Digital Business Model

• “We cannot solve our problems with the same thinking we used
when we created them.”

Albert Einstein
Business Model Canvas
What is a Business Model?

• “ A plan for successful operation of a business, identifying sources of

revenue, the target customer base, products, and details of
financing.”
• Buiness models depicts how the key drivers of a business fit together.
Business Model Canvas
Business Model Canvas
• Customer Segments: Who are your customers?
• Value Proposition: Why do customers buy from you? What is the gain you provide or the
need you satisfy?
• Channels: How are your products and services delivered to the market?
• Customer Relationships: How do you get, keep, and grow your customers?
• Revenue Streams: How does your business earn money?
• Key Resources: What unique strategic resources does your business have or need?
• Key Activities: What unique strategic activities does your business perform to deliver
your value proposition?
• Key Partnerships: What non-key activities can you outsource to enable you to focus
more on your key activities.
• Cost Structures: What are the major costs incurred by your business?
Business Model Canvas
• Customer Segments: Who are your customers?
• Value Proposition: Why do customers buy from you? What is the gain you provide or the
need you satisfy?
• Channels: How are your products and services delivered to the market?
• Customer Relationships: How do you get, keep, and grow your customers?
• Revenue Streams: How does your business earn money?
• Key Resources: What unique strategic resources does your business have or need?
• Key Activities: What unique strategic activities does your business perform to deliver
your value proposition?
• Key Partnerships: What non-key activities can you outsource to enable you to focus
more on your key activities.
• Cost Structures: What are the major costs incurred by your business?
Left/Right Split

• Broadly speaking we can say that those elements on the lefthand side
of the canvas represent costs to the business, whereas elements on
the righthand side generate revenue for the business.
Customer Segment
• You enter the different customer segments or that you will serve. If you
can, create one or more persona for each segment you serve.
A persona is simply a relatable description of each customer type
you serve.
• Highlight your customers’ motivations, their problems and capture the
“essence” of who they are

Many businesses will serve just one customer segment, but not all.

For example, Google serves two customer segments, people performing

searches as well as advertisers.
Value Proposition
• The value proposition describes the value that you deliver to each
customer segment. What problems do you solve for each customer
segment? What needs do you satisfy? The Value Proposition answers the
question, “why will customers buy from us?”.
• Newness.
• High performance.
• Ability to customize.
• Design.
• Brand/Status.
• Price.
• Cost reduction.
• Risk reduction.
• Convenience.
Channels
• Channels refer to how your products or services are sold to
customers.
• To complete this section ask yourself:
• How do your customers want to be reached?
• How are you reaching them now?
Customer Relationship
• Get: How do customers find out about you and make their initial
purchase? For example, this could be through advertising on Google.
• Keep: How do you keep customers? For example, excellent customer
service might help keep customers.
• Grow: How do you get our customers to spend more? For example,
you could send out a monthly newsletter to keep them informed
about your latest products.
Revenue Streams
• You’re actually trying to figure out what strategy you’ll use to capture
the most value from your customers?
• Will customers simply pay a one-time fee?
• Will you have a monthly subscription fee?
• Perhaps you give away your product for free like Skype and hope that
some portion of customers upgrade to the paid premium product?
Google - Advertisers pay Google to place their ads in front of users with
buying intent. For example, if you search for “Nike trainers” you will see
ads. If you search for something without purchasing intent, such as
“picture of flowers” you probably won’t see any ads.
• build our infrastructure to be able to best provide the value
proposition.
Key Resources

• Physical: such as buildings, vehicles, machines, and distribution

networks.
• Intellectual: such as brands, specialist knowledge, patents and
copyrights, partnerships, and customer databases.
• Human: sometimes your people will be your most key resource, this
is particularly true in creative and knowledge-intensive industries.
• Financial: such as lines of credit, cash balances etc.
Key Activities

• Production: refers to delivering your product. You will typically do this

to either a high quality or a high quantity.
• Problem Solving: Consultancies and other service organizations often
have to come up with new solutions to individual customer problems.
• Platform/Network: Networks, software platforms can function as a
platform. For example, a key activity for Facebook is updating the
platform.
When completing this section, it is a mistake to list all the activities of
your business, instead only include activities which are absolutely core
to delivering your value proposition.
Key Partners

you list the tasks and activities that are important but which you will
not do yourself. Instead, you will use suppliers and partners to make
the business model work.
There are usually three reasons for creating a partnership:
• Economies of scale.
• Reduction of risk and uncertainty.
• Acquisition of resources or activities.
Cost Structure

