BUSINESS MODELS IN THE WEB Electronic Transactions by Alvertis I., Biliri E., Askounis D.
An idea Who What How Means Income Costs
Business Models Definition A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. (Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010) Business Models are stories that explain how enterprises work. (Margretta. Why Business Models Matter. Harvard Business Review. 2002) A business model is the method of doing business by which a company can sustain itself -- that is, generate revenue.
1. Value Proposition The collection of products and services a business offers to solve a customer s problem or satisfy a customer need. According to Osterwalder, a company's value proposition is what distinguishes itself from its competitors. Innovation Price Branding "Getting the job done" Design Risk reduction Value Proposition Adaptation Usability Cost reduction Performance Accessibility
For how long? Subjective?
Reduce Risk
Scalable? Cost B2B mainly Customization
?? Innovation Design Usability Brand
Innovation Design Performance Brand
2. Customer Segments B2C Niche Market Multi-sided Market Customer Segments Mass market Diversified Market Β2Β Segmented Market
Who the customers are? Source: http://www.designvision.com/strategy-in-the-mobile-world/
3. Customer Relations Customer Relationships Personal Assistance Self -service Communities Exclusive Services Automated Services Co-creation
What s NOT effective Customer Relation
4. Channels Salesman Web sales Direct Own Stores Partner stores Channels Wholesale Indirect
5. Revenue Streams Asset sale Usage fee Subscription fee Lending Licensing Advertising Middleman / Brokerage Revenue Streams
Leasing
Licensing
Can t buy me Love Ad-based
6. Resources Physical Intellectual Human Financial Key Resources
7. Key Activities Key Activities Production Problem solving Platform / network creation
Problem Solving
Standardisation Mass usage Platform / network creation
8. Key Partnerships Key Partnerships Optimization & Economy of Scale Cost or Risk Reduction Specific resources + +
Key Partnerships + + +
9. Cost Structure Cost Driven Vs. Value Driven FC Fixed costs VC Variable costs Economies of scale Economies of scope Cost Structure
How What
Freemium (Skype)
Amazon Big Picture 2005 Opportunities investigated in 2006
Multi-sided Platform (Google)
Long Tail (LEGO)
Free (Metro)
Bait & Hook
Business Models Can Change! From hardware sales R$ to Bait & Hook R$ In 1992, HP LaserJet III printer cost >$2000 HP made money from the hardware margin In 2014, HP printer cost < $100 HP makes money on the ink Source: Gigi Wang (2014) Business Models Innovations
History of Business Models Mass production, speedy service Aggregation Specialization, door-to-door transportation Built to order, just in time manufacturing, direct to consumer sales Internet revolution, consumers as storefronts, online booking 1950 s 1960 s 1970 s 1980 s 1990 s
Business Models for ecommerce Brokerage models Advertising models Infomediary models Merchant models Manufacturer (direct) models Affiliate models Community models Subscription models Utility models Source: M. Rappa. Business Models on the Web. http://digitalenterprise.org/models/models.html
E-Commerce Source: Croll, A., Yoskovitz, B. (2013) Lean Analytics. O Reilly
SaaS Source: Croll, A., Yoskovitz, B. (2013) Lean Analytics. O Reilly
Free Mobile App Source: Croll, A., Yoskovitz, B. (2013) Lean Analytics. O Reilly
Media Site Source: Croll, A., Yoskovitz, B. (2013) Lean Analytics. O Reilly
UGC Source: Croll, A., Yoskovitz, B. (2013) Lean Analytics. O Reilly
Two Sided Marketplaces Source: Croll, A., Yoskovitz, B. (2013) Lean Analytics. O Reilly
Business Model Innovation in Apple
Business Models Innovations (BMIs) BMIs represent an often underutilized source of future value Competitors might find it more difficult to imitate or replicate an entire novel activity system than a single novel product or process Since BMIs can be a potentially powerful competitive tool, managers must be attuned to the possibility of competitors efforts (that come from outside their traditional industry barriers) Source: Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT Sloan Management Review, 53(3).
