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Key Course Information Recap. For labs next week…  Lab registration  Be sure that you have registered in a lab on the course website and check the room.

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Presentation on theme: "Key Course Information Recap. For labs next week…  Lab registration  Be sure that you have registered in a lab on the course website and check the room."— Presentation transcript:

1 Key Course Information Recap

2 For labs next week…  Lab registration  Be sure that you have registered in a lab on the course website and check the room location  Remember to take the coupon sheet that came with the lab manual to your lab  You need it to get the access codes for the 2 assessments due at the end of the week  Read the Lab #1 materials carefully and make sure you have prepared for the lab as per the instructions  Remember that ½ of your participation mark is determined based on your prep work for the lab

3 Additional Sessions  DON’T FORGET! the mandatory BBA Student Success Session Sunday night at 7pm in P1025/27 for all students that did not attain a B- in BU111 or BU111/127 combined (C+ and below)  Strongly recommended for those who only attained a B-  Everyone that wants to improve their grade in BU121 is welcome  Students that had a C- or lower must also make an appointment with the Academic Advisors in the BBA office

4 Business Models How you intend to make money with your idea…Turning your idea into a profitable business or sustainable not- for-profit “A product is the centre of a business model, but it is not a business in and of itself – it can’t succeed without a great business model. ” The Dragon’s Den Guide to Real-World Business Models

5 Learning Objectives After studying this topic, you should understand:  what a business model is and the different building blocks that make up a business model  why it is important to understand your business model  why companies in the same industry or with essentially the same product/service might have different business models  how a company’s business model affects how it operates  some of the common patterns found in business models  the process of building a business model and be able to apply it

6 What is a Business Model?  “a business model describes the rationale of how an organization creates, delivers, and captures value” Alexander Osterwalder – “Business Model Generation”  How a company intends to make money / the logic by which it sustains itself financially  How your idea actually becomes a business that makes money / social venture that is sustainable  Different companies can have similar offerings but different business models  Model affects strategy/ways of operating  Blueprint describing how an organization operates

7  Gillette virtually gives away the handle and makes its money selling a steady supply of razor blades  Companies that sell electric shavers make their money up front

8 3 Ways to Make Money in Water Filtration Q WaterAquaOvoEvent Water Solutions Rents water filtration systems for a monthly fee to restaurants Sells water filtration systems with a stylish cooler for a one-time fee to individuals Rents water filtration systems for a per- event fee to event holders

9  Subscription-based vs advertising-based revenue model  Focus on selecting content readers willing to pay for vs selecting content to attract readers advertisers want to sell to

10  Sell tickets at cost and make profits on refreshments  Refreshment stand staffing critical  - long lines dissuade customers  - staff try to ‘up sell’

11 What is Your Business Model?  Product or service model?  Merchant or agency model?  consumer-direct, retail, pop-up, or party plan  Producer or licensor model?  Independent owner/operator or Franchising/licensing model?  Traditional or game-changer model?  Revenue model? / Why is it sustainable?

12 “Business Model Generation” Alexander Osterwalder and Yves Pigneur  https://www.youtube.com/watch?v=QoAOzMTL P5s https://www.youtube.com/watch?v=QoAOzMTL P5s 

13 Mass market Niche market Segmented Diversified Multi-sided Consumer electronics Gluten-free products Banking Amazon Credit card companies

14 Newness Performance Customization “Getting the job done” Design Brand/status Price Cost reduction Risk reduction Accessibility Convenience/ usability Cell phones PCs Jeans Rolls Royce Apple Rolex Walmart UPS Service guarantee Mutual funds iTunes

15 Partner Indirect Partner stores Wholesaler Own Indirec t Own stores Direct Sales force Web sales Awareness Evaluation Purchase Delivery After sales

16 Personal assistance Dedicated personal assistance Self service Automated services Communities Co-creation Car dealerships Private banking Grocery stores Amazon HOGs Product reviews

17 Asset sale Usage fee Subscription fees Lending/rentin g/leasing Licensing Brokerage fees Advertising Ford Hotel WOW Zipcar.com Content, technology Credit cards Media

18 Key Questions to Answer  Who pays you? – consumer, business, licensee…  How does your product/service generate revenue?  How do you charge? – unit price, transaction fee, royalty…  When do you get paid? How do you collect? – up front, installments, back end…  Is your revenue model scalable? – can your respond to sudden increases in sales without spreading your resources too thin? **  What is your pricing model? – price floor, price ceiling, price point  What is the lifetime value of each customer? = annual revenue x number of years a customer will pay you from The Dragon’s Den Guide to Real-World Business Models

