Strategic PlanningBusiness Model Canvas (BMC)

2:20minute cliphttp://www.youtube.com/watch?v=QoAOzMTLP5s#at=4

Business Models on Canvas

• Unbundling Business Models (3 in 1 model)– Customer relations, – Infrastructure management,– Product innovation.– Example: Private Banking, Telecommunications.

• Relies on outsourcing non-core functions.– Eg Telecommunications

• Infrastructure to equipment makers • Product innovation to smaller creative agencies• CRM – their core business.

Business Models on Canvas

• The Long Tail– Selling less of more (online/direct channel).– Shifts the focus from product to service.

– KP/ KA/ KR now all about platform (websites with full &updating functionality) rather than inventory.

Business Models on Canvas

• Multi-sided Models– (Multi sided model brings two interacting customer

populations together and extracts value from that.• Eg newspaper readers / advertisers

– Value of interaction increases with network effect.– Combines with freemium model.

• One VP for each segment/ C$&R$ quite different (asymmetric) /KA&KP about platform.

Business Models on Canvas

• Freemium– (basics for free, pay for add-ons)• Eg Economist magazine online – 3 articles/month for free.• Skype VOIP phones (freemium)/ Skypeout (premium)

• Freemium is a numbers game– A small customer base paying for premium– A big customer base not paying for freemium.– Important number is conversion rate from• Freemium premium

Business Models on Canvas (cont)

• Freemium– (basics for free, pay for add-ons)

• VP of two parts (basic + add-ons) / R$ from add-ons cover C$ of VP.

• Often a professional /amateur split in market

Business Models on Canvas

• Bait & Hook– Making money from after sales service• Mobile phones (free handset(bait) ‘with a plan’ (hook))• Gilette Razors (cheap handle(bait) multiple blade sales (hook))

• VP of two parts / CS buys one handle - locked in for blade repeats / R$ from blades subsidised C$ of handles.

Business Models on Canvas

• Manufacturing - raw material into final products.

• KR&KA linking to C$• KP link to VP, R$• CH link to CS

Business Models on Canvas

• Retail - products for sale to public at central location.– The Warehouse

• CH all important.• Expertise in CR, CS link to VP.• KA,KR logistics• KP suppliers

Business Models on Canvas

• Franchising – business system and support for sale.

• Multi sided model – VP to franchisees, and to CS– KR,KA business support at two levels.– KP (franchise network), C$ control.

Business Models on Canvas

• Subscription – customers sign on to regular fees.– Multisided model (?) user plus advertiser– Magazines, websites.

• R$ ‘cashflow’ model.• CH important, often more than one• C$ control (limited R$)• VP may serve several CS

Business Models on Canvas

• Professional Services – specialised skill sold in time units.– Lawyer, dentist

• KP, KA, KR all drive VP (specialty/expertise)• CH usually one-on-one (implications for R$)

Business Models on Canvas

• Licensing – Intellectual property used by others for fees.– Leased equipment,

• KP,KR about support for users/product• VP based on exclusivity

Summarising Strategy Prospector◦ Seeks new markets, innovator, fast changer in response to

pressures, first mover. Defender◦ Seeks security & stability of limited range of products.

Analyser◦ Between Prospector & Defender, ‘smart second’, picks

winners Reactor◦ Risk averse, no real strategy, changes only when necessary.

Strategies for declining markets

o Harvesto Maximize short-term cash flow

o Maintenanceo Maintain market share for the short-term

o Profitable survivoro Increase share of the declining market

o Nicheo Strengthen share position in one or a few

segments

More . .

• "An outstanding strategy weakly executed will always be trumped by a weak strategy with outstanding execution."

• Aggressive strategy- hit their sweet spot.