How to Design an Effective Business Model

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30-minute lecture for idExpress, NOVU & dutch in Dialogues House Amsterdam on June 22, 2011

Transcript of How to Design an Effective Business Model

  • How to design an effective business modeliDexpress, NOVU & dutch

  • The next 30 minutes will provide you with insights on how to design effective business models with both business logic and creative instinct

  • 34%

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    41%

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    Retail and FMCGHigh-tech industryMedia and technologyCreative industryProfessional services

    Publishers, broadcasters, retailers and technology companiesEntertainment, telecom and television production companiesTravel and leisure, architecture, fashion and professional services companiesIndustrial manufacturing, (bio-)technology, science and education, banking and insurance companiesAviation, automotive, engineering and construction companies

    2011

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    Let me introduce myself

    Strategy Consultant: 80% corporate/executive + 20% start-up/new ventures

  • Goal to learn how to design effective business models

    1.Lets meet the canvas>>> and your greatest challenges

    2.Lets think services>>> and use your creative instinct

    3.Lets talk business >>> and bring in your business logic

  • 1The canvasthe players, the game

  • Lets meet the canvas

  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue StreamsWhat are the most important costs inherent in our business model? Which Key Resources are most expensive?

    Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • Wrap up left-hand side of the business model

    1. Greatest challenge for your value proposition>>> customer orientation and service innovation

    2. Greatest challenge for your key activities>>> process innovation and automation

    3. Greatest challenge for your key resources>>> human resources

    4. Greatest challenge for your key partners>>> managing alliances

    5. Greatest challenge for your cost structure>>> productivity and cost control

    How to design an effective business modeliDexpress, NOVU & dutch

  • Break

    Lets describe your nightmare competitor

  • Goal imagine your ultimate competitor1. Think of a competitor with unlimited resources and working capital

    >>> dont rely on the past2. This competitor has as many valuable relationships as you have

    >>> forget any market barriers3. This competitor is operational in business today

    >>> let go of the status quo4. What would this ultimate competitor look like and how would he act?

    5. What would you do to deal with this competitor (e.g. prevent/defense/become/...)?

    5 minutes, individually

    Break

  • Lets play

  • Goal to learn how to design effective business models

    1.Lets meet the canvas>>> and your greatest challenges

    2.Lets think services>>> and use your creative instinct

    3.Lets talk business >>> and bring in your business logic

  • 2Servicethe concept

  • Lets think services

  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue StreamsWhat are the most important costs inherent in our business model? Which Key Resources are most expensive?

    Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • How to design an effective business modeliDexpress, NOVU & dutchWrap up right-hand side of the business model

    1. Greatest challenge for your value proposition>>> customer orientation and service innovation

    2. Greatest challenge for your customer relationships>>> establish relationships

    3. Greatest challenge for your channels>>> create multiple touch-points

    4. Greatest challenge for your customer segments>>> value-driven innovation

    5. Greatest challenge for your revenue streams>>> usage, subscription, licensing models

  • Lets discuss the impact of trends in your markets

    Trends

  • Trends

  • Lets illustrate

    The global emerging middle class now stands at two billion people who spend USD 6.9 trillion a year, a figure which is expected to rise to USD 20 trillion - twice current US consumption - by 2020.

    Source: McKinsey, July 2010

  • Lets illustrate

    The top ten value creators in the Boston Consulting Groups 712-company sample are all from Asia: five companies listed on stock exchanges in China, two in Hong Kong, and one each in India, Indonesia, and South Korea.

    Source: Boston Consulting Group, September 2010

  • Lets illustrate

    The US ranked 24th out of 25 markets around the world in an examination of green consumer habits around the world. Approximately two in three Americans perceive green products to be too costly and one-third believes they dont work as well as regular products.

    Source: GfK Roper, October 2010

  • Lets illustrate

    Consumers from emerging markets in the Asian region are more willing to pay more for green products. Nearly 95% of Thai consumers, 90% of Chinese consumers and over 80% of Malaysian and Korean consumers are willing to pay more, yet less than 60% of consumers from other Asia-Pacific markets such as Hong Kong and Australia exhibit willingness to pay more.

