Value Creation study notes (retake)

Purpose Economy

Purpose
Economy
knowledge-
based
economy
industrial
economy
agricultural
economy
The purpose economy is a new era in which the business worth of a company is
determined by their societal value instead of simply their profit.

Purposeful entrepreneurship is a way of doing business leading to a better world -

better for people, for nature.
It is about entrepreneurship in favor of the bigger whole, the general interest, a way
to offer a concrete, long term and constructive contribution of the problems of today.

○ Each of the three previous economies were unique to the context and
set of conditions of the day, all of which served as forces to impact the
markets in each economy.
○ The Purpose Economy is defined by the quest for people to have more purpose
in their lives → It is an economy where value lies in establishing purpose
for employees and customers—through serving needs greater than
their own, enabling personal growth, and building community.
○ Each part of our world has gone through a radical transformation in the
last few decades, and they are now converging into a new set of
processes to change the way society operates.
External environment

● External environment: macro and meso or contextual and transactional

● A business model illustrates the design of transaction content, structure and
governance so as to create value through the exploitation of business
opportunities
● A business model is a blueprint for a strategy to be implemented through:
○ organizational structures
○ organizational processes
○ systems
BM in environment
Internal environment → business model
Transactional environment (market) → (market) forces
External contextual environment → trends and development
 The Triple Bottom Line

People

Profit
Planet

→ THE 3 P’s ARE EQUALLY IMPORTANT!

People
● measures impact on:
○ all people involved with the company (from supplier to CEO of the
company)
○ in tourism involved companies include the community where the
company does business or has impact on
○ Examples:
■ offering health care,
■ good working hours,
■ healthy/ safe work environment,
■ opportunities for advancement and education
Planet
● measure and reduce/ eliminate the ecological footprint:
○ companies look at the entire life cycle of their actions and try to
determine the true cost of what they are doing regarding the
environment
○ Examples:
■ companies take pains to reduce their energy usage
■ dispose of any toxic waste in a safe way

■ use renewable energy sources

dont produce products that are unsafe or unhealthy

Profit
● the idea is that profits will help empower and sustain the community as a
whole, and not just flow to the CEO and shareholders
 ● economic value created by the company for the surrounding community and
society

people
planet
bearable

sustai
nable

equitable
viable

profit

McKinseys 7’S Model

● Emphasis on human resources (Soft S), rather than the traditional mass
production tangibles of capital, infrastructure and equipment, as a key to
higher organizational performance
● all the seven areas are interconnected and a change in one area requires
change in the rest of a firm for it to function effectively

● some parts are linked with BMC:

 ○ strategy → business model canvas is a blueprint for a strategy
○ staff → key resources
○ skills → key resources
● Soft elements = harder to describe, take longer to change
○ highly determined by the employees of the organisation
● Hard elements are easily identified and easier to change

● Can be for example used in the following situations:

○ improve the performance of a company
○ determine how to implement a proposed strategy
Structure:
The line of reporting, task allocation, coordination and supervision levels

Strategy:
The top level plan to create competitive advantage

Systems:
The supporting systems and process of the comapny, like information systems

Shared Values:
core values of the company and from the underpinning culture and how the business
bahaves and is perceived to behave in the wider context

Style:
the overarching style of leadership adopted within the comany

Staff:the number and types of employees Skills: the skills and competences of the
employees

Porters 5 Forces
Threat of substitute products
In other words, the costs associated with switching to another provider.. The threat from new brands,
products or services can arise from either existing or new players. This applies especially to services
that are offered at lower costs by new competitors. These products and services can often be at risk
for substitution.

→ products similar to yours

→ perfect substitute to yours

The bargaining power of buyers

It is useful to distinguish the power of buyers from their willingness to actually use that power. That
willingness has increased significantly since the advent of the internet because it has become much
easier to publish user-generated content like ratings, reviews or other forms of word-of-mouth. Often
with the help of social media, a platform that significantly enhanced the power of buyers. (yelp)

Supplier power.
An assessment of how easy it is for suppliers to drive up prices.

→ if there is a lot of suppliers, you can pick the one you want to use
→ if there is not many suppliers, they have power over price

Competitive rivalry.
The main driver is the number and capability of competitors in the market. Many competitors, offering
undifferentiated products and services, will reduce market attractiveness.

