ventures.
Dominant Logic:
The dominant logic of the existing business model imposes cognitive constraints on managers, limiting their ability to think beyond the established ways.
Organizational Inertia
The forces that constrain the mindset and behavior of managers, causing them to continue past practices and resist adopting new ways, particularly when it comes to implementing business model innovation (BMI).
It involves passive resistance to change, which can be driven by several factors.
Countering Organizational Inertia
One of the key recommendations to counter organizational inertia is to continuously experiment with new business models. Experimentation helps overcome the barriers to business model implementation by reducing market uncertainty and fostering an entrepreneurial mindset within the organization.
Probing: Visiting innovation hotspots or establishing development centers in cities known for innovation.
Local experiments and in-market tests: Conducting small-scale, localized trials to gather real-world data.
Corporate venturing: Investing in or collaborating with startups to explore new business models.
Drawbacks of Structural Separation:
While separation can enable a business model to thrive, it also has drawbacks:
Redundancies: The two models might end up duplicating efforts or resources.
Underexploited synergies: There may be opportunities for collaboration between the old and new models that are not fully utilized.
Cultural Differences: Separate units can develop distinct organizational cultures, which may lead to conflicts.
Governance and Incentive Issues: The two models might require different governance structures and incentive systems, leading to confusion or inefficiency.
Unresolved Decisions: It can be difficult to determine when, if ever, to integrate the old and new models, and the transition process can be fraught with challenges.
asset trap
where past investments create a bias toward continuing with the old model, making it hard to embrace innovation.
Institutionalized Approaches to Innovation
Accelerators: Programs that speed up the development of new business models.
Incubators: Organizations that nurture early-stage business ideas.
Innovation labs: Dedicated spaces for exploring new technologies and business models.
Cross-functional teams: Teams made up of members from different departments to foster creativity.
Scouting missions and challenges: Initiatives like hackathons that encourage problem-solving and creativity.
Scouting Missions:
temporary projects set up by firms to gather timely and relevant information on new developments, particularly related to business model innovations in areas crucial to the firm.
The teams (referred to as scouts) typically seek input from startups, inventors, specialized consultancies, university researchers, and attend conferences and trade shows at the forefront of innovation.
The purpose of scouting missions is to identify new opportunities and keep the firm informed about emerging trends and innovations that may impact its business model.
Think Tanks
A think tank is a more permanent version of a scouting mission, focused on research and innovation. It can be an independent institution or a part of a corporation.
Cultural Change through Challenges:
Challenges like hackathons can be particularly effective for changing company culture and shifting employees’ mindsets toward innovation and entrepreneurship.
holistic
encompassing the whole of a thing, and not just the part
Startup risks typically fall into five categories:
Demand-side risks: The risk that customers may not accept the product or service as expected.
Supply-side risks: Risks related to the management team, product/service quality, technology, and partners/vendors.
Competition risks: The risk that competitors may imitate the offering.
Capital market risks: Risks related to funding, timing, and valuation at exit.
Environmental risks: Risks arising from macroeconomic, regulatory, and political factors.
Shift from B2C to B2B:
B2C (business-to-consumer) models to B2B (business-to-business) models.
The tight control by these platforms over distribution channels for digital products has made it more difficult for individual entrepreneurs to directly reach consumers, leading to a rise in businesses targeting other businesses (e.g., through the platforms).
Business model innovation can accentuate or reduce different types of risks:
Demand-side risks: Radically new business models may increase demand-side risks, especially if customers are initially reluctant or skeptical. For example, e-commerce firms like Amazon faced early customer reluctance about online payments.
Supply-side risks: Complex partnerships or significant investments in assets can create path dependencies, increasing supply-side risks.
Competition risks: Innovative models may be easy to imitate, as seen with Disney Plus entering streaming services similar to Netflix. Strong competitors may engage in unfair practices that harm innovators, as Google did by favoring its own price comparison service over rivals.
Capital market risks: Innovative models can increase funding risks as angel investors and venture capitalists may delay funding decisions on unproven business models.
Environmental risks: Business model innovations may raise regulatory concerns, such as Didi Chuxing’s carpooling model being temporarily suspended due to public safety issues.
Implementing Business Model Innovation (BMI) in New Ventures
creating a new venture from scratch OR reshaping an existing
organization, BUT
Weaker Inertia in New Ventures:
New ventures, by definition, have a shorter history and less organizational inertia, meaning less the resistance to change.
