IT Busines Model v2

7/31/2019 IT Busines Model v2

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IT Business

Models


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Contents

Business Models

Key Elements of Business Models

Business Model Generation

Categories of Business Models


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Business Models

A business model is what a business does and how itmakes money.

A business model describes the

rationale of how an organizationcreates, delivers, and capture

value.Business Model Generation


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A set of planned activities designed to result in aprofit in a marketspace.

Description of how the enterprise produces,delivers and sells products or services, thusshowing how it delivers value to the customersand how it creates wealth [Margretta 2002].

Refers to the structure and processes in place tooperationalise the strategy of the business.

An architecture for the product, service andinformation flows;

A description of the various business actors

and their roles; A description of the potential benefits for the

various actors;

A description of the sources of revenues.


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An Anecdote: Encyclopedia Britannica

5

Founded by 3 Scottish printers in 1768

Earliest and most famous encyclopedia - evolved through 15

editions

Bought over by Sears

Peak of the business sold over USD650m in 1990 Strength: Comprehensive and authoritative, Good business

model, reputable publisher

After 1990, sales drop by 80%

Threat: CD ROM Microsoft gave away free encyclopedia

Encarta. which could fit 7million words with illustrations and

interactivity.

Britannica has 40m words. Cost of producing one

encyclopedia USD250, USD600 given to salesman.

ENDING?


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The Cheap Revolution

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Shift from buying expensive proprietaryproducts to buying cheapgenericproducts

Cheap Tech Cost savings are compelling

Google = runs on 100,000 cheap servers

One breaks = discards

Avoids expensive service contracts and in-house staff

Dellification Moved from selling PCs to also selling servers, printers, storage

devices.

Cheap is occurring elsewhere: Labor outsourcing to other countries

Film production camcorders etc.

Software Linux Vs. Microsoft

Telecommunications Voice-over-IP


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Key Elements of a Business Model?

Why should the customer buy from you?Value Proposition

How will you earn money?Revenue Model

What marketspace do you intend to serve? What is its size?Market Opportunity

Who else occupies your marketspace?Competitive environment

`What special advantage does your firm bring to themarketspace?

Competitive Advantage

How do you plan to promote your products or services?Market Strategy

What types of organisational structures within the firm arenecessary to carry out the business plan?

Organisational development

What kinds of experiences and background are important for thecompany leaders to have?

Management Team


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The Five Forces Model Evaluating Business

Segments

Organizations use Porters Five Forces Modelto determine the relative attractiveness of an

industry


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RevenueModel

Advertising

Subscription

TransactionFee

Sale

Affiliate


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Business Model Generation

Canvas

Patterns

Design Strategy

Process

Outlook Afterword


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Customer

Segments

Revenue

Streams

Customer

Relationships

Key

Partnerships

Cost

Structure

Key Activities

Key

Resources

Channels

Value

Propositions

The 9 Building Blocks


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1- Customer Segments

For whom are we creating value?

Who are our most important customers?


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1. Mass Market do not distinguish between customer

segments. VP, CH, CR are the same electronics sector.2. Niche market Cater to specific, specialized customer

segments. Tailored to specific requirements car part

manufacturer.

3. Segmented Distinguish between market segments withslightly different needs and problems. metal auto, watch &

medical.

4. Diversified serves two unrelated customer segments with

different needs and problems. Amazon add cloudcomputing to the retail business.

5. Multi sided markets serve 2 or more interdependent

customer segments. Credit card company large base of card

holders vs large base of merchants. Free newspaper needs a

large reader to attract advertisers.

1- Customer Segments


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2 - Value Propositions

What value do we deliver to the customer?

Which one of the customers problems are we

helping to solve?

Which customer needs are we satisfying?

What bundles of products and services are we

offering to each Customer Segment?


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1. Newness satisfy new set of needs that customers

previously didnt perceive because there are no similar

offering = hand phones.

2. Performance Improving product or service performance.

PC.

3. Customization Tailoring products and services to the

specific needs of customers creates value. Mass

customization.

4. Getting the job done helping customer get certain jobs

done. Roll Royce & airline.

5. Design important but difficult element to measure.

fashion

6. Brand/Status customers find value in using & displaying

brand. Coca Cola


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7. Price offering similar value at lower price Air Asia

8. Cost reduction helping customer reduce price is an

important way of creating value - leasing

9. Risk reduction reducing risk when purchasing products or

services used car.

10. Accessibility making products and services available to

customers who previously lacked access. NetJets

11. Convenience/usability easy to use. iPod, iTunes, iPad.


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3 - Channels

Through which channels do we reach our

customer?

How are we reaching them now?

