Tools for Business Model Generator

Prepared by Hani TarabichiFrom Business Model Generator

Book

The Spirit!!!

• Create Value• Build New Business• Improve and transforms organizations• Innovative way of thinking• Visionary – Game changer• Challenge driven

What is a Business Model

• A business model describes the rationale of how an organization creates, delivers, and captures value

• Business concept must be simple, relevant, and understandable

• A business model is built on 9 blocks covering 4 areas:– Customer– Offers– Infrastructure– Financial viability

9 blocks of business model

• Customer Segment CS• Value Proposition VP• Channels CH• Customer Relationships CR• Revenue Streams RS• Key Resources KR• Key Activities KA• Key Partnership KP• Cost Structure C$

Customer Segment CS

• Defines the different groups of people that company aims to reach and serve

• Without profitable customers NO company can survive

• Distinct segment = Common needs = Common behavior = Better service

• The question is WHICH segment to serve and which to ignore???

Customer Segment CS

• Customer groups represents different segments IF:– Their needs require and justify distinctive offers– They are reached through different channels– They require different kind of relationships– They have substantially different profitability– They are willing to pay for different aspects of the

offer

Customer Segment CS

• Types of segments:– Mass Market: FMCG, B2C– Niche Market: B2B, specific requirements– Segmented Market: By size or industry– Diversified Market: Diversified customer business

model– Multi-Sided Platform: Credit cards companies

Value Proposition VP

• Bundle of products and services that create value to specific segment

• VP is the reason why customers choose one company over another

• VP solves customer problems and satisfies his needs

• Some VP might be innovative while others may be similar to other offers

Value Proposition VP

• What value do we deliver to our customers?• Which one of our customer’s problems are we

solving?• Which customer needs are we satisfying?• What bundle of products/services are we

offering to each customer segment?• VP are quantitative: Price, speed..• VP are qualitative: Design, customer experience

Value Proposition VP

• Examples of VP:– Newness– Performance– Customization– Getting the job done– Design– Brand status– Price– Cost reduction– Risk reduction– Accessibility– Convenience/ Usability

Channels CH

• How to communicate with and reach customer segments to deliver value proposition

• Deals with any sales touch point:– Communication– Distribution– Sales channels

Channels CH

• Channels help in:– Raising awareness– Helping customers evaluate Value Proposition– Allows customers to purchase– Delivers value proposition to customers– Provide post-purchase customer support

Channels CH

• Channels help in:– Raising awareness– Helping customers evaluate Value Proposition– Allows customers to purchase– Delivers value proposition to customers– Provide post-purchase customer support

Channels CH

• Through which channels do our customer segments want to be reached?

• How are we reaching them now?• How are our channels integrated? • Which one works best?• Which channel is most cost effective?

Channels CH

• Channels options:– Direct .vs. Indirect– Owned .vs. Partner

• Which channel mix??OWN

Direct

Sales Force

Web Site

Own store

Partner

Indirect

Own store

Partner

store

Wholesaler

Customer relationships CR

• Type of relationships a company establishes with specific customer segment

• Drivers for customer relationships:– Customer acquisitions– Customer retention– Boosting sales/ up-selling

Customer relationships CR

• What type of relationships does each of our customer segments expect us to establish?

• How costly is it?• How customer relationships integrated with

rest of business model?

Customer relationships CR

• Categories of customer relationships:– Personal assistance: Human interaction– Dedicated personal assistance: Most intimate– Self service: No direct relationship with customer– Automated services: Self service + Automated

process– Communities: involvement on-line– Co-creation: Reviews, content creation..

Revenue Stream RS

• The cash a company generates from each customer segment• For which value is each customer segment truly willing to

pay?• Revenue streams for different segments may have different

pricing mechanism– Fixed price list– Bargaining– Auction– Market dependant– Volume dependant– Yield dependant on inventory

Revenue Stream RS

• For what do customers currently pay?• How are customers currently pay?• How would they prefer to pay?• How much does each customer revenue

stream contribute to overall revenues?

Revenue Stream RS

• Ways to generate Revenue Streams:– Asset Sale: Selling ownership rights of products– Usage fees: phone services, hotels– Subscription fees: Access to service, annual fees,

gyms, mobile..– Lending/renting/leasing: Temporary rights to use– Licensing: Permission to use protected intellectual

property in exchange for licensing fees– Brokerage fees: Intermediary services– Advertising

Key Resources KR

• Important assets to make business model works

• Can be owned or leased

Key Resources KR

• What key resources do our value proposition requires?

• What key resources do our distribution channels requires?

• What key resources do our customer relationship requires?

• What key resources do our revenue streams requires?

Key Resources KR

• Key resources categories:– Physical: Manufacturing facilities, building,

vehicles, machines, systems, POS, Distribution networks

– Intellectual: Brands, Proprietary knowledge, patents, copy rights, partnerships, customer data base

– Human: Human resources– Financial: Either resources or guarantees

Key Activities KA

• Most important things a company must do to make its business model works

• What key activities do our value proposition require?

• What key activities do our channels require?• What key activities do our Customer segment

require?• What key activities do our revenue streams

require?

Key Activities KA

• Production– Design– Making– Delivering

• Problem solving– New solutions– Knowledge– Continuous training

• Platforms / Network

Key Partnerships KP

• Network of suppliers and partners that make business model works

• Partnerships and alliances are made to:– Optimize business model– Reduce risk and uncertainty– Acquire resources

Key Partnerships KP

• Types of partnerships:– Strategic alliance between none competitors– Coopetition: Strategic partnership between

competitors– Joint-Venture: Develop new business– Buyer-supplier relationships to assure reliable

supplies

Key Partnerships KP

• Who are our key partners?• Who are our key suppliers?• Which key resources are we acquiring from

partners?• Which key activities do partners perform?

Cost Structure C$

• Describes all costs incurred to operate a business model

• Can be easily calculated after defining– Key activities– Key resources– Key partnerships

Cost Structure C$

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

• Which key resource are most expensive?• Which key activities are most expensive?• Is our business model Cost Driven .vs. Value

Driven?

Cost Structure C$

• Cost driven business model– Focus on minimizing cost– Use low price value proposition– Maximum automation– Extensive outsourcing

• Value driven business model– Focus on value creation– Premium value proposition– High degree of personalized services

Cost Structure C$

• Cost structures can have the following characteristics:– Fixed cost: Constant cost despite volume of

production– Variable cost: Proportional cost with output

volumes– Economies of scale: Cost advantages as output

expands and average cost per unit drops– Economies of scope: Cost advantages due to large

scope