Venture Further workshop Business Models. Martin Henery

Transcription

1 Venture Further workshop Business Models Martin Henery

2 2 Risks in starting up / running a business Working in groups, brainstorm the key elements that you think are necessary for a successful business Where can it go wrong and why? What would the worst business in the world look like?

3 3 Some reasons why businesses fail Nothing new to say Cash flow crises No management accounts Falling out Lack of succession planning Poor management systems Lack of adequate working capital Inability to recognise what business the company is in Inadequate board Improper organisational structure Failure to delegate Poor market selection Rapid growth Rapidly changing external market conditions Inability to make use of essential business and management practices Incorrect diagnosis of the key skills gaps to develop or fill Not setting up tools to monitor and manage business. Insufficient (financial) planning Excessive optimism Inability to change Lack of expertise

4 4 Details Supply side CSFs for delivering value proposition Appropriate resources and activities given priority Most important things a company must do in order to make its business model work Appropriate relationship with partners Strategic partners / alliances Co-opetition: Joint ventures Buyer-Supplier relationships to assure reliable supplies Demand side Problem being solved? Trends? Channel to market Competition Entry point Sales process Awareness raising > evaluation > purchase > delivering > post purchase and feedback

5 5 Bases for Competitive Advantage Speed of innovation Strategic alliances or Partners! Organisationally superior Business model Proprietary elements Specialist knowledge Trade Secrets Unique Rights Intellectual Property Fig. 2.2

6 How is money made and how does the business work? 6 Take Inputs Process/Manufacture Output Costs Fixed and Variable Revenue Businesses need to make a profit Revenues > costs Sustainable Competitive Advantage Revenues >> costs Profit

7 7 What can be done to avoid these issues? Demand side Supply side Value proposition Key resources Customer segment Key activities Relationship Partners Channel to market Costs (money out) Revenue (money in)

8 Apple and itunes 8

9 The Business Model Canvas 9

10 10 Established business models (patterns) The Digital Enterprise (see Rappa s website) The Long Tail (MySpace) Multi-sided platforms (Metro, Google) Freemium (Flickr, Real Player, Skype) Variants Open Source (Red Hat) The Insurance Model (Rega, Rega, Rega - slide 34) Razor and blades (Gillette) Open Business Models Outside-in, inside-out 10

11 The Business Model Canvas 11

12 Adapted from Osterwalder Business Model Canvas for Google 12 Key Partners Key Activities Platform Management Managing Services Expanding Reach Key Resources Value Propositions 1. Targeted Ads 2. Free Search 3. Monitising Content Customer Relationships Acquire and Retain (lower cost of marketing and identifying needs of customers). Identify and nurture latent needs, i.e. Google + Create new types of customers Google Drive Tools for advertisers to get a handle on ROI Customer Segments 1. Advertisers 2. Web-Surfers 3. Content Owners Search Engine Brand IP Channels Freemium / Trojan Horse Free search engines Cost Structure Platform Costs Revenue streams Keyword Auctions (1) Free (2 and 3)

13 Adapted from Osterwalder Business Model Canvas for The Metro 13 Key Partners Distribution agreement with public transport networks Key Activities 1. Distribution 2. Write and Produce a daily paper Value Propositions 1. Ad space in high circulation newspaper 2. Free city-wide commuter paper Customer Relationships Acquistion Retention Customer Segments 1. Advertisers 2. Commuters Key Resources Channels Brand Distribution network and logistics 1. Ad Sales Force 2. Public Transport, Train stations, Bus stops Cost Structure 1. Distribution 2. Content, design and print of a daily newspaper Revenue streams 1. Fees for ad space in paper 2. Free Newspaper

