assignment

Lesson 3: Business Model Canvas

IBUS 718: Consulting & Organizational Development in the Multinational Corporation

Business Model Canvas

Business Model Analysis How do we make money? (Revenue mix)

Value

Business Model Analysis How do we make money? (Revenue mix)

How do we structure both revenues and costs? (Revenue mix & Cost structure)

ValueEfficiency

Business Model Analysis How do we make money? (Revenue mix)

How do we structure both revenues and costs? (Revenue mix & Cost structure)

How do we design and evolve reinforcing business models (The whole is greater than the sum of the parts)

• Mass Market

• Niche Market

• Segmented

• Diversified

• Milti-sided

Professor Dirk Brown

• Newness

• Performance

• Customization

• “Getting the job done”

• Design

• Brand/status

• Price

• Cost reduction

• Risk reduction

• Accessibility

• Convenience/Usability

Professor Dirk Brown

Channel Types Channel Phases

Own Direct

Sales Force 1.Awareness How do we raise awareness about our company’s products and services?

2. Evaluation How do we help customers evaluate our organization’s Value Proposition?

3. Purchase How do we allow customers to purchase specific products and services?

4. Delivery How do we deliver a Value Proposition to the customers?

5. After Sales How do we provide post-purchase customer support?

Web Sales

Indirect

Own Stores

Partner Partner Stores

Wholesaler Professor Dirk Brown

• Personal assistance

• Dedicated assistance

• Self-service

• Automated services

• Communities

• Co-creation

• Asset sale

• Usage fee

• Subscription fees

• Lending/renting/leasing

• Licensing

• Brokerage fees

• Advertising

• Fixed vs. dynamic pricing

Professor Dirk Brown

• Physical

• Intellectual

• Human

• Financial

Professor Dirk Brown

• Production

• Problem solving

• Platform/network

Professor Dirk Brown

• Optimization and economy of scale

• Reduction of risk and uncertainty

• Acquisition of particular resources and activities

• Cost-driven

• Value-driven

• Fixed costs

• Variable costs

• Economies of scale

• Economies of scope

Business Model Canvas Evolves

Source: Alexander Osterwaldes & Yves Pigneur, Business Model Generation

Professor Dirk Brown

Professor Dirk Brown

Professor Dirk Brown

Professor Dirk Brown

Professor Dirk Brown

Professor Dirk Brown

Patterns

• Product Innovation

• Infrastructure Management

• Customer Relationship Management

Unbundling Business Models

Installed Customer Base

Acquisition Retention

Retail

Voice Data

Content

Network Maintenance

Services Provisioning Marketing

Content dev.

Network Brand

Customer Base

Telcom Equipment Suppliers

Voice Data

Service Revenues

Network Maintenance Marketing

Network Management

Product

Innovation

Customer Relationship

Original Telco.

Network Maintenance

Services Provisioning Marketing

Content dev.

Installed Customer Base

Acquisition Retention

Retail

Voice Data

Content

Network Brand

Customer Base

Telcom Equipment Suppliers

Voice Data

Service Revenues

Network Maintenance Marketing

Product

Innovation

Customer Relationship

Network Management

Telcos Network

Infrastructure Operation & Maintenance

Network Maintenance

Services Provisioning

Network

Service RevenuesNetwork Maintenance (Economies of Scale)

Unbundling Telco.

Network Maintenance

Services Provisioning Marketing

Content dev.

Installed Customer Base

Acquisition Retention

Retail

Voice Data

Content

Network Brand

Customer Base

Telcom Equipment Suppliers

Content Providers

Voice Data

Service Revenues

Network Maintenance Marketing

Product

Innovation

Customer Relationship

Telcos New

Products & Services

R&D

Intellectual Property

Licensing Fees

Unbundling Telco.

Installed Customer Base

Acquisition Retention

Retail

Voice Data

Content

Marketing

Brand Customer Base

Telcom Equipment Suppliers

Content Providers

Voice Data

Service Revenues

Marketing Licensing Fees

Unbundling Telco.

The Long Tail

Niche Content Providers

Internet

Large Scope of Niche Product

Platform Management

Service Provisioning Promotion

Platform

Niche Content Providers

Selling less of more Platform management

and development

User Generated

Content

Content Production

Tools

Many Niche Segments

Long Tail

Multi-Sided Platform

Platform Management

Service Provisioning Promotion

Platform

Platform management and development

Customer Segment 1 Customer Segment 2 Customer Segment 3

Etc.

Value prop. 1 Value prop. 2 Value prop. 3

Revenue flow 1 Revenue flow 2 Revenue flow 3

Including FREEIncluding Revenue Flow Subsidy?

Etc.

Multi-Sided Platform

Platform Management

Platform Brand

Platform management and development

Storage costs

Casual users

Premium users

(e.g. high volume)

Free basic service

Paid premium service

Free limited basic account

Subscription premium account

Mass customized

Switching costs

InternetOpen Source

Insurance

Freemium

Customers Free or cheap

product/ service

Subscription or “Blades”

Free or Cheap

“Lock-in”

Recurring Revenues

Bait & Hook (Razor & Blades)

Source: Prof. Henry Chesbrough, UC Berkeley, Open Innovation: renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis, Sept 27, 2004

Source: Prof. Henry Chesbrough, UC Berkeley, Open Innovation: renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis, Sept 27, 2004

Outside-in

Innovation Partners

Research Community

Screening Managing network

Exploring secondary markets

Screening capabilities Access to innovation network

Externalizing development costs

Outside-in (Buy Innovation)

Source: Prof. Henry Chesbrough, UC Berkeley, Open Innovation: renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis, Sept 27, 2004

Inside-out

R&D results

Unused intellectual property

Secondary market

Licensees

Innovation customers

Sale, License fees, Spin-off

Inside-out (Sell Innovation)

• Unbundling & Bundling

• Bait & Hook

• Long tail

• Outside-in

• Inside-out

• Multi-sided platform

• Freemium

• Open source

• Insurance

Business Model Canvas Patterns

Patterns

You can't disrupt your own industry if you don't know what customers want.

Professor Dirk Brown

Value Proposition Customer Needs

Value Proposition Canvas*

* Strategyzer

Value Proposition Canvas*

* Strategyzer

Source: Alexander Osterwaldes & Yves Pigneur, Business Model Generation

Professor Dirk Brown

Source: Alexander Osterwaldes & Yves Pigneur, Business Model Generation

Source: Wikipedia

Business Model Canvas Evolves

Source: Alexander Osterwaldes & Yves Pigneur, Business Model Generation

Professor Dirk Brown

Summary of this Lesson In this lesson: • You exercised the business model canvas and value proposition

canvas and explored how these can evolve over time and can inform strategic decisions for the multinational corporation.

• You also analyzed various patterns in the business model canvas as a tool to explore business model innovation.