Founders and employees in new ventures are accustomed to frequent changes (or “pivots”) to adapt and ensure the firm’s survival, making them more agile and open.
Leadership and Decision-Making:
In new ventures, founders, as owners of the business, often have the decision-making power to drive business model innovation.
This ability to make strategic decisions can help overcome the business model innovation leadership gaps that are often seen in larger, more bureaucratic organizations.
Risks and Challenges in BMI for New Ventures:
Strategic and external fit must be ensured to avoid dependency on external stakeholders, which could create unilateral risks.
Like established firms, new ventures also face their own leadership and governance challenges, which need careful attention during business model innovation.
sharks dilemma
The sharks dilemma involves deciding when to partner with external entities that may have the potential to abuse their market power or misappropriate valuable resources, versus opting for less risky but potentially less advantageous partners.
Need to have defensive mechanisms (e.g., legal protection, alternative partners) to counter this dilemma
agile
vikrus, judrus
Dependent Entrepreneurship”
Dependent entrepreneurship highlights the challenges that entrepreneurs face when their success is tightly tied to the policies and market dynamics of dominant digital platforms.
Smaller, Less Structured Leadership Teams: The founding team in new ventures often faces challenges like:
Role confusion and unclear responsibilities,
Conflicts among co-founders,
Lack of mission-critical competencies,
Poor communication, leading to inefficiencies.
Board of Directors (BOD) Challenges:
In many new ventures, BOD members are deeply invested in the business and often possess significant industry knowledge, which allows them to add value. However, this can sometimes lead to governance issues:
Too cozy relationships between directors and management, blurring the lines between helping the team create value and proper governance.
Potential governance voids could emerge, where directors, due to shared financial interests with management, may overlook critical issues.
Approaches to Overcoming Business Model Innovation (BMI) Implementation Barriers in New Ventures
Thorough Analysis of Challenges
Risk Management Approaches
1 Business planning: A vital tool for managing risks and organizing the venture in a structured way.
2 Building trust with external stakeholders: Establishing reliable relationships with key partners.
3 Lowering dependence on third parties: Reducing the risks that come from relying too heavily on external actors.
4 Strategic considerations in adopting a revenue model: Thoughtfully selecting a revenue model that aligns with the business goals.
5 Improving internal governance: Strengthening leadership and organizational structures to support innovation.
Business Planning as a Risk Management Tool:
1 Business planning is a crucial way of managing risks in new ventures, as it can significantly increase the chances of survival.
2 Organizational Development: Many entrepreneurs fail to organize their ventures effectively, which harms their chances of success. A business plan helps organize the venture and define clear strategies.
3 Holistic Mindset: The process of business planning promotes a holistic mindset, allowing founders to recognize gaps, identify risks, and test assumptions.
4 Mitigating Uncertainty: Planning helps make the venture process more predictable and manageable, reducing the unpredictability of business model innovation.
Fieldwork and Data Collection
exacerbate
- bloginti
- erzinti
Intrinsic vs. Symbolic Aspects:
The intrinsic dimension of actions refers to the functional tasks that help the venture progress (e.g., developing a business plan, explaining the model to investors).
The symbolic dimension refers to how these actions communicate positive qualities such as trustworthiness and legitimacy to stakeholders.
Four Types of Symbolic Actions:
(i) Personal Credibility:
Demonstrating the entrepreneur’s personal commitment, expertise, and integrity to gain trust from stakeholders.
(ii) Professional Organization:
Showcasing the organization’s professionalism and efficiency through structured processes and well-established practices.
(iii) Organizational Achievement:
Highlighting past accomplishments and successes to reassure stakeholders about the company’s potential and reliability.
(iv) Stakeholder Relationship Quality:
Fostering positive relationships with stakeholders (such as investors, customers, and partners) to ensure long-term cooperation and trust.
Why Choose Risky Partners?
Ventures often choose partners with high market power or the potential for misappropriation when they have limited alternatives or when they urgently need the resources and capabilities these partners offer.
The critical question is: Why risk partnering with such entities? The answer lies in the venture’s specific resource needs and the defense mechanisms they have in place to protect their own knowledge and resources.
Effective Defense Mechanisms:
Legal Protection: Patents or other forms of intellectual property protection can help guard against resource misappropriation and knowledge leakage. However, in many business model innovations, traditional patent protection may be less effective, making this defense weaker.
