BUSINESS MODEL GENERATION

Alaa Moustafa
Business Development Manager, eSpace

facebook.com/alaa.moustafa
Twitter.com/alaamoustafa

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 eSpace Profile

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 Agenda
• Business Model vs. Business Plan
• Business Model Canvas
• Business Models Patterns
• Business Model Design
• Business Model Design Process

Ref: Business Model Generation

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 Business Model Vs. Business Plan
How an organization A formal statement
creates, delivers, and of a set of business
captures value from goals, and how to
customer. reach those goals

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 BUSINESS MODEL CANVAS
A shared language for describing, visualizing, assessing, and changing
business models.

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 Business Model Canvas

DESCRIBE
DISCUSS
DESIGN your
How
CHALLENGE Business
can you
IMPROVE Model?
INNOVATE
CHOOSE
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 Business Model Canvas

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 1. Customer Segments (CS)

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 1. Customer Segments (CS)
• The Customer Segments Building Block
defines the different groups of people or
organizations an enterprise aims to reach
and serve.

• Examples:
- Mass Market - Niche Market (Car parts Manufactures)
- Diversified (Amazon) - Multisided (Credit Card: Holders & Merchants)

- Segmented (Banking Customer over $100,000)

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 2. Value Proposition (VP)

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 2. Value Proposition (VP)
• The Value Propositions Building Block
describes the bundle of products and
services that create value for a specific
Customer Segment.

• Examples:
- Newness (Cell Phones) - Performance (Faster PCs )
- Customization (Custom Software Dev.)
- Cost Reduction (CRM Applications) - Price (Lower Price)

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 3. Channels (CH)

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 3. Channels (CH)
• The Channels Building Block describes how a
company communicates with and reaches
its Customer Segments to deliver a Value
Proposition.

• Channels Phases:
Awareness Evaluation Purchase Delivery After Sales

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 4. Customer Relationships (CR)

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 4. Customer Relationships (CR)
• The Customer Relationships Building Block
describes the types of relationships a company
establishes with specific Customer Segments.
Relationships can range from personal to
automated.

• Customer relationships may be driven by the

following motivations:
– Customer acquisition
– Customer retention
– Boosting sales (upselling)

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 5. Revenue Streams (R$)

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 5. Revenue Streams (R$)
• The Revenue Streams Building Block represents
the cash a company generates from each
Customer Segment. A business model can
involve two different types of Revenue
Streams:
– Transaction revenues
– Recurring revenues

• Way to generate Revenue:

- Asset Sale - Usage Fee - Subscription Fees - Renting/Leasing
- Licensing - Advertising

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 6. Key Resources (KR)

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 6. Key Resources (KR)
• The Key Resources Building Block describes
the most important assets required to make
a business model work

• Key Resources can be categorized as

follows:
- Physical (Buildings – Machines – Point of Sale System)
- Financial (Cash – financial guarantees)
- Human Resources
- Intellectual (Brands – Customer Databases)

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 7. Key Activities (KA)

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 7. Key Activities (KA)
• The Key Activities Building Block describes
the most important things a company must
do to make its business model work

• Key Activities can be categorized as follows:

- Production (Manufacturing firms)
- Problem Solving (Hospitals)
- Platform/Network (Visa Card)

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 8. Key Partnerships (KP)

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 8. Key Partnerships (KP)
• The Key Partnerships Building Block
describes the network of suppliers and
partners that make the business model
work.

• Reasons for creating Partnerships:

- Optimization and economy of scale
- Reduction of risk and uncertainty
- Acquisition of particular resources and activities

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 9. Cost Structure (C$)

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 9. Cost Structure (C$)
• The Cost Structure describes all costs incurred
to operate a business model. There are two
Classes Cost Structures:
– Cost Driven
– Value Driven

• Cost Structure Characteristics:

- Fixed Costs (Salaries – Rents – etc.)
- Variable Costs (Depends on the produced service like Music Festival)
- Economies of Scale (Larger companies benefit from lower bulk purchase rates)
- Economies of Scope (Same marketing activities may support multiple products)

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 Business Model Canvas Template

http://www.canvanizer.com
Free and easy tool to design, discuss and share your business model
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 BUSINESS MODELS PATTERNS
Classification for business models with similar characteristics, similar
arrangements of business model Building Blocks, or similar behaviors.

