CH 3 Business Models and Strategies

Business model

A companies core plan for how it creates, delivers and captures value. Specifies how the organization makes its money

Business plan

a detailed document that is prepared for

strategic guidance and to aid in the acquisition of resources, either

internal or external

Functions of a business model

• Articulate the Value Proposition -value created

• Identify the Market Segment to be Targeted, who and what

• Identify the Structure of the Value Chain: create and distribute the

offerings

• Estimate Cost Structure and Profit Potential

• Define Position in Value Network (Ecosystem)

• Formulate the Competitive Strategy

Evolving Business models : IBM

Business Machines > Computers > Tech Services (now focusing on cloud and Ai tech)

Evoloving Business models : GE

Was a Product/Services Conglomerate

Now 'World's Biggest Infrastructure Technology Company'

Focus on IoT and Machine Data

IBM and GE

Both founded in the physical economy and forced to adapt to the digitial economy

Evolving Business models: Amazon

Has many working parts; e-commerce with direct sales, 3rd party sellers as well as subscription based elements.

How Amazon Brought Multiple Business

Models Under One Roof

• It focused on customer satisfaction.

• It focused on innovation both to provide satisfaction and to lower costs.

• It recognized technology as a core competency.

• It promoted a "culture of metrics" in which all activities are measured and data- driven

improvements are made.

• The metrics culture also drove it to engage in experiments to improve its offerings.

• It constantly reevaluated its business model and makes changes or develops new

approaches as required.

Value proposition

A description of the customer value delivered to a specific target market.

It explains- How the products solves problems/improves situations

What specific benefits customers can expect

why customers should buy over competitors

Elements of a value proposition

Headline - Describes the end benefit your offering to the customer

Sub-headline or paragraph- Detailed Explanation of what you offer, to whom and why

3 bullet points (optional) - List all the benefits /features

A visual Element- Show a video or image to enhance your message

Process of creating a value proposition

1. identify customer benefits your product offers

2. link benefits to value offering

3. differentiate and position yourself

Building Blocks of the Business Model canvas

1. Customer Segments

2. Value Propositions

3. Channels

4. Customer Relationships

5. Revenue Streams

6. Key Resources

7. Key Activities

8. Key Partnerships

9. Cost Structure

Pipe model

Business Model where businesses create value by controlling a linear series of

activities- the classic value chain. The inputs at one end of the chain undergo a

series of steps that transform them into a finished product to create value. Value

is produced upstream and consumed downstream. - one direction.

Platform model

A business model where businesses create value by facilitating interactions

between external producers and consumers.

Two- sided Platform model

Connects two distinct groups, typically a supply and demand where each group needs the other for the platform to work (Uber: Drivers/Riders, AirBnb: Hosts/Guests

Multi-sided platform model

More than two distinct groups interacting, adds 3rd party networks, Advertisers, developers that interact with and feed off of the core user base (Facebook, google)

Advertising model

Delivering Awareness and Opportunities to Potential Customers: Delivers ads to customer segments, can use this model exclusively or supplement with affiliate/subscrition

Native advertising

Format where the ad being shown fits the context of the content on the site (healthcare ads on medical websites)

Brokerage model

Brings sellers and buyers together

on the Web to exchange goods and services, often for a fee or commission. Only facilitates the transaction and holds no inventory. (Etsy, Ebay)

Infomediary Model

Gathering and Distributing Useful Data

A site that gathers and organizes large amounts of data and acts as the middleman for those who supply the info and those who want it. Can be for businesses or individual people.

Merchant Model

Providing Goods and Services

consist of retailers or wholesalers that offer goods and services online. They dont only facilitate the transaction but also acquire, hold and ship goods. (Walmart, Bestbuy, Nordstrom) Amazon can also fall under this.

Manufacturer (Direct) Model

Reaching Buyers Directly

Provides direct sale of own manufactured products. Bypasses intermediaries such as wholesalers in channels of distribution. Straight from manufacturer to customer.

(Dell, Zara)

Utility model

Delivering Services or Content in a "Pay-as-You-Go" format

Only pay for services you consume, when you stop using you stop paying.

(Electricity, Water,)

Subscription model

Delivering Services and Content for a (Usually recurring) Set Fee

Existed before internet (Netflix, Hulu, Adobe)

Affiliate model

Incentives for Bringing Qualified Buyers

3rd party partners (influencer, content creators) get money for bringing qualified buyers. Usually a % or flat fee commission. (Hello fresh, Shopify, Better help)

Community model

Utilizes the network effects of the internet to connect like-minded individuals and

groups. relies on groups of people with shared interests. (reddit, wikipedia)

CrowdFunding model

a type of community model that is used to obtain needed resources, including financing, by soliciting from a community instead of traditional funding sources. (GoFundMe, Kickstarter)

Freemium Model

A business model where a company offers some basic services for free, and then charges money for certain additional features. (Spotify, Quizlet, Canva)

Blockchain

a shared, immutable (unchangeable) ledger that records transactions and tracks assets. These assets can be intangible (copyright, intellectual property, patents, etc.) or tangible (land, coffee, cars, etc.) allowing for virtually anything to be tracked and traded on this network

Crypto currency

a virtual currency that utilizes blockchain

technology.

Smart contacts

• sets of rules that are written and stored on the blockchain.

• automatically executed once the defined conditions in the contract are met.