how to design a winning business model
TRANSCRIPT
Classified - Private Use
How to Design a Winning Business
ModelBased on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
Benny HerlambangTeddy MustaqimFreidiena
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
Introduction – Idea In Brief What Is A Business Model Three Characteristic Of A Good Business Model How Business Models Generate Virtuous Cycle Competing With Business Models Sample Of Business Models Business Models VS Strategy & Tactics
CONTENTS
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
Current fact:“seven out of 10 companies are trying to create innovative business models, and 98% are modifying existing ones”
“most companies still create and evaluate business models in isolation, without considering the implications of how they will interact with rivals’ business models.”
INTRODUCTION – IDEAS IN BRIEF
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
Now and then…
Why we need business model…
INTRODUCTION – IDEAS IN BRIEF
PAST FUTUREStrategy has been the primary
building block of competitivenessSustainable advantage may well
begin with business model.
DEVELOPING COUNTRY DEVELOPED COUNTRY
Pressure to crack open market (mostly mid & bottom) driving a
surge of business model innovation
Economic slowdown is forcing companies to modify / replace
their business model.
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
Facts about business model:- Company that want to get a value trough business
model may need to do some radical transformation which focus on innovation & modification.
- A business model successes depends on how it interact with other’s model.
- Much of problem lies on company’s narrow focus that work on isolation. One may superior in isolation but actually result less when it interacts.
INTRODUCTION – IDEAS IN BRIEF
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
WHAT IS A BUSINESS MODEL
Definition: “a story that explains how an enterprise works” “who is your customer, what does the customer value and
how do you deliver value at an appropriate cost?”
Business model consist of 4 Elements:1. A Customer value Proposition2. A profit formula3. Key resources4. Key processes
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
THREE CHARACTERISTIC OF A GOOD BUSINESS MODEL
1. Aligning with company goals
While designing a business model, the choices made should enable the organization to achieve its goals.
Example: Xerox PARC; Xerox was unable to draw new business from its innovation, due to lack of alignment with its goals.
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
THREE CHARACTERISTIC OF A GOOD BUSINESS MODEL
2. Self-reinforcing
While creating business model, the choices made should complement one another: there must be internal consistency.
Example: Providing comfort level in a low cost airline, comparable to that offered by a full fare carrier (reducing number of seat on plane and offering food and coffee).
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
THREE CHARACTERISTIC OF A GOOD BUSINESS MODEL
3. Robustness
A good business model should be able to sustain its effectiveness over time by fending off 4 threats:- Imitation- Holdups- Slack- Sub-situation
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
THE CHOICES & ITS CONSEQUENCES
A component of Business Models is CHOICES; which types are:1. Policy choices2. Asset choices3. Governance Choices
The choices have consequences….
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
THE CHOICES & ITS CONSEQUENCES
The choices have CONSEQUENCES, which the types are:1. Flexible Consequences2. Rigid Consequences
Unlike flexible consequences, rigid ones are difficult to imitate because companies need time to build them.
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
There are consequences of business model choices. The consequences enable further choices and so on. This process generates virtuous cycles that continuously strengthen the business model.
E.g.: Ryanair’s business model creates several virtuous cycles that maximize its profits through increasingly low cost and prices.
But these cycles don’t go on for a long time
E.g.: If ryanair’s workforce forms a union and demand higher wages, one of the cycles will become vicious.
HOW BUSINESS MODELS GENERATE VIRTUOUS CYCLE
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
THREE WAYS TO COMPETING WITH BUSINESS MODEL
1. Strengthen Your Virtuous CycleModify the business models to generate new virtuous cycle to compete more efficient with rivals.
2. Weaken Competitor’s CycleUse the rigid consequences of the choices to weaken entrants’ virtuous cycle.
3. Turn Competitor Into ComplementRival with different business models can also become partners in value creation.
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
SAMPLE OF RYANAIR BUSINESS MODEL
Ryanair in 1980’s… Took CHOICES to offer
excellent service & standardize fleet.
Need redesign due to competitive market
In early 1990’s, has been transformed (radically) into a low cost carrier
.
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
SAMPLE OF RYANAIR BUSINESS MODEL
Ryanair nowadays… Become the largest low
cost carrier in Europe. Take CHOICES on low
fares, that: Align with its goal;
“firmly establish itself as Europe's leading low-fares”
Self-reinforcing its virtuous cycle
Robust; its has run for 20 years
.
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
SAMPLE OF COKE’S COOLER DIVISION BUSINESS MODEL
.
BEFO
REAF
TER
High-end cooler
High electricity intake Less placement Less sales
Mid-low cooler
Less electricity intake More placement More sales More money to
get more coolers
CHOICES CONSEQUENCES
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
These three are interrelated…
1. StrategyContingent plan about which business model will be used; choices and consequences are reflection of it
2. Business Model Logic of the company, how it operates, creates and capture values
3. TacticsResidual choices open to a company by virtue of a business model it employs.
BUSINESS MODEL VS STRATEGY & TACTICS
Classified - Private Use Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
CLOSING REMARKS…
To achieve better competitiveness, a company should not only create a strategy but should implement it into a good business model.
A good business model is a model that align with your goal, self-reinforcing and robust.
When you have a good model, you may able to strengthen your cycle, weaken you rival’s cycle or make it as a complement.
Strategy, business model and tactics are interrelated; strategy is design the car, business model is the car and tactics is how we drive the car.
A company may struggling to build them toughly , especially because of their interactions with those of other players (rivals, suppliers, etc) that has their these three, too.
That’s the essence of competitiveness—and developing strategy, tactics, or innovative business models has never been easy.
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THANK YOU
Based on a Harvard Business Review with same title by Ramon Casadesus-Masanell and Joan E. Ricart
Benny HerlambangTeddy MustaqimFreidiena