Titolo presentazione

sottotitolo& Archetypes
Business Modeling
Milano, XX mese 20XX

Prof. Angelo Cavallo

Agenda

• What, Why, How business modeling?

• Business model archetypes

• Guest: Challenges in Business Modeling – A real case

• Business model design and validation: Lean Strategy&Tool

• Guest – HR perspective on compenteces the market is looking for

Purpose: Why?

Invention vs Innovation

Invention: «something newly designed or created, or the activity of designing

or creating new things»

Innovation: bringing inventions into the market or finding/creating a market

for inventions
Purpose: Why?

Innovation and Invention are two different process indeed

historically inventors may not correspond to innovators.

Inventors may result capable of extroridany action creating

something that has never been done before and that can have
great impact on real world.

But making such great impact happen is a different story, and

may require differnt capabilities.
Purpose: Why?

Examples: The «first» Internet

Invention: The first telegraph was

invented by Claude Chappe and his
brother Ignazio Chappe (end of 1700).

Innovation: Samuel Morse, who also

created Morse Code, was the first
person to build a commercially
successful telegraph communication
system in 1837 à key words: making
money and market adoption/diffusion
Purpose: Why?

How to move from inventions to

innovation?
CREATE
Business Modeling:

The process of creating a

business model
Value
What is a BM?
CAPTURE DELIVER
Business models is the value
architecture through which a
company creates, delivers to
and captures value from the
market.
Purpose: Why? 1/2

Business Model as a comprehensive unit of analysis for

innovation

• Product/Service Innovation: a new product/service valued by

the market (e.g. Iphone)

• Process Innovation: a new process valued by the market (e.g.

Nutella)

• Business Model Innovation: a new business model valued by

the market (e.g. Amazon; Ryanair)
Purpose: Why? 2/2

Being able to introduce a new business model is a capability extreamely

required nowdays

Any kind of professionals (managers, entrepreneurs, designers etc.) may

benefit form developing such capability

Business modeling is at the heart of entrepreneruship: «startups are

temporary organizations looking for a proven business model» (Steve Blak).

Business modeling is at the heart of corporate entrepreneruship: «large

organizations are expecially in need of re-thinking and constantly innovating
their business models to be sustainable in the long run» (Jeff Covin)
Business Model Archetypes

90% of all new business models

aren’t actually new. They are based
on existing archetypes.
Business Model Archetypes

Business Model Archetypes (or Patterns) are a set of predefined choiche that are
used to describe the way a company creates, delivers, and captures value.

• Freemium/Razor and Blade

• Subscription

• Hidden Revenue:

• Affiliate

• (Innovation) Platform

• (Transaction) Multi-sided market

Business Model Archetypes

•Product-centric vs. Service (Owned vs. Rented)

•Direct vs. Indirect sales (intermediaries)
•Vertical (single industry) vs. Horizontal (cross)
•Branded vs. Private Label (e.g. Elemaster)
•Advertising-supported vs. Fee-based
 Business Model Archetypes

•Cost Leader vs Differentiation.

•Niche vs Mass Market

•Premium vs Budget

•Local vs Global (Non scalable vs Scalable)

Business Model Archetypes

•Convenience vs Experience
•Price vs Value.
•Customization vs Standardization
•Access vs Ownership
•Functionality vs Emotion (e.g., Yankee Candle)
An Actionable Framework: The Business Model Canvas
(Osterwalder, 2010)
CREATE VALUE DELIVER

CAPTURE
The Business Model Canvas: an aggregated view (2/2)

• Value Proposition: a selected bundle of products and/or

services targeting a group of customers and satisfying
well-defined needs.
• Customer Interface: the channels through which we offer
our value propositions to our customers and the types of
relationships we entertain with our customers.
• Value Infrastructure: the key activities, resources and
suppliers/partners on which the value proposition is built.
• Value Monetization: the revenue streams through which
the company earns from its customers and the
corresponding cost structure.
 The Business Model Canvas: The Building Blocks of a
Business Model

A business model can be described by looking at a set of nine building blocks. To get
a good picture of our business model we should describe our:

1. Customer segments: Our groups of customers with distinct characteristics.

2. Value proposition: The bundles of products and services that satisfy our
customer segments’ needs.
3. Distribution channels: The channels through which we communicate with
our customers and through which we offer our value propositions.
4. Customer relationships: The types of relationships we entertain with each
customer segment.
5. Revenue streams: The streams through which we earn our revenues from
our customers for value creating and customer facing activities.
6. Key resources: The key resources on which our business model is built.
7. Key activities: The most important activities performed to implement our
business model.
8. Partner network: The partners and suppliers we work with.
9. Cost structure: The costs we incur to run our business model.
1. Customer Segments

• Customers are the heart of any business model. Successful companies

know how to turn satisfied customers into revenue streams.

• A clear description and understanding of a company’s customers is an

integral part of every business model.