Secrecy: Keeping critical business model components confidential, such as through trade secrets, is another defense. This reduces the risk of competitors gaining access to valuable intellectual property.
Timing: Delaying the involvement of risky partners until later in the development process can help. This allows the venture to mitigate knowledge leakage by reaching a stage where it is less vulnerable to resource loss.
Additional Protection Strategies:
Alternative Providers (Plan B): Having alternative partners ready can reduce dependence on any one potentially risky partner. This provides a contingency plan if the relationship with the high-risk partner deteriorates.
Strengthening Ownership Among Key Managers: Encouraging key team members (such as managers or co-founders) to have a financial stake in the venture can align their interests with the business. This reduces their incentive to disclose sensitive information and encourages a stronger commitment to the venture’s success.
Salaried Managers and Risk: Salaried managers, who are not personally invested in the venture, might be more inclined to adopt an opportunistic approach (e.g., disclosing business secrets or joining competing firms). Ensuring ownership stakes or equity compensation can mitigate this risk and strengthen their long-term commitment to the venture.
Skillfulness in symbolic management involves
High awareness of resource constraints: Recognizing that resources, including time, are limited, and making the most of available resources to create a lasting impression.
Willingness to work around constraints: Instead of being limited by the lack of resources, skillful managers find creative ways to convey the message.
Tailoring the message: Adapting the communication to fit the audience’s expectations and needs.
Complementary delivery style: Using the most effective method to communicate, such as face-to-face meetings, which can be more personal and impactful compared to emails or written reports.
Types of Revenue Models:
Paid Revenue Model:
- Subscription Model: Payments are made on a recurring basis. Examples include Netflix, where customers pay a fixed amount per month for continued service.
- Transaction-Based Model: Customers pay for each transaction or service rendered. It’s more variable in nature compared to subscriptions.
–The paid revenue model is generally effective when product quality is high, consumer awareness is strong, and advertising costs are low.
Advertising Revenue Model:
- Under this model, users get access to a service for free, but revenue is generated by advertisers who pay to display ads to users.
–It’s more effective when the ad rates are high, and user aversion to ads is low. However, it’s often linked to lower product quality, as the focus shifts to increasing ad revenues.
Freemium Model:
- A mix of free and paid versions of a product. The free version might have ads or limited features, while the premium version is paid and offers more benefits.
- Examples: Spotify and Dropbox.
–The freemium model is particularly useful for segmenting customers and giving them a chance to “try before they buy.” However, self-cannibalization (where free users never convert to paid users) is a potential issue.
Understanding the target market: Are they willing to pay for quality, or is a free service with ads more attractive?
Competitive landscape: What are competitors doing, and how can the chosen revenue model help differentiate the firm?
Challenges in Establishing Governance:
Boundary-Spanning Nature of Business Models: Many digital business models rely heavily on external stakeholders (suppliers, partners, and customers). These models require active participation from external parties in the firm’s activity system.
Increasingly Digital and Global Reach: Digital business models that are “born digital and global” have a broad market reach. Both opportunities and challenges, including the loss of human touch and the increased anonymity of interactions. It’s easy for governance issues to be overlooked due to the impersonal nature of digital transactions.
Delayed Public Listing and Governance: Many high-valuation companies, such as Airbnb, choose to remain private for extended periods rather than go public through an IPO. This means they continue to raise funds through private equity sources. While this allows for greater flexibility in financing, it also creates challenges in ensuring that the governance structures and internal controls are evolving alongside the firm’s growth and market influence.
Key Governance Principles in Entrepreneurial Ventures:
Clear roles and responsibilities for internal stakeholders (e.g., executives, board members).
Accountability mechanisms to ensure transparent decision-making processes.
Board oversight to manage both short-term actions and long-term strategies.
Ownership structures that balance the interests of investors, founders, and other stakeholders.
A venture’s board typically consists of both inside and outside directors:
Inside directors usually include the founders, CEO, and possibly other top executives.
Outside directors often include representatives from professional investors (e.g., venture capital firms), former co-founders, or independent directors with significant industry experience.
onflicts between institutional investors and founders
Institutional investors, who sit on the board, are fiduciaries for all shareholders. This can create a conflict of interest when decisions are made about timing or the mode of a liquidity event. Founders may want to delay a liquidity event to ensure the company’s long-term success, while investors might push for quicker returns.
