venture further workshop business models docs... · • csfs for delivering value proposition ......
TRANSCRIPT
Venture Further workshop
Business Models
Martin Henery
Risks in starting up running a business
bull Working in groups brainstorm the key elements that you think are necessary for a successful business
bull Where can it go wrong and why
bull What would the worst business in the world look like
2
Some reasons why businesses fail
bull Nothing new to say
bull Cash flow crises
bull No management accounts
bull Falling out
bull Lack of succession planning bull Poor management systems
bull Lack of adequate working capital bull Inability to recognise what
business the company is in
bull Inadequate board bull Improper organisational structure
bull Failure to delegate
bull Poor market selection
bull Rapid growth
bull Rapidly changing external market conditions
bull Inability to make use of essential business and management practices
bull Incorrect diagnosis of the key skills gaps to develop or fill
bull Not setting up tools to monitor and manage business
bull Insufficient (financial) planning
bull Excessive optimism
bull Inability to change
bull Lack of expertise
3
Details
Supply side
bull CSFs for delivering value proposition
bull Appropriate resources and activities given priority
bull Most important things a company must do in order to make its business model work
bull Appropriate relationship with
partners
ndash Strategic partners alliances ndash Co-opetition
ndash Joint ventures
ndash Buyer-Supplier relationships to assure reliable supplies
Demand side
bull Problem being solved
bull Trends
bull Channel to market
bull Competition
bull Entry point
bull Sales process
ndash Awareness raising gt evaluation gt purchase gt delivering gt post purchase and feedback
4
Bases for Competitive Advantage
Fig 22
bull Speed of innovation
bull lsquoStrategic alliancesrsquo or Partners
bull Organisationally superior
bull Business model
bull Proprietary elements
ndash Specialist knowledge
ndash Trade Secrets
ndash Unique Rights
ndash hellip Intellectual Property
5
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
6
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Risks in starting up running a business
bull Working in groups brainstorm the key elements that you think are necessary for a successful business
bull Where can it go wrong and why
bull What would the worst business in the world look like
2
Some reasons why businesses fail
bull Nothing new to say
bull Cash flow crises
bull No management accounts
bull Falling out
bull Lack of succession planning bull Poor management systems
bull Lack of adequate working capital bull Inability to recognise what
business the company is in
bull Inadequate board bull Improper organisational structure
bull Failure to delegate
bull Poor market selection
bull Rapid growth
bull Rapidly changing external market conditions
bull Inability to make use of essential business and management practices
bull Incorrect diagnosis of the key skills gaps to develop or fill
bull Not setting up tools to monitor and manage business
bull Insufficient (financial) planning
bull Excessive optimism
bull Inability to change
bull Lack of expertise
3
Details
Supply side
bull CSFs for delivering value proposition
bull Appropriate resources and activities given priority
bull Most important things a company must do in order to make its business model work
bull Appropriate relationship with
partners
ndash Strategic partners alliances ndash Co-opetition
ndash Joint ventures
ndash Buyer-Supplier relationships to assure reliable supplies
Demand side
bull Problem being solved
bull Trends
bull Channel to market
bull Competition
bull Entry point
bull Sales process
ndash Awareness raising gt evaluation gt purchase gt delivering gt post purchase and feedback
4
Bases for Competitive Advantage
Fig 22
bull Speed of innovation
bull lsquoStrategic alliancesrsquo or Partners
bull Organisationally superior
bull Business model
bull Proprietary elements
ndash Specialist knowledge
ndash Trade Secrets
ndash Unique Rights
ndash hellip Intellectual Property
5
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
6
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Some reasons why businesses fail
bull Nothing new to say
bull Cash flow crises
bull No management accounts
bull Falling out
bull Lack of succession planning bull Poor management systems
bull Lack of adequate working capital bull Inability to recognise what
business the company is in
bull Inadequate board bull Improper organisational structure
bull Failure to delegate
bull Poor market selection
bull Rapid growth
bull Rapidly changing external market conditions
bull Inability to make use of essential business and management practices
bull Incorrect diagnosis of the key skills gaps to develop or fill
bull Not setting up tools to monitor and manage business
bull Insufficient (financial) planning
bull Excessive optimism
bull Inability to change
bull Lack of expertise
3
Details
Supply side
bull CSFs for delivering value proposition
bull Appropriate resources and activities given priority
bull Most important things a company must do in order to make its business model work
