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This is a guide for entrepreneurs to examine and analyze their existing business models, and consequently to improve it. The in thing now is business model improvement for the 21st century vs strategy for the last 30 years.This lecture is for students of entrepreneurship elective at the MBA in Ateneo Graduate School of Business, a leading MBA school in the Philippines. It is being uploaded for the convenience of present and former students for the said elective. Formerly, innovations in business have been skin deep: processes, products and strategy. But the markets, customers, and competitive landscape are rapidly changing. A new and faster model for business to be up to speed is badly needed by big and small business alike and/or a deeper and more analytical understanding of their business model.
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Guide for entrepreneurs on business model improvement
Adapting in the 21st century
Business Model Innovation
THE GRANDPARENT OF ALL INNOVATIONS
DEFINITION OF BUSINESS MODEL
How a company does business Covers the following: . target customer . Revenue/ cost .main value proposition > It also tells: How mvp is communicated How mvp is delivered
New trend among businesses
According to Harvard Business Review:
> 7 out of l0 businesses will change their business models
>98% changed their business models > for three decades, strategy was the
“in” thing; now its BM (business model)
Analogy
Driving your old car up to 200 kmh?
But aren’t we doing that with ourbusiness using old tired models?
Focus of the 20th century:
Strategy Process/manufacturing innovation Marketing brand Legal means/lobbying!!!
The new millenium requires better faster models!!!
A better model
The business model
Business model vs strategy vs tactics
Business model – the carStrategy – the accessories added to the carTactics – how the car is driven
BM I
Compelling reasons for BMI
Benefits:l. Cost reduction – in 55 cases2. Strategic flexibility – in 55 cases3. Focus and specialization - 45 cases4. Fully exploiting opportunities- 45 cases5. Reduce risks -21 cases6. Conversion of fixed cost to variable cost
Business Model Innovation Matters
In the case of Apple, its stock prices went up fourfold even surpassing that
of Google. And just to think that the drivers were iPod and iTunes!
Business model overview
Business model – another view
Another bm canvass
BM analysis using sticky notes
What,who, how, how much?
BM using the whiteboard
Social Entreprise BM
Four main areas of business model
Customers Customer offering Infrastructures Financial viability
Alex Osterwalder definition of BMI
“Creating value for customers and so ciety by replacing outmoded business
model due to processing competitive and environmental pressures.”
Building Blocks of Business Model CUSTOMERS:
Customer segments Channels Relationships
INFRASTRUCTURES: Key processes Key partners Key resources
FINANCIAL VIABILITY- Revenue- Cost
CUSTOMER VALUE PROPOSITION
BMI “Seizing White Space” by Mark Johnson
Range of potential activities not currently addressed by the present BM.
Four areas must be clearly defined: Customer value proposition Profit formula Key resources Key processes
BMI Boston Consulting Group
OPERATING MODEL Value chain Organization Cost model
VALUE PROPOSITION Target segments Product offering Revenue model
Harvard Business School on BMI
Authors: Clayton Christensen, MarkJohnson of Innosight, 2008 and 20ll
FOUR MAJOR BM BLOCKS1. Customer value proposition2. Profit formula3. Key resources4. Key processes
Clayton Christensen - HBS
Steps in BMI
1. Visualize2. Assess3. Renew 4. Plan5. Implement
BMI Exercise
1. Have a business model in front of you.2. Have your team and officers discuss and clarify your present MVP, PTM, Channels,
Customer bonding etc.3. Using sticky paper, post the same at the at the BM canvass; use green for your strength (or mark with+) and pink/yellow for weakness.4. Using ERRC method, innovate your BM
BMI Vs Other Management Tools
Brand management- cosmetic changes in the 4 ps o marketing may not be enough to sustain the sales/business. The BM is the platform
Business Plan- is merely a promise and may not address mismatch between co and customer value perception and/or lack of accomplishment of the job (MVP)
Criticism vs. Ideo
Design and creativity- Ideo produced the design for I tunes and Kindle. But its other novelty products such as its work shopping cart did not add value nor changed the industry.
Technology- Google grew on existing technology. It did not reinvent the technology
Contrarian view vs BPO
American Apparel decided not to outsource its clothing at China @ $4.00/hr but instead used expensive $40.00/hr US labor. Why?
Business Model Innovation covers more
The backbone of strategy has been marketing: development, penetration, product development and manufacturing process.
Strategy also covers divestment and business liquidation!
Liquidation as a Strategy
Mostly Marketing/Brand Strategies
10 New Business Models
1. Localized low cost producer2. One-of-experience3. Beyond advertising model4. Markets are conversation5. Low budget innovation6. Community funded7. Sustainability focused8. Twisted freemium9. Unlimited niches10. In crowd business modelGo to: http//www.slideshare.net/ockearts/10 new-business-
models-for-the-decade
Total Innovation from BMI
New PTM- new customers? Who are the non customers that may be reached by your exististing channels?
Can you offer new value to existing customers? What can be done to your existing infrastructures to serve your existing customers? New ones?
Examples:
Cloud computing from Amazon Use of UPS tracking system to assist Ford track cars in transit Bounty Fresh putting up Chooks to Go
Innovation in channels
The old channels – in house or BPO Direct to the customers, or retail
outlets Media platforms: above the line
below the line or social media? SEO?
Other innovation areas in BM
Key partners Key resources Value chain configuration New costs New profits
Can you now innovate your current business model?
Can you now create a new model from ground up?
acknowledgement
The pictures and photographs are from google images
The primary sources of ideas on business model have been cited in the slides
