1. Designing Business Models
(& Business Ecosystems)
Michael Weiss
Carleton University
TIM Program
michael_weiss@carleton.ca
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2. Objective
• Upon completion of this session, you will know about:
– Building blocks of a business model
– Modeling a business ecosystem
• And you will be able to:
– Create a model of your business and your ecosystem
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3. Agenda
1. Modeling your business
2. Common business models
3. Modeling your ecosystem
4. Key lessons
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4. 1. Modeling your business
• What is a business model?
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5. 1. Modeling your business
• What is a business model?
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6. Business model frameworks
• Business model frameworks
– Provide a shared vocabulary and structure for describing and
comparing business models
– Aim to be intuitive, yet comprehensive enough to capture the
nuances of business operations and strategy
• Examples of business model frameworks
– Four-box framework (Johnson, 2010)
– Six-function framework (Chesbrough & Rosenbloom, 2002)
– Four-factor framework (Muegge, 2012)
– Business model canvas (Osterwalder & Pigneur, 2010)
Read the article on Business Model Discovery in the TIM
Review, http://www.timreview.ca/article/545
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7. Comparison (1)
Four-box framework: Six-function framework:
Seizing the White Space Open Innovation
1) Customer value proposition 1) Value proposition
2) Profit formula 2) Market segment
3) Key resources 3) Value chain
4) Key processes 4) Cost structure/profit potential
5) Value network
6) Competitive strategy
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8. Comparison (2)
Nine building blocks: Four-factor framework:
Business Model Canvas Business Model Discovery
1) Customer segments 1) Importance (pain point)
2) Value propositions 2) Stakeholder value propositions
3) Channels 3) Profit formula
4) Customer relationships 4) Capabilities (these include
resources and processes)
5) Revenue streams
6) Key resources
7) Key activities
8) Key partnerships
9) Cost structure
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9. Business model canvas
Key partners Key activities Value Customer Customer
proposition relationships segments
Key Channels
resources
Cost structure Revenue streams
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10. Guiding questions (1)
Offer • What value do your deliver to the customer?
• Value • What customer problem are you solving?
proposition • Which jobs are you helping them get done?
• Which customer segments do you serve? What
products and services do you offer to each?
Customers • Who are you creating value for?
• Customer • How do you segment your market and which
segments segment (“niche”) do you focus on initially?
• Customer • How do you acquire, keep, and grow your
customer base (customer relationships)?
relationships
• How do you reach those customers?
• Channels
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11. Guiding questions (2)
Profit Formula • What value are customers willing to pay for?
• Revenue • What revenue streams do you have, and how
streams much does each stream contribute?
• Cost structure • What are your most are most expensive?
activities/resources
important costs? Which
• Is your business model cost- or value-driven?
Infrastructure • What resources/activities are required in order
to deliver the value to the customer?
• Key
resources • Examine your distribution channels, customer
relationships, and revenue streams!
• Key activities • Who are your key suppliers and partners (eg
• Key partners intermediaries, complementors)?
• Which resources/activities do you acquire?
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12. Business model canvas tools
• Most common way of using the canvas is the paper
version: describe your business model in 15 min
– A PDF version of the canvas can be downloaded here: http://
businessmodelgeneration.com/canvas
• There are various online tools that support editing and
collaboration of business model canvases
– A Google Docs version is here: http://agile.dzone.com/news/
how-create-business-model (go to File | Make a copy...)
• There are also mobile apps that help you capture and
share your business model designs
– http://businessmodelgeneration.com/toolbox
– http://www.businesscanvas.co/app-tour (a LTW company!)
