BUSINESS MODEL Presented By

Karanveer Singh
PRN
12020541103

& Saurabh Thakral

Shweta Rani
12020541127
12020541131

A BUSINESS CASE Sweta Sharma

Soumya Ranjan Dalai
12020541139
12020541148
Archit Malhotra 12020541154
Business Model
What is a business model?
A business model involves:
1. The products and services a firm offers
2. The infrastructure and network of partners
3. The customer relationship capital
4. And the financial aspects

We define a business model as consisting of two elements:

(a) what the business does, and
(b)How the business makes money doing these things

What does it do?

It provides a concise representation of how an interrelated set of decision variables in
the areas of venture strategy, architecture, and economics are addressed to create
sustainable competitive advantage in defined markets.
Types of business models

 The Business Model Canvas (Osterwalder & Pigneur)

 The Four-Box Business Model (Johnson)
 The STOF model (Bouwman, De Vos & Haaker)
 Business Model Schematics (Weill & Vitale)
 Technology/market mediation (Chesbrough & Rosenbloom)
 Entrepreneur’s business model (Morris, Schindehutte & Allen)
 e3-value (Gordijn & Akkerman)
The Business Model Canvas (Osterwalder & Pigneur)
1. The Business Model Canvas is design- and innovation-oriented.

2. Osterwalder and Pigneur stress the role of design in business to imagine ‘that
which does not exist’ and want to offer support in the form of design tools
and techniques.

3. They address a number of design techniques and tools: customer insights,

ideation, visual thinking, prototyping, storytelling and scenarios.

4. Visualisation also allows for clearer discussions and changes because the
model becomes more concrete and tangible.
 The Four-Box Business Model (Johnson,
2010)
Assumptions

Knowledge

1. Four-Box Business Model focuses on companies entering the ‘white space’

where there is a poor fit with the current organization and where new
customers or existing customers served in fundamentally different ways are
targeted.
2. Four Box business model should provide a structure to reveal and
categorize all of the issues that must be must be addressed in the white
space where, relatively speaking, assumptions are high and knowledge is
low.
• An offering that helps • Revenue Model
customers more • Cost Structure
effectively, reliably, • Target Unit Margin
conveniently, or
• Resource Velocity
affordably solve an
important problem (or
satisfy a job-to-be-done) VALUE KEY
at a given price PROPOSITION PROCESSES

PROFIT KEY •Processes

• People FORMULA RESOURCES (Design, product
• Technology development, sourcing,
manufacturing, marketing,
• Products hiring & training, IT)
• Facilities •Business rules &
• Equipment success metrics
• Funding & Brand •Behavioural Norms
Comparison of the two models
Business Model Canvas makes the use of a visualization template which is not the case for
the Four-Box Business Model.

This visualization is a major strength when it comes to designing and communicating

business models.

Johnson positions business rules, behavioral norms and success metrics as part of the key
processes and also sees them as connecting the boxes of the business model and keeping
it in proper balance.

They ensure that the customer value proposition can be delivered in a repeatable and
predictable way while fulfilling the profit formula. This links the business model to the
day-to-day operations.
The Current Scenario

• Fierce competition from cable companies

• Cable companies entering into Telcos domain

• 80% of large European telecom operators looking into providing IPTV

• Telcos to compensate for falling revenues

• They can leverage on brand equity and offer

bundled services
• Unclear IPTV Business model
 The STOF Model
 Successfully designed business
models for mobile services,
insurance intermediaries & e-
commerce
 How a group of organizations can
create and capture value form
innovative services
 4 domains
 External factors
 External Factors
• Increase in effective distribution capacity
• Increase in the ability to process user feedback
Technological Drivers • Increase in the storage and processing power controlled by viewers
• Separation of applications from transport

• Market demand
Market Drivers and
• Convergence of the information, telecommunication and TV industries
Conditions • Competition

• Spectrum scarcity to abundant channels

Regulatory Drivers • Dumb to intelligent terminals
IPTV Business Model (Utilizing STOF Framework) – SERVICE DOMAIN
Telecom operators perspective:-
SERVICE DOMAIN  Need for value proposition
 Indicate Technical & Financial feasibility
Description of a firm’s Specific Market  Market Analysis to understand Customers
service provision Segments & Customers  Minimize Gap between Perceived & Delivered
Expected Value to IPTV Customers Telcos can Enhance services & meet expectations by:-
 Delivered  Adding more channels
 Not exceed Tech & Fin Capability of Organization  Adjusting tariffs
 Defining KPIs & KQIs
 Improving user-friendliness

Compete with
Resources & Finances required to deploy IPTV Services Satellite & Cable
by Telcos, the three possible types of leverage:-
IPTV as Mass Market Service
1) Bundling of video services with broadband & Voice
2) Offering VAS (e.g. Interactive services, VoD, PVR)
3) Attractive service portfolio - exclusivity or ‘long tail’ niche Leverage Current
channels Expertise & Customer Loyalty
Presence in Voice & Broadband Arena
IPTV Business Model (Utilizing STOF Framework) – TECHNICAL
DOMAIN
TECHNOLOGY DOMAIN (Area of Functionality)

TRANSPORT MIDDLEWARE CONTENT

ACCESS VIDEO
BACKBONE DEVICES BILLING ON CRM Content Layer
NETWORK
DEMAND

Influence

Infrastructure Meeting
SERVICE DESIGN
Transmission Requirements

Three Levels Influence the Financial as well as the Organizational Domain

The telecom operators can use

Bandwidth design approaches:- Enhancing Quality of Service:-
 Adding large capacity immediately  Better transmission infrastructure Middleware improvement involves:-
TELCOS FACE

 Gradually increasing the capacity  High End Encoding/Decoding equipment  Integrating platforms
ISSUES

Quality of  Offer different service levels to different  Customer relationship management

Service customers.  Balance b/w advanced STBs & middleware
 Cost effective & Stable technology deployment
 User Friendly Equipment
Middleware  New Revenue Models still a Question Mark?
Capability
IPTV Business Model (Utilizing STOF Framework) – ORGANIZATION
DOMAIN

VALUE NETWORK

Actors  CONTENT PRODUCE or PURCHASE ???

