Business Role in Society 2 Notes

Business Model

Business Model

A system of how a company creates and captures value

A company takes the elements in its surroundings, transforms them and puts them back into the surroundings

Using the managerial functions of planning, organizing, integrating staff, directing and controlling, it transforms the elements or inputs

Value Creation

The process of transforming elements in the surroundings to create value for customers

Managerial Functions

Planning, organizing, integrating staff, directing, and controlling to transform inputs

External Environment

The context in which a company operates, including industry, economy, and society

Strategic Decisions

Choices made by a company regarding offerings and results from a systemic perspective

Holistic Approach

An analysis unit that emphasizes understanding business at a system level

Value Capture

The process of obtaining financial returns from value created

E-commerce Growth

The rise of online business models in the 1990s due to the Internet

Innovation in Business Models

Companies with higher financial performance focus more on innovating their business models

Tools for Business Model Development

Methods like brainstorming, maps, Plan Cruncher, Business Model Canvas, and Lean Canvas

Brainstorming

A group activity to generate and share ideas in a safe environment

Mental Maps

Flow diagrams that illustrate the organization and relationships within a company or project

Plan Cruncher

A one-page summary highlighting key aspects of a business idea

Business Model Canvas

A tool consisting of 9 blocks representing key areas of a company

Lean Canvas

A modified version of the Business Model Canvas focusing on problems, solutions, key metrics, and unfair advantages

Value Proposition

The main reason a customer would buy a product

Market Segments

Identifying the main target audience and their specific needs

Customer Relationship

The type of relationship a company wants to build with its customers

Channels

The methods used to deliver products/services to customers

Key Activities

Essential activities required for the production or sale of a product/service

Key Partners

Entities that help a company maximize operations, such as suppliers and strategic alliances

Key Resources

Required assets needed to create value for customers

Cost Structure

The monetary consequences of operating a business model, including fixed and variable costs

Revenue Streams

Various ways a company can generate income

Business Patterns

Concepts capturing design ideas that can be reused in business models

"Free" Business Model

A model where at least one segment benefits from a free offer

"Open" Business Models

Models that create value

A company is more than just

a product or service

Systemic perspective

The survival of any company implies strategical decisions towards what’s being offered, how and what results are getting from a:

A business model it’s a new analysis unit that’s different from:

• The product

• The company

• The industry or network

It emphasizes an holistic approach at system level to explain how companies do business

What does a business model try to explain

The value creation and value capture

Origin of the concept of business model

With the growth of the internet in the 90’s. And therefore, the e-commerce became a thing

A business model intervenes between technical and economical scopes

Aportaciones técnicas: ej. rendimiento de factibilidad

Modelo de negocio: mercado, propuesta de valor, cadena de valor, costo y beneficio, red de valor, estrategia competitiva

Salidas económicas: ej. valor, precio, beneficio

Tools to develop business models

• When we are designing our business model, its very common that our ideas come in random waves and it can cause us to rule them out or forget them. Sometimes, we can’t communicate only with words

• To solve those limitations and to enhance the results, there are some tools to develop business models

The 5 tools to develop business models

1. Brainstorming

2. Maps

3. Plan Cruncher

4. Business Model Canvas

5. Lean Canvas

Brainstorming

• It’s a bunch of ideas generated by a work group that are gather in a safe and ideal place to share thoughts and ideas without worrying about whether they are accepted or not

• The proposed ideas become public and anyone can share their opinion and propose modifications

Mental Maps

Flow diagrams that show the organization and the relationship between the different components of the company/project

Plan Cruncher

• One page summary that show the highlights that turn an idea into a great business

• It uses icons and few text

Business Model Canvas

Tool formed by 9 blocks that represent each key area of the company

Lean Canvas

• Its similar canvas to the BMC but with some changes:

  • The alliances are substituted by problems

  • The key activities changed by the solution

  • The key resources change for the key metrics or KPI’s, that will become a key element when pivoting

  • The relationship block is substituted by unfair advantage

Propuesta de valor

• La principal razón por la que alguien compraría tu producto

• “Un modelo de negocio fundamentado en la innovación se basa en encontrar y fomentar nuevas formas de crear, entregar y captar valor” - A.Osterwalder

Principales causas del fallo en emprendimientos

• 52% modelo de negocio, 29% motivos financieros, 19% otros

• Un modelo de negocios describe los funamentos de cómo una organización crea, desarrolla y capture valor

Business Model Canvas Areas

• How?

• What?

• For whom?

• How much?

Business Patterns

Propuesta de valor

• ¿Que valor entregamos al cliente?

• ¿Que necesidades estamos satisfaciendo?

• ¿Que paquetes de producto/servicio estamos ofreciendo a cada segmento de clientes?

