businessmodelgeneration-141206115947-conversion-gate01

05/03/2023Business Model Generation (Osterwalder and Pigneur, 2010)

1

Business Model GenerationWritten byAlexander Osterwalder and Yves Pigneur2010


2

Table of content1. Canvas2. Patterns3. Design4. Strategy5. Process6. Outlook7. Afterword


3

1. Canvas

1. Definition of a business model2. The 9 building blocks3. The business model canvas template


4

1. Business Model2. Elements of a Business ModelA business model describes the rationale of how an organization creates, delivers and captures value

Customer Segments

Customer Relationship

Value Proposition

Channel

Revenue Stream

Key activities

Key partners

Key resources

Cost structure


5

CS. Customer segmentDifferent group of people or organizations an enterprise aims to reach and serve Segments defined by: Customer needs Reach Relationships Profitability Willingness to pay

Dominant forms: Mass market (e.g. Wal-

Mart) Niche market (e.g.

Apple) Segmented (e.g.

Microsoft Home/ Office/ Enterprise)

Diversified (e.g. Amazon Cloud)

Multi-sided platforms (e.g. eBay)


6

VP. Value PropositionsBundle of products and services that create value for a specific customer segmentWays of value creation: Newness Performance Customization Getting the job done Design Brand/ status Price Cost reduction (on usage) Risk reduction Accessibility Convenience/ usability


7

CH. ChannelsHow company communicates with and reaches its customer segments to deliver value proposition

Channel phases: Awareness Evaluation Purchase Delivery After sales

Own Partner Direct Indirect

Sales force

Web sales

Own stores

Partner

stores

Wholesaler

s


8

CR. Customer RelationshipsType of relationship a company establishes with specific customer segments Nature of customer relationships: Personal assistance (e.g. call centers) Dedicated personal assistance (e.g. private

banking HNIs) Self-service (e.g. online banking) Automated services (e.g. customer rating/ review) Communities (e.g. PatientsLikeMe.com ) Co-creation (e.g. YouTube.com)


9

R$. Revenue StreamCash a company generates from each customer segment (transaction revenue or recurring revenue)Revenue models: Asset sales (e.g.

automobiles) Usage fee (e.g.

telecom) Subscription fee

(e.g. gym) Lending/ renting/

leasing (e.g. car rental)

Licensing (e.g. patent royalties)

Brokerage fee (e.g. credit cards)

Advertising (e.g. media industry)

Pricing mechanisms Fixed menu pricing Dynamic pricingList price Product feature

dependentCustomer segment

dependentVolume dependent

NegotiationYield management

(e.g. airline seats)

Real-time-markets Auctions


10

KR. Key ResourcesThe most important assets required to make a business model workCategories of resources include: Physical (e.g. facilities, buildings, machines,

systems, networks) Intellectual (e.g. brands, proprietary knowledge,

patents and copyrights, partnerships and customer databases)

Human (e.g. knowledge intensive and creative industries)

Financial (e.g. cash, lines of credit, stock options)


11

KA. Key ActivitiesThe most important things a company must do to make its business model workKey business activities could include: Production Problem solving (e.g. service/ utility industries) Platform/ network (e.g. matchmaking platforms,

software, etc)


12

KP. Key PartnershipsNetwork of partners or suppliers that make the business model work Types of partnerships could be: Strategic alliance

between non-competitors Coopetition, as alliances

between competitors Joint ventures for

developing new products Buyer- supplier

relationships to assure reliance supplies

General motives are: Optimization and

economies of scale Reduce risk and

uncertainty (e.g. Blu-ray)

Acquisition of particular resources and activities


13

C$. Cost StructureCost incurred in operating a business model Dominant cost structures Cost driven (e.g. low-price

value proposition, automation, outsourcing)

Value driven (e.g. premium value creation, and high degree of personalization)

Characteristics of cost structure:

