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Business Models - Definition, Building Blocks, Innovation

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An introduction to business models and business model innovation.

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Business Models - Definition, Building Blocks, Innovation

  1. 1. Business Models – Definition, Building Blocks, Innovation Remus Toma tomaremus@gmail.com @RemusToma http://ro.linkedin.com/in/remustoma
  2. 2. Are they right? !   “…today, business models are one of the most sloppy used terms in business; they are often stretched to mean everything and end up meaning nothing” (Magretta, 2002) !   “…a business model is like the old saying about teenage sex: everyone talks about it all the time; everyone boasts about how well he or she is doing it; everyone thinks everyone else is doing it; almost no one really is;” (TechCrunch, 2011) @RemusToma * http://tcrn.ch/P9MWpT
  3. 3. Apparently so… A recent study (Zott et al. 2010) showed that out of 103 business model publications: •  37% don’t define the concept at all •  44% define the model but without overlaps •  The rest…quote others @RemusToma
  4. 4. Why should we know what a Business Model is? !   To know what the heck we’re talking about with investors !   To helps focus your start-up/company employees !   To give you a framework to think about your business !   To obtain a shared understanding !   To obtain a shared language !   To be able to innovate and create great Business Models @RemusToma
  5. 5. So, what is a Business Model? !   The business model is a diagram that escribes the logic behind how your business functions. OR !   “A business model describes the rationale of how an organization creates, delivers, and captures value” (Ostervalder & Pigneur, 2009:14) !   So, the business model comprises of several elements: product/ service, distribution, customers, financial viability Delivers Value Company Customer (value (value creator) receiver) Captures Value @RemusToma
  6. 6. What are the components of a Business Model? !   9 building blocks (Osterwalder & Pigneur 2002): Pillar Business Model Block The Product Value Proposition Customer Segment The Customer Distribution Channel Customer Relationship Key Resources Infrastructure Management Key Activities Key Partnerships Revenue Streams Financial Aspects Cost Structure @RemusToma
  7. 7. Building Netflix’s Business Model !   Netflix allows renting an unlimited number of movies, for an unlimited period of time, choosing from a huge variety of movies, in exchange for a monthly payment, and deliver them through a convenient and fast mail delivery. @RemusToma
  8. 8. 1. Customer Segment !   Who are you creating value for? Who are the customers that you wish to reach and serve? Who are your most important customers? !   Identify customer needs and desires and segment the market !   Most common market segmentation techniques of users with common needs: !   By geography !   By demographics (age, sex, income, occupation, etc.) Netflix Segmentation:   By personality, lifestyle, social class, interests. ! !   By behavior – how they use the product, brand loyalty, etc. Avid movie explorers !   Etc. that prefer convenient delivery @RemusToma
  9. 9. 2. Value proposition !   The product/service that is useful for your customer segments -> why customers love you !   Answers the question: what value do I deliver? Which problems or needs are we solving/satisfying? !   Value is what the customer gets for what he gives2, but can be influenced by: !   Performance !   Customization Netflix VP: !   Design

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