    Source: Datamonitor, December 2010

  • Lets illustrate

    A national survey of 1,800 independent businesses in the US found that 80% said public awareness of the value of choosing locally owned businesses had increased in the last year.

    Source: ABA, January 2010

  • Lets illustrate

    Between the year 2010 and 2040, the global population age 65 and older is expected to rise from 530 million to 1.3 billion.

    Source: US Census Bureau, March 2010

  • Lets illustrate

    The number of non-employer (single person) businesses in the US, with an income greater than USD 1,000 (often secondary sources of income) increased by 40.5% in the ten years from 1997 to 2007.

    Source: US Census Bureau, June 2010

  • Lets illustrate

    An average of 78% of consumers in the US, UK, Canada, Brazil, India and China say they are willing to co-create with brands.

    Source: IBM, January 2010

  • Lets illustrate

    Each year, global consumers make more than 500 billion online impressions on one another regarding products and services.

    Source: Forrester, September 2010

  • How to design an effective business modeliDexpress, NOVU & dutchService design process

    1. Discover>>> goals, strategy, context and customer journey

    2. Conceptualize>>> experiences from end-users to personnel

    3. Design>>> touchpoints, service system, look-and-feel

    4. Build>>> platform, physical locations, media, training

    5. Deliver>>> organise, communicate, evaluate

  • Goal to learn how to design effective business models

    1.Lets meet the canvas>>> and your greatest challenges

    2.Lets think services>>> and use your creative instinct

    3.Lets talk business >>> and bring in your business logic

  • 3Businessthe models

  • Lets talk business

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue StreamsWhat are the most important costs inherent in our business model? Which Key Resources are most expensive?

    Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue StreamsWhat are the most important costs inherent in our business model? Which Key Resources are most expensive?

    Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • Ideas for inspiration

  • Goal share your most valued strategy book1. Decide on your most valued strategy book

    >>> be ready to explain why2. Ask your neighbor for his/her business card

    >>> and find one of your own3. Promise you will send him/her your most valued strategy book, as long as it is reciprocal

    >>> and share your experience in 2 minutes

    5 minutes, couples

    Break

  • Thank you >>> final thoughts

  • The importance of first drafts of new ideas

  • Facilitation to challenge assumptions

  • And visualisation of your business model

  • How to design an effective business modeliDexpress, NOVU & dutchPitfalls in business model innovation

    1. Executives focus too much on the content of the business model, without creating a shared language in a facilitated innovation process>>> create a shared language

    2. Executives regenerate successes from the past>>> speak out and challenge assumptions

    3. Executives are unable to be open to new ideas from others, because they are not at ease with letting go (some) of their control on the strategy formulation process>>> be brave and embrace others ideas

    4. Executives want perfect results>>> perceive results as first drafts

    5. Executives want to go too fast, because once a common language is shared the enthusiasm rises and new ideas keep arriving at the scene>>> invite a facilitator, create and reflect

  • Use all the knowledge you already have!Combine creative instinct with business logic... and design effective business models for your ideas!

    Ouke [email protected]@oukearts+31642266233

  • i New modelsfor inspiration

  • 10 New Business Models for this Decade1. Localized Low-Cost Business Model2. One-Off Experience Business Model3. Beyond Advertising Business Model4. Markets Are Conversations Business Model5. Low-Budget Innovation Business Model6. Community-Funded Business Model7. Sustainability-Focused Business Model8. Twisted Freemium Business Model9. Unlimited Niches Business Model10. In-Crowd Customers Business Model

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  • Localized Low-Cost Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Simple, small and cheap

    product/service

    Lower-incomes in emerging

    markets

    Metropolitan areas in

    mature markets

    Independent product/service

    designers

    Low costs

    Energy efficient distribution via local vendors

    Income generating/self-

    sustaining

    BrandsOther areas in

    mature markets

    Low prices x High volumes

    Cost efficient procurement

    Lower customer expectations

    Marketing and quality

    management

    Standardized local micro producers

    Micro financed local banks/foundations

    Minimum specifications

    Higher incomes in emerging

    markets

    Localized Low-Cost Business Model

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

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    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? How are we integrating them with customer routines?

