Entrepreneurship and Innovation

Vision and plans: Mapping the

outlines of a new venture

Dr Nigel Lockett
n.j.lockett@bradford.ac.uk

www.bradford.ac.uk/management

What is a business model?

• An architecture for the product, service and information
flows, including a description of the various business
actors and their roles; and a description of the potential
benefits for the various business actors; and description
of the sources of revenues . . . and marketing plan.
(Timmers 2000)
• Are inventing new value propositions, transforming the
rules of competition, and mobilizing people and
resources to unprecedented levels of performance. Is a
distinct system of suppliers, distributors, commerce
services providers, and customers that use the Internet
for their primary business communications and
transactions. (Tapscott et al 2000)

© Lockett 2009 2/16

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 What it [BM] isn’t!
• Business models describe, as a system,
how the pieces fit together. But they don’t
factor in one critical dimension of
performance: competition … that … is
strategy’s job (Magretta 2002)

Magretta (2002) Why Business Models Matter

© Lockett 2009 3/16

Why are BMs useful?

• Supports analysis
– Components
– Assumptions
• Enables comparison
– Uniqueness
• Meaningful taxonomies
– Trends
– Change

© Lockett 2009 4/16

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 BM components - Timmers
• Architecture for:
– Product
– Service
– Information flows
• Description of:
– Actors & their roles
– Potential benefits for actors
– Sources of revenues
• Marketing strategy
Timmers (2000) Electronic Commerce: Strategies and Models for B to B Trading
© Lockett 2009 5/16

BM components - Hamel
Customer Benefits Configuration Company Boundaries

Customer Core Strategic Value

Interface Strategy Resources Network

Fulfilment & Support Business mission Core competencies Suppliers

Information & Insight Product/market scope Strategic assets Partners
Relationship Basis for Core processes Coalitions
dynamics differentiation
Pricing structure

Efficiency / Uniqueness / Fit / Profit / Booster

Hamel (2000) Leading the Revolution

© Lockett 2009 6/16

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 BM components - Afuah & Tucci
Business Model
Components
Linkages
Dynamics
Value configuration
Finance

Coordination
Internet Commerce
Community
Performance
Properties Content
Communication

Environment
Competitive
Macro
Impact of Internet

Afuah and Tucci (2000) Internet Business Models and Strategies

© Lockett 2009 7/16

BM building blocks
Business Model
Pillar Description
Building Block
Value
Product Gives an overall view of a company's bundle of products and services
Proposition
Target
Describes the segments of customers a company wants to offer value to
Customer
Customer Distribution
Describes the various means of the company to get in touch with its customers
Interface Channel
Explains the kind of links a company establishes between itself and its different
Relationship
customer segments
Value
Describes the arrangement of activities and resources
Configuration
Infrastructure Core Outlines the competencies necessary to execute the company's Infrastructure
Management Competency business model
Partner Portrays the network of cooperative agreements with other companies necessary
Network to efficiently offer and commercialize value
Sums up the monetary consequences of the means employed in the business
Cost Structure
Financial model
Aspects Revenue
Describes the way a company makes money through a variety of revenue flows
Model
Ostenwaster, Pigneur and Tucci (2005) Clarifying Business Models: Origins, Present and future concepts
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 BM’s place in the firm - Ostenwaster
Competitive
Forces

Legal Customer
Environment Demand
Business
Strategy

Business
Social Model Technological
Environment Changes

Business
Organisation
ICT

Ostenwaster, Pigneur and Tucci (2005) Clarifying Business Models:

© Lockett 2009 9/16 Origins, Present and future concepts

Entrepreneurial process

Idea
Generation

Opportunity
Recognition

Exploitation

Expressed as a
Business Model

© Lockett 2009 10/16

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 Timmons Model
Communication

Opportunity Resources
Business Plan

Fits & gaps

Ambiguity Exogenous forces

Creativity Leadership
Team

Uncertainty Capital market context

Founder

Timmons & Spinelli (2007) New Venture Creation

© Lockett 2009 11/16

Opportunity BM
Dimensions
Dimensions are a way of expressing the
different element of the business idea. They
help support analysis, structure discussion
and enable comparison.

Proposition This is all about the value proposition

underlining the business model. Often
Dimensions

expressed as a mission statement.

Who is the leader, the management team

People and the network of advisors, customers,
suppliers and stakeholders? Social capital
and networking

Organisational/company structure and the

Process processes that support and link them.
Discussion of main areas, including
marketing and IT. Ownership

Gross profit, net profit, p&l, balance sheet,

Financial cashflow, KPIs and capital requirements.
Raising finance. Exit strategy.
© Lockett 2009 12/16

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 Opportunity BM
Imperatives
Imperatives are what is driving the business
opportunity? Typical one or more will apply to
a business idea and are outside of the
control of the enterprise
Societal

Proposition
Societal imperatives: the wider global, social
and environmental factors. Such as climate
change, demographics, fair-trade and
Dimensions

Imperatives
antisocial behaviour. Social enterprise. Commercial
Commercial imperatives: the global and local
People
economic factors. Such as price of oil and
carbon trading.
Regulatory
Regulatory imperatives: legislation, rules and
legal requirements. Such as data
protection/accessProcess
and minimum wage

Technological imperatives: mobile

communications, broadband, internet, online
Technological
social networks, nanotechnology and
healthcare. This isFinancial
a good area to explore
with students as the often feel comfortable
and excited by new technologies.

Opportunity business model

Societal

Proposition
Dimensions

Imperatives

Commercial

People

Regulatory

Process

Technological

Financial

7
 Opportunity context

Market is made-up Industry is made-up

of customers (or
potential) who buy
products and
services. Explore
the market
of competitors who
Market analysis Industry analysis supply products and
services. Analysis of
the industry
attractiveness in

Industry
conditions. Segment order to identify
Market

customers by gaps. Iterative

demographics & process with
needs (!) in order to segmentation of
identify attractive market
segments

Segmentation Gap

© Lockett 2009 15/16

Opportunity cycle
Develop new ideas and
identify potential
opportunities
Revised New

Express opportunity
as a business model

Business Model Business Model

Analyse the market
and industry context for
business model

© Lockett 2009 16/16