Innovation & Business Model & Business Model Canvas 2014

Business Models & Business Model Canvas

Serdar Temiz, temiz@kth.se

ME2603 Entrepreneurship 6.0 credits2014

Serdar Temiz temiz@kth.se 2014

Some Questions

• What is Invention• What is Innovation

There are many inventions, but far fewerinnovations.An invention is a novel ideaInnovation is the commercialization of thatnovel idea

Types of Innovation

1. Technology innovation2. Process innovation3. Product & service innovation4. Business Model innovation

Process innovation

Implementation of a new or significantly improved production or delivery method

Technology innovation

Product / service innovation

Business Model Innovation

It can be, even more, important than tech innovation!

Business Model Innovation

Finding and executing the right business model can be the only/ main reason of the success

What is this?

Haloid Model 914Xerox Model 914

Why business models matter?Joan Magretta

• Who is the customer and what does the customer value?

• How do we make money from the business?• How can we deliver value to the customer at an

appropriate cost?• Writing a new story• A better way than existing alternatives• Making the number add up• Tweaking on the fly based on feedback

Business Model WarfareLangdon Morris

• Business mortality is high• Technology innovation by itself has rarely

been sufficient to ensure the future.• Similar products and services• Advantages resulting from a successful

business models are fleeting. Models need to be continuously reviewed and updated when necessary

How Business Models Emerge (1 of 3)

– The value chain is the string of activities that moves a product from the raw material stage, through manufacturing and distribution, and ultimately to the end user.

Primary activities are directly concerned with the creation or delivery of a product or service.Support activities help to improve the effectiveness or efficiency of primary activities

Raw Material

Value ChainPrimary & Secondary Activities +

Margin

Product / Service

The Value Chain (again)

"Competitive Advan tage: Creating andSustaining superior Performance" (1985).

The Value Chain (continued)– Entrepreneurs look at the value chain of a product

or a service to pinpoint where the value chain can be made more effective or to spot where additional “value” can be added.

A business Model is..

The business model is a strategic plan to be implemented through organizational structures, processes, and systems in order to need customer needs.

Simple Business Model

Value Proposition

Revenue Model

Production Model

Delivery Model

Simple Business ModelVa

HOW MANY OPTIONS DO WE HAVE?

Forces affecting the business model

• Customer needs• Competition• Technological change• Social change• Legal environment

Source: PwC, The future of mobility, October 2013

Basic Business Model Map

Product/Service Ecosytem

Customer EcoSystem

Finance

There are different type of Business Model Maps

Serdar Temiz temiz@kth.se 2014By Alexander Osterwalder & Yves Pigneur

The 9 building blocks for Business Model Canvas

1. Customer Segments2. Value proposition3. Channels4. Customer Relationships5. Revenue Streams6. Key Resource7. Key Activities8. Key Partnerships9. Cost Structure

1. Customer Segment• For whom are we creating value? • Who are our most important customers?• Customer Segments– Mass Market– Niche market– Segmented - related customer segments: frequent

flier program, bank customers with big assets– Diversified: Unrelated customer segments: Amazon– Multi sided: free newspaper-readers and advertisers

Find a Customer-I

• Why?• Who is your customer? Grave, School, hospital, apotek, free newspaper• Can everyone be your customer?• "people who want to buy a flat," • "anyone needs job" • “Everyone who goes to university”

Find a Customer-II

• Find a customer for solving a pain• Use the Customer Profile• Describe who is making purchasing decision? IT ? Operations Group? Management?• Make sure they are happy• Market is important but -do not only think market• Billion dollar market does not start in few minutes

Q’s for Customer

IDENTIFIABLE – what distinguishes them?MEASURABLE – how many belong to your target segment?REACHABLE – how to reach, communicate with each segmentWILLING– do they want it?ABLE– they want but can they afford it?

Q’s for Customer - Macro Level

• Population size• Population character• Disposable income levels• Educational background• Primary languages• Infrastructure• Regulations• Political affiliation• And so on…

Keep In Mind -Paradox

• Customer is important but you can not give all they want

• Learn to stay No,• Learn to focus• Learn to ”change and adopt”• They may not know what they want: buying

process is mysterious

2.Value Proposition

• a bundle that meets that meets a customer's needs or solve his/her problem.

• benefits can be tangible and intangible• Reason why customers pick one business or

another.• can be – innovative, new disruptive offer– similar to existing offers but just added feature or

attribute in some sort of way

Some Elements that may add to value

• newness• customization• getting job done• support• price

• design• status/ brand• Accessibility• risk deduction• usability

2. Value Proposition - Q’s to answer –

• What pain do we solve for customer?• What do we deliver for customer?• What value do we develop for customer• Which need of customer do we satisfy?

3. Channels

• Awareness of products and services, Evaluation of value proposition, Purchase, Delivery, After sales

• Direct: Brick and mortal stores, websales, sales force

• Indirect: wholesales partner stores,

Value Proposition

Customer Segment

3. Channels- Qs

• Through which Channels do our Customer Segments want to be reached?

• How are we reaching them now? • How are our Channels integrated? • Which ones work best? • Which ones are most cost-efficient?

4. Customer Relations

• Customer acquisition

• Customer retention

• Boosting sales (upselling)

Value Proposition

Customer Segment

Example Customer Services

Can you give some example companies?• (Dedicated)Personal assistance• Self Service• Community• Co-creation• Automated

4. Customer Relationships

• What type of relationship does each of our Customer Segments expect us to establish and maintain with them?

