Lean Launch Pad- Business Model Generation. Jonathan Chee EEM 3450 Engineering Innovation and Entrepreneurship 22 nd September 2016

Transcription

1 Lean Launch Pad- Business Model Generation Jonathan Chee EEM 3450 Engineering Innovation and Entrepreneurship 22 nd September 2016

2 Jonathan s Profile With over 28 years of experience in private equity, M&A, investment management, corporate finance and operations in USA and Asia. A member of the Investment Committee in Shenzhen Capital Group ( 深圳创新投资公司 ) and Huawei Technology.

3 Jonathan s profile Previous Experiences Chief Investment Officer, Eagle Ride Investment, Listed in HK (0901.HK) Head of PE/VC, Huawei Technology Partner, CIVC Management Company General Manager, Shenzhen Capital Group & UOB-Shenzhen Capital JV Managing Director, Standard Chartered Private Equity Assistant Vice President, Vertex Management Inc., (USA) Education BSc. in Physics. (National University of Singapore) MSc. In Communications Engineering (University of Bradford, UK)

4 What we will cover Definition of a Business Model The 9 Building Blocks The Business Model Canvas

5 Business Model Definition A business model describes the underlying reasons of how an organization creates, delivers, and captures value for the shareholders.

6 The 9 Building Blocks 1. Customer Segments (CS) 4. Customer Relationships (CR) 7. Key Activities (KA) 2. Value Propositions (VP) 5. Revenue Streams (R$) 8. Key Partnerships (KP) 3. Channels (CH) 6. Key Resources (KR) 9. Cost Structure (C$)

7 1. Customer Segments (CS) The different groups of people or organizations an enterprise aims to serve Separate segments if: Needs require a distinct offer Different Distribution Channels Different types of relationships Substantially different profitability Willing to pay for different aspects of the offer

8 Examples of Customer Segments Mass market Niche market Segmented Diversified Multi-sided platforms (or multi-sided markets) One large group of customers with broadly similar needs and problems Specific, specialized CS often found in supplier-buyer relationships Segments with slightly different needs and problems Two unrelated CS with different needs and problems Two or more essential and interdependent CS

9 2. Value Propositions (VP) Bundle of products and services that create value for a specific Customer Segment Each VP caters to the requirements of a specific CS, and can be: Innovative/New or disruptive offer Similar to existing market offers, but with added features and attributes

10 Possible sources of value creation Newness Satisfy a set of needs that customers previously didn t perceive (no prior similar offering) Performance Improving product or service performance Customization Tailoring products and services to the specific customers needs Getting the job done Helping a customer get certain jobs done Design Delivering a product with superior design Brand/Status Creating a brand that customers value using and displaying

11 Price Offering similar value at a lower price (for pricesensitive CS) Cost reduction Helping customers reduce costs Risk reduction Reducing customers risks incurred when purchasing products or services Accessibility Making products and services available to customers who previously lacked access to them Convenience/Usability Making things more convenient or easier to use

12 3. Channels (CH) How a company communicates with its Consumer Segments to deliver a Value Proposition Channels serve several functions, including: Raises consumer awareness about a company s products and services Helps customers evaluate a company s VP Allows customers to purchase products and services Delivers a VP to customers Provides post-purchase customer support

13 Partner Indirect Own Direct Channel Types Channel Phases Sales force Web sales Own stores Partner stores 1. Awareness How do we raise awareness about our company s products and services? 2. Evaluation How do we help customers evaluate our organization s Value Proposition? 3. Purchase How do we allow customers to purchase specific products and services? 4. Delivery How do we deliver a Value Proposition to customers? 5. After sales How do we provide postpurchase customer support? Wholesaler

14 4. Customer Relationships (CR) The types of relationships a company establishes with specific Customer Segments Customer relationships may be driven by the following motivations: Customer acquisition Customer retention Boosting sales (upselling)

15 Personal assistance Customer representative who provides help during the sales process or after purchase completion Dedicated personal assistance Dedicated customer representative to an individual client Self-service No direct relationship with customers provides all necessary means for customers to help themselves Automated services Mixes customer self-service with automated processes can simulate a personal relationship when done well Communities Online user communities maintained by companies to facilitate knowledge exchange and mutual problem solving between users Co-creation Companies co-creating value with customers

16 5. Revenue Streams (R$) The cash a company generates from each Customer Segment A business model can involve two different types of Revenue Streams: Transaction revenues resulting from one-time payments Recurring revenues from ongoing payments

