Business model design

Tarek Fahim

Business Model Design

Certainty comes from the courage to follow uncertain paths

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Breaking the ICE

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Iqbal Quadir Had a DreamReference: Business Models Beyond Profit - Social Entrepreneurship Lecture

Alexander Osterwalder

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Achieving the DreamReference: Business Models Beyond Profit - Social Entrepreneurship Lecture


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How do you provide connectivity to villagers when they are too poor to buy a phone ?

Customers managemen

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Reference: Business Models Beyond Profit - Social Entrepreneurship Lecture


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By providing an intermediary a loan to buy a phone and resell call services

Customers managemen

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What about Network Management & Customers ?

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Show Me the Money

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Achieving the DreamReference: Business Models Beyond Profit - Social Entrepreneurship Lecture


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Rashmi, 24 Bangladeshi village phone lady2-3 $ daily income

• There are about 250ʼ000 women retailing telephone services in 60ʼ000 villages giving access to about 100 million people

• The 250ʼ000 telephones are producing revenues at an annual rate of well over $100 million for GrameenPhone

• Each entrepreneur makes about $2 in profits per day or about $700 per year

• $50 million net profit for GrameenPhone



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Business Model Ingredients

Return Structure

Profit Formula

Human Capital Orientation –

Role of the Crowds

Growth Model

Financing Options

Value Proposition (VP)

Change Philosophy

Key Resources & Platforms

Key Processes



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GrameenPhone Business Model

For Profit Organization

with core social impact

ingredient

Enabling mobile connection to rural people who normally

cannot afford to own a telephone, provides a good

income-earning opportunity to Village Phone operators living

in rural areas

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Change Philosophy

1

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Return Structure

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• Trying to balance the generation of both social/environmental and economic returns

• To remain effective and sustainable at the same time

• The balance between economic and social/environmental return are choices base (No best practice or correct answer)

Social and/or Environmental Return

Purely philanthropic enterprises

Purely commercial enterprises

Economic Return

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The way to create value for customers—that is, a way to help customers get an important

job done

By “job” we mean a fundamental problem in a given situation that needs a solution

Once we understand the job and all its dimensions, including the

full process for how to get it done, we can design the offering

Target Customer

Job to be Done

Offering

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Profit Formula

The blueprint that defines how the company creates

value for itself while providing value to the

customer

Revenue Model:

price x volume

Cost

Structure

Margin

Model

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Quick-Wins

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Human Capital Orientation – Role of the Crowds5

Collaborative Production

Fully Partially None

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The key resources are assets such as technology, products,

facilities, equipment, and channels required to deliver the value proposition to the targeted customer. The focus here is on the key elements that create

value for the customer and the company, and the way those

elements interact

Every company also has generic resources that do not create competitive differentiation

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Key Processes

Operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale. These

may include such recurrent tasks as training, development, manufacturing, budgeting, planning, sales, and service.

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Processes & NormsRules &

Metrics

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Financing Options8

Equity Financing

Debt Financing

Angel Investment

Donations & Grants

3 Fs InvestmentFamily / Friends / Fools

Self Financing

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Growth Model

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Franchise

By Concept One Self

Different Perspective

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OK. Where do I start ?

Return Structure

Profit Formula


Role of the Crowds

Growth Model

Financing Options


Change Philosophy


Key Processes

Founder’s Oriented Choices

Customer’s Oriented Choices

Reality Bites

Entrepreneurship Mindset

Design Thinking & Innovation

Business As Usual

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Going Forward…What to do ?

Return Structure

Profit Formula


Role of the Crowds

Growth Model

Financing Options


Change Philosophy


Key Processes

Less Frequently Changing More Frequently Changing

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Constrained Innovation !!

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Case In Point : Tata Motors Nano Car

Providing a safer alternative for scooter families.

The cheapest car available in India cost five times what a scooter did

and that many of these

families could not afford one.

“Offering an affordable, safer, all-weather alternative for scooter

families, one with the potential to reach tens of millions of people who were not yet part of the car-buying

market”

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Envisioning a price point of around US$2,500, less than half the price of the cheapest car available.

This, of course, had dramatic ramifications for the profit formula:

• Significant drop in gross margins.

• Radical reduction in many elements

of the cost structureHowever, he could still make money if he could

increase sales volume dramatically, and he knew that his target base of consumers was

potentially huge

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For Tata Motors to fulfill the requirements of its customer value proposition and profit formula for the Nano, it had to reconceived how a

car is designed, manufactured, and distributed

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Built a small team of fairly young engineers who would not

- like the company’s more-experienced designers -

be influenced and constrained in their

thinking by the automaker’s existing profit formulas.

This team dramatically minimized the number of parts in the vehicle, resulting in a

significant cost saving

Choose to outsource a remarkable 85% of the Nano’s

components and use nearly 60% fewer vendors than normal to reduce transaction costs and achieve better economies of

scale

Envisioned an entirely new way of assembling and distributing its cars. The ultimate plan is to ship the modular components of the vehicles to a combined network of company-owned and independent entrepreneur-owned assembly

plants, which will build them to order.

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29 FS

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Other Constrained Innovations !!!!

$30 cataract surgeryAravind Eye hospital

$0.01 cell phone minuteBharti Airtel $0.01 shampoo

Hindustan Unilever

$25 micro loansKIVA Organization

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Constrained Innovation !!

Return Structure

Profit Formula


Role of the Crowds

Growth Model

Financing Options


Change Philosophy


Key Processes

Values

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Putting It All Together

Customers’ Base

Values

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Any Questions ?

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Looking Forward to Seeing You There.

Quick-Wins

Business model design

Business

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