→ all competitors, including yourself

→ rivalry of these competitors is influenced by the four surrounding powers

Threat of new entry.

Profitable markets attract new entrants, which erodes profitability. Unless incumbents have strong and
durable barriers to entry, for example, patents, economies of scale, capital requirements or
government policies, then profitability will decline to a competitive rate.

Business Model Canvas

“ A business model describes the rationale of how an organisation

creates, delivers and captures value”

→ a tool (blueprint) to visualize the strategy of an organization

● the 9 building blocks cover the main areas of a business and its logic behind it

1. Value Proposition
→ describes the bundle of products and services that create value for a specific
customer segment

★ what needs to be done (jobs)

★ solves a problem or satisfies a need (pains)
 ★ aggregation, bundle of benefits (gains)

- why customers turn to one company over another

- is leading, start of everything
- number of VP = number of customer segments

WHAT value do we deliver to the customer?

either qualitative (design, customer experience)

or quantitative ( price, speed of service)

possible VP’s:
1. Newness: often technology related, cellphones
2. Performance: Pc sector, by bringing more powerful machines on the market
3. Customization: tailoring products, no mass customization, co-creation

2. Customer Segments
→ describes the different groups of of people or organizations an enterprise aims to
reach and serve

Mass :
○ large group, broadly similiar needs
Niche :
 ○ specific customer segments
Segmented:
○ slightly different needs and problems
Diversified:
○ two different segments with very different need
Multi-sided Platforms (or markets):
○ Two or more interdependent segments, both required to make BM
work

→ make a conscious decision about which to serve

market segmentation criteria:

Geographic, demographic, psychographic, (Purchase-)behaviour

3. Channels
→ how a company communicates with and reaches its customer segments to deliver the
Value Proposition

functions:
- raising awareness
- helps customers evaluate VP
- allows customers to purchase
- delivering a VP to customers
- providing post-purchase support

4. Customer Relationships

→ types of relationships a company establishes with specific customer segments

➢ acquisition = getting new customers

➢ retention = avoid customers to leave
➢ loyalty
➢ boosting sales (up, cross, deep selling)
 Long life customers buy more and higher priced options, are less price
sensitive and less costly to serve → more loyal

Types of Customer Relationships:

1. Personal Assistence (call centers)

2. dedicated Personal Assistance (Bank)
3. Self-Service (Albert Heijn)
4. Automated Services
5. Communties (Portals)
6. Co-Creation (Nike Shoes)

5. Key Resources
→ describes the most important assets required to make a BM work

● Physical (facilities, vehicles)

● Intellectual ( brands, copyrights)
● Human (knowledge intensive & creative industries
● Financial (cash, credit)

6. Key Activites

→ the most important things a company must do to make its business model work
like:
- Production
- Problem solving
- platform/ network

7. Key Partnerships
→ the network of suppliers and partners that make the business model work

types:
1. Strategic alliances between Non-Competitors
2. Coopetition: strategic partnerships between competitors
3. Joint Ventures by two or more parties to develop new businesses
4. Buyer-Supplier relationships to assure reliable supplies

For reasons like:

- Optimization and economy of scale
- reduction of risk and uncertainty
 - acquisition of particular resources and activities

Tracey and
Wiersma
Operational Excellence
low or lowest price, hassle free
service
(process - centric)

Realized
Value
Customer Intimacy
Product deliver what specific
Leadership customers want,
offer P&S that push anticipate needs
performance (Relationship-centric)
boundaries
(knowledge - centric

8. Revenue Streams
→ represents the cash a company generates from each customer segment

1. Transaction: revenues resulting from one time payment

2. Recurring: revenues resulting from ongoing payments to either deliver a VP to
customers or provide post purchase customer support

different types:
● Asset Sale
● Usage fee
● Subscription fee
● Lending/ Renting/ Leasing
● Licensing
● Brokerage Fees (Commission)
 ● Advertising

Pricing Mechanisms:

Predefined Prices that are based on static variables → FIXED MENU PRICING

Prices change based on market conditions → DYNAMIC PRICING

9. Cost Structure
→ all costs incurred to operate a BM

Either Cost-Driven (minimizing costs wherever possible) or

Value Driven (premium Vp, high degree of personalized service)

Fixed Costs remain the same despite the volume of goods/ services
Variable costs vary proportionally with the volume of goods/ Services