Sustainable BMIs Soiurce: Model Behavior: 20 Business Model Innovations for Sustainability. Sustainability. February 2014. http://www.sustainability.com/library/model-behavior#.u6duho2szje
Bait & Hook BMI (Subscription model) A customer must pay an ongoing fee, usually monthly or annually, to gain ongoing access to a product or service. In some instances, the model is tied to the purchase and operation of an asset, where the consumer must pay an ongoing fee to make the asset operational. Examples of brands using the "Bait & Hook" business model: Coffee machines: very low price for buying the coffee machine and after paying a lot of money for the coffee caps. Mobile phones: low price for the mobile phone, even free, being subsidised by the telecoms operator and after a minimum monthly fee with a predefined permanence period. Printers: cheap price for the printer machine but after a high price for printer cartridges.
Product as a Service BMI Consumers pay for the services that a product provides without the responsibility of repairing, replacing or disposing of it. This model shifts the burden of product repair and replacement to the company, and offers customers top product performance at all times, creating more accountability within the broader system for product disposal, and higher likelihood of product repair, reuse and recycling.
Freemium BMI A proprietary product or service (often software, media or web services) is provided free of charge, but money (premium) is charged for premium features, functionality or virtual goods. A freemium model is sometimes used to build a consumer base when a critical mass is needed to make the product valuable to consumers.
Collective Consumption BMI (Shared Economy) The sharing economy has changed the way consumers think about ownership and created a new level of engagement between users around the world. Shared resource models enable customers to access a product, rather than own it, and use it only as needed.
Multi-sided Platforms BMI A business is able to connect users with each other and provide the underlying infrastructure on which others can build and exchange value. Any business is able to connect users with each other and provide the underlying infrastructure on which others can build and exchange value. Source: WIRED, Platforms are eating the world. http://www.wired.com/insights/2013/12/outlook-2014- platforms-eating-world/ Image: http://www.indianic.com/blog/mobile/small-businesses-thriving-on-the-platform-of-mobiles.html
Types of Platforms to facilitate transactions, interactions, mobilization Source: http://dupress.deloitte.com/dup-us-en/focus/business-trends/2015/platform-strategy-new-level-business-trends.html
Crowd-funding BMI Tap the resources of an entire network to raise money in increments from a group of people; they are financial contributions from online investors, sponsors or donors to fund for-profit or non-profit initiatives or enterprises. Pebble: > $20 million Ouya: > $8.5 million
Produce on Demand BMI An organisation produces a product only when consumer demand has been quantified and confirmed. Companies do so via online platforms that enable consumers to design their own products, vote on preferred product elements, and in some cases engage with other consumers in product creation.
Physical to Virtual BMI To eliminate brick and mortar infrastructure and dramatically reduce the resources needed to supply a product to a consumer. It changes where and how a transaction happens.
10 types of innovation of Larry Keely, Doblin Source: http://www.business-model.be/business-model-innovation_1/
Gartner s 2016 Emerging Technologies Hype Cycle
Digital leaders outperform their peers in every industry Revenue Generation Profitability Market Valuation Sources: The Digital Advantage: How digital leaders outperform their peers in every industry. MIT Center for Digital Business & Capgemini Consulting & Westerman, G., Bonnet, D., McAfee, A. (2014) Leading Digital: Turning Technology into Business Transformation. Harvard Business Review Press
Additional Material FutureEnterprise MOOC New Forms of Enterprise: How to deliver digital business innovations and capture value : Enroll at: http://moodle.epu.ntua.gr/ (note: you need to create your account and log in in order to access the material) Attend Week 2: Define your business model innovation Business Model Innovation Blog post series at: http://www.futureenterprise.eu/
Sources
QUESTIONS etransactions@epu.ntua.gr Dr. Alvertis I. alvertisjo@epu.ntua.gr Biliri E.- ebiliri@epu.ntua.gr