Reflective Report
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CONSTRUCTING BUSINESS MODELS
MBA600 Week 5
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WEEK 5 FOCUSES ON TWO LEARNING OBJECTIVES
Discuss and translate theory, skills and knowledge into effective management practice.
Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage.
Other learning objectives
Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one.
Undertake independent research to solve complex business problems.
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QUICK REVIEW OF KEY CONCEPTS
What we learned in Week 4
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Analysis steps in the strategy planning process
WE LEARNED FROM LAST WEEK
Internal to the firm External to the firm Operational within the firm
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Focuses of strategy and fit
Corporate strategy
Choice of industries and markets in which the firm competes (or wants to compete)
Competition strategy
Choice of how the firm defines its competitive advantage within a specific industry or marketWE LEARNED
FROM WEEK 3
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WHAT WE LEARNED LAST
WEEK
Industry attractiveness, resources and profit performance
Capabilities were discussed in previous weeks
Capital management
Financial stability
Cash flow
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We shift from Corporate Strategy to Competition Strategy
WHAT WE WILL LEARN THIS
WEEK
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INTRODUCTION TO BUSINESS MODELS
Competition Strategy
Choice of how the firm defines its competitive advantage within a specific industry or market
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‘A business model articulates the logic …
that demonstrates how a business
creates and delivers value to customers.’
It is conceptual, not financial
Ideas of Professor David Teece
A business model is conceptual, not financial
Five steps to achieve sustainable business models
PURPOSE OF BUSINESS MODELS
TEECE, D. J. 2010. Business Models, Business Strategy and Innovation. Long Range Planning, 43, 172-194.
4 Isolating mechanisms to hinder
imitation and disintermediation
3 Implement mechanisms to
capture value from each segment
2 Create a value proposition for each segment
1 Segment the market
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3 IDEAS
IMPEDING RIVALS FROM IMITATING (COPYCAT) THE IDEAS IN A BUSINESS MODEL
Systems, processes and assets in a business model may be hard to implement
Non-transferability in VRIO as an isolating mechanism
Creating value in the minds of customers may complex and uncertain
Causally ambiguous in VRIO as an isolating mechanism
Rivals may be reluctant to cannibalise existing sales and profits, or upset important business relationships
Non-substitutable in VRIO as an isolating mechanism
TEECE, D. J. 2010. Business Models, Business Strategy and Innovation. Long Range Planning, 43, 172-194.
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TYING THE PIECES TOGETHER
Considerations for Constructing a Business Model
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Value Propositions
What value do we deliver to the customer?
Which one of the customer’s problems are we helping to solve?
What bundles of products and services are we offering to each customer segment?
What customer needs are we satisfying?
Key Partners
Who are key partners and suppliers?
What key resources to we acquire from them?
What key activities do the perform?
Key activities
What key activities strengthen Value Propositions?
What are the distribution channels?
What are the revenue streams?
Nature of customer relationships?
Key Resources
What key resources strengthen Value Propositions?
What key resources strengthen customer relationships?
What key resources strengthen revenue streams?
Customer Relationships
What type of relationship does each customer segment want from us?
What customers have an established relationship?
How are relationships integrated in the business model?
How costly are relationships?
Customer Segments
For whom are we creating value?
Who are the most important customers?
Cost Structure
What are the most important costs/investments in the business model?
What key resources and key activities are most expensive?
Revenue Streams
What value will customers pay for?
What value do customers currently pay for?
What is the customer experience when paying?
What is the proportion of revenue streams to total revenue?
Channels
What channels do customers what to be reached?
How are we reaching them now?
How are our channels integrated?
What channels work best?
What channels are most cost-efficient?
How are channels integrated with customer routines?
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
WHAT A BUSINESS MODEL CANVASS LOOKS LIKE
14 RESOURCE-BASED VIEW AND
DYNAMIC CAPABILITIES
RESOURCES
Resources mean the factors of production
Land: natural resources
Labour: human resources, knowledge, automation
Capital: finance, access to funding
ALIGNMENT WITH RESOURCES
AND CAPABILITIES
DYNAMIC CAPABILITIES
Capability
A firm’s capacity to successfully perform a unique business activity
Dynamic capability
A firm can intentionally adapt its resources to create customer value
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
VALUE PROPOSITIONS
Impeding competitor imitation
VALUE PROPOSITIONS
What value do we deliver to the customer?
Which one of the customer’s problems are we helping to solve?
What bundles of products and services are we offering to each customer segment?
What customer needs are we satisfying?
