Introduction to

Business Models

Knowledge Transfer | Accelerating Innovation V. Nilsen

Business model is a buzzword that everybody
used (or overused) during the dotcom boom.

In fact, poorly thought out business models were

the downfall of many dotcoms.

However, the business model dates back to the

earliest days of business; it merely describes the
way in which a company makes money.

www.investopedia.com

Knowledge Transfer | Accelerating Innovation V. Nilsen

• A business model is a framework for
• how a company will create, deliver, and
• capture value in economic, social,
• cultural, or other contexts.

Knowledge Transfer | Accelerating Innovation V. Nilsen

Tools for Business Modeling
Business Model Canvas Lean Canvas
• - A strategic • - An adaptation of
management and Business Model
• Canvas (by Alexander
• entrepreneurial tool Osterwalder)
developed • which Ash Maurya created
• by Alexander in the
Osterwalder • Lean Startup Spirit (fast,
concise,
• - It allows the startup to • and effective startup)
• describe, design, • - It focuses on problems,
challenge, solutions,
• invent, and pivot the • key metrics, and
competitive
business
• advantages.
• model.

Knowledge Transfer | Accelerating Innovation V. Nilsen

Knowledge Transfer | Accelerating Innovation V. Nilsen
Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Key Resources Channels

Cost Structures Revenue Streams

Source: Business Model Generation, A. Osterwalder

Knowledge Transfer | Accelerating Innovation V. Nilsen

Value Proposition
What distinguish your business from the competitor?
What is the value you provide the customer?
• Newness
• Performance
• Customization
• "getting the job done”
• Design
• Brand/status
• Price
• Risk reduction
• Convenience/usability

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Value Proposition Canvas

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Knowledge Transfer | Accelerating Innovation V. Nilsen
Knowledge Transfer | Accelerating Innovation V. Nilsen
Customer Segments
Who are your main customers?
• Mass Market
• Niche
• Segments
• Multi-Sided

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Channels Phases
How do you distribute the
value proposition to your
customers?
AWARENESS - how do we
raise awareness about our
company’s
products and services?
• ○ Advertising (Word of
Mouth, Social Media,
Newspaper, Online
• etc.)

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Channel Phases
• EVALUATION- how do we help customers
evaluate our organization’s Value Prop?
• ○ Surveys
• ○ Reviews
• PURCHASE- how do we allow customers to
purchase specific products and services?
• ○ Web vs. Brick and Mortar
• ○ Self Checkout

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Channel Phases
• DELIVERY- how do we deliver a Value
Proposition to customers?
• ○ Over the counter
• ○ Delivered/Catered
• AFTER SALES - how do we provide post-
purchase customer
• support?
• ○ Call center
• ○ Return policy
• ○ Customer assistance

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Customer Relationship
What is the relationship the business have with
its customers?
• Personal Assistance
• Dedicated Personal
Assistance
• Self Service
• Automated Services
• Communities
• Co-creation

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Key Activities
The most important activities in executing a
company's value proposition

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Key Resources
The resources that are necessary to create
value for the customer
• Human
• Financial
• Physical
• Intellectual

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Key Partners
Which partners are necessary for making the
business work?

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Revenue Stream
For what value are our customers really willing
to pay?
● For what do they currently pay?
● How would they prefer to pay?
● How much does each Revenue Stream
contribute to overall revenues?

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Common Types of Revenue Streams
How the company makes income
• Selling a product – Direct sale
• Usage Fee
• Subscription Fees
• Renting/Leasing
• Licensing
• Brokerage Fees
• Advertising
• Freemium
• Bait and Hook Model

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Cost Structure
What are the cost associated with running the
business and how does it scale with sales
• Fixed Costs
• Variable Costs
• Economies of Scale
• Economies of Scope

• Cost-Driven vs. Value-Driven

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• Fixed cost
• Costs that remain the same despite the volume of goods or services
produced. Examples include salaries, rents, and physical
manufacturing facilities. Some businesses, such as manufacturing
companies, are characterized by a high proportion of fixed costs.
• Variable cost
• Costs that vary proportionally with the volume of goods or services
produced. Some businesses, such as music festivals, are
characterized by a high proportion of variable costs.
• Economies of scale
• Cost advantages that a business enjoys as its output expands. Larger
companies, for instance, benefit from lower bulk purchase rates. This
and other factors cause average cost per unit to fall as output rises.
• Economies of scope
• Cost advantages that a business enjoys due to a larger scope of
operations. In a large enterprise, for example, the same marketing
activities or Distribution Channels may support multiple products.

