innovation & business model & business model canvas 2014
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Business Models & Business Model Canvas
Serdar Temiz, temiz@kth.se
ME2603 Entrepreneurship 6.0 credits2014
Serdar Temiz temiz@kth.se 2014
Serdar Temiz temiz@kth.se 2013
Some Questions
• What is Invention• What is Innovation
Serdar Temiz temiz@kth.se 2013
There are many inventions, but far fewerinnovations.An invention is a novel ideaInnovation is the commercialization of thatnovel idea
Serdar Temiz temiz@kth.se 2014
Types of Innovation
1. Technology innovation2. Process innovation3. Product & service innovation4. Business Model innovation
Serdar Temiz temiz@kth.se 2013
Process innovation
Implementation of a new or significantly improved production or delivery method
Serdar Temiz temiz@kth.se 2014
Technology innovation
Serdar Temiz temiz@kth.se 2014
Product / service innovation
Serdar Temiz temiz@kth.se 2014
Business Model Innovation
It can be, even more, important than tech innovation!
Serdar Temiz temiz@kth.se 2014
Business Model Innovation
Finding and executing the right business model can be the only/ main reason of the success
Serdar Temiz temiz@kth.se 2013
What is this?
Serdar Temiz temiz@kth.se 2013
What is this?
Haloid Model 914Xerox Model 914
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Why business models matter?Joan Magretta
• Who is the customer and what does the customer value?
• How do we make money from the business?• How can we deliver value to the customer at an
appropriate cost?• Writing a new story• A better way than existing alternatives• Making the number add up• Tweaking on the fly based on feedback
Serdar Temiz temiz@kth.se 2013
Business Model WarfareLangdon Morris
• Business mortality is high• Technology innovation by itself has rarely
been sufficient to ensure the future.• Similar products and services• Advantages resulting from a successful
business models are fleeting. Models need to be continuously reviewed and updated when necessary
Serdar Temiz temiz@kth.se 2013
How Business Models Emerge (1 of 3)
– The value chain is the string of activities that moves a product from the raw material stage, through manufacturing and distribution, and ultimately to the end user.
Primary activities are directly concerned with the creation or delivery of a product or service.Support activities help to improve the effectiveness or efficiency of primary activities
Raw Material
Value ChainPrimary & Secondary Activities +
Margin
Product / Service
Serdar Temiz temiz@kth.se 2013
How Business Models Emerge (2 of 3)
The Value Chain (again)
"Competitive Advan tage: Creating andSustaining superior Performance" (1985).
Serdar Temiz temiz@kth.se 2013
How Business Models Emerge (3 of 3)
The Value Chain (continued)– Entrepreneurs look at the value chain of a product
or a service to pinpoint where the value chain can be made more effective or to spot where additional “value” can be added.
Serdar Temiz temiz@kth.se 2013
A business Model is..
The business model is a strategic plan to be implemented through organizational structures, processes, and systems in order to need customer needs.
Serdar Temiz temiz@kth.se 2013
Simple Business Model
Value Proposition
Revenue Model
Production Model
Delivery Model
Serdar Temiz temiz@kth.se 2013
Simple Business ModelVa
lue
Prop
ositi
on
10Re
venu
e M
odel
10
Prod
uctio
n M
odel
10
Del
iver
y M
odel
10
HOW MANY OPTIONS DO WE HAVE?
Serdar Temiz temiz@kth.se 2013
Forces affecting the business model
• Customer needs• Competition• Technological change• Social change• Legal environment
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Source: PwC, The future of mobility, October 2013
Serdar Temiz temiz@kth.se 2014
Basic Business Model Map
Product/Service Ecosytem
Customer EcoSystem
Finance
Value
Serdar Temiz temiz@kth.se 2014
There are different type of Business Model Maps
Serdar Temiz temiz@kth.se 2014By Alexander Osterwalder & Yves Pigneur
Serdar Temiz temiz@kth.se 2014
The 9 building blocks for Business Model Canvas
1. Customer Segments2. Value proposition3. Channels4. Customer Relationships5. Revenue Streams6. Key Resource7. Key Activities8. Key Partnerships9. Cost Structure
Serdar Temiz temiz@kth.se 2013
1. Customer Segment• For whom are we creating value? • Who are our most important customers?• Customer Segments– Mass Market– Niche market– Segmented - related customer segments: frequent
flier program, bank customers with big assets– Diversified: Unrelated customer segments: Amazon– Multi sided: free newspaper-readers and advertisers
Serdar Temiz temiz@kth.se 2014
Find a Customer-I
• Why?• Who is your customer? Grave, School, hospital, apotek, free newspaper• Can everyone be your customer?• "people who want to buy a flat," • "anyone needs job" • “Everyone who goes to university”
Serdar Temiz temiz@kth.se 2014
Find a Customer-II
• Find a customer for solving a pain• Use the Customer Profile• Describe who is making purchasing decision? IT ? Operations Group? Management?• Make sure they are happy• Market is important but -do not only think market• Billion dollar market does not start in few minutes
Serdar Temiz temiz@kth.se 2013
Q’s for Customer
IDENTIFIABLE – what distinguishes them?MEASURABLE – how many belong to your target segment?REACHABLE – how to reach, communicate with each segmentWILLING– do they want it?ABLE– they want but can they afford it?