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13. 2. Common business models
• Examples of using the canvas
– One-time sales model
– Subscription model
– Multi-sided platform model
– Freemium model
• Legend
– Flow of value to customers V
– Flow of value to company $
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14. One-time sales model
Design
ld
an d bui
pro duct
rs er
Supplie Value Custo m
ion t
pro posit segmen
rs
Eng inee t
& sales Interne
IP Sales
force
Pro duct Hu man Pro duct
es
develo p
ment reso urc sales
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15. Subscription model
Design
an d bui
ld Access
y
ser vice capabilit
er
d Custo m
eg Clo u segmen
t
r
pro vi de
e rs Access
Develo p
nt/
to conte
Ser vice ser vice
hosting
Salaries
d ng
Ser vice eg Clo u Ba se Recurri
ment fee fee fee
develo p
cost
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16. Multi-sided platform model
k er
Develo p Value Networ Custo m
ain ion effect segmen
t
& maint pro posit
platfor m #1 #1
er
Platfor m Value Custo m
t
pro posit
ion segmen
#2 #2
Platfor m Revenue Revenue
ment
develo p flo w #1 flo w #2
& mgmt
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17. Freemium model
Develo p Free ba
sic Large
ain base of
& maint ser vice
platfor m e rs
free us
ase
Platfor m Premiu m Small b
g
ser vice of payin
users
Fixe d Cost of Cost of Free ba
sic Pai d
costs free premiu m ser vice premiu m
ser vice ser vice ser vice
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19. FixMyStreet.com canvas
Develo p ls
urce & maint
ain re d Referra Resi den
ts
Open so ize Empowe
co m mun
ity platforCusto m
m
citizens
(platfor
m) platfor m
ts urce d City
Resi den Open so Re duce Web & s
(reports
)
platfor m costs mobile a
pp Co uncil
ation Sales
Platfor m Custo miz
ment Free Ser vice
develo p access fees
& mgmt
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20. 3. Modeling your ecosystem
• Strategy traditionally focused on execution
• Execution focus is on developing value proposition,
operations, and monitoring competition
• Creates a blind spot that hides dependencies
• Wide-lens perspective: expand your focus to your
entire ecosystem (partners and environment)
• Delivery of your value proposition depends on your
ability to align your strategy with your partners
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21. Ecosystem risks
• Co-innovation risk: who else needs to innovate in
order to your innovation to succeed?
– Success of an innovation depends on complementors
(technology, procedure, or organization)
– Help your weakest complementor to succeed
• Adoption chain risk: who else needs to adopt your
innovation before end-consumers can assess it?
– Uncertainty of market success increases with number of
intermediaries that must adopt innovation
– Identify bottleneck partner in adoption chain and either i)
subsidize them, ii) focus on a niche and provide exclusivity, or
iii) circumvent them via an alternative path
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22. Value blueprint
• Value blueprint is about constructing a picture of your
entire ecosystem at the start
• Judge risk of all required ecosystem elements as red
(show stopper), yellow, or green
• Need to move a cohort of partners in the same
direction: need to reassign value captured to the
weakest link in your ecosystem
• Value blueprint is a map that makes your ecosystem
and dependencies explicit
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23. What a value blueprint shows
• End customer (who ultimately adopts?)
• Your own project (what do you need to deliver?)
• Suppliers (what inputs do you need?)
• Intermediaries (what stands between you and your
end customer? who touches your offer?)
• Complementors (what else is required before each
intermediary adopts the offer & moves forward?)
• Co-innovation and adoption chain risks
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24. Value blueprint (template)
Supplier 1
You Intermediary End
Supplier 2 Customer
Supplier 3
Supplier to
Complementor 1
Complementor
Supplier to
Complementor 1 24
Supplier to
Complementor 2 Complementor 2
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25. Battle of e-readers: Sony vs Amazon
• Sony and Amazon built ecosystems using the same
pieces (e-books, e-readers, publishers, store, ...)
• Sony’s competence was in hardware, left a blind spot
wrt the dependencies on content providers
E-Ink Screen
Other Sony End
Retailers
Components Reader Customer
Sony DRM
Connectivity
Sony vis USB
Authors Publishers Connect
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26. Amazon’s Kindle ecosystem
• Amazon was well-positioned in the e-book ecosystem,
but its expertise was not in hardware
• Different from Sony, Amazon played the role of an
integrator, delivering a whole customer solution
Connectivity
via wireless
Amazon Amazon End
Kindle .com Customer
Amazon
DRM
Authors Publishers
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27. Leadership prism
• Tool to assess benefit to each actor in the value
blueprint: surplus = relative benefit – cost
Relative Cost Surplus
benefit
Partner A
Partner B
Partner C
Value
proposition Partner D
Partner E
Partner F
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28. 4. Key lessons
• Business model canvas allows you to test your
assumptions about your business
• Value blueprint and leadership prism allow you to
model your role in a business ecosystem
• Business model canvas gives you your customer
value, unique advantage, and financials
• Value blueprint and leadership prisms allow you to
articulate the value for your partners
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29. Further readings
• Johnson, M. (2010), Seizing the White Space:
Business Model Innovation for Growth and Renewal,
Harvard Business Press
• Osterwalder, A. & Pigneur, Y. (2010), Business Model
Generation, John Wiley & Sons
• Muegge, S. (2012), Business model discovery by
technology entrepreneurs, April, TIM Review
• Adner, R. (2012), The Wide Lens, Portfolio/Penguin
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30. Highly recommended
• If you enjoyed this presentation, you may like these
articles on technology entrepreneurship …
http://www.timbooks.ca
http://amzn.to/VNKxlx
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