Knowledge Transfer | Accelerating Innovation V. Nilsen

Knowledge Transfer | Accelerating Innovation V. Nilsen
Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Key Resources Channels

Cost Structures Revenue Streams

Knowledge Transfer | Accelerating Innovation V. Nilsen

Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Key Resources Channels

Cost Structures Revenue Streams

Knowledge Transfer | Accelerating Innovation V. Nilsen

 Examples

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Knowledge Transfer | Accelerating Innovation V. Nilsen
Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Content
Easy Online
Providers
access to
Content content People who
owners binge watch
when you tv shows
Key Resources want it Channels

Distribution Digital
platform platform

Cost Structures Revenue Streams

Royalties Salaries Bandwidth Subscription

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Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Payment Platform Cheap way Online

maintenance community
providers of getting
Customer
an unique Phone
Travel travel Travelers
support support
networks experience
Key Resources Channels

Platform Home
Rent out owners
your extra
space Online
Brand

Cost Structures Revenue Streams

Platform
Insurance % Fee
costs

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Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships
Marketing
People
Platform Online living/workin
development support g abroad
Exchange
Payment money from
Support
providers one currency
to another at Frequent
Key Resources Channels users of
better rates
exchange
Brand services

Trust Web platform

Platform

Cost Structures Revenue Streams

Platform % Fee
development
Support Insurances

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Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships
Maintaining
platform Online
Publishers Online and
Logistics Platform
phone
support
Price Mass
Suppliers and Marketing
manufacturers market
Key Resources Channels
Selection
Network of Warehouses
sellers Brand
Convenience/
Amazon.com
Platform Speed

Cost Structures Revenue Streams

Commission
Platform, Logistics, Marketing, Sales Subscription
on sales
Physical Storage,

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Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships
Platform
development and Connect with Online Internet Users
maintenance friends, share
content …
Advertising sales
Content and analytics
Advertisers and
Providers Reach a specific marketers
target group with
Key Resources your advertising
Channels

Users
Small businesses
Facebook adds,
Brand Facebook pages

Platform

Cost Structures Revenue Streams

Bandwidth Sales

Add Revenue
Platform

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Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships
Production
Communities
Logistics Price Individuals
Self-service
Suppliers Sales Simplicity
Key Resources Channels
Convenience
Appliance Brand Businesses
producers IKEA
Customization
Physical
Resources Web sales

Cost Structures Revenue Streams

Marketing Product
Production
and sales sales

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Basic Models
• Brokerage • Pay as you go
• Bundling • Razor/blades
• Crowdsourcing • Product to service
• Disintermediation • Standardization
• Freemium • Subscription
• Leasing • Negative operating
• Low-touch cycle

Source: Seizing the white space, Mark Johnson

Knowledge Transfer | Accelerating Innovation V. Nilsen

Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Key Resources Channels

Cost Structures Revenue Streams

Knowledge Transfer | Accelerating Innovation V. Nilsen

Knowledge Transfer | Accelerating Innovation V. Nilsen
 Building your own
business models

Knowledge Transfer | Accelerating Innovation V. Nilsen

Key Partnership Key Activities Value Propositions Customer Customer Segments
Relationships

Key Resources Channels

Cost Structures Revenue Streams

Knowledge Transfer | Accelerating Innovation V. Nilsen

Source / Learn more

Knowledge Transfer | Accelerating Innovation V. Nilsen