17 Ways to generate Revenue Streams Asset sale Selling ownership rights to a physical product Usage fee Providing the use of a particular service (charged according to usage amount) Subscription fees Selling continuous access to a service Lending/Renting/Leasing Licensing Brokerage fees Temporarily granting someone the exclusive right to use a particular asset for a fixed period Giving customers permission to use protected intellectual property Performing intermediation services on behalf of two or more parties Advertising Advertising a particular product, service, or brand

18 Two main types of pricing mechanisms: Fixed Menu Pricing Predefined prices are based on static variables List price Product feature dependent Customer segment dependent Volume dependent Fixed prices for individual products, services, or other VP Price depends on the number or quality of VP features Price depends on the type and characteristic of a CS Price as a function of the quantity purchased Dynamic Pricing Prices change based on market conditions Negotiation (bargaining) Yield management Real-time-market Auctions Price negotiated between two or more partners depending on negotiation power and/or negotiation skills Price depends on inventory and time of purchase Price is established dynamically based on supply and demand Price determined by outcome of competitive bidding

19 6. Key Resources (KR) The most important assets required to make a business model work Key Resources can be: Physical Financial Intellectual Human

20 Categories of Key Resources Physical Such as manufacturing facilities, buildings, vehicles, machines, systems, point-of-sales systems, and distribution networks Intellectual Such as brands, proprietary knowledge, patents and copyrights, partnerships, and customer databases Human All enterprises require human resources (particularly prominent business models such as knowledgeintensive and creative industries) Financial Financial resources and/or financial guarantees, such as cash, line of credit, or a stock option pool for hiring key employees

21 7. Key Activities (KA) The most important things a company must do to make its business model work Activities differ depending on business model type, e.g.: Software maker Microsoft: software development PC manufacturer Dell: supply chain management Consultancy McKinsey: problem solving

22 Examples of Key Activities Production Related to designing, making, and delivering a product in substantial qualities and/or of superior quality Problem solving Related to coming up with new solutions to individual customer problems (e.g. knowledge management and continuous training) Platform/Network Related to platform management, service provisioning, and platform promotion (applicable in business models designed with a platform as a Key Resource)

23 8. Key Partnerships (KP) The network of suppliers and partners alliances that help to optimize business models, reduce risk, or acquire resources Four different types of partnerships: Strategic alliances between non-competitors Coopetition strategic partnerships between competitors Joint ventures to develop new businesses Buyer-supplier relationships to assure reliable supplies

24 Three motivations for creating partnerships Optimization and economy of scale Optimizes allocation of resources and activities, through outsourcing or sharing infrastructure reduce costs Reduction of risk and uncertainty Competitors may form a strategic alliance in one area while competing in another reduces risk Acquisition of particular resources and activities Relying on other firms for particular resources or to perform certain activities helps to acquire knowledge, licenses, or access to customers

25 9. Cost Structure (C$) All costs incurred to operate a business model such as creating and delivering value, maintaining Customer Relationships, and generating revenue Two broad classes of C$s (many business models fall in between these two extremes) Cost-driven Minimizing costs wherever possible using low price VPs, maximum automation, and extensive outsourcing. Value-driven Value creation Typically premium VPs and a high degree of personalized service

26 Cost structures can have the following characteristics: Fixed costs Costs that remain the same despite the volume of goods or services produced (e.g. salaries, rents) Variable costs Costs that vary proportionally with the volume of goods or services produced Economies of scale Economies of scope Cost advantages as output expands (e.g. lower bulk purchase rates) Cost advantages due to larger scope of operations (e.g. in a large enterprise, Distribution Channels may support multiple products)

27 The Business Model Canvas The nine Building Blocks form the basis of the Business Model Canvas - A hands-on tool that fosters understanding, discussion, creativity, and analysis

28 Example Joy Sprouts Problem: Lack of quantifiable data to track development of preschoolers Solution: Technology that gives parents a tailored learning profile of their child through a single dashboard in an app: School: Collect info from children s wearable devices & from teachers through classrooms mobile devices Home: Collect info from child s interaction with games and activities

29 Example Joy Sprouts Business model: School: allows for real-time tailored feedback to parents (monthly subscription fee of US$750 per school) Home: allow consumers to purchase individual game module (price range of US$3-$10 per Sprout, or a monthly subscription of US$17).

30 Example Joy Sprouts Online: APP O2O: children s wearable devices and classroom mobile devices Offline: signed up and selling of games etc. Parents Teachers Children

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