Week 2

Question 1

What is a business model?

Answer 1

The heuristic logic that connects technical potential with the realization of economic value.

Question 2

The business model maps which two domains together?

Answer 2

o	Technical domain:
	Technical inputs such as:
•	Feasibility
•	Performance
o	Economic domain
	Economic outputs
•	Value
•	Profit
•	Price
o	In between Business model:
	Value proposition
•	Value offered to the customer
	Market segments
	Value chain
	Revenue, costs and profit
	Value network

Question 3

What do customers want?

Answer 3

They want benefits, not features

Question 4

Why is a business model needed for a given technology

Answer 4

Technology:
• By itself no single objective value
• Economic value stays latent until it is in the market through a business model

Question 5

What are the business model functions?

Answer 5

• 1. Creates value
o Requires a series of activities to deliver the product to the customer, value is added throughout these various activities

• 2. Captures a portion of that value
o Requires that the firm establishes an unique resource/assets/opposition within the series of activities in which it enjoys a competitive advantage

• Business model
o Is a set of assumptions about how a firm will create and capture (appropriate) value for all its stakeholders – connecting technology to economic profits

Question 6

User value is:

Answer 6

the value perceived by customers

Question 7

opportunity costs

Answer 7

as required for resources

Question 8

Use value - opportunity costs =

Answer 8

value created

Question 9

Value created exists of?

Answer 9

• seller
• competitors
• customers
• suppliers
• others

Shares of created value captured

Question 10

In the value created part, what is the customer shares, firms share, and suppliers share

Answer 10

Customer

• willing to pay
• price

Firm:

• price
• costs

Supplier:

• costs
• opportunity costs

Question 11

What is the innovation process perspective?

Answer 11

o First part = value creation phase

o Second part = value appropriation phase

Question 12

• Does value creation always lead to value creation?

Answer 12

o Not always the case

o Use a business mapping (ex. business mode canvas)

Question 13

Business model innovation:
• New ways to create and capture value
• Why important?

Answer 13

o	Related to performance of entrepreneurial firms
o	Important for new firms because
	Competitive position
	Changes of survival
o	Increases operating margins

Question 14

Where can BMI start? and what is it called if it start everywhere?

Answer 14

• Can start anywhere in the BMC, if start everywhere at once it is called: multiple epicentre business model innovation

Question 15

BMI involves what?

Answer 15

• BMI involves the discovery and adoption of fundamentally different models of value proposition, value creation and / or value capturing

Question 16

to what degree should you do business model innovation?

Answer 16

• Types of changes
o Radical new business models
o Incremental changes to existing business models

• Degree of business model innovation and new firm survival:
o U shaped graph: both incremental and radical = long term survival, in between (moderate) is short term

Question 17

BMI and its effect on performance:

Answer 17

o 1. Positive effect of novelty-centred business model design on performance
 Confirmed
o 2. A positive effect of efficiency-centred business model design on performance
 Mixed support from analysis (zott and Amit 2007) more research is needed
o 3a. More novelty-centred and efficiency-centred business model design, the higher the performance of the firm, because 1. And 2. Seen above.
 No support, more research is needed
o 3b. More novelty-centred and efficiency-centred business model design, the lower the performance of the firm due to splitting the resources
 No support, more research is needed

Question 18

Chesbrough (2002) What are the functions of a business model:

Answer 18

o articulate the value proposition, i.e. the value created for users by the offering based on the technology;
o identify a market segment, i.e. the users to whom the technology is useful and for what purpose, and specify the revenue generation mechanism(s) for the firm;
o define the structure of the value chain within the firm required to create and distribute the offering, and determine the complementary assets needed to support the firm’s position in this chain;
o estimate the cost structure and profit potential of producing the offering, given the value proposition and value chain structure chosen;
o describe the position of the firm within the value network linking suppliers and customers, including identification of potential complementors and competitors;
o formulate the competitive strategy by which the innovating firm will gain and hold advantage over rivals.

Question 19

The 6 functions of a business model collectively serve additional functions, namely to……… (chesbrough, 2022)

Answer 19

justify the financial capital needed to realize the model and to define a path to scale up the business.

Question 20

Hwat is the key for a start-up according to Burns 2014?

Answer 20

identify and focus limited resources on just three or four clearly defined,
important and sizeable market segments. The marketing mix, marketing and communications strategy
can then be tailored to the needs of customers in these different segments.

Question 21

To be viable, a market segment must be:

Answer 21

Distinctive with significantly different needs from other segments. Without this the segment
boundaries are likely to be too blurred.
2. Sufficiently large, or willing to pay a high enough price, to make the segment commercially
attractive. It may be that a gap in the market exists because it is not commercially viable.
3. Accessible. The gap in the market might not exist in reality because the segment cannot be
reached through communication or distribution channels.
4. Defendable from competitors. If the segment is not defendable, for example because it is a
commodity market, prices and profits will quickly reduce as competition increases.

Question 22

What are the Three core value propositions that offer fundamental ways of achieving sustainable competitive
advantage:

Answer 22

Low price/low cost: this is where customers value low price more than anything. Economies
are scales are important to lower prices, e.g., commodity products.
 High differentiation: this is where customers value the other elements of the marketing mix
more than price and are therefore willing to pay a premium.
 Customer focus: this is where the fifth ‘P’ (people or service) is important and ensures that
customers are provided with a product/service that is more closely tailored to their specific
requirements.

Question 23

What are the properties of lowprice low cost?

Answer 23

Maintain cost leadership
through economies of scale
 Continually drive down
costs
 Achieve high sales volumes
 Improve efficiency
 Standardize

Question 24

What are the properties of high differentiation?

Answer 24

Understand the basis for the
differential advantage
 Build on differential
advantage
 Build barriers to entry
 Build the brand
 Continuous innovation
 Encourage creativity and
innovation.

Question 25

What are the properties of Customer Focus

Answer 25

Maintain close relationships
with customers
 Keep in touch with and
understand changes in
customer needs
 Maintain customer loyalty
 Maximize sales to existing
loyal customers (economies
of scope)
 Build the brand

Question 26

What is niche marketing strategy? It can also be called beachhead approach?

Answer 26

Companies that offer both high differentiation and customer focus are said to have a niche marketing strategy. Market focus involves understanding in depth the needs of relatively few customers and therefore there is more scope for differentiation.

It involves targeting smaller markets and therefore there are more opportunities for smaller businesses.
This is the strategy that research tells us is most likely to succeed for a start-up since they can charge higher prices and are more likely to sustain their differential advantage because the smaller market segment does not attract competitors, at least initially.

Question 27

What is the underlying principle in pricing?

Answer 27

the price charged for a product or service ought to reflect the value-to-customer of the package of benefits.

Question 28

What is cost+ or full-cost pricing?

Answer 28

This takes the total cost of producing a product or
delivering a service and divides it by the predicted number of units to be sold to arrive at the average
cost, to which a target mark-up is then added. Some costs, often called overheads, are fixed, and do
not change with volume (e.g., depreciation of equipment, rent and some salaries). Another benchmark
is the variable cost of the product or service – the cost of producing one additional unit.