Class4 October 12

MGT420
Business Model
Inderpreet Wadhwa
Inderpreet.Wadhwa@epfl.ch

Climate Entrepreneurship, Introduction 1

Agenda

✓ Theory of Business Models

✓ Break
✓ Case Studies
✓ Break
✓ Class Exercise : Model Canvas
✓ Wrap up

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Business Idea to Business Model

https://youtu.be/wwShFsSFb-Y

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Business Model and the Art of Profitability

Who has your money in their pockets?

How are you going to get it in your pocket?

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What is a Business Model ?

It’s how you deliver value to your

customers, via products or services in
exchange for a set cost

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Categorized As……

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Pipe Models

Pipe business models create goods or

services, push them out and sell them to
customers in a linear flow, much like water
through a pipe.

i.e. Tesla manufactures electric cars and

sells direct to consumers and provide after
sales service.
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Platform Models

Platform business models connect two or

more participant groups playing an
intermediation role.

i.e. Facebook connects users, advertisers,

content developers. Consumers do not pay,
advertisers pay to reach their customers.

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What Entails a Good Business Model Design?

Early designs (like bricks-and-mortar) usually describe

singular aspect, often the revenue model

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A Better and Wholistic Approach is to Define

1. Value Propositions
2. External Operations
✓Target Customer Segments
✓Distribution Channels
✓Customer Relationships
3. Internal Operations
✓Resources
✓Activities
✓Partners
4. Financial Aspects : Cost & Revenue Structures

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What is a Value Proposition?

A unique combination of products and services that

offer value to the customer. A good solution to a
problem.

It can be based on newness, performance, price,

convenience, lower risk….

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Define Customer Segments before Value Proposition

1. Understand your buyers persona, needs and buying

behaviors before you develop your Value Proposition
2. Consider depth of pain, budget, reach for creation of
your Customer Segments
3. Mass Market vs. Niche

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Test your Value Proposition Hypothesis

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Reflection

Your Customer Segment

✓What are their key job(s)?
✓What are their key pains?
✓What do they perceive as gains?

Your Value Proposition

✓What are your gain creators?
✓What are your pain relievers?

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Setup Distribution Channels to Deliver

1. Owned channels (D2C) are stores, internet,

telephone, traditional & electronic mail
2. Partner channels are through retailers,
representatives and distributors
3. Partnership channels bring in smaller profits, allow
faster expansion and extended reach
4. Decision Parameters
✓Standard Vs. Non Standard offering
✓Control over channel viz a viz competitor
✓Time to market Vs. establishing partnerships

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Customer Relationships are Key to Expanding Sales

1. Customer acquisition driven by content and social

media marketing is cost effective
2. Sustaining quality, ensuring product meets (or
exceeds) customer needs is the best way for
customer retention and sales expansion
3. Your customers are your best sales person, consider
constant connection strategies such as
✓Personal Assistance
✓Automated Service
✓Communities

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 BREAK

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Key Resources Enable Value Proposition

1. Can be physical, human, financial - owned, leased or

acquired from partners
2. Requirements depend if Product, scope or
infrastructure driven business
3. Your scale-up depends on your understanding of Key
Resources

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Key Activities enable Business Purpose

1. These are essential tasks that bring your business to

life
2. Typical activities are R&D, Production, Marketing,
Sales and Customer Service
3. Type of activities are based nature of the business
i.e. Production, Problem Solving, Platform

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Optimize Business Model with Partners

1. Partnership is a relationship to acquire resources at

low cost, scale-up and/or reduce the risk of your
business failure
2. Buyer-supplier is the most common type, others
include JVs (new business or geography) and
Strategic (Non competitors)
3. Ensure sustainable agreements with defined
expectations

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What is Your Audience Willing to Pay?

1. Revenue Streams are ways in which you generate

income and know if you will be profitable or not.
2. Two main types are single-payment and recurring
income with fixed price or dynamic price
mechanisms
3. Consider what benefits encourage customers to pay
more and at what prices they are acquiring similar
services

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Cost Structure, Last but not Least

1. Costs are what you spend on production and related

services to deliver value to your customers
2. Cost-driven models focus on minimizing costs
whereas value-driven models have a high level of
customization and service
3. Consider your fixed costs, variable and effect of
economies of scale (analyze Key Resource and
Activity costs)

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Business Model Canvas

https://youtu.be/wlKP-BaC0jA

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Tesla

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Spotify

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Airbnb Business Model Canvas

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Reflection

Think of a company that has a

✓Subscription business model?
✓Franchise business model?
✓Razor & Blade business model?

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 You are likely to change your business
model several times, so pick one that gets
you in the moneymaking mindset…

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 BREAK

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Exercise : Design your Business Model Canvas

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Wrap Up

✓ Business Model explains how your

start-up creates (proposition),
delivers (operations) and captures
(profits) value

✓ Finalize your Business Model Canvas

✓Next Week: Go To Market Strategy

✓Class Exercise : Present Market

Research Plan Results

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Next Class October 19

Thank you

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