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 Business Models Patterns
Un-Bundling Business Models
The Long Tail
Multi-sided Platforms
FREE as a Business Model
Open Business Models

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 Un-Bundling Business Models
• The concept of the “unbundled” corporation holds that
there are three fundamentally different types of
businesses
• The three types may co-exist within a single corporation,
but ideally they are “unbundled” into separate entities in
order to avoid conflicts or undesirable trade-offs
• Business Types
– Customer Relationship Businesses
– Product Innovation Businesses
– Infrastructure Businesses
• Examples: Private Banking Industry and Mobile Telecom
Industry

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 Un-Bundling Business Model
Example: The Mobile Teleco

• Traditionally Mobile telecommunication

competed on network quality.
• They realize that their key asset is no
longer the network—it is their brand
and their Customer Relationships.
• What they did in:
– Telecos have outsourced operation and maintenance to equipment
manufacturers.
– Teleco can sharpen its focus on branding and segmenting
customers and services.
– Telecos work with multiple third-parties that assure a constant
supply of new technologies, services, and media content such as
mapping, games, video, and music
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 The Long Tail
• Long tail business models are about selling
less of more.
• They focus on offering a large number of
niche products, each of which sells relatively
infrequently.
• Examples: Youtube, Facebook and Lulu.com

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 The Long Tail
Example: Books Publishing Industry

• Old Model:
– The traditional book publishing model is built
on a process of selection whereby publishers
screen many authors and select those that
seem most likely to achieve minimum sales
targets.

• New Model:
– Lulu.com’s business model is based on
helping niche and amateur authors bring
their work to market.
– It eliminates traditional entry barriers by
providing authors the tools to craft, print,
and distribute their work through an online
marketplace.

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 Multi-sided Platforms
• Multi-sided platforms bring together two or
more distinct but interdependent groups of
customers.
• The platform creates value by facilitating
interactions between the different groups.
• Examples: Visa, Google and eBay

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 Multi-sided Platforms
Example: Google's Business Model

• The heart of Google’s business model is its

Value Proposition of providing extremely
targeted text advertising globally over the
web.
• The model only works, though, if many people
use Google’s search engine.
• The more people Google reaches, the more
ads it can display and the greater the value
created for advertisers.

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 FREE as a Business Model
• In the free business model at least one
substantial Customer Segment is able to
continuously benefit from a free-of-charge
offer.
• Non-paying customers are financed by
another part of the business model or by
another Customer Segment.
• Examples: Flickr, Youtube, Skype and Google

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 FREE as a Business Model
Example: Newspapers Publishing Model

• One industry crumbling under the

impact of FREE is newspaper
publishing.
• Traditionally, newspapers and
magazines relied on revenues from
three sources: newsstand sales,
subscription fees, and advertising.

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 BUSINESS MODEL DESIGN
The techniques and tools from the world of design that can help you
design better and more innovative business models.

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 Business Model Design

Customer Insights
Ideation
Visual Thinking
Prototyping
Storytelling

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 1. Customer Insights
• Good business model design
views the business model
through customers‘ eyes, an
approach that can lead to the
discovery of completely new
opportunities.
• Successful innovation requires a deep
understanding of customers, including
environment, daily routines, concerns, and
aspirations.
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 2. Ideation
• What’s needed is a creative
process for generating a large
number of business model ideas
and successfully isolating the
best ones. This process is called
ideation.
• We can distinguish four
epicenters of business model
innovation:
– Resource-driven
– Offer-driven
– Customer-driven
– Finance-driven
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 3. Visual Thinking
• By visual thinking we mean
using visual tools such as
pictures, sketches and diagrams
to construct and discuss
meaning.
• Business models are complex
concepts, it is difficult to truly
understand a model without
sketching it out.

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 4. Prototyping
• Prototyping is a powerful tool for developing
new, innovative business models. It makes
abstract concepts tangible and facilitates the
exploration of new ideas.
• Prototyping comes from the
design and engineering
disciplines, where it is widely
used for product design,
architecture, and interaction design.

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 5. Storytelling
• Storytelling will help you effectively
communicate what it is all about. Good stories
engage listeners, so the story is the ideal tool to
prepare for an in-depth discussion of a business
model and its underlying logic.
• Why Storytelling?
– Introducing the New
– Pitching to investors
– Engaging Employees

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 BUSINESS MODEL DESIGN PROCESS
The concepts and tools to simplify the task of setting up and executing
a business model design initiative.

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 Business Model Design Process

Mobilize

Understand

Design

Implement

Manage

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 1. Mobilize
• Prepare for a successful business model
design project
• Mobilizing Activities:
– Frame project objectives
– Test preliminary business ideas
– Plan
– Assemble team

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 2. Understand
• Research and analyze elements needed for
the business model design effort
• Understanding Activities:
– Scan environment
– Study potential customers
– Interview experts
– Research what has already been tried (e.g.
examples of failures and their causes)
– Collect ideas and opinions

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 3. Design
• Generate and test viable business model
options, and select the best
• Design Activities:
– Brainstorm
– Prototype
– Test
– Select

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 4. Implement
• Implement the business model prototype in
the field
• Implementing Activities:
– Communicate & Involve
– Execute

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 5. Manage
• Adapt and modify the business model
in response to market reaction
• Managing Activities:
– Scan the environment
– Continuously assess your business
model
– Rethink your business model
– Align business models throughout the
enterprise
– Manage synergies or conflicts between
models

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 ANY QUESTIONS?
Thanks for your time.

Alaa Moustafa
Business Development Manager, eSpace

facebook.com/alaa.moustafa
Twitter.com/alaamoustafa

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