Fixed costs Variable costs Economies of scale Economies of scope


14

3. Business model canvas templateKey

PartnersKey

ActivitiesValue

PropositionCustomer Relation

Customer Segments

Key Resources

Channels

Cost Structure Revenue Streams


15

Apple iPod/ iTunes business ModelKey

PartnersRecord

companiesOEMs

Key ActivitiesHardware

designMarketing

Value Propositi

onSeamles

s music experience

Customer Relation

LovemarkSwitching

cost

Customer Segments

Mass market

Key Resources

PeopleApple brand iPod

hardware iTunes

softwareContent and

agreement

ChannelsRetail

storesApple

stores iTune

storesApple.com

Cost StructurePeopleManufacturing Marketing and sales

Revenue Streams iTunes storesLarge hardware revenueSome music revenue


16

2. Patterns

1. Unbundling business models2. The long tail3. Multi-sided platforms4. Free as a business model 5. Open business models


17

1. Unbundling business models

Early market entry enables charging premium prices and acquiring large market share; speed is key

High cost of customer acquisition makes it imperative to gain wallet share; economics of scope are key

High fixed costs make large volumes essential to achieve low unit costs; economics of sale are key

Battle for talent; low barriers to entry; many small players thrive

Battle for scope; rapid consolidation; a few big players dominate

Battle for scale; rapid consolidation; a few big players dominate

Employee entered; coddling the create stars

Highly service oriented; customer-comes-first mentality

Cost focused; stresses standardization, predictability and efficiency

Product Innovation

Customer Relationship Management

Infrastructure Management

Economics

Competition

Culture

Examples: mobile telecom industry, private banking industry


18

2. Long tail business models Selling less of more; large number of niche

products, each of which sells relatively infrequently

Moving away from only selling ‘hit’ products Examples: Netflix, eBay, YouTube, Facebook,

Lulu.com (book publishing), Lego Factory Drivers

Democratization of tools of production (e.g. movie making)

Democratization of distribution (on Internet) Falling search cost of connecting supply with

demand


19

Long tail explained for music industry


20

3. Multi-sided platforms Brings together two or more distinct but

interdependent groups of customers. Product value by: Facilitating interactions Network effect (more leads to more) Same-side

effect and other-side effect One side generates revenue, and other side is

subsidized Examples: Visa, Google, eBay, Microsoft

Windows SDK, Financial Times, Wii game console, Metro (free newspaper)


21

Google business ModelKey

PartnersKey ActivitiesPlatform

managementManaging

servicesExpanding

reach

Value Propositi

onTargeted

adsFree

searchMonetizi

ng content

Customer Relation

Customer Segments

AdvertisersWeb

surfersContent

ownersKey

ResourcesSearch

platform Channels

Cost StructurePlatform cost

Revenue Streams Keyword auctionFree


22

PSP/ Xbox versus Wii focusKey

PartnersKey

ActivitiesValue

Proposition

High performance console

Console audience

Customer

Relation

Customer Segments Hardcore

gamers Game

developers

Key Resources

Channels

Cost Structure Revenue Streams Hardware sales at a loss Royalties from developers

Sony PlayStationMicrosoft Xbox

Key Partners

Key Activities Value Proposition

Family console

Access to console users

Cheap game development cost

Customer

Relation

Customer Segments

Casual gamers

Game developers

Key Resources

Channels

Cost Structure Revenue Streams Profitable hardware sales Royalties from developers

Nintendo Wii


23

4. ‘Free’ as a business model Non-paying customers are financed by

another part of the business model or by another customer segment

Examples: Metro (free paper), Flickr, Open Source, Skype, Google, Free Mobile Phones, Insurance

Some models are: Advertising (one side of multi-sided platform pays) Freemium (free basic offerings, and optional

premium services) Bait and hook (free or inexpensive trials)


24

Red Hat Linux business modelKey

PartnersLinux

Open Source development community

Key ActivitiesSoftware

support services

Software visioning and testing

Value Propositio

nFree

(Linux) open source based software

Continuous upgraded, services and guaranteed software

Customer Relation

Self service and direct access to engineers

Customer Segments

AdvertisersWeb

surfersContent

ownersKey

ResourcesRed Hat

(Linux) software

ChannelsRedhat.co

mRed Hat

global branches

Cost StructureElements of a service company

Revenue Streams Professional subscription Free software


25

Skype business modelKey

PartnersPayment

providersDistributio

n partnersTelco

partners

Key ActivitiesSoftware

development

Value Propositio

nFree

Internet and voice calling

Cheap calls to phones (SkypeOut)