bull Appropriate relationship with
partners
ndash Strategic partners alliances ndash Co-opetition
ndash Joint ventures
ndash Buyer-Supplier relationships to assure reliable supplies
Demand side
bull Problem being solved
bull Trends
bull Channel to market
bull Competition
bull Entry point
bull Sales process
ndash Awareness raising gt evaluation gt purchase gt delivering gt post purchase and feedback
4
Bases for Competitive Advantage
Fig 22
bull Speed of innovation
bull lsquoStrategic alliancesrsquo or Partners
bull Organisationally superior
bull Business model
bull Proprietary elements
ndash Specialist knowledge
ndash Trade Secrets
ndash Unique Rights
ndash hellip Intellectual Property
5
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
6
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Details
Supply side
bull CSFs for delivering value proposition
bull Appropriate resources and activities given priority
bull Most important things a company must do in order to make its business model work
bull Appropriate relationship with
partners
ndash Strategic partners alliances ndash Co-opetition
ndash Joint ventures
ndash Buyer-Supplier relationships to assure reliable supplies
Demand side
bull Problem being solved
bull Trends
bull Channel to market
bull Competition
bull Entry point
bull Sales process
ndash Awareness raising gt evaluation gt purchase gt delivering gt post purchase and feedback
4
Bases for Competitive Advantage
Fig 22
bull Speed of innovation
bull lsquoStrategic alliancesrsquo or Partners
bull Organisationally superior
bull Business model
bull Proprietary elements
ndash Specialist knowledge
ndash Trade Secrets
ndash Unique Rights
ndash hellip Intellectual Property
5
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
6
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Bases for Competitive Advantage
Fig 22
bull Speed of innovation
bull lsquoStrategic alliancesrsquo or Partners
bull Organisationally superior
bull Business model
bull Proprietary elements
ndash Specialist knowledge
ndash Trade Secrets
ndash Unique Rights
ndash hellip Intellectual Property
5
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
6
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
6
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
What can be done to avoid these issues httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
7
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Apple and iTunes
8
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
The Business Model Canvas
9
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Established business models (patterns)
bull The Digital Enterprise (see Rapparsquos website) The Long Tail (MySpace)
bull Multi-sided platforms (Metro Google)
bull Freemium (Flickr Real Player Skype)
ndash Variants
bull Open Source (Red Hat) bull The Insurance Model (Rega Rega Rega - slide 34)
bull Razor and blades (Gillette)
bull Open Business Models ndash Outside-in inside-out
10
10
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
11
The Business Model Canvas
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Value Propositions 1 Targeted Ads 2 Free Search 3 Monitising Content
Channels bull Freemium Trojan Horse bull Free search engines
Customer Relationships
bull Acquire and Retain
(lower cost of marketing and identifying needs of customers) Identify and nurture latent needs ie Google + bull Create new types of customers ndash Google Drive bull Tools for advertisers to get a handle on ROI
Customer Segments 1 Advertisers 2 Web-Surfers 3 Content Owners
Revenue streams bull Keyword Auctions (1) bull Free (2 and 3)
Cost Structure bull Platform Costs
Key Partners
bull
Key Resources bull Search Engine bull Brand bull IP
Key Activities bull Platform Management bull Managing Services bull Expanding Reach
Business Model Canvas for hellipGoogle hellip 12 Adapted from Osterwalder
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Value Propositions
1 Ad space in high
circulation
newspaper
2 Free city-wide
commuter paper
Channels
1 Ad Sales
Force
2 Public
Transport
Train
stations Bus
stops
Customer
Relationships
bull Acquistion
bull Retention
Customer
Segments
1 Advertisers
2 Commuters
Revenue streams
1 Fees for ad space in paper
2 Free Newspaper
Cost Structure
1 Distribution
2 Content design and print of a daily newspaper
Key Partners
bull Distribution
agreement with
public transport
networks
Key Resources
bull Brand
bull Distribution
network and
logistics
Key Activities
1 Distribution
2 Write and
Produce a
daily paper
Business Model Canvas for hellipThe Metro hellip 13 Adapted from Osterwalder
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Value Proposition Provide procedures frameworks
and people to enable owner to
develop their business
(a) New salon owners () (Free
introduction to Case A ndash start of
relationship ndash pay next time)
(b) Owner()manager stylists
(free them up from tasks they
arenrsquot good at donrsquot want to do
but still want growth amp profits)
Case A could do this by
taking on direct responsibility
for certain operational areas
(or finding people to do that)