Principal-principal conflicts:
Different institutional investors may have conflicting interests in a venture. This can cause significant issues for the company’s development.
To manage these conflicts, founders and managers often use strategies like:
Engaging in role-based interactions: Building relationships with investors who have board representation.
Proposing single decision alternatives: Avoiding multiple proposals during board meetings.
Holding separate brainstorming meetings: Discussing business model and strategic issues outside of board meetings.
Forming political alliances: Using strategic framing and selective information sharing to close the strategy-making process.
Key elements of strong leadership include:
Shared values and beliefs: The leadership team should work to develop a corporate culture based on shared values that guide decision-making.
Functional teams to buffer negative effects: For example, counteracting the effects of narcissistic or hubristic leadership by fostering functional, collaborative teams.
Empowering employees and encouraging bottom-up decision-making: This creates a flatter organizational structure and ensures that power is distributed more equally, which facilitates better monitoring and aligns objectives.
Key risks for new ventures include:
Dependence on Third-Party Partners.
Governance and Leadership Issues.
Also:
Demand-Side Risks: Uncertainty about customer acceptance and market demand.
Supply-Side Risks: Risks related to resources, partners, and the product or technology.
Competition Risks: The threat of competitors imitating the business model.
Capital Market Risks: Challenges with funding, including investor expectations.
Environmental Risks: External risks from macroeconomic, regulatory, and political factors.
WeWork lemtis
rapid expansion, questionable financial practices, and a failed IPO attempt, led to significant financial challenges. In November 2023, burdened by a massive debt load and declining demand for office spaces, WeWork filed for bankruptcy
WeWork CEO
Adam Neumann. He served as the CEO until 2019. Neumann was central to the company’s rapid growth, but his leadership was also marked by controversial decisions, including aggressive expansion, questionable financial management, and a lavish lifestyle. These factors played a role in WeWork’s struggles and eventual failed IPO attempt.
After Neumann’s departure in 2019, Sandeep Mathrani took over as CEO.
Accusations against Amazon by new
ventures
Changes to Amazon’s search algorithms or selling terms
can cause their sales to evaporate overnight
* Amazon strictly limits contact between sellers and
customers, which makes their brand identity almost
invisible to shoppers
* Amazon has also been caught using its venture capital
fund to invest in startups, only to steal those startups’
ideas and create rival products and services
LON =
Liability of Newness
Stinchcombe, 1965
arguing that organizations cannot be understood simply by focusing on the individuals involved but must be analyzed in the context of the broader social structures that shape them. Stinchcombe also discussed the ways in which organizations evolve and develop over time, emphasizing that organizations are influenced by the historical and social environments in which they operate.
internal fit and problem creating it / how to solve them
Creating internal fit within an organization refers to aligning its structure, processes, resources, and culture to support the business strategy effectively.
Can be active (e.g., protests) or passive (e.g., path dependence & lack of motivation or culture of experimenting)
Solutions to Address Internal Fit Challenges:
Strategic Alignment: Ensure that the organization’s structure and resources are aligned with its strategy. This may involve reshaping departments or redefining roles to support strategic goals.
Cultural Change: Cultivate a culture that aligns with strategic goals, whether through leadership development or team-building initiatives.
Improved Communication: Foster open and transparent communication across all levels of the organization. This includes setting up regular meetings, feedback loops, and collaboration tools.
Clear Leadership and Direction: Ensure consistent and clear leadership, with leaders acting as role models for the culture and strategy. Leadership should communicate the vision and strategy regularly.
Effective Resource Allocation: Regularly review the allocation of resources to ensure they are being used efficiently and are directed toward areas critical to achieving strategic goals.
Process Optimization: Continuously assess and improve processes to ensure they are flexible enough to adapt to new demands but structured enough to maintain efficiency.
Change Management: Implement strong change management practices, ensuring that employees understand the need for change and are equipped to adapt.
Technology and Tools: Invest in modern tools and technologies that can support communication, decision-making, and collaboration across the organization.
Talent Development: Focus on continuous development of talent through training, mentoring, and hiring strategies that ensure the right skills are in place to support the business model.
Delivered duty paid (DDP) is
delivery agreement, whereby the seller assumes all responsibility for transporting the goods until they reach an agreed-upon destination