Key Questions:
1. Who do we create value for?
2. Do any of these customers merit to be grouped into a distinct
category, because…
·… we propose them a distinct offer?
·… we reach them through different communication and distribution
channels?
·… we entertain different relationships with them (e.g. more
personal)?
·… they have a substantially different profitability?
2. Value Proposition

• The value proposition is the reason why customers turn to one company
over another. It solves a customer problem or satisfies a customer need.
Each value proposition consists of a selected bundle of products and/or
services.

• Some value propositions may be innovative and represent a new or

disruptive offer. Others may be similar to existing market offers, but with
added features and attributes.

Key Questions:
1. What do we offer the market?
2. What is the specific bundle of products and services you offer each of
our customer segments?
3. Which customer needs does each value proposition cover?
4. Do we offer different service levels to different customer segments?
Factors enabling value creation

• Originality • Cost reduction for the customer

• Performance • Risk reduction for the customer

• Customization • Accessibility

• «Getting the job done» • Handiness

• Design

• Brand/Status

• Price
3. Channels

• A company reaches its customers through various communication and

distribution channels. They represent the interface between a company, its
value propositions and its customers.

• Communication and distribution channels have become increasingly important

in business model design. For example, cost intensive channels should be used
for very profitable clients, while unprofitable clients should be served through
cost efficient channels.

Key Questions:
1. Through which communication and distribution channels do we reach our
markets?
2. How well does each channel work?
3. How expensive or cost efficient is each of our channels?
4. Through which communication and distribution channels do we promote
and deliver each value proposition?
5. Through which channels do we reach each customer segment?
Channels

The direct (sales force, web) or indirect channels (owned dealers, dealer
of partner, wholesalers) have different functions:

• Create awareness of the proposal

• Support the customer in the evaluation of the proposal

• Allow the purchase of specific products/services

• Get the value proposition to the customer

• Support the customer in the post-sale phase

4. Customer Relationships

• Getting relationship management right in our business model is crucial today

to satisfy customer’s expectations. For instance, customers paying a high
price for a product or service will expect a high touch relationship, while
customers paying a cheap price do not expect more than automated, yet
customized relationships.

• A sound business model has a clear strategy for customer relationship

management for each customer segment.

Key Questions:
1. Do we develop and maintain different types of client relationships in our
business model (e.g. more or less intense, more or less personal)?
2. How resource intensive is each of these client relationship types in
terms of time consumption and other costs?
3. For each client segment, which client relationship types and
mechanisms do we develop and maintain?
Customer Relationship management

• Personal assistance

• Dedicated personal assistance

• Self-service

• Automated services

• Online community

• Co-creation
5. Revenue Streams

• If customers comprise the heart of a business model, revenue streams are

its arteries.

• Revenue streams come from one or several segments of clients who are
willing to pay for the value they get from our offer.

• These revenue streams come in the form of selling, lending, licensing,

commissions, transaction fees or advertising fees.

Key Questions:
1. What are our revenue streams?
2. What are the revenue streams from each customer segment and
value proposition?
3. How much is each revenue stream’s contribution to overall revenues
in terms of percentages?
Examples of revenue streams

• Sell of products/services

• Usage fees

• Subscription fees

• Exclusive right of use for a limited time (renting)

• Licence

• Brokerage fees

• Advertising fees
6. Key Resources

• At the basis of every business model there is a set of key resources a

company must dispose of to make its business model work.

• These key resources include classical ones such as human resources and
tangible assets. Increasingly, business models are also built on intangible
assets that are difficult to quantify, such as brand equity and expertise of a
specific domain.

Key Questions:
1. What are the key resources we rely on to run our business model?
2. How does each of these resources relate to our value propositions
and their corresponding customer segments, channels and
relationships?
7. Key Activities

• To implement a business model a company needs to perform a number

of key activities. It may perform these activities itself or get them done
through a network of partners.

Key Questions:
1. What are the main activities we operate to run our business model?
2. On which key resources do they rely?
3. To which value propositions, channels or relationships do they
contribute?
8. Partner Network

• Today’s Business Models are more and more the result of a network of
partnerships, joint ventures, cooperation and alliances between different
companies.

• Every company must ask itself if and how it can leverage its own business
model by partnering with other companies. This includes the question of
what a company wants to do by itself and what it wants to do with partners.
It also includes the question of levering one’s own value proposition by
combining it with the value proposition of strategic partners.

Key Questions:
1. Which partners and suppliers do we work with?
2. Which key resources do they relate to?
3. To which value propositions, channels or relationships do they
contribute?
9. Cost Structure

• The cost structure is a direct result of all the other building blocks of the
business model. Ideally costs should be traceable back to each business
model block.

Key Questions:
1. What are the most important cost positions in our business model?
2. Can the cost positions be easily connected to a business model building
block?
3. Can costs be calculated for each customer segment?
Successful Business Models
Successful Business Models
Successful Business Models
Group work activity

Please draw the BM of Ryanair by working in group of 3/5 people.

 Titolo presentazione
sottotitolo
Business
Milano,Modeling:
XX mese 20XX Tools

Prof. Angelo Cavallo

 Titolo presentazione
Thank you!
sottotitolo
Milano, XX mese 20XX
Angelo Cavallo Ph.D.
[email protected]