(c) Owner()manager (want to
learn about business and
develop as they grow their own)
Case A will provide mentoring
to assist personal
development (Premium area)
SMS suppliers
Opportunities for marketing new
systems using case studies of
enhanced profitability using their
systems and Case A
Channels lsquoPartnerrsquo with SMS
suppliers (iSalon
Shortcuts)
Social networks to
drive traffic to site
(Twitter facebook
LinkedIn)
Online mobile and f2f
Maybe concentrate on
lsquowarmrsquo contacts (no
cold calling ndash could
waste time)
SEO activities ndash drive
business to website
Relationships Existing clients
Blog providing forum for
commenting on industry
issues best practice
new ideas products
Customer acquisition
SMS gt client lists Word
of mouth networking
Complementary
partners
Specialist disc groups
eg LinkedIn ndash
recognised as
Industry Experts
Market segments
(a) New salon owners () (not
done this before but value help
and need to know the basics)
FREE
(b) Owner()manager stylists
(want to free up their time to
focus on the things that only
THEY can do in the business)
(c) Owner()manager (wish to
free themselves to work on the
business rather than in it ndash
maybe more entrepreneurial)
Supplier of Salon Management
Systems (SMS)
Aiming at small end of market
Want owners () to get best out of
system Limit to level of
customisation they can provide
( Small independent saloon
owner-manager stylists usually
with 6 or more employees and no
more than 2-3 salons who are
interested in growing and
developing the business by
maximising profitability and
increasing revenue streams
Revenue streams
Annual licence fee (per property and dependant on package purchased)
Complementary products (click through ads or of sales made to clients)
Mentoring services (premium service ndash per consultation)
Responsibility for delivering key operational targets (paid on performance)
Key Costs Customer acquisition
Updating knowledge base
121 f2f meetings
Preparation for meetings including analysis amp presentation of data
Updating and customising materials
Developing new materials (some multi-media audio podcasts video)
Maintaining on-line platform
Legal costs (Copyright design rights trademarks CDAs etc)
Key Partners Habia (standard setting body
for the hair beauty nails and
spa industries) ndash presume
that material once badged
will be used by teaching
organisations
Suppliers of salon mgmt
systems (SMS)
[Strategic relationship with
industry leaders
iSalon amp Shortcuts]
Key colleges and training
institutes ndash provide
workshops and maybe
accredited delivery In
exchange for your time
students get exposure to
Case A business methods
(connect promising students
with clients) What branded
items can be given away
lsquoplacedrsquo during Fresherrsquos
week at college
Key Resources SOPs that cover the
lsquohow-torsquo of running a
business
On-line platform with
on-line documentation
amp multi-media material
(enhance learning)
Experienced business
advisors (different levels)
Contacts networks
within the industry
Complementary partners
Case studies (success)
Conversion software
Key Activities Developing and
maintaining up-to-date
procedures amp policies
Customisation
processes
Automated data
processing
Analysing data
Running quarterly
reviews
Scanning for potential
opportunities and
threats for clients
Client interaction (inc f2f)
Case A ndash Business Model ndash Proposed
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
The Supply Side ndash Delivering Value
15
How do I deliver the value proposition
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
16
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Value Proposition
Women ndash aged 18-30 years
who are looking for new skills
job opportunities new
friendships aspirational role
models
those looking for more ethical
products but Green People
Channels
On-line
Retail
Raising awareness
Factory shop
Relationships
Engaged growing
customer base
informative positive
professional fun and
sassy confident
design led rich and
vibrant
Market segments
Disadvantaged who are
also unemployed
(They will possibly fall into
these categories ndash
homeless and mental
health issues Suffered
abuse long-term
unemployed (question of
stress and basic social
skills)
Women interested in
design eco-fashion
environment up-cycling
Recycled green ethical
clothing
Revenue streams
Retail ndash product sales
Training contracts
Donated fabrics
Donations
Key Costs Designers
Building website
Maintenance of website
Factory shop training premises
Updating social platforms
Key Partner Material fabric suppliers
Training commisioners
Designers
Key Resources High quality trainers
Designers able to pass
on designs and train
others
Good negotiators able to
capture new contracts
Individuals able to
convert fabrics to
scalable products
On-line platform
Key Activities High quality accredited
training opportunities
Design and conversion
of fabrics
Generating PR amp stories
Winning contracts
Maintaining and building
new relationships with
materials suppliers
Trend-watching ideas to
practice ndash good design
Factory shop
On-line amp social media
Case Bndash Outlined Business Model