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What a Business model Canvass looks
like
VALUE PROPOSITIONS
Impeding competitor imitation
VALUE PROPOSITIONS
Characteristics
Newness
Performance
Customisation
‘Getting the job done’
Design, brand, status
Price differentiation or cost reduction
Accessibility, convenience, usability
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WORKSHOP TIME
Positioning Value Propositions internally and externally
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POSITIONING VALUE
PROPOSITIONS INTERNALLY AND
EXTERNALLY
WORKSHOP
Value Propositions can be VRIO assets if competitively unique in the minds of customers
In groups, identify how your firm and its competitors take advantage of Value Propositions (30 minutes)
How are Values espoused internally by leaders and in organisational culture?
How are Values externally positioned in the brand?
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RESOURCE INVESTMENTS
Considerations for Constructing a Business Model
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What a Business model Canvass looks
like
SUPPLY CHAIN ADVANTAGES
KEY PARTNERS
Who are key partners and suppliers?
What key resources to we acquire from them?
What key activities do the perform?
Motivations for partnerships
Economies of scale
Reducing risk and uncertainty
Acquiring resources and activities
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
INTERNAL OPERATIONS ADVANTAGES
KEY ACTIVITIES
What key activities strengthen Value Propositions?
What are the distribution channels?
What are the revenue streams?
Nature of customer relationships?
Categories
Production
Problem solving
Platform/Network
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
HUMAN, PROCESS AND
SYSTEM RESOURCES
KEY RESOURCES
What key resources strengthen Value Propositions; customer relationships; revenue streams?
Types of resources
Physical
Intellectual
Virtual
Human
Process
System
Financial
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
LOW-COST OR DIFFERENTIATION
ADVANTAGES
COST STRUCTURE
What are the most important costs/investments in the business model?
What key resources and key activities are most expensive?
Considerations
Cost-driven (low-price competitive advantage)
Value-driven (differentiation competitive advantage)
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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WORKSHOP TIME
Creating and developing resources for competitive advantage
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COMPETITIVE THREAT OF RESOURCE
INNOVATION OR IMITATION
WORKSHOP
Successful firms prioritise investments in resources that create and sustain competitive advantage
In groups or individually, identify the resources investments in your firm and its competitors (30 minutes)
Use financial statements and cash flow, presented in Week 4
Use desktop research to discover the ‘innovations’ from company announcements, blogs, whitepapers, advertisements, etc
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CAPABILITIES
Considerations for Constructing a Business Model
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What a Business model Canvass looks
like
EXTERNAL- FACING
ADVANTAGES
CUSTOMER RELATIONSHIPS
What type of relationship does each customer segment want from us?
What customers have an established relationship?
How are relationships integrated in the business model?
How costly are relationships?
Examples
Customer assistance
Dedicated customer support
Self-service
Automated services
Communities
Co-creation Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
NICHE ADVANTAGES
CUSTOMER SEGMENTS
For whom are we creating value?
Who are the most important customers?
Considerations
Mass market
Niche market
Segmented
Diversified
Multi-sided platform
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
DELIVERY REACH ADVANTAGES
CHANNELS
What channels do customers what to be reached?
How are we reaching them now?
How are our channels integrated?
What channels work best?
What channels are most cost-efficient?
How are channels integrated with customer routines?
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
DELIVERY REACH ADVANTAGES
(continued)
CHANNELS
Channel phases
1. Awareness: raising awareness of products and services
2. Evaluation: engaging customers to evaluate our Value Propositions
3. Purchase: customer experience when buying products and services
4. Delivery: customer realisation of Value Propositions
5. After Sales: provision of post-purchase customer support
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
BUSINESS SIZE AND
PROFITABILITY ADVANTAGES
REVENUE STREAMS
What value will customers pay for?
What value do customers currently pay for?
What is the customer experience when paying?
What is the proportion of revenue streams to total revenue?
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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What a Business model Canvass looks
like
BUSINESS SIZE AND
PROFITABILITY ADVANTAGES (continued)
REVENUE STREAMS
Revenue sources
Asset sales
Usage fee
Subscription fee
Lending, renting, leasing
Licensing
Brokerage fee
Advertising
Fixed pricing
List price
Dependent on product feature; customer segment; volume
Dynamic pricing
Negotiation (bargaining)
Yield management
Real-time-market
Source: https://en.wikipedia.org/wiki/Business_Model_Canvas
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WORKSHOP TIME
Building a Suite of Dynamic Capabilities
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BUILDING DYNAMIC
CAPABILITIES
WORKSHOP
A firm’s capacity to successfully perform a unique business activity is a capability. It becomes dynamic when the firm can adapt to customer expectations.
In groups or individually, assess the adaptability of your firm and its competitors (30 minutes)
Use financial statements (Chairperson and CEO messages)
Use desktop research to discover key initiatives, for instance transformation projects, M&A, alliances, capital acquisitions
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Se e k h e l p w h e n yo u n e e d i t !
Thank you