Business Models

• A business model is 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

• The companies interact with the customers and other companies

• A company doesn’t exist in the void, it depends of its context and external environment… it’s part of a bigger system: industry, economical environment, society…

• A company is more than just a product or service.

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

• 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

• It tries to explain both: the value creation and value capture

• The concept of business model became frequent with the growth of Internet in the 90’s. And, therefore, the e-commerce became a thing

• The companies that have a higher financial performance put an extra effort in innovating their business model (more than those who don’t have that performance

• A business model intervenes between technical and economical scopes

Tools to develop Business Models

• When we are designing our business model, it’s 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

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

Business Models

• 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

• Áreas:

2. 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

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

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

Business Patterns

• Pattern

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

  • 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

• “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

• 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

Pivoting

• 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

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

• Pivot

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

Conscious Business Models

• 4 Pilars

  • Higher purpose

  • Stakeholders

  • Conscious culture

  • Conscious leaders