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Resources
bull Osterwalderrsquos Business Model Canvas
ndash httpwwwbusinessmodelgenerationcomdownloadsbusinessmodelg
eneration_previewpdf - Free Book (part of)
ndash Blog - httpwwwbusinessmodelalchemistcom
ndash Slideshare - httpwwwslidesharenetAlexOsterwalder
ndash Youtube - httpwwwyoutubecomwatchv=dtfNsuP2AQQ
18
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Venture Further workshop
Business Models
(additional material)
Martin Henery
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
The business model simplified httpwwwyoutubecomwatchv=QoAOzMTLP5s
Demand side
ndash Value proposition
ndash Customer segment
ndash Relationship
ndash Channel to market
ndash Revenue (money in)
Supply side
ndash Key resources
ndash Key activities
ndash Partners
ndash Costs (money out)
20
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
The Demand Side ndash Creating Value
21
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
The basics of marketing
bull Segmentation
ndash Dividing the market in a meaningful way
ndash Identifying your customer amp what they value
ndash Characterise storyboard stereotypes
bull Targeting
ndash Which segment will you focus on
ndash Deciding on and adopting a specific strategy
bull Positioning
ndash How do you wish your offering to be perceived
ndash Create an image in the mind of the consumer
22
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
bull Identify and prioritise needs
bull Identify what benefits to supply
bull Understand how value is derived
ndash Use case
ndash Pricing
bull Channel to market
ndash Getting product to customer ndash How exchange can be made
bull Product service configuration
bull Product positioning and pricing
bull Targeting customer
Why is segmentation important
23
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Entrepreneurial Marketing
bull Appreciate the importance of marketing throughout the business start up process
ndash To identify key market segments ndash To develop an effective marketing strategy
ndash Define the business and create sustainable value ndash Identify route to market
ndash Aligns and counterbalances the internal and external requirements and forces
bull Marketing as you go
ndash Highly responsive to market (close to customer)
Value Proposition makes that possible
24
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Value Proposition
bull Determine the value proposition
ndash The value created to users by using the product or service
bull Creating and capturing value
ndash Value only arises when someone does something different as a consequence of using your product or service
Positioning Template
For (target customers) Who (has the problemneedpain)
Our product hellip(is new) Provideshellip (results)
Unlikehellip(competitors or substitutes)
25
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
26
Channels
bull Describes how a company communicates with and reaches its Customer
Segments to deliver a Value Proposition
bull Channels are customer touch points
ndash Raising awareness among customers about a companyrsquos products and
services
ndash Helping customers evaluate a companyrsquos Value Proposition
ndash Allowing customers to purchase specific products and services
ndash Delivering a Value Proposition to customers
ndash Providing post-purchase customer support
26
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
27
Customer Relationships
bull Describes the type of relationships a company establishes with its specific Customer Segments
bull Relationships can range from personal to automated motivated by the need for
ndash Customer acquisitions
ndash Customer retention
ndash Boosting sales (upselling)
27
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
The Supply Side ndash Delivering Value
28
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
How do I deliver the value proposition
29
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
30
Key Resources
bull Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition reach markets maintain relationships with customer segments and earn
revenues
bull These can be physical financial intellectual or human and can be owned
or lease by the company or acquired from key partners
30
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
31
Key Activities
bull Describes the most important things a company must do in order to make its business model work
bull Every business model calls for a number of key activities These are the most important actions a company must take to operate successfully
bull Like Key Resources they are required to create and offer a Value
Proposition reach markets maintain Customer relation ships and earn revenues And like Key Resources Key Activities differ depending on
model type
31
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
32
Key Partnerships
bull Describes the network of suppliers and partners that make the business model work
bull Companies create alliances to optimise their business models reduce risk and acquire resources
bull Different types of partnerships include
bull Strategic alliances between non-competitors
