Business Models

W E B I N A R V I I

Topics Introduc*on to business models

Business model pa4erns

Asset-­‐based business models

Business model pivots

Disrup*ve business model characteris*cs

Working Defini<ons
◦
The design of a business is the means for delivering

value to customers & earning a profit. ◦ Business design incorporates the selec*on of

customers, its offerings, the tasks it will do itself and

those it will outsource, and how it will capture profits. ◦ A business model is the descrip*on of how the business will work in economic terms; a business model is a set of planned assump*ons about how a firm will create value for all its stakeholders. It is a system that enables a company to grow & make money on a sustainable basis.

Examples Razor versus razor blades

Kindle versus iPad

Southwest Airlines versus American Airlines

Costco

$9.00

$37.57

Bill of
Materials
(BOM)

6

7

Strategy Elements for Two Airlines
Element

American

Southwest

Customer

Customers to many places in the world

Customers point to point in U.S.

Product
Accessibility

Price
Service

Differentiation

Wide product scope; flies almost anywhere

Limited point to point flights; easy maint. & training for low cost

Scope of product & activities Very broad; connects everywhere Narrow; only flies to selected cities

Organizational design
& implementation

Hub & spoke; high fixed costs

Point to point;lower, flexible costs;control costs Value Proposition
Dominant value
Differentiating value

Strategy Elements for Two Airlines
Element

American

Southwest

Value capture for profit Dominant hub city; requires high occupancy Requires high occupancy Value for talent

High pilot salaries; good career historically Participation in stock options & camaraderie

Business model ques<ons: What are we good at?

What is our secret sauce?

What is the source of compe**ve advantage?

Knowing and understanding the business model helps: Iden*fy customer pain points

Understand the leverage opportuni*es

Knowing whether your product is an aspirin or a vitamin

Develop the right selling strategy

Evolu<on of the Business Model Globaliza*on has facilitated the transfer of business models across geographic boundaries.

Technological advancements have fostered the development of new business models.

The large infusion of private capital into new ventures has helped to spur the crea*on of new, innova*ve business models.

Business models in SoKware
Revenue Source
• Product
• Tied product
• Web-based SW
• Service

15

• Support
• Advertising
• Data-mining

Distribution

Pricing

Timeframe

• Direct
• Retail
• OEM

• Per user
• Per CPU
• Per site
• Per use

• Perpetual
• Lease
• One-time

Examples in SoKware
• Microsoft Office
• Adobe Acrobat
• Oracle Siebel CRM
• Salesforce.com
• Red Hat
• Google
• LinkedIn

Revenue Source
• Product
• Tied product
•