14 Case A Business Model Proposed Key Partners Habia (standard setting body for the hair, beauty, nails and spa industries) presume that material once badged will be used by teaching organisations Suppliers of salon mgmt systems (SMS) [Strategic relationship with industry leaders: isalon & Shortcuts] Key colleges and training institutes provide workshops and maybe accredited delivery. In exchange for your time students get exposure to Case A business methods (connect promising students with clients) What branded items can be given away / placed during Fresher s week at college Key Activities Developing and maintaining up-to-date procedures & policies Customisation processes Automated data processing Analysing data Running quarterly reviews Scanning for potential opportunities and threats for clients Client interaction (inc. f2f) Key Resources SOPs that cover the how-to of running a business On-line platform with on-line documentation & multi-media material (enhance learning) Experienced business advisors (different levels) Contacts / networks within the industry Complementary partners Case studies (success) Conversion software Value Proposition Provide procedures, frameworks and people to enable owner to develop their business (a) New salon owners (*) (Free introduction to Case A start of relationship pay next time) (b) Owner(*)/manager / stylists (free them up from tasks they aren t good at / don t want to do but still want growth & profits) Case A could do this by taking on direct responsibility for certain operational areas (or finding people to do that) (c) Owner(*)/manager (want to learn about business and develop as they grow their own) Case A will provide mentoring to assist personal development (Premium area) SMS suppliers Opportunities for marketing new systems using case studies of enhanced profitability using their systems and Case A Relationships Existing clients Blog providing forum for commenting on industry issues, best practice, new ideas, products Customer acquisition SMS > client lists, Word of mouth, networking Complementary partners Specialist disc. groups, e.g. LinkedIn recognised as Industry Experts Channels Partner with SMS suppliers (isalon, Shortcuts) Social networks to drive traffic to site (Twitter, facebook, LinkedIn) Online, mobile and f2f Maybe concentrate on warm contacts (no cold calling could waste time) SEO activities drive business to website Market segments (a) New salon owners (*) (not done this before but value help and need to know the basics) FREE (b) Owner(*)/manager / stylists (want to free up their time to focus on the things that only THEY can do in the business.) (c) Owner(*)/manager (wish to free themselves to work on the business rather than in it maybe more entrepreneurial?) Supplier of Salon Management Systems (SMS) Aiming at small end of market Want owners (*) to get best out of system. Limit to level of customisation they can provide (* Small independent saloon owner-manager / stylists usually with 6 or more employees and no more than 2-3 salons who are interested in growing and developing the business by maximising profitability and increasing revenue streams Key Costs Customer acquisition Updating knowledge base 121 / f2f meetings Preparation for meetings including analysis & presentation of data Updating and customising materials Developing new materials (some multi-media: audio / podcasts, video) Maintaining on-line platform Legal costs (Copyright, design rights, trademarks, CDAs, etc) Revenue streams Annual licence fee (per property and dependant on package purchased) Complementary products (click through ads or % of sales made to clients) Mentoring services (premium service per consultation?) Responsibility for delivering key operational targets (paid on performance)

15 15 The Supply Side Delivering Value How do I deliver the value proposition?

16 16

17 Key Partner Material / fabric suppliers Training commisioners Designers Case B Outlined Business Model Key Activities High quality accredited training opportunities Design and conversion of fabrics Generating PR & stories Winning contracts Maintaining and building new relationships with materials suppliers Trend-watching, ideas to practice good design Factory shop On-line & social media Key Resources High quality trainers Designers able to pass on designs and train others Good negotiators able to capture new contracts Individuals able to convert fabrics to scalable products On-line platform Value Proposition Women aged years who are looking for new skills, job opportunities, new friendships, aspirational role models those looking for more ethical products but Green People?? Relationships Engaged, growing customer base, informative, positive, professional, fun and sassy, confident, design led, rich and vibrant Channels On-line Retail Raising awareness Factory shop Market segments Disadvantaged who are also unemployed (They will possibly fall into these categories homeless and mental health issues. Suffered abuse, long-term unemployed (question of stress and basic social skills) Women interested in design, eco-fashion, environment, up-cycling? Recycled, green ethical clothing Key Costs Designers Building website Maintenance of website Factory shop / training premises Updating social platforms Revenue streams Retail product sales Training contracts Donated fabrics Donations?

18 Resources 18 Osterwalder s Business Model Canvas eneration_preview.pdf - Free Book (part of) Blog - Slideshare - Youtube -

19 Venture Further workshop Business Models (additional material) Martin Henery

20 20 The business model simplified Demand side Supply side Value proposition Key resources Customer segment Key activities Relationship Partners Channel to market Costs (money out) Revenue (money in)

21 The Demand Side Creating Value 21

22 22 The basics of marketing Segmentation Dividing the market in a meaningful way Identifying your customer & what they value Characterise, storyboard, stereotypes Targeting Which segment will you focus on? Deciding on and adopting a specific strategy Positioning How do you wish your offering to be perceived? Create an image in the mind of the consumer

23 23 Why is segmentation important? Identify and prioritise needs Identify what benefits to supply Understand how value is derived Use case Pricing Channel to market Getting product to customer How exchange can be made Product / service configuration Product positioning and pricing Targeting customer

