Business Model Generation

BUSINESS MODEL GENERATION

Alaa Moustafa Business Development Manager, eSpace facebook.com/alaa.moustafa Twitter.com/alaamoustafa

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eSpace Profile

Agenda

• Business Model vs. Business Plan

• Business Model Canvas

• Business Models Patterns

• Business Model Design

• Business Model Design Process

Ref: Business Model Generation


Business Model Business Plan Vs.

How an organization creates, delivers, and captures value from

customer.

A formal statement of a set of business goals, and how to reach those goals


BUSINESS MODEL CANVAS A shared language for describing, visualizing, assessing, and changing business models.


Business Model Canvas

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How can you

DESCRIBE DISCUSS DESIGN

CHALLENGE IMPROVE INNOVATE CHOOSE

your Business Model?

Business Model Canvas


1. Customer Segments (CS)


1. Customer Segments (CS)

• The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve.

• Examples: - Mass Market - Niche Market (Car parts Manufactures)

- Diversified (Amazon) - Multisided (Credit Card: Holders & Merchants)

- Segmented (Banking Customer over $100,000)


2. Value Proposition (VP)


2. Value Proposition (VP)

• The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment.

• Examples: - Newness (Cell Phones) - Performance (Faster PCs )

- Customization (Custom Software Dev.)

- Cost Reduction (CRM Applications) - Price (Lower Price)


3. Channels (CH)


3. Channels (CH)

• The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

• Channels Phases:


Awareness Evaluation Purchase Delivery After Sales

4. Customer Relationships (CR)


4. Customer Relationships (CR)

• The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated.

• Customer relationships may be driven by the following motivations: – Customer acquisition

– Customer retention

– Boosting sales (upselling)


5. Revenue Streams (R$)


5. Revenue Streams (R$)

• The Revenue Streams Building Block represents the cash a company generates from each Customer Segment. A business model can involve two different types of Revenue Streams: – Transaction revenues

– Recurring revenues

• Way to generate Revenue: - Asset Sale - Usage Fee - Subscription Fees - Renting/Leasing - Licensing - Advertising


6. Key Resources (KR)


6. Key Resources (KR)

• The Key Resources Building Block describes the most important assets required to make a business model work

• Key Resources can be categorized as follows: - Physical (Buildings – Machines – Point of Sale System)

- Financial (Cash – financial guarantees)

- Human Resources - Intellectual (Brands – Customer Databases)


7. Key Activities (KA)


7. Key Activities (KA)

• The Key Activities Building Block describes the most important things a company must do to make its business model work

• Key Activities can be categorized as follows: - Production (Manufacturing firms)

- Problem Solving (Hospitals)

- Platform/Network (Visa Card)


8. Key Partnerships (KP)


8. Key Partnerships (KP)

• The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work.

• Reasons for creating Partnerships: - Optimization and economy of scale - Reduction of risk and uncertainty - Acquisition of particular resources and activities


9. Cost Structure (C$)


9. Cost Structure (C$)

• The Cost Structure describes all costs incurred to operate a business model. There are two Classes Cost Structures: – Cost Driven

– Value Driven

• Cost Structure Characteristics: - Fixed Costs (Salaries – Rents – etc.)

- Variable Costs (Depends on the produced service like Music Festival)

- Economies of Scale (Larger companies benefit from lower bulk purchase rates)

- Economies of Scope (Same marketing activities may support multiple products)


Business Model Canvas Template


http://www.canvanizer.com Free and easy tool to design, discuss and share your business model

http://www.canvanizer.com/

BUSINESS MODELS PATTERNS Classification for business models with similar characteristics, similar arrangements of business model Building Blocks, or similar behaviors.


Business Models Patterns

Un-Bundling Business Models

The Long Tail

Multi-sided Platforms

FREE as a Business Model

Open Business Models


Un-Bundling Business Models

• The concept of the “unbundled” corporation holds that there are three fundamentally different types of businesses

• The three types may co-exist within a single corporation, but ideally they are “unbundled” into separate entities in order to avoid conflicts or undesirable trade-offs

• Business Types – Customer Relationship Businesses – Product Innovation Businesses – Infrastructure Businesses

• Examples: Private Banking Industry and Mobile Telecom Industry


Un-Bundling Business Model Example: The Mobile Teleco

• What they did in: – Telecos have outsourced operation and maintenance to equipment

manufacturers. – Teleco can sharpen its focus on branding and segmenting

customers and services. – Telecos work with multiple third-parties that assure a constant

supply of new technologies, services, and media content such as mapping, games, video, and music

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• Traditionally Mobile telecommunication competed on network quality.