Serdar Temiz temiz@kth.se 2013
Q’s for Customer - Macro Level
• Population size• Population character• Disposable income levels• Educational background• Primary languages• Infrastructure• Regulations• Political affiliation• And so on…
Serdar Temiz temiz@kth.se 2013
Keep In Mind -Paradox
• Customer is important but you can not give all they want
• Learn to stay No,• Learn to focus• Learn to ”change and adopt”• They may not know what they want: buying
process is mysterious
Serdar Temiz temiz@kth.se 2013
2.Value Proposition
• a bundle that meets that meets a customer's needs or solve his/her problem.
• benefits can be tangible and intangible• Reason why customers pick one business or
another.• can be – innovative, new disruptive offer– similar to existing offers but just added feature or
attribute in some sort of way
Serdar Temiz temiz@kth.se 2013
Some Elements that may add to value
• newness• customization• getting job done• support• price
• design• status/ brand• Accessibility• risk deduction• usability
Serdar Temiz temiz@kth.se 2013
2. Value Proposition - Q’s to answer –
• What pain do we solve for customer?• What do we deliver for customer?• What value do we develop for customer• Which need of customer do we satisfy?
Serdar Temiz temiz@kth.se 2013
3. Channels
• Awareness of products and services, Evaluation of value proposition, Purchase, Delivery, After sales
• Direct: Brick and mortal stores, websales, sales force
• Indirect: wholesales partner stores,
Value Proposition
Customer Segment
Serdar Temiz temiz@kth.se 2013
3. Channels- Qs
• 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?
Serdar Temiz temiz@kth.se 2013
4. Customer Relations
• Customer acquisition
• Customer retention
• Boosting sales (upselling)
Value Proposition
Customer Segment
Serdar Temiz temiz@kth.se 2013
Example Customer Services
Can you give some example companies?• (Dedicated)Personal assistance• Self Service• Community• Co-creation• Automated
Serdar Temiz temiz@kth.se 2013
4. Customer Relationships
• What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
• Which ones have we established? • How costly are they? • How are they integrated with the rest of
our business model?
Serdar Temiz temiz@kth.se 2013
5. Revenue Streams
• For what value are our customers really willing to pay?
• One time/ recurring?• 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?
Serdar Temiz temiz@kth.se 2013
5.Revenue Streams
•ChannelsValue Proposition
Customer Segment
• Asset sale• Usage fee: use more, pay more• Subscription: monthly, yearly• Leasing/Lending/Renting• Licensing: patents, license fee• Brokerage fees• Advertising
Fixed pricing
Dynamic pricing
Serdar Temiz temiz@kth.se 2013
5.Revenue Streams
Fixed pricingDynamic
pricing
• List price • Product feature
dependent• Customer segment
dependent• Volume dependent
• Yield management : hotels, airlines
• Real-time-market :supply and demand
• Auctions Price • Negotiation
Serdar Temiz temiz@kth.se 2013
6. Key Resources
Value Proposit
ion
physical financial
intellectual human
Key resources can be owned or leased by the company or acquired from key partners.
Serdar Temiz temiz@kth.se 2013
6. Key Resources
• What Key Resources do our Value Propositions require?
• Our Distribution Channels? • Customer Relationships? • Revenue Streams?• What physical resources, intellectual,
human, financial resources do we have?
Serdar Temiz temiz@kth.se 2013
7. Key Activities
• What Key Activities do our Value Propositions require?