bull Coopetition strategic partnerships between competitors (Porter
video)
bull Joint ventures to develop new businesses
bull Buyer-Supplier relationships to assure reliable supplies
32
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
How is money made and how does
the business work
Take Inputs ProcessManufacture Output
Costs ndash Fixed and Variable Revenue
Profit
Businesses need to make a profit Revenues gt costs
Sustainable Competitive Advantage Revenues gtgt costs
33
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
min
istr
ative
Oth
er
op
era
tin
g e
xp
en
se
(in
co
me
)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Making a Profit ndash Capturing Value
34
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
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nd
Ma
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Comparison financial performance of EBaY and Amazon
EBaY
39
Cost Structure
bull Describes all costs incurred to operate a business model
bull Creating and delivering value maintaining Customer Relationships and
generating revenue all incur costs
bull Such costs can be calculated relatively easily after defining Key Resources Key Activities and Key Partnerships
35
35
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
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istr
ative
Oth
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xp
en
se
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To
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xp
en
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s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Revenue Streams
bull Represents the cash a company generates from each Customer Segment
bull A business model can involve two different types of Revenue Stream
ndash Transaction revenues resulting from one time customer payment
ndash Recurring revenues resulting from ongoing payments to either deliver a
Value Proposition to customers or to provide post-purchase customer support
36
36
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
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nt
(= R
ampD
)
Ge
ne
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nd
Ad
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ative
Oth
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tin
g e
xp
en
se
(in
co
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)
To
tal o
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ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Costs and Revenues
bull Bad debts and depreciation bull Research and development bull Equipment and raw materials
bull Utilities rates taxes and VAT
bull Insurance and legal
bull Marketing (incl promotion)
bull Salaries and benefits bull Professional services
bull Transportation bull Stationary consumables
bull Establishing IPR
bull Interest bull Rental leasing charges bull Web hosting IT bull Travel and subsistence
bull Rent and service charges
bull Sales ndash Selling product billable hours
bull Licensing
bull Royalties
bull Leasing rentals
bull Delivery charges
bull Product insurance
bull Commission bonuses tips
bull After sales maintenance servicing
and upgrades
bull Consumables (razors and blades)
bull Installation consultancy and training
bull Interest rent and other forms of ROI
37
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
nte
nt
(= R
ampD
)
Ge
ne
ral a
nd
Ad
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ative
Oth
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xp
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se
(in
co
me
)
To
tal o
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ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
Unaudited Condensed Consolidated Statement of Income
(US Dollars In Thousands)
EBaY Three Months Ended
June 30
Source 2004 2005
Net revenues 773412 100 1086303 100
Cost of net revenues 146531 19 191840 18
Gross profit 626881 81 894463 82
Operating expenses
Sales and marketing 189150 24 287144 26
Product development 59978 8 71639 7
General and administrative 102940 13 129340 12
Payroll tax on employee stock options 5186 1 1560 0
Amortization of acquired intangible assets 15769 2 25794 2
Total operating expenses 373023 48 515477 47
Income from operations 253858 33 378986 35 38
38
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
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nd
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(= R
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Oth
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)
To
tal o
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g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39
copy
MHenerymsecacuk
EBaY
Amazon
0
10
20
30
40
50
60
70
80
Co
st o
f sa
les
Sa
les a
nd
Ma
rke
tin
g
Te
ch
no
log
y a
nd
co
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(= R
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xp
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co
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)
To
tal o
pe
ratin
g e
xp
en
se
s
Inco
me
fro
m o
pe
ratio
ns
of net revenue
Comparison financial performance of EBaY and Amazon
EBaY
39