 Maintain the Physical Network, Hardware and Advertisement -
Software
Content Providers small revenue
 CORE RESPONSIBILITY: Distribute the
Equipment Providers content(Video)
Middleware providers  Middleware provides a seamless service to the Vertical
Advertisers end-user
Consumers  System Integrator + Telco Operators = Efficient Integration
Middleware
IPTV Business Model (Utilizing STOF Framework) – FINANCIAL
DOMAIN
Divide over actors
TECHNICAL DESIGN CAPITAL COST according to

OPERATION PERFORMANCE FINANCIAL

COST INDICATORS ARRANGEMENT

Co-Determine
Divide over actors according to
SERVICE REVENUE SOURCE
REVENUE RISK
COMPETITION PRICING MODEL

FINANCIAL PERFORMANCE :
Result of COST & REVENUE
PRICING depends on:
• Market Competition
• Operational Costs
• Company Strategy
TARIFFS
Co-Determine
Available Models :
FIXED COST :
• Flat Rate (Subscription)
• Technical & Service design
• Pay-per-View
• High availability : High end Servers
• Advertising (VoD)
• Interactive Services: Network
• Customization & Personal Services
Equipment
(Future scope)
Design Issues and Trade-offs (1 of 2)
Service Design
Service Design issues Service Domain Other Domains

Service Bundling Triple play, quartet play Complex organization structure

Values added services New and unique services Large investments and risk of failure

Current portfolio Content through only available platform Requires cost-effective network and
advanced middleware complex
organization arrangement

Organizational Design
Organizational Design issues Organization domain Other domain

Vertical Integration Vertical integrated firm Bundling service

Horizontal Integration Horizontal integrated firm Cost revenue sharing
Technical Issues
Technical design issues Technical domain Other domain

Bandwidth Higher Bandwidth Large investment on Infrastructure

Quality of Service High QoS Large investment or extra

customization
Middleware capability Extensive capability for interacting, Large investment or low revenue
conditional access, security, CRM generation

Financial Design
Financial Design issues Finance domain Other domain

Revenue/cost sharing Horizontal integration

Content portfolio
Middleware capability
Revenue model Value added service
Content portfolio
Horizontal/Vertical Integration
 IPTV BUSINESS MODEL SCENARIOS

• Scenario 1: Telecom operators Mammoth

• Scenario 2: Head- to- head competition
• Scenario 3: Market deadlock
• Scenario 4: Back to basics
SCENARIO DIMENSIONS, SCENARIOS & CRITICAL ISSUES
 SCENARIO 1: TELECOM OPERATOR’S MAMMOTH

MEASURES CRITICAL ISSUES/ CHALLENGES

 Introduce bundled products
 Horizontal integration
 Pricing strategy: Aggressive
approach
• Limited resource
• Co-ordination between newly
established unit & other unit
• Seamless bundles & efficient
billing system
 SCENARIO 2: HEAD- TO- HEAD COMPETITION

MEASURES CRITICAL ISSUES

 Operators able to satisfy people’s  Ability to create content

individual choices & provide value in diversity
the long-tail

 High distribution cost

 IP- based distribution technology
SCENARIO 3: MARKET DEADLOCK

 Several large merger deals create natural monopolies.

 Regulators propose bringing back strict anti-trust policies.

 Cable and satellite companies take advantage of the regulatory environment.

They consolidate their businesses and become dominant and vertically integrated
national players.

 In this scenario, consumers are already quite experienced with digital TV and they
are interested in new services.
CHALLENGES

 Hard to generate profit for telecom operators in a stagnating market.

 The key critical design issue has to do with providing new value-added services.

 Conflict with content oriented firms in case they open up long tail strategy for
value added services (e.g. :- PVR services).
MEASURES

 To embed advertisements in programs that consumers are willing to watch.

 Provide entertaining or informative advertising that consumers do not want to

miss.

 Reward consumers who watch advertisements.

 Telecom operators can also agree to tolerate consumers copying contents and
avoiding advertisements if the value-added services manage to attract enough
new subscribers.
SCENARIO 4: BACK TO BASICS
 In this scenario, regulators adopt strict anti-trust policies toward the big telecom
operators in the market.

 Several vertically integrated and global companies dominate the television

market.

 Most consumers are satisfied with the television services currently provided by
cable and satellite companies.

 There is little demand for interactive services and internet TV.

 Consumers have decided to use bundling services for reasons of convenience and
to facilitate easier configuration.
CHALLENGES
 In this scenario, regulatory barriers and consumer indifference make it hard for
telecom operators to offer IPTV services.

 Bundling may still be an effective strategy, however it will be difficult to persuade

consumers to switch from cable companies to telecom operators.

 The potential market is limited.

 The content supply side is dominated by several vertically integrated global

companies.
MEASURES
 To make better use of the existing technologies, services and resources that are
there to support IPTV development.

 Better program quality and customer service.

 Secondly, telecom operators should leverage their customer base in the

broadband and telephony market.

 Thirdly, they can create complementary programs and content on the television
and broadband platforms.