2.1 Market segments

We have to id our main target, that which is worth the effort. The idea is to find the features or needs of that segment and develop the right strategies to approach them

1. Massive segmentation

2. Niche market

3. Traditional segmentation

4. Diversify: many segments, each one with a different set of features

5. Multi-platforms: they serve different segments that are somehow connected

2.2 Customer Relationship

• To be successful, a company must id the type of relationship they want to build with their customers

• There are several types of relationships:

  • Personal assistance: stronger relationship

  • (Devoted) personal assistance, ex. personal shopper

  • Self-service: indirect interaction

  • Automated services

  • Communities: interaction between customers who share their experiences

  • Co-creation: the customer is part of the production process

2.3 Channels

• It includes how do we deliver the product/service to the customer

• You can use your own channels, others or both:

  • Direct

  • Indirect

  • Combination

• Consider the distribution type:

  • Massive ex.coca cola

  • Intense ex. hp

  • Selective ex. zara

  • Exclusive ex. mcdonalds

Channels

• Direct

• Indirect

• Combination

Distribution type

• Massive ex.coca cola

• Intense ex. hp

• Selective ex. zara

• Exclusive ex. mcdonalds

3.1 Key Activities

• It requires to id those activities that are required for the production or sale of the product/service

• They are a must

• The most important categories are:

  • Production

  • Problem solution

  • Platform or network

3.2 Key Partners

• There are always partners that help the company to maximize the operations

• It can include: suppliers, financial institutions, legal aid, government, strategic alliances

3.3 Key Resources

• Include in this section all those resources that are needed to create value for the customer. They are considered as required assets to hold and support the company

• They can be: human, financial, physical and intellectual

4.1 Cost Structure

• In this section you’ll find the most important monetary consequence that occurs while operating business models

• It’s important to define whether your business is:

  • Cost motivated

  • Value motivated

• Consider: fixed and variable costs, scale economies

Cost definitions

• Cost motivated

• Value motivated

4.2 Revenue Streams

• It answers the question: how do we obtain money? There are many ways, some of the more common are:

  • selling assets

  • usage fair

  • subscription

  • rent/leasing

  • licensing

  • commission

  • advertising

Pattern

“It refers to the concept of capturing design ideas and be able to reuse them” - Christopher Alexander

Business model patterns

• In business models it’s related to:

  • Description with similar features

  • Similar behaviour

  • Similar organizations

• A pattern in Business Models describes similar characteristics, similar arrangements of business model building blocks, or similar behaviors

• 90% of all business models are based on 1 of the 55 existing patterns

• The business patterns are a source of inspiration

• When you have your own business or want to improve one, you should create your own proposal

“Free” as a Business Model

• At least, one of the segments gets constantly benefited by the free offer

• ex. Spotify

“Open” Business Models

• It creates and captures value by systematically collaborating with external partners

• It opens the research process to a third-party

• ex. innocentive

“Cross-sale” Business Models

• The companies can easily offer products or deals that are not necessarily linked to the main industry they’ve chosen

• They can generate additional income with relatively little-to-no changes in the infrastructure and existing assets

• ex. Ikea

“The long Tail” Business Models

• They’re focused on offering a huge variety of (rare) products, each one is sold in low volumes

• The real challenge in selling specialized content is to find potential buyers

• ex. amazon

“Razon & Blades” Business Models

• Business based on replacement/refill

• The basic product is cheap, sometimes it’s free, but the add-ons are expensive

• ex. Nespresso

Industry and Disruptors

Disruptors: Entities that significantly alter industry dynamics

Impact: Can lead to industry decline or transformation

Innovation: Often introduce new technologies or business models

Market Share: Disruptors can capture significant market share quickly

Consumer Behavior: Shift in preferences towards disruptor offerings

Adaptation: Established industries must adapt to surviveCompetition: Increased competition drives innovation and efficiency

Examples: Uber (transportation), Netflix (entertainment), Airbnb (hospitality)Response Strategies: Collaboration, investment in innovation, or acquisitionRegulation: Disruptors may challenge existing regulatory frameworks

Example industries and disruptors

Invincible companies

• “Its a company that reinvents itself constantly, before it becomes obsolete”

  • It beats itself

  • It explores the future by being excellent in the present

  • It cultivates an innovation and execution culture

  • It computes with superior business models

  • It transcend the industry’s limits

Invincible company’s competition

• An invincible company uses tools to explore the present and explore the future

7 actions of the exploration stage

Pivot

• It represents the decision of making a significant change to one or more elements of the business models

Example of Pivot

Conscious business models definition

4 pilars of conscious business models

• Higher purpose

• Stakeholders

• Conscious culture

• Conscious leaders

Conscious Business Models