BUSINESS MODEL

SCHEDULE

 Introduction
 House Keeping Rules
 What is a Business Model?
 Building Blocks of a Business
 Group Exercise
 Presentations
 Wrap up

2
 OBJECTIVES

At the end of this session you should be able to:

 Explain what constitutes a business model
 Identify the components of a business model
 Design a business model canvass
 STRUCTURE
What

The Business Model

Components of a Business Model

The Business Model Canvas

How

Lecture

Open Discussion

Case Study
 A BUSINESS MODEL

 How an organization creates, delivers and captures

value
 Shows how a company intends to make money
5
 WHAT IS A BUSINESS MODEL

 “A Business Model describes the rationale of

how an organization creates, delivers and
captures value” (Osterwalder & Pigneur, 2010)

 The Business Model is like a blueprint for a

strategy to be implemented through
organizational structures, processes and
systems 6
 9 BUILDING BLOCKS OF
THE BUSINESS MODEL
 The Business Model is made up of nine building blocks that show
the logic of how a company intends to make money

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8
THE BUILDING BLOCKS

9
N NN N

10
THE NINE BLOCKS COVER THE FOUR MAIN AREAS OF A BUSINESS
Customer

Offer
s

4 Main areas of
Business

11

Financial
viability
cture
Infrastru
 GROUP DISCUSSION
GOLD TRANSPORT COMPANY
 1:0 VALUE PROPOSITIONS
Products and services

 The offering that solves the customer’s problems.

 It may be a new or disruptive offer or similar to an existing market offer,

but with added features and attributes.

 It is an aggregation or bundle of benefits that a company offers customers.

 It states the values we deliver to our customers.

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 WHAT VALUE DO WE DELIVER
TO CUSTOMERS?
 A value proposition creates value for a customer segment through a distinct
mix of elements catering to that segment’s needs (Sterwald, 2010).

 Values may be quantitative e.g. price, speed of service

 Or qualitative e.g. design, customer experience

 The value could be on newness, performance, customization, taste, variety,

price, convenience, design 15
 2:0 CUSTOMER SEGMENTS

 A business model must be designed around a strong

understanding of specific customer needs.

 Who are we creating value for? Whose pain are we

curing?

 Who in this group do we serve? Who do we ignore?

 Are their needs homogeneous or different?

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WHERE DO WE FIND OUR
CUSTOMERS?
 WHERE DO WE FIND OUR CUSTOMERS?
HOW DO WE SEGMENT OUR CUSTOMERS?

 Mass Market
 Models focussed on one group of customers that can be reached with the
same value proposition, distribution channels, customer relationship.

 Niche Market
 Models targeting specialized customer segments. The value proposition,
distribution channels, customer relationships are all tailored to the
specific requirements of a niche market.
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CUSTOMER SEGMENTS
 HOW DO WE SEGMENT OUR
CUSTOMERS?
 Segmented Market

 models that serve customers with similar but slightly different needs and problems. Examples –
Airlines, Banks.

 Diversified Market

 Models that serve two or more unrelated customer segments with very different needs and
problems.

 Multi-Sided Market

 Models that serve two or more interdependent customer segments. Examples – Interswitch,
Facebook, Konga. Where you have subscribers, advertisers, merchants. 21
 ACTIVITY 1.1

 Complete Value Proposition and Customer Segments in your

Workbook

 Who is willing to share theirs?

 Open discussion
 3.0 CHANNELS

 This is how an organization communicates and reaches its customers to deliver a value

proposition.

 These are customer touch points that influence the customer’s experience.

 They create / increase awareness for the offering.

 They help customer interact with the company.

 They are integrated.

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HOW DO WE DELIVER TO
OUR CUSTOMERS?
 DISTINCT TYPES AND PHASES OF
CHANNELS
Channel Channel Phases
Types
Sales force Awareness Evaluation Purchase Delivery Aftersales
Direct
Own

Web sales How do How do we How do How do we How do you

we raise help customers we allow deliver a provide post-
Own Stores awareness evaluate our customers value purchase
about our organization’s to Proposition customer
Partner company’s value purchase to support?
stores products proposition? specific customers?
and products
Indirect
Partner

Wholesaler services? and

services

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Source: Osterwalder & Pigneur, 2010
 4:0 CUSTOMER RELATIONSHIPS

 The types of relationships a company establishes with specific

customer segments.

 Customer relationship drivers:

 customer acquisition
 customer retention
 boosting sales

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CUSTOMER RELATIONSHIP
 CATEGORIES OF CUSTOMER
RELATIONSHIPS
 Personal Assistance  Automated Services

 Dedicated personal  Communities

Assistance
 Co-creation
 Self Service

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 5:0 KEY ACTIVITIES
 These are the most important actions a business must take to create,
deliver and capture value.

 These will include activities to deliver value proposition, reach

markets, maintain customer relationships and earn revenues.

 These include production, problem solving, platform / network,

marketing and customer relationship.

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GROUP DISCUSSION
SILVER WATER LIMITED
SILVER WATER LIMITED

34
 6:0 KEY RESOURCES

 These are the most important assets required to make a business

model work.

 The resources needed to deliver the value proposition.

 They can be physical, financial, intellectual or human.

 They can be owned, leased or outsourced.

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 7:0 KEY PARTNERS
 This includes the network of partnerships and alliances that enable the business create,

capture and deliver value.

 Organizations need partnerships to reduce risk or acquire resources.

 Four types of partnerships;

 Strategic alliances between non-competitors

 Competition – strategic partnerships between competitors

 Joint ventures to develop new businesses

 Buyer-Supplier relationships to assure reliable supplies 38

39
 ACTIVITY 1.2

 Complete Building Blocks 3-7 (Channels of Distribution, Customer

Relationships, Key Activities, Key Resources and Key Partners) in
your workbook using your business

 Who is willing to share theirs?

 Open discussion
 8:0 COST STRUCTURE
This describes all costs incurred to operate a Business Model.
The cost structure can be:

 Value-driven

 Cost-driven
 Fixed cost

 Variable cost

 Economies of scale
 Economies of scope 41
COSTS
 9:0 REVENUE STREAMS

 This represents the value/cash that organizations generate from delivering

value to each customer segment.

 What value is the customer willing to pay?

 Each revenue stream has different pricing mechanisms.

 There are two types of revenue streams transaction revenues (one-off) and
recurring revenues (on-going payments)
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 WAYS OF GENERATING REVENUE
 Sales of Product(s) or Service(s)

 Asset Sale or Usage fee

 Subscription fees

 Lending/Renting/Leasing

 Licensing

 Brokerage

 Pricing mechanisms are also important in revenue generation ( Fixed and dynamic
45
pricing)
 GROUP DISCUSSION
BRONZE BAKERY LIMITED
 ACTIVITY 1.3

 Complete Cost Structure and Revenue Streams in your Workbook

 Who is willing to share theirs?

 Open discussion
GROUP ACTIVITY

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 GROUP ACTIVITY

 Join your Group

 Pick a Business

 Do the BMC for the Business

 Anyone can be picked to present for the group

 WRAP UP

 Group Presentations

 Discussion

 Wrap up
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Curriculum developed by the Enterprise Development Centre (EDC)
GROUP PRESENTATIONS
FEEDBACK ON PRESENTATION
CONCLUSION