• They realize that their key asset is no longer the network—it is their brand and their Customer Relationships.

10/28/2013 Business Model Generation

The Long Tail

• Long tail business models are about selling less of more.

• They focus on offering a large number of niche products, each of which sells relatively infrequently.

• Examples: Youtube, Facebook and Lulu.com


The Long Tail Example: Books Publishing Industry

• Old Model: – The traditional book publishing model is built

on a process of selection whereby publishers screen many authors and select those that seem most likely to achieve minimum sales targets.

• New Model: – Lulu.com’s business model is based on

helping niche and amateur authors bring their work to market.

– It eliminates traditional entry barriers by providing authors the tools to craft, print, and distribute their work through an online marketplace.


Multi-sided Platforms

• Multi-sided platforms bring together two or more distinct but interdependent groups of customers.

• The platform creates value by facilitating interactions between the different groups.

• Examples: Visa, Google and eBay


Multi-sided Platforms Example: Google's Business Model

• The heart of Google’s business model is its Value Proposition of providing extremely targeted text advertising globally over the web.

• The model only works, though, if many people use Google’s search engine.

• The more people Google reaches, the more ads it can display and the greater the value created for advertisers.


FREE as a Business Model

• In the free business model at least one substantial Customer Segment is able to continuously benefit from a free-of-charge offer.

• Non-paying customers are financed by another part of the business model or by another Customer Segment.

• Examples: Flickr, Youtube, Skype and Google


FREE as a Business Model Example: Newspapers Publishing Model

• One industry crumbling under the impact of FREE is newspaper publishing.

• Traditionally, newspapers and magazines relied on revenues from three sources: newsstand sales, subscription fees, and advertising.


BUSINESS MODEL DESIGN The techniques and tools from the world of design that can help you design better and more innovative business models.


Business Model Design

Customer Insights

Ideation

Visual Thinking

Prototyping

Storytelling


1. Customer Insights

• Good business model design views the business model through customers‘ eyes, an approach that can lead to the discovery of completely new opportunities.

• Successful innovation requires a deep understanding of customers, including environment, daily routines, concerns, and aspirations.


2. Ideation

• What’s needed is a creative process for generating a large number of business model ideas and successfully isolating the best ones. This process is called ideation.

• We can distinguish four epicenters of business model innovation: – Resource-driven

– Offer-driven

– Customer-driven

– Finance-driven


3. Visual Thinking

• By visual thinking we mean using visual tools such as pictures, sketches and diagrams to construct and discuss meaning.

• Business models are complex concepts, it is difficult to truly understand a model without sketching it out.


4. Prototyping

• Prototyping is a powerful tool for developing new, innovative business models. It makes abstract concepts tangible and facilitates the exploration of new ideas.

• Prototyping comes from the design and engineering disciplines, where it is widely used for product design, architecture, and interaction design.


5. Storytelling

• Storytelling will help you effectively communicate what it is all about. Good stories engage listeners, so the story is the ideal tool to prepare for an in-depth discussion of a business model and its underlying logic.

• Why Storytelling?

– Introducing the New

– Pitching to investors

– Engaging Employees


BUSINESS MODEL DESIGN PROCESS The concepts and tools to simplify the task of setting up and executing a business model design initiative.


Business Model Design Process


Mobilize

Understand

Design

Implement

Manage

1. Mobilize

• Prepare for a successful business model design project

• Mobilizing Activities:

– Frame project objectives

– Test preliminary business ideas

– Plan

– Assemble team


2. Understand

• Research and analyze elements needed for the business model design effort

• Understanding Activities: – Scan environment

– Study potential customers

– Interview experts

– Research what has already been tried (e.g. examples of failures and their causes)

– Collect ideas and opinions


3. Design

• Generate and test viable business model options, and select the best

• Design Activities:

– Brainstorm

– Prototype

– Test

– Select


4. Implement

• Implement the business model prototype in the field

• Implementing Activities:

– Communicate & Involve

– Execute


5. Manage

• Adapt and modify the business model in response to market reaction

• Managing Activities: – Scan the environment

– Continuously assess your business model

– Rethink your business model

– Align business models throughout the enterprise

– Manage synergies or conflicts between models


ANY QUESTIONS? Thanks for your time.

Alaa Moustafa Business Development Manager, eSpace facebook.com/alaa.moustafa Twitter.com/alaamoustafa


Business Model Generation

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