value as foundation of business - mycourses.aalto.fi
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Value as foundation of businessIndustrial engineering 1 / 20.9.2021
Petri ParvinenMikko Jääskeläinen
LiiketoimintamalliThe nature of value,Business models,Competition & business environment
Principles of sales and marketing
Value as foundation of business
Purposeful economic activity
Transformation
Resources Transaction
UtilityYou
desire something
You own something
You can trade with
others
You can product
somethingProduction
of goods and services
Retail,logistics Financing
NeedWantDemandConsumption
CapabilitiesCompetence
LandPower
At the heart of production and transaction is the product*
Transformation
Resources Transaction
Utility
Product*
* Here, product rrefers to all offerings of a company, be it products, services, or their combination
Product* has propertiesthat link it to the userand to the operationsand business of theproducer. Both of thesedefine the sustainabilityof the product and thebusiness.
* Tuote tarkoittaa tässä yhteydessä yrityksen tarjoamaa, oli se sitten tuote, palvelu, tai näiden yhdistelmä
Product
CustomerCompany
Goals of the
customer
Business model
Propertiesrelevant to
the use
Propertiesrelevant to the
business
Gyms & Fitness(NACE) 9313 - Fitness facilities
+ 109 other= 129 companies, 216 facilities
-40
-20
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1. The nature of valueWhat the value of a product is based on, and what the customers are paying for?
1. Value is not a property of a product or service, but it is the property of use and transaction
2. The value of use stems from those practices and meanings to which the product relates
3. Value stems from users needs & goals, but is manifested in the price of the product• Value of use > Transaction value (market price)
Value
The process of going to the gym?
The process of going to the gym
Value from useInterface costs
The value of service (or product) consists of its fit to the user’s aims and its usability
Aspects that increase thevalue of the service:
Functions of the devices& training space
Guidance, training
Social meanings for identity and distinction
Aspects that increase the value of usability
Care for children
Lockerroom services
Reachability, multiplelocations
Need Goal
Value of aproduct / service
to its user
Value of a product to customer:How important the goals is, how relevant
the product is for achieving this goal, how well it matches this need?
Practices&
Meanings(Social,
functional,& esthetic)
Product
Userinterface
Userexperience
Value of use
Needs& Goals
Practices&
Meanings(Social,
functional,& esthetic)
Basicweights
Gym +exercisegroups
Specializedexercise
0
20
40
60
80
100
120
140
160
180
Basicweights
Gym +exercisegroups
Specializedexercise
Pric
e/ m
oWider offering and specialized know-how appears to
increase transaction value(and implicitly, value of use)
The value of the productis based on the benefitsthat it enables customerto achieve when used
2. Business modelHow the value a product for a customer is connected to the operations of a company?
Product
Userinterface
Userexperience
Value of use
Needs& Goals
Practices&
Meanings(Social,
functional,& esthetic)
Businessmodel
What are therequirements of the service to its
production?
Product design
Product Operations
Customer Develop.
Value Technology
CapabilitiesVisibility, meaning
Business model1. Individual elements
2. Connections betweenelements
3. Interfaces toenvironment
Business modelBusiness model = a system of interconnected and
interdependent activities that define how a company operates, how it produces value and what are its interfaces towards customers, partners, and suppliers
= Framework to describe the business model of a company, focusing especially:1. the most relevant activities of a firm2. the relevant differences between firns
Description of Business model
www.businessmodelgeneration.com
Business ModelBusiness Model Canvas,
especially for drafting a new BM and for communication
Business model
Prof. Jens SchmidtTU-C2010 Introduction to Strategic Management
Especially for strategy
Operations• Activities and inputs
• Scope (own production vs. acquired)
• Locations
Customer linkage• Channels & sales
• Customer relationship• Brands & marketing
Market position• Product offering and customer needs• Value proposition and revenue logic
• Customer segments
Development• New products and services
• New markets• New capabilities
A sketch of business models in gyms
Range of offering Range of operationsBasic gym
Combination
Specialized
Increasingcapability/
coordinationintensity
Individual gym
Chain
Franchise chain
Increasingresource-
complexity
Franchise gym
Subsidiary
Basicweights
Gym +exercisegroups
Specializedexercise
Individual firm
Chain Franchise Subsidiary0
102030405060708090
100
Corporate forms in fitness business
Number of firms Number of locations
Specialized
Combination
Gym
Individual firm
Franchise
SubsidiaryChainIndividual
firmFranchise
SubsidiaryChain
Meanings & motives Practices Products &
Services Production
Aesthetic & socialmeanings
Functionalneeds
Locker room
Group activities
Gym
Venue
+ services
+ services
+ services
+ services Resources and processesrequired to produce the
services
Building blocks of business model a gym
The value that theproduct offers for thechosen customer groupdefines the business operations
3. Business environment & competitionFor which customers a company shouldcompete?
0
20
40
60
80
100
120
140
160
180
Basicweights
Gym +exercisegroups
Specializedexercise
Pric
e/ m
oWider offering and specialized know-how appears to
increase transaction value(and implicitly, value of use)
Use value =Benefit of using the product
Transactionvalue =Market price
Max price
Competedprice of a product
Value is not a property of a product or service, but a property of the customers’ use of the product and
the transaction that it entails
Why am I in IKEA?
Price
Offering(Range &
availability)
Economies of scale
Location (cheap)
Self-assembly
Self-service
Space economies
Warehouse scale
Porter 1995 What is strategy? HBR
Synergistic elements of IKEA
Value for userCompeting businessmodels
Market price
Productioncosts
CompetitiveBMs
InfeasibleBMs
Varying, customer specific uses à
Varying, customer specific valuearvo
Competitiondecreasesthe market price for a product/service
Product Operations
Customer Development
Product Operations
Customer Development
Product Operations
Customer Development
(Lauttasaari)
Specialized
Basic gymCombination
revenue
Prof
it
-250
-200
-150
-100
-50
0
50
100
150
200
250
0 200 400 600 800 1000 1200 1400
(Kaari)
Image, brand, location
Geographic reach,IT & HR systems
Locations, brand
Specialized expertice
Individual firm
Chain Franchise Subsidiary
Specialized
Combination
Gym
Competitive factors
Competitive factors
Product Operations
Customer Development
Value Price
What is the goal of the user and how the product helps to make it happen?
(Job-to-be-done)
Competitive Advantage
Fit withneeds
Synergies withinoperations
Coreresources
Product
Bus
ines
s va
lue Fit with
resources&
capabilities
Systemicbenefits
Coreresources
Competi-tiveness
Product
Userinterface
Userexperience
Value of use
Needs& Goals
Practices&
Meanings(Social,
functional,& esthetic)
Product design
Bus
ines
s va
lue Fit with
resources&
capabilities
Systemicbenefits
Coreresources
Competi-tiveness
Business design
Requirements of the service to itsproduction
The limitations of resources, business model and
competition to feasibleproducts and services
Why customerbuys a product?
What a companyshould produceand how?
For whichcustomers a company shouldcompete?
The value of the product is basedon the benefits that it enablescustomer to achieve when used
The value that the product offers for the chosen customer group definesthe efficient business operations, and thereby focus and limits of thecompanyResources, capabilities, and business model determines themarket where the company canfunction efficiently
THX!