• In the Cost Structure building block, we want to map key activities to

costs. We also want to ensure that costs are aligned with our Value
Proposition.
• It should be straightforward to determine your most important costs
and your most expensive after you’ve defined your Key Resources,
Key Activities, and Key Partnerships.
Porter’s Competitive Forces Model
• Traditional competitors
• New market entrants
• Substitute products and services
• Customers
• Suppliers
 Using Information Systems to Achieve Competitive Advantage

Porter’s Competitive Forces Model

In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined not
only by competition with its traditional direct competitors but also by four forces in the industry’s
environment: new market entrants, substitute products, customers, and suppliers.
• Traditional competitors: Existing firms that share a firm's market space

• New market entrants: New companies have certain advantages, such as not being
locked into old equipment and high motivation, as well as disadvantages, such as less
expertise and little brand recognition. Some industries have lower barriers to entry.

• Substitute products and services: These are substitutes that your customers might
use if your prices become too high.
• Internet telephone service can substitute for traditional telephone service. The more
substitute products and services in your industry, the less you can control pricing and
raise your profit margins.
• Customers: The power of customers grows if they can easily switch to a
competitor's products and services, or if they can force a business and its
competitors to compete on price alone in a transparent marketplace where there
is little product differentiation and all prices are known instantly .

• Suppliers: The more different suppliers a firm has, the greater control it can
exercise over suppliers in terms of price, quality, and delivery schedules.
 HIGH LOW

Threat of New Market Entrants No entry barrier Significant entry barrier

Threat of Substitute product and services Many alternatives Few alternatives

Customers power Many choices from whom to buy Few choices

Suppliers power Buyers have few choices Many choices

Traditional competitors Competition is fierce Competition is complacent

What is a business model?

• It is how an organization:

Creates + Delivers + capture + Defends

… Value
Digital Business Model
• Digital Business Model are novel ways to generate demand from new
users, new products, new partners and new markets as well as defend
value – by practicing techniques first pioneered by internet
companies.
• Apple generates demand for its iPhone, iPad, Apple TV and Apple
watch products from new partners. The software developers will
build millions of apps for Apple products. The more apps available,
the more users will buy Apple products.

• Samsung SmartThings, smart home appliances that is, as well as

Philips Hue connected light bulbs, generate demand from new uses
for their Smart Home products. Samsung allows software developers
to extend its home hub and sensor products by extending them and
connecting them to thousands of other home appliances.
• Amazon, in turn, generates demand from new markets. In the
consumer electronics market, Kindle tablets are priced at cost, so as
to generate demand for Amazon's e-commerce services, which are
bundled to the Kindle. Amazon then transfers the demand for its
Kindle tablets, that is, from the consumer electronics market, into a
demand for its e-commerce business. In all four examples mentioned,
software developers are the connecting link.
How Digital Business Model add value:
 Network effect

Network Economics
the marginal costs of adding another participant or creating another product
are negligible, whereas the marginal gain is much larger.

the more people offering products on eBay, the more valuable the eBay site
is to everyone because more products are listed, and more competition
among suppliers lowers prices.
Apple iOS Traditional + Digital Business Model
 Examples of third party apps
Smart Home Integration:
Developers can integrate their smart home devices with Amazon Alexa for voice control. For example,
Philips Hue lights can be controlled using Alexa voice commands, allowing users to adjust lighting settings.
E-commerce Tools:
Third-party developers create tools and software for Amazon sellers and e-commerce businesses. These
tools help with inventory management, pricing optimization, and sales analytics.
Content Streaming Services:
Streaming services like Netflix and Hulu have apps that are compatible with Amazon's Fire TV and Fire TV
Stick, allowing users to stream movies and TV shows.
Grocery Shopping Apps:
Apps like Instacart enable users to order groceries online and have them delivered to their doorstep. These
apps often integrate with Amazon Fresh and other grocery delivery services.
Amazon Traditional + Digital Business Model
Google Android Traditional + Digital Business
Model
Facebook Traditional + Digital Business Model
Value Web
Internet technology has made it possible to create highly synchronized
industry value chains called value webs.
• A value web is a collection of independent firms that use
information technology to coordinate their value chains to
produce a product or service for a market collectively. It is
more customer-driven and operates in a less linear fashion
than the traditional value chain.