Project about applications for smart city
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L7_BuildingBusinessModels.pdf
Digital Innovation, Creativity and Enterprise
Week 6: Building Business Models
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Session Outline
■ What is a Business model ?
■ The Four Parts of a Business Model.
■ The Customer Value Proposition (CVP).
■ Different Types of CVPs and Customer Segments.
■ The Business Model Canvas (BMC).
What is a Business Model ?
■ It is a conceptual framework that describes how a
company creates, delivers, and extracts value.
■ It includes a network of activities and resources to create
a sustainable and scalable business that delivers value
to target customers.
■ Business models help entrepreneurs generate value and
scale.
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■ In any company (big, small, new, old) must always be poised for
adjustment and changes as new information is received and market
change.
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The Business Model
” A startup is a temporary organization in
search of a scalable business model”
Steve Blank
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The Four Parts of a Business Model
The business model consists of four main interlocking parts that
together create ‘the business’. Without these four parts, there is no
business, no company, no opportunity. These are as follows:
■ The Offering.
■ The Customers.
■ The Infrastructure.
■ The Financial Viability.
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The Offering
■ The first part of the business model, which identifies
what you are offering to a particular customer segment,
the value generated for those customers, and how you
will reach and communicate with them.
■ The offering includes the customer value proposition
(CVP), that describes exactly what products or services
your business offers and sells to customers.
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Customers
■ Entrepreneurs typically can’t serve everyone in a market,
so you have to choose whom best to target.
■ You have to determine how you will reach those
segments and how you will maintain a relationship with
the customer.
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Infrastructure
■ It is generally includes all the resources (people,
technology, products, suppliers, partners, facilities,
cash, etc.) that an entrepreneur must have in order to
deliver the CVP.
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Financial Viability
■ Defines the revenue and cost structures a business needs to
meet its operating expenses and financial obligations.
■ How much will cost to deliver the offering to our customers ?
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The Customer Value Proposition (CVP)
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It is the most important part of your business model, and for
your CVP to be truly effective, it needs three qualities:
■ It must offer better value than the competition.
■ It must be measurable in monetary terms.
■ It must be sustainable.
The CVP means thinking about your business from
the customer’s viewpoint rather than from an
organizational perspective. Your CVP must
demonstrate that you are meeting the needs of
various customer segments.
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Four Problems Experienced by
Customers:
Customer encounter at least one of four problems that prevent
them from getting a job done. These problems include:
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Lack of Skills Lack of Access
Lack of Time Lack of Money
What job is the customer trying to get done ?
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• Swedish home furnishings company IKEA understood the goal of
customers who needed to furnish their rooms or apartments on a tight
budget but did not want to settle for unattractive, secondhand pieces.
• FedEx made the job of transporting a letter or package overnight from
point A to point B effortless in comparison with regular mailing and
parcel delivery services.
• Tata Motor created a CVP focused on providing an affordable, safe,
more comfortable mode of transport for the low price of $2,500.
Different Types of CVPs and Customer Segments
Three main types of approaches in creating value
propositions:
■ The All-Benefits
■ The Points-of-Difference
■ The Resonating-Focus
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The All-Benefits
■ It involves identifying and promoting all the benefits of
your product or service to target customers, with little
regards to the competition or any real insight into what
customer really wants or needs.
■ It is overly product focused.
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The Points-of-Difference
■ A type of approach that focuses on the product or
service relative to the competition and how the
offering is different from others on the market.
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The Resonating-Focus
■ A type of CVP that describes why people will really like
your product and focuses on the customers and what
they really need and value.
■ Also, called "just what the customer wants” or “product-
market fit”.
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■ As knowledgeable entrepreneur, you must realize
that a major part of your business proposition is to
figure out which customers to focus on and which
ones to ignore.
■ For example, if you are trying to sell luxury yachting
experiences, you may target professionals between
30 and 65, with a high income, who live in location
close to water, and who have an interest in water
sports.
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Defining Your Target Customer
Types of Customer Segments:
■ Businesses often have different CVPs for each customer
segment. This is to ensure they are meeting the needs of
the customers within each segment.
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Some examples of different customer segments targeted by
different types of businesses include:
■ Mass markets
■ Niche markets
■ Segment markets
■ Diversified markets
■ Multisided markets.
Matching the right CVP to targeted customer segments is
essential to the development of a scalable business model.
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Types of Customer Segments:
The Business Model Canvas (BMC)
■ It is a type of visual plan that depicts the business on
one page by filling in nine blocks of business model:
1. Customer Value Proposition.
2. Customer Segments.
3. Channels (e.g. online).
4. Customer Relationships
5. Key Activities (e.g. sales management).
6. Key Resources (e.g. people, information & technology).
7. Key Partners (e.g. suppliers).
8. Revenue Streams.
9. Cost Structure.
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The Business Model Canvas (BMC)
Remember a business model is about creating,
capturing, and delivering value. The business
Model Canvas is a great tool to help you think
about this, and encourages you to find answers to
the most important questions and think about them
in a structured way.
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