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  • One-Off Experience Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    One-off experiences

    Online channels

    3rd party see-hear-buy

    product/serviceInstant

    consuming

    Instantcontributing

    Experience seeking

    customers

    Customers in markets of abundance

    Software development

    Offline event organizers

    Hosting costs

    Conversation engagement and initiative

    Software platform

    Commissions pop-up

    commerce

    Commissionsinstant online

    retail

    Offline pop-up commerce

    Online retailers

    Online presence and findability

    costs

    One-Off Experience Business Model

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

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    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? How are we integrating them with customer routines?

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  • Beyond Advertising Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Research, compare,

    review

    Beyond Advertising Business Model

    Trusted product/service advice

    Customers in mature markets

    Online channels

    IndividualsFacilitate interacting

    Facilitate sharing and contributing

    Commissions

    Commercial partners

    Publicpartners

    Facilitation fees

    On-demand interaction

    Customers in emerging markets

    Facilitation skills

    Content management

    costsOnline findability

    costsFacilitators

    Review portals

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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  • Example

  • Markets Are Conversations Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Markets Are Conversations Business Model

    Modular and beta products/

    servicesEngaged

    customers

    Online social networks

    Real-time tracking and conversing

    Find, follow, interact and collaborate

    Product/service improvement

    and innovation

    Social media skilled

    employees

    Lower product/service failure

    costsHigher recurrent

    revenues

    Media companies

    Non-engaged customers

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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  • Low-Budget Innovation Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Low-Budget Innovation Business Model

    Co-created products Early adopters

    Customer participation

    Local customer communities

    Global trend trackers

    Offline development

    labs

    Customer behavior

    intelligence

    Lower product development

    costs

    Higher new product success

    rate

    Customer observation

    Free / personalized

    samples

    Followers

    Online channels

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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  • Community-Funded Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Community-Funded Business Model

    Community-funded products Believers

    Community management

    Media companies

    Retail storesCommunity intelligence

    Production costs Product sales

    Fund management

    Suppliers

    Online community

    platform

    Buyers

    Distribution costsMarketing costs Interest

    Supplier subscriptions

    Producers

    Community membership

    Distributors

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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  • Sustainability-Focused Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Sustainability-Focused Business Model

    Sustainable products/services

    Customers in emerging markets

    Ecological organizations

    Research costs

    Retail stores

    Green status

    Brand defining employees

    Sustainable premiums

    Ecological impact research

    Green storytelling

    Green marketing Governments

    Customers in mature markets

    Marketing costs Government grants

    Product/service design

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

    ATeT]dTBcaTP\b

    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? How are we integrating them with customer routines?

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

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  • Twisted Freemium Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Twisted Freemium Business Model

    Free open source based

    product

    Paying customers

    Open source development community

    Platform development

    costs

    Online platform

    Continuously serviced product

    Open source product

    Professional subscription

    Product support services

    Product versioning and testing

    Self-service customers

    Sales costs

    Local branches

    Distribution costs

    Self-service and access to platform

    Designer: Ouke Arts ([email protected])

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    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? How are we integrating them with customer routines?

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

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  • Unlimited Niches Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    Unlimited Niches Business Model

    Platform

    Many niche segments

    Content production tools

    Low volumes x unlimited items

    Platform development

    Platform management

    Niche content providers

    Online channels

    User generated content

    Unlimited scope of niche content

    Platform management

    and promotion

    Service delivery

    Platform promotion

    Niche content providers

    Mass-customized

    Designer: Ouke Arts ([email protected])

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  • In-Crowd Customers Business Model

  • } 44 The Business Model Canvas

    Cost Structure

    Key Partners

    Key Resources

    Channels

    Key Activities

    Value Proposition

    Customer Relationships

    CustomerSegments

    Revenue Streams

    In-Crowd Customers Business Model

    Brand

    In-crowd customers in

    mature markets

    Personal in-crowd

    encounters

    Social and cultural

    experiences

    Highest margin prices

    Ambassadormarketing costs

    Production/service delivery

    costs

    Brand ambassadors

    Offline networks

    Social and cultural

    agencies

    Status triggering product/service

    Selective marketing

    Extremely personalized

    Production/service delivery

    Designer: Ouke Arts ([email protected])

    What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

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    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? How are we integrating them with customer routines?

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