Customer Relation

Mass customized

Customer Segments

Web users globally

People who want to call phones

Key Resources

Software developers

Software Channels

Skype.com

Headset partnerships

Cost StructureSoftware developmentCompliance management

Revenue Streams SkypeOut pre-paid or

subscriptionHardware sales


26

Gillette: ‘Bait and hook’ business modelKey PartnersManufacture

rsRetailers

Key Activities

MarketingR&DLogistics

Value Propositio

nRazor

handleBlades

Customer Relation

Built-in ‘lock-in’

Customer Segments

Customers

Key Resources

BrandPatents

(blocking) ChannelsRetail

Cost StructureMarketingManufacturingLogistics R&D

Revenue Streams One time hand purchaseFrequent blade replacement


27

5. Open Business Models

Closer Open The smart people in our field work with us

We need to work with smart people both inside and outside our company

To profile from research and development, we must discover it, develop it, and ship it ourselves

External R&D can create significant value; internal R&D is needed to claim some portion of that value

In we conduct most of the best research in the industry, we will win.

We don’t have to originate the research to benefit from it

If we create the most or the best ideas in the industry, we will win.

If we make the best use of internal and external ideas, we win.

We should control our innovation process, so that competitors don’t profit from our ideas

We should profit from others’ use of our innovations, and we should buy others’ intellectual property whenever it advances our own interest

Principles of innovation


28

Outside-in versus inside-out approachesKey Partners

Other company’s IP

External scientists

Retires scientists

Key Activities Internal R&D

Key Resources

Internal R&D

Cost Structure Leveraging internal R&D Value

Proposition IP for

underserved diseases

Customer Relation

Acquisition

Retention

Customer Segments

Outside researchers

Channels Patent

pools

Revenue Streams License fee

Procter & Gamble: Connect and Develop

GlaxoSmithKline: Patent Pools


29

InnoCentive Key PartnersMajor

‘seekers’

Key Activities

Platform management

Acquire solvers and seekers

Value Proposition

Access to broad network of scientist ‘solvers’

Connect ‘seekers’ and ‘solvers’

Access to scientific challenges with cash rewards

Customer

RelationOnline

profiles

Customer Segments

Seekers (company)

Solvers (scientists)

Key Resources

BrandPatents

(blocking)Channels Innocent

ive.com

Cost StructurePlatform management Acquisition of solvers and seekers

Revenue Streams Free access to challenges Fee to list challenges Commission on rewards for

solutions


30

3. Design

1. Customer insights2. Ideation3. Visual thinking4. Prototyping 5. Storytelling 6. Scenarios


31

1. Customer insights “If I had asked my customers what they

wanted, they would have told me ‘a faster horse.’”- Henry FordEmpathy Map

What does the customer SEE?

What does the customer HEAR?

What does the customer SAY

and DO?

What does the customer THINK

and FEEL?

PAIN GAIN


32

2. Ideation A creative process for generating a large

number of (business model) ideas and successfully isolating the best ones.

Generation

Synthesis

Suggested approaches:Epicenters of Business Model InnovationWhat if? Analysis


33

Epicenters of Business Model InnovationResource- driven Offer- driven

Customer- driven Finance- driven

Example: Amazon Web Services

Example: Cemex (Mexican cement company)

Example: 23andMe (personalized DNA testing)

Example: Xerox 914 (lease at $95 per month, 2000 free copies, 5 cents per copy


34

Power of ‘what if’ questions Examples IKEA (buyers pick up components in flat

packaging and assemble themselves) Rolls-Royce (maintenance price for every hour

an engine runs) Skype (free voice calling over Internet) Car2go by Daimler (car rental anywhere in the

city) Zopa (peer-to-peer landing system) Grameen Phone (microfinance coupled with

mobile devices)


35

Ideation ProcessGeneral approach Team composition (diverse at

all levels) Immersion (home work on

customer, technology, trends, business models)

Expanding (ideation with a focus on quantity, not quality)

Criteria selection (e.g. implementation time, revenue potential, possible customer resistance, and impact on competitive advantage)

Prototyping (creation of a business model for shortlisted ideas)

Brainstorming rules Stay focused on a well

honed statement Enforce rules, such as

deferring judgment, go for quality, encourage wild ideas, etc.

Think visually with post-it notes, sketches, etc.

Prepare, with an immersion exercise beforehand


36

3. Visual Thinking Sketches- however rudimentary or

amateurish- help people better describe, discuss, and understand issues.