• Our Distribution Channels? • Customer Relationships? • Revenue streams?• Production- Microsoft• Network/Platform: Facebook, ebay, Visa
Serdar Temiz temiz@kth.se 2013
8. Key Partnerships
Why Partnership?– reduce cost, – Reduction of risk and uncertainty: Web standards– Acquisition of particular resources and activities: Nokia
Windows, HTC phones• Strategic alliances between non-competitors• Coopetition: strategic partnerships between
competitors• Joint ventures to develop new businesses• Buyer-supplier relationships to assure reliable supplies
Serdar Temiz temiz@kth.se 2013
8. Key Partnerships -II
• Who are our Key Partners? • Who are our Key suppliers? • Which Key Resources are we acquiring from
partners? • Which Key Activities do partners perform?
Serdar Temiz temiz@kth.se 2013
9. Cost Structure-I
• Business model Cost Structures:
cost
-driv
en minimizing costs wherever possible
valu
e-dr
iven Premium
Value Propositions and a high degree of personalized service
Serdar Temiz temiz@kth.se 2013
9. Cost Structure-II• Cost Structure Characteristics:
• minimizing costs wherever possibleFixed costs
• Premium Value Propositions and a high degree of personalized serviceVariable costs
• average cost per unit to fall as output risesThe same Distribution
Economies of scale
• Channels for different products and servicesmay support multiple products.
Economy of Scope
Serdar Temiz temiz@kth.se 2013
9. Cost Structure
• What are the most important costs inherent in our business model?
• Which Key Resources are most expensive?• Which Key Activities are most expensive?
Serdar Temiz temiz@kth.se 2014By Alexander Osterwalder & Yves Pigneur
Serdar Temiz temiz@kth.se 2013
Team, Social Value, Enviromental cost etc.
Problems with this canvas?
Serdar Temiz temiz@kth.se 2014By Alexander Osterwalder & Yves Pigneur
Serdar Temiz temiz@kth.se 2014By Alexander Osterwalder & Yves Pigneur
Serdar Temiz temiz@kth.se 2013
• Strategic Mission?• Customer Segments are Hypotesis for startups• Fits to New and Existing Business but does it
work in Start ups?• Metrics?• Competition? Organisational Structure?• Unfair Advantage over competitors?
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Mark Johnson
Serdar Temiz temiz@kth.se 2013
Spotify Business Model
Serdar Temiz temiz@kth.se 2013
Business Model Canvas – Spotify- September 2014
Key Partners Key Activities Value Propositions
• .
Customer Relationships
Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Serdar Temiz Stockholm-Sweden
Listeners• Legal music for free or minimum payment
• Be social when you listen• Music based on mood
• Automated service
• self service (FAQ)• Community forum• Customer Service
• Awareness at social media
• Mobile application• Desktop application• Spotify.com
Advertisers
• self service : on learning how ads are located in the spotify etc.
• personal assistance: to put ad, advertisers should get in touch directly
• Targeted advertisement-
• commercials between songs: make listeners sure to listen
• Keep technology up and running
• Adding more music, label, artists to Spotify offering
• Launching Spotify in different countries
• Music,• Server,• Brand• Employees
• Labels, • aggregators (e.g merlin
network )• Facebook
• License fee• Salaries• Technology cost
• Awareness with social media partners (fb, msn)
• Customer center representative
Advertisement revenue
Subscription of unlimited and premium customers
Serdar Temiz temiz@kth.se 2013
Are we done?
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Business Model Canvas – Spotify- September 2014
Key Partners Key Activities Value Propositions
• .
Customer Relationships
Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Serdar Temiz Stockholm-Sweden
Listeners• Legal music for free or minimum payment
• Be social when you listen• Music based on mood
• Automated service
• self service (FAQ)• Community forum• Customer Service
• Awareness at social media
• Mobile application• Desktop application• Spotify.com
Advertisers
• self service : on learning how ads are located in the spotify etc.
• personal assistance: to put ad, advertisers should get in touch directly
• Targeted advertisement-
• commercials between songs: make listeners sure to listen
• Keep technology up and running
• Adding more music, label, artists to Spotify offering
• Launching Spotify in different countries
• Music,• Server,• Brand• Employees
• Labels, • aggregators (e.g merlin
network )• Facebook
• License fee• Salaries• Technology cost
• Awareness with social media partners (fb, msn)
• Customer center representative
Advertisement revenue
Subscription of unlimited and premium customers
Can add music to their code
• developer.spotify.com/• physical meetups
????++?
Serdar Temiz temiz@kth.se 2013
Facebook’s Canvas?
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
iTune’s Canvas
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2013
Twitter’s Canvass
Serdar Temiz temiz@kth.se 2013
Serdar Temiz temiz@kth.se 2014
Thank youSerdar Temizserdar_temiztemiz@kth.se
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