• Which ones have we established? • How costly are they? • How are they integrated with the rest of

our business model?

5. Revenue Streams

• For what value are our customers really willing to pay?

• One time/ recurring?• For what do they currently pay? • How are they currently paying? • How would they prefer to pay? • How much does each Revenue Stream

contribute to overall revenues?

5.Revenue Streams

•ChannelsValue Proposition

Customer Segment

• Asset sale• Usage fee: use more, pay more• Subscription: monthly, yearly• Leasing/Lending/Renting• Licensing: patents, license fee• Brokerage fees• Advertising

Fixed pricing

Dynamic pricing

5.Revenue Streams

Fixed pricingDynamic

pricing

• List price • Product feature

dependent• Customer segment

dependent• Volume dependent

• Yield management : hotels, airlines

• Real-time-market :supply and demand

• Auctions Price • Negotiation

6. Key Resources

Value Proposit

physical financial

intellectual human

Key resources can be owned or leased by the company or acquired from key partners.

6. Key Resources

• What Key Resources do our Value Propositions require?

• Our Distribution Channels? • Customer Relationships? • Revenue Streams?• What physical resources, intellectual,

human, financial resources do we have?

7. Key Activities

• What Key Activities do our Value Propositions require?

• Our Distribution Channels? • Customer Relationships? • Revenue streams?• Production- Microsoft• Network/Platform: Facebook, ebay, Visa

8. Key Partnerships

Why Partnership?– reduce cost, – Reduction of risk and uncertainty: Web standards– Acquisition of particular resources and activities: Nokia

Windows, HTC phones• Strategic alliances between non-competitors• Coopetition: strategic partnerships between

competitors• Joint ventures to develop new businesses• Buyer-supplier relationships to assure reliable supplies

8. Key Partnerships -II

• Who are our Key Partners? • Who are our Key suppliers? • Which Key Resources are we acquiring from

partners? • Which Key Activities do partners perform?

9. Cost Structure-I

• Business model Cost Structures:

en minimizing costs wherever possible

iven Premium

Value Propositions and a high degree of personalized service

9. Cost Structure-II• Cost Structure Characteristics:

• minimizing costs wherever possibleFixed costs

• Premium Value Propositions and a high degree of personalized serviceVariable costs

• average cost per unit to fall as output risesThe same Distribution

Economies of scale

• Channels for different products and servicesmay support multiple products.

Economy of Scope

9. Cost Structure

• What are the most important costs inherent in our business model?

• Which Key Resources are most expensive?• Which Key Activities are most expensive?

Team, Social Value, Enviromental cost etc.

Problems with this canvas?

• Strategic Mission?• Customer Segments are Hypotesis for startups• Fits to New and Existing Business but does it

work in Start ups?• Metrics?• Competition? Organisational Structure?• Unfair Advantage over competitors?

Mark Johnson

Spotify Business Model

Business Model Canvas – Spotify- September 2014

Key Partners Key Activities Value Propositions

Customer Relationships

Customer Segments

Key Resources Channels

Cost Structure Revenue Streams

Serdar Temiz Stockholm-Sweden

Listeners• Legal music for free or minimum payment

• Be social when you listen• Music based on mood

• Automated service

• self service (FAQ)• Community forum• Customer Service

• Awareness at social media

• Mobile application• Desktop application• Spotify.com

Advertisers

• self service : on learning how ads are located in the spotify etc.

• personal assistance: to put ad, advertisers should get in touch directly

• Targeted advertisement-

• commercials between songs: make listeners sure to listen

• Keep technology up and running

• Adding more music, label, artists to Spotify offering

• Launching Spotify in different countries

• Music,• Server,• Brand• Employees

• Labels, • aggregators (e.g merlin

network )• Facebook

• License fee• Salaries• Technology cost

• Awareness with social media partners (fb, msn)

• Customer center representative

Advertisement revenue

Subscription of unlimited and premium customers

Are we done?

Business Model Canvas – Spotify- September 2014

Key Partners Key Activities Value Propositions

Customer Relationships

Customer Segments

Key Resources Channels

Cost Structure Revenue Streams

Serdar Temiz Stockholm-Sweden

Listeners• Legal music for free or minimum payment

• Be social when you listen• Music based on mood

• Automated service

• self service (FAQ)• Community forum• Customer Service

• Awareness at social media

• Mobile application• Desktop application• Spotify.com

Advertisers

• self service : on learning how ads are located in the spotify etc.

• personal assistance: to put ad, advertisers should get in touch directly

• Targeted advertisement-

• commercials between songs: make listeners sure to listen

• Keep technology up and running

• Adding more music, label, artists to Spotify offering

• Launching Spotify in different countries

• Music,• Server,• Brand• Employees

• Labels, • aggregators (e.g merlin

network )• Facebook

• License fee• Salaries• Technology cost

• Awareness with social media partners (fb, msn)

• Customer center representative

Advertisement revenue

Subscription of unlimited and premium customers

Can add music to their code

• developer.spotify.com/• physical meetups

????++?

Facebook’s Canvas?

iTune’s Canvas

Twitter’s Canvass

Thank youSerdar Temizserdar_temiztemiz@kth.se

Innovation & Business Model & Business Model Canvas 2014

Education

Transcript of Innovation & Business Model & Business Model Canvas 2014

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