Suggested processes Visualizing with Post-it notes Visualizing with drawings

Understand the essence Enhance dialogue Explore ideas Improve communication

Telling a visual story


37

4. Prototyping For pre-implementation visualization and

testing Tool of inquiry Infuses a design attitude, which includes

Willingness to explore crude ideas Rapidly discarding them Take time to examine multiple possibilities Accept uncertainty until design direction matures

Scale of prototypes Napkin sketches elaborate canvas business

case field-test


38

5. Storytelling Why storytelling? Introducing the new (provoke ideas/

justify change/ introducing tangibility) Pitching to inventors (for clarification) Engaging employees

Typical starting points (choice of protagonist)

Company perspective (employee observer)

Customer perspective (customer jobs)

Techniques:

Talk and image

Video clips

Role play

Text and image

Comic strip


39

6. ScenariosTypes of scenarios Define different customer settings

How products or services are used What kind of customers use them Customer concerns, desires and objectives

Possible future environments


40

4. Strategy

1. Business model environment2. Evaluating business models3. Business model perspectives on Blue Ocean

Strategy4. Managing multiple business models


41

1. Business Model Environments

Industry forcesSuppliers and other value

chain actorsStakeholdersCompetitors (incumbents)New entrants (insurgents)Substitute products and

services

Key trendsRegulatory trendsTechnology trendsSocietal and cultural trendsSocioeconomic trends

Macro-economic factorsGlobal market conditionsCapital marketsEconomic infrastructureCommodities and other

resources

Market forcesMarket segmentsNeeds and demandsMarket issuesSwitching costRevenue attractiveness


42

2. Evaluating business models Big picture assessment

Happens on the business model Identification of +/ - for each of the nine elements

of business model SWOT analysis (Strength- Weakness-

Opportunity- Threat) Value proposition assessment Cost/ revenue assessment Infrastructure assessment Customer interface assessment


43

SWOT analysis (indicative questions)1/4Value proposition assessment Our value propositions are well aligned with

customer needs Our value propositions have strong network

effect There are strong synergies between our

products and services Our customers are very satisfied


44

SWOT analysis (indicative questions) 2/4Cost/ revenue assessment We benefit from strong margins Our revenues are predictable We have recurring revenue streams and frequent repeat

purchases Our revenue streams are diversified Our revenue streams are sustainable We collect revenue before we incur expenses We charge for what customers are really willing to pay for Our pricing mechanisms capture full willingness to pay Our costs are predictable Our cost structure is correctly matched to our business model Our operations are cost-efficient We benefit from economies of scale


45

SWOT analysis (indicative questions) 3/4Infrastructure assessment Our key resources are difficult for competitors to replicate Recourse needs are predictable We deploy key resources in the right amount at the right

time We efficiently execute key activities Our key activities are difficult to copy Execution quality is high Balance of in-house versus outsourced execution is ideal We are focused and work with partners when necessary We enjoy good working relationships with key partners


46

SWOT analysis (indicative questions) 4/4Customer interface assessment Customer churn rates are low Customer base is well segmented We are continuously acquiring new customers Our channel are very efficient Out channels are very effective Channel reach is strong among customers Customers can easily see our channels Channels are strongly integrated Channels provide economies of scope Channels are well matched to customer segments Strong customer relationships Relationship quality correctly matches customer segments Relationships bind customers through high switching costs Our brand is strong


47

SWOT- Assessing threats – 1/2Value proposition

threats Are substitute

products and services available?

Are competitors threatening to offer batter price or value?

Cost/ revenue threats Are our margins threatened

by competitors? By technology?

Do we depend exclusively on one or more revenue streams?

Which revenue streams are likely to disappear in the future?

Which costs threaten to become unpredictable?

Which costs threaten to grow more quickly than the revenues they support?


48

SWOT- Assessing threats – 2/2Infrastructure threats Could we face a disruption in

the supply of certain resources?

Is the quality of our resources threatened in any way?

What key activities might be disrupted?

Is the quality of our activities threatened in any way?

Are we in danged of losing any partners?

Might our partners collaborate with competitors?

Are we too dependent on certain partners?

Customer interface threats Could our market be saturated

soon? Are competitors threatening

our market share? How likely are customers to

defect? How quickly will competition in

our market intensify? Do competitors threaten our

channels? Are our channels in danged of

becoming irrelevant to customers?

Are any of our customer relationships in danger of deterioration?