19 Physical Intellectual Human Financial Walmart Nike, Microsoft Mayo Clinic Stock options for key employees

20 Making Selling Supporting Manufacturing, providing services, platform/network development Promotion and education Finding talent/HR, customer service, platform/network management

21 ola Optimization and Economy of Scale Reduction of risk and uncertainty Acquisition of resources and activities Outsourcing or sharing infrastructure BluRay Mobile phone operating systems

22 Cost driven Value driven Fixed costs Variable costs Economies of scale Economies of scope Walmart Luxury hotel Manufacturing Services Distribution for multiple products

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25 Business Model Patterns  Multi-Sided Platform  Value is created by facilitating interactions between two or more distinct but interdependent groups of customers  Of value to one group only if the other groups of customers are also present – and grows in value to the extent that it attracts more users – network effect  Examples: Visa (credit card companies), eBay, Financial Times (newspapers), Facebook, Video game consoles, Google

26 Multi-sided platform Targeted Ads Advertisers From Business Model Generation by Alex Osterwalder & Yves Pigneur Free Search Keyword Auctions Monetizing Content Web Surfers Content Creators

27 Business Model Patterns cont’d…  The Long Tail  Selling ‘less of more’ – focusing on offering a large number of niche products, each of which sells relatively infrequently vs. focusing on selling a small number of products, each selling in high volume # of sales # of products  Examples: Netflix, eBay, YouTube, Facebook, LEGO Factory (customer-designed kits), lulu.com

28 ‘Traditional’ Book Publishing Model Broad Content Ideally ‘hits’ Retail Network Broad Audience Wholesale revenuesPublishing and Marketing Content Acquisition, Publishing, Sales Content, Publishing Knowledge From Business Model Generation by Alex Osterwalder & Yves Pigneur

29 ‘New’ Long Tail Model 1. Self- publishing Services 2. Marketplace for Niche Content Lulu.co m 1. Niche Authors 2. Niche Audiences Sales Commissions (low), Publishing Service Fees Platform Development and Management Platform Develop- ment, Logistics Platform, Print-on- Demand Infrastructure Commun- ities of Interest, Online Profile From Business Model Generation by Alex Osterwalder & Yves Pigneur Niche Authors Sell ‘Less of More’ Internet Niche. Can cater to Users and Content Providers – Multi- Sided Large scope of Niche Content and Content Production Tools

30 Business Model Patterns cont’d…  FREE  At least one substantial customer segment is able to continuously benefit from a free-of-charge offer, financed by another part of the business model or by another customer segment  Different patterns make the free offer possible  Advertising  Freemium  Bait & Hook  Examples: Google / Flickr, Skype / Free mobile phones, Gillette

31 Freemium Free Internet and Video calling Web users Globally From Business Model Generation by Alex Osterwalder & Yves Pigneur Cheap calls to phones - SkypeOut Mass customized People who want to call phones Pre-paid or subscription Skype.com

32 ‘Bait & Hook’ Razor handle Mass market – people who shave From Business Model Generation by Alex Osterwalder & Yves Pigneur Built-in ‘Lock-in’ 1x handle purchase Blades Frequent blade replacements

33 Business Model Patterns cont’d…  On a earlier slide asked: “What is Your Business model?”: Traditional or game changer? Some recent game changer patterns:  Freemium  Membership models – subscription box, member community, flash sales  Crowdsourcing models – crowdsourcing, crowdfunding, peer-to-peer sharing

34 Other Examples  Groupon vs other daily businesses  Social entrepreneurship  Startup for grannies – different approaches

35 Building Your Business Model The Process

36 1. Understanding the Context

37 Building the Model… 2. Build on Customer Insights  Ask them! 3. Brainstorm  Ask ‘what if?’ questions  Rules: prepare, stay focused, defer judgment, and think visually…

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39 Building the Model cont’d … 4. Think Visually  Post-it notes  Use thick marking pens  Write only one element on each post-it  Write only a few words to capture the essential point  Drawings

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42 Building the Model cont’d … 4. Think Visually  Post-it notes  Use thick marking pens  Write only one element on each post-it  Write only a few words to capture the essential point  Drawings 5. Tell the Story

43 Key Concepts  The details of the building blocks and the process of building the canvas are important for the New Venture project, but will NOT be tested on exams  Important to download the PDF of the Business Model Generation book and READ the assignment requirements  For exam purposes you should understand  what a business model is, and different business model patterns that exist  how companies can have basically the same product but different business models  and how your business model affects how you operate


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