How are our channels integrated?

Which ones work best?

Which ones are more cost efficient? How are we integrating them with customer

routines?


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4 - Customer Relationships

What kind of relationship does each of our

customer segments expect us to establish and

maintain with them?

Which ones have we established?

How costly are they?

How are they integrated with the rest of our

business model?


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1. Personal assistance Communicate with real customer rep

call center, point of sale.

2. Dedicated personal assistance Dedicating a custrep for aclient.

3. Self-service customer help themselves.

4. Automated services mix of self service + automated process.

5. Communities utilizing social network.6. Co-creation - go beyond traditional customer-vendor

relationship. Amazon invites customer reviews add value to

book. You Tube solicit customers to create content.

4 - Customer Relationships

Customer

Acquisition

Customer

Retention

Boosting Sales

(Upselling)


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5 Revenue Streams

For what value are our customers really willing

to pay?

For what do they currently pay?

How are they currently paying?

How would they prefer to pay?

How much does each revenue streamcontribute to overall revenues?


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1. Asset Sale selling ownership rights to a physical product.

2. Usage Fee the more a service is used, the more thecustomers pay. Telco, hotels.

3. Subscription Fees Selling continuous access to a service.

4. Lending/renting/Leasing temporarily granting rights to a

user for a fee. Auto5. Licensing give customers permission to use IP in exchange

for licensing fees. Microsoft.

6. Advertising Advertise a brand, product or service.

7. Brokerage Fees intermediation services performed onbehalf of 2 or more parties. Credit card, real estate agents.

8. Affiliate marketing -

5 - Revenue Streams


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6 - Key Resources

What key resources do our value propositions

require?

Our distribution channels?

Customer relationships?

Revenue Streams?


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7- Key Activities

What key activities do our value propositions

require?

Our distribution channels?

Customer relationships?

Revenue Streams?


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1. Production activities related to designing, making,delivering products in substantial quantities and/or superior

quality. Manufacturing firms. Dell supply chain.

2. Problem Solving New solution to Individual customer

problems. Operations of consultancies, hospitals, serviceorganizations.

3. Platform/Network Networks, match-making platforms,

software, & brands. E-Bays platform its website. Visa

credit card, transaction platform for merchants, customersand banks. Microsoft managing interface between other

vendors software with its Windows OS.

7 Key Activities


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Three motivations for creating partnerships.

1. Optimization and economy of scale The most basic form of

partnership is designed to optimize the allocation of resources

and activities. To reduce costs, and often involve outsourcing

or sharing infrastructure.

2. Reduction of risk and uncertainty Partnerships help reducerisks in a competitive environment characterized by

uncertainty. Forming strategic alliances in one area while

competing another.

3. Acquisition of particular resources and activities Fewcompanies own all resources or perform all activities

described by their business models e,g A mobile phone

manufacturer, may license an operating system for its handset

rather than developing one inhouse.

8 Key Partners


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9 Cost Structure

What are the most important costs inherent in

our business model?

Which key resources are most expensive?

Which key activities are most expensive?


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1. Cost-driven minimize costs no frills airline.

2. Value-driven focus on value creation luxury hotels

9 Cost structure

Fixed Costs - cost that remain the same despite thevolume of goods or services

Variable costs - vary propotionally with volume

Economies of scale - cost advantage that a business enjoys

as its output expand. Lower bulk purchase rates.

Economies of scope - cost advantage that a businessenjoys due to a larger scope of operations. Same

distribution channels support multiple products.


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Manufacturer selling directly


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Categories

ofBusinessModels

Onlinedirect

marketing

ServiceProvider

Tendering

OnlineAuction

Product &Service

Customisation

CommunityProvider

Subscription

Portal

to customers - E-tailing

e-Bay

Lelong.com.my

sellers submit bids and

the lowest bidder wins

seller of services

site where people ofcommon interests cancome together

Integrated services

Search services,

contents, news,e-mail, chat etc


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TransplantedReal-World

Business Model

Mail Order

Advertising

Free Trial

Real estate

Native InternetBusiness Model

Library

Freeware

Access

Provision

Web

hosting

Wiki, Blogs,

Yahoo, Google

Amazon

Software

Web space, domain names

By ISPs

Free web hosting

Free software


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E-Shop Information brokerage

Trust services

E-AuctionE-Procurement

Degree of InnovationHigherLower

Functional

Integration

Singlefunctions

Multiplefunctions/integrated

e-Mall

Value Chain Service Provider

Virtual Community

Collaboration platform

3rd party marketplace

Value Chain Integrator

Classification of Internet-based Business Model

Documents

IT Busines Model v2