49

SWOT- Assessing opportunities– 1/2Value proposition

opportunities Could we generate recurring

revenues by converting products into services?

Could we better integrate our products or services?

Which additional customer needs could we satisfy?

What complements to or extensions of our value propositions are possible?

What other jobs could we do on behalf of customers?

Cost/ revenue opportunities Can we replace one-time

transaction revenues with recurring revenues?

What other elements would customers be willing to pay for?

Do we have cross-selling opportunities either internally or with partners?

What other revenue streams could we add or create?

Can we increase price? Where can we reduce cost?


50

SWOT- Assessing threats – 2/2-aInfrastructure opportunities Could we use less costly

resources to achieve the same result?

Which key resources could be better sourced from partners?

Which key resources are under-exploited?

Do we have unused intellectual property of value to others?

Could we standardize some key activities?

How could we improve efficiency in general?

Would IT support boost efficiency?

Are there outsourcing opportunities?

Could greater collaboration with partners help us focus on our core business?

Are there cross-selling opportunities with partners?

Could partner channels help us better reach customers?

Could partner complement our value proposition?


51

SWOT- Assessing threats – 2/2-bCustomer interface opportunities How can we benefit from a

growing market? Could we serve new customer

segments? Could we better serve our

customers through finer segmentation?

How could we improve channel efficiency or effectiveness?

Could we integrate our channels better?

Could we find new complementary partner channels?

Could we increase margins by directly serving customers?

Could we better align channels with customer segments?

Is there potential to improve customer follow-up?

How could we tighten our relationships with customers?

Could we improve personalization?

How could we increase switching cost?

Have we identified and fired unprofitable customers? If not, why not?

Do we need to automate some relationships?


52

3. Business model perspectives on Blue Ocean StrategyFour action framework (ERRC Grid) Which of the factors that the industry takes for granted

should be eliminated? Which factors should be reduced well below the industry

standards? Which factors should be raised well above the industry

standards? Which factors should be created that the industry has never

offered?KP KA VP CR CS

KR CHC$ R$

Cost Side

Value Side Eliminate/ Reduce Raise/ Create


53

4. Managing multiple business modelsChoices of business model in bringing an idea

to the market Integration (e.g. integration of each SMH

(Swatch Group) watch brand across the high, mid and low segments)

Autonomy (e.g. Car2go care rental startup from Daimler?)

Separation (e.g. complete independence of Nespresso SA from Nescafe)


54

5. Process

1. Starting point2. Five phases


55

1. Starting pointObjectives of new business models Satisfy markets (e.g. Tata Nano, NetJets,

GrameenBank, Lulu.com) Bring new product to market (e.g. Xerox 914,

Swatch, Nespresso, Red Hat) Improve market (e.g. Dell, Nintendo Wii, IKEA,

Bharati Airtel, Skype, Ryan air, Amazon.com, Better Place)

Create market (e.g. Diners Club, Google)


56

2. Five phasesPhases are Mobilize (setting the stage) Understand (immersion) Design (inquiry) Implement (execution), and Manage (evolution)


57

6. Outlook

1. Business models beyond profit2. Computer aided business models 3. Business model and business plan4. Implementation issues5. Leveraging IT


58

1. Beyond-profit business models Categories Third-party funded enterprise models Triple bottom line business models

KPGrameen

BankNetwork

Consortium (Telenor)

KAManage

network

VPIncome

opportunity

Mobile commn’

CR CSVillage

phone ladies

Villagers KR CHGrameen

BankVillage

phone ladies

C$Network

R$Communication income

Grameenphone


59

2. Computer aided There are a host of computer application

useful for mind mapping, scenario generation, large data analysis, trend spotting, etc, that could complement paper-based approaches


60

3. Business plans Executive summary The team

Management profile Why we are a winning team

The business model Vision, mission and values How our business models works Value proposition Target market Marketing plan Key resources and activities

Financial analysis Breakeven analysis Sales scenarios and projections Capital spending Operating costs Funding requirements

External environment The economy Market analysis and key trends Competitor analysis Competitive advantage of our

business model Implementation roadmap

Projects Milestones Roadmap

Risk analysis Limiting factors and obstacles Critical success factors Specific risks and

countermeasures Conclusion Annexes

businessmodelgeneration-141206115947-conversion-gate01

Documents

Transcript of businessmodelgeneration-141206115947-conversion-gate01