24 24 Entrepreneurial Marketing Appreciate the importance of marketing throughout the business start up process To identify key market segments To develop an effective marketing strategy Define the business and create sustainable value Identify route to market Aligns and counterbalances the internal and external requirements and forces Marketing as you go Highly responsive to market (close to customer) Value Proposition makes that possible

25 Value Proposition 25 Determine the value proposition The value created to users by using the product or service Creating and capturing value Value only arises when someone does something different as a consequence of using your product or service Positioning Template For (target customers) Who (has the problem/need/pain) Our product.(is new) Provides (results) Unlike (competitors or substitutes)

26 26 26 Channels Describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. Channels are customer touch points Raising awareness among customers about a company s products and services. Helping customers evaluate a company s Value Proposition Allowing customers to purchase specific products and services Delivering a Value Proposition to customers Providing post-purchase customer support

27 27 27 Customer Relationships Describes the type of relationships a company establishes with its specific Customer Segments. Relationships can range from personal to automated motivated by the need for Customer acquisitions Customer retention Boosting sales (upselling)

28 The Supply Side Delivering Value 28

29 How do I deliver the value proposition? 29

30 30 30 Key Resources Describes the most important assets required to make a business model work allowing the enterprise to create and offer its value proposition, reach markets, maintain relationships with customer segments, and earn revenues. These can be physical, financial, intellectual, or human and can be owned or lease by the company or acquired from key partners.

31 31 31 Key Activities Describes the most important things a company must do in order to make its business model work. Every business model calls for a number of key activities. These are the most important actions a company must take to operate successfully. Like Key Resources, they are required to create and offer a Value Proposition, reach markets, maintain Customer relation ships and earn revenues. And like Key Resources, Key Activities differ depending on model type.

32 32 32 Key Partnerships Describes the network of suppliers and partners that make the business model work. Companies create alliances to optimise their business models, reduce risk and acquire resources. Different types of partnerships include Strategic alliances between non-competitors Coopetition: strategic partnerships between competitors (Porter video) Joint ventures to develop new businesses Buyer-Supplier relationships to assure reliable supplies

33 How is money made and how does the business work? 33 Take Inputs Process/Manufacture Output Costs Fixed and Variable Revenue Businesses need to make a profit Revenues > costs Sustainable Competitive Advantage Revenues >> costs Profit

34 Making a Profit Capturing Value 34

35 35 Cost Structure Describes all costs incurred to operate a business model. Creating and delivering value, maintaining Customer Relationships, and generating revenue all incur costs. Such costs can be calculated relatively easily after defining Key Resources, Key Activities and Key Partnerships. 35

36 36 Revenue Streams Represents the cash a company generates from each Customer Segment A business model can involve two different types of Revenue Stream. Transaction revenues resulting from one time customer payment Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers or to provide post-purchase customer support 36

37 37 Costs and Revenues Bad debts and depreciation Research and development Equipment and raw materials Utilities, rates, taxes and VAT Insurance and legal Marketing (incl. promotion) Salaries and benefits Professional services Transportation Stationary, consumables Establishing IPR Interest Rental / leasing charges Web hosting, IT Travel and subsistence Rent and service charges Sales Selling product, billable hours Licensing Royalties Leasing, rentals Delivery charges Product insurance Commission, bonuses, tips? After sales; maintenance, servicing and upgrades Consumables (razors and blades) Installation, consultancy and training Interest, rent and other forms of ROI

38 38 Unaudited Condensed Consolidated Statement of Income (U.S. Dollars In Thousands) EBaY Three Months Ended June 30 Source Net revenues 773, % 1,086, % Cost of net revenues 146,531 19% 191,840 18% Gross profit 626,881 81% 894,463 82% Operating expenses: Sales and marketing 189,150 24% 287,144 26% Product development 59,978 8% 71,639 7% General and administrative 102,940 13% 129,340 12% Payroll tax on employee stock options 5,186 1% 1,560 0% Amortization of acquired intangible assets 15,769 2% 25,794 2% Total operating expenses 373,023 48% 515,477 47% Income from operations 253,858 33% 378,986 35% 38

39 Cost of sales Sales and Marketing Technology and content (= R&D) General and Administrative Other operating expense (income) Total operating expenses Income from operations Comparison financial performance of EBaY and Amazon 39 80% 70% 60% 50% 40% 30% 20% 10% 0% Amazon % EBaY of net revenue EBaY M.Henery@msec.ac.uk