Business Model Patterns

Session 5

Course : EN 001 – Entrepreneurship 1

Year : September 2013

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Acknowledgement

These slides have been adapted from

Osterwalder, Alexander et al. 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. JWS. New Jersey. ISBN: 978-0470-87641-1. Chapter 2.

Learning Outcome

• LO 1: Identify entrepreneurs personality and innovative business ideas

• LO 2: Analyse business model and business model patterns http://www.alibaba.com/member/id100020104.html

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Objectives

• Unbundling Business Model

• The Long Tail• Multi Sided Platform• FREE as a Business

Model• Open Business Model

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Group Assignment for Session 5

• Build your interviewed company Business Model Canvas

• The business model consist of a complete 9 building blocks

• Every group member should understand business model of the company

• Make a draft report. Final report will be submitted as midterm exam paper.

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Business Model Pattern

• Pattern in architecture is the idea of capturing architectural design ideas as archetypal and reusable descriptions.

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Business Model Pattern

• Business models with similar characteristics, similar arrangements of business model Building Blocks, or similar behaviors is called as business model patterns.

• The patterns help to understand business model dynamics and serve as a source of inspiration with business models

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• Types of Business Model Patterns:– Unbundling– Long Tail– Multi-Sided Platforms,– Free Business Model– Open Business Models

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Business Model Patterns

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Unbundling Business Model

• The concept of the “unbundled” corporation holds that there are fundamentally different types of business: Customer Relationship business, product innovation business, and infrastructure business.

• The three types may co-exist within a single corporation, but ideally they are “unbundled” into separate entities in order to avoid conflict or undesirable trade-offs.

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Product Innovation Customer Relationship Management

Infrastructure management

Early market entry enable charging premium price and acquiring large market share; speed is key.

High cost of customer acquisition makes it imperative to gain large wallet share; economies of scope are key

Highly fixed cost make large volumes essential to achieve low unit cost; economies of scale are key

Battle for talent; low barriers to entry; many; small players thrive

Battle for scope; rapid consolidation; a few big players dominate

Battle for scale; rapid consolidation; a few big players dominate

Employee centered; coddling the creative stars

Highly service oriented; customer-comes-first mentality

Cost focused; stresses standardization, predictability , and efficiency.

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Three core Business Types

Unbundling The Mobile Telco

• Mobile telecommunication firms have started unbundling their business.

• Traditionally they competed on network quality, but now they are striking network sharing deals with competitors our outsourcing network altogether to equipment manufacturers

• Their key asset is no longer the network - it is their brand and their Customer Relationship.

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Unbundling The Mobile Telco

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Unbundling The Mobile TelcoInfrastructure Management

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• Telco such as France telecom, KPN, and Vodafone have outsourced operations and maintenance of some their network to equipment manufacturers such as Nokia Siemens Networks, Alcatel-Lucent, and Ericsson.

• Equipment manufacturers can run the networks at lower cost because they service several telco at a time and thus benefit from economies of scale.

• After unbundling it’s infrastructure business, a telco can sharpen its focus on branding segmenting customers and service which are its key asset and its core business.

• By concentrating on customers and increasing share of wallet with current subscribers, it can leverage investment made over the years acquiring and retaining customers.

• On the first mobile telco to pursue strategic unbundling was Bharti Airtel, now one of India’s leading telco. It outsourced network operations to Ericson and Nokia Siemens Network and IT infrastructure to IBM, allowing the company to focus on its core competency; building Customer Relationship

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Unbundling The Mobile TelcoCustomer Relationship

• For product and service innovation the unbundled telco can turn to smaller, creative firms.

• Innovation requires creative talent, which smaller and more dynamic organization typically do a better job of attracting.

• Telcos work with the multiple third-parties that assure a constant supply of new technologies, services, and media content such as mapping, games, video and music.

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Unbundling The Mobile TelcoContent Provider

The Long TailBusiness Model

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• Are about selling less of more

• Focus on offering a large number of niche product, each of which sells relatively in frequently.

• Aggregate sales of niche items can be as lucrative as the traditional model whereby a small number of bestseller account for most revenues

• Long tail business models require low inventory cost and strong plat from to make niche content readily available to interested buyers

The Long Tailat Publishing Company

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• Eliminates traditional entry barriers by providing authors the tools to craft, print, and distribute their work through an online marketplace

• The more number of authors, the more it succeeds, because authors become customers

• Thousands of authors use lulu.com’s self service tools to publish and sell their books

marketing.anchormobile.net

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The Long Tailat Publishing Company

The Long Tail LEGO Factory

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Multisided PlatformsBusiness Model

• Multi-Sided Platforms bring together two or more distinct but interdependent groups of customers. Such platforms are of value to one group of customers are also present.

• The platforms creates value by facilitating interactions between the different groups.

• A multi-sided platform grows in value to the extents that it attracts more users, a phenomenon known as the network effect.

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www.inspiratonfeed.com

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Multisided PlatformsGoogle

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Multisided PlatformsGoogle

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Multisided PlatformsGoogle

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Multisided PlatformsGoogle

Free as a Business Model

• one substantial Customer Segment is able to continuously benefit from a free of charge offer

• Different patterns make the free offer possible

• Non paying customers are financed by another part of the business model or by another Customer Segment

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Free Business ModelSkype

Open Business Model

• Open Business Model to create and capture value by systematically collaborating with outside partners.

• This may happen from the “outside-in” by exploiting external ideas within the firm, or from the “inside-out” by providing external parties with ideas or assets lying idle within the firm.

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Principles of Innovations

Closed Open

The smart people in our field work for us We need to work with smart people both inside and outside our company

To profit from research and development (R&D). we must discover it develop it, and ship it out selves

External R&D can create significant value internal R&D is needed to claim some portion of that value

If we conduct most of the best research in the industry we will win.

We don’t have to originate the research to benefit from it

If we can create the most or the best ideas in the industry, we will win

If we make the best use of internal and external ideas, we will win

We should control our innovation process, so that competitor don’t profit from our ideas

We should profit from others’ us of our innovations and we should buy other’s intellectual property (IP) whenever it advances our own interests

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The Connector : InnoCentive

• Companies seeking insights from external researchers incur substantial cost when trying to attract people or organizations with knowledge that could solve their problems.

• Researchers who want to apply their knowledge outside their own seeking attractive opportunities.

• That is where a company called InnoCentive saw opportunity.

• InnoCentive provides connections between organizations with research problems to solve

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The Connector : InnoCentive

Group Assignment for Session 6

• Evaluate Key Activities (operational) of interviewed companies business model

• Make a short report

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References

• Osterwalder, Alexander et al. 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. JWS. New Jersey. ISBN: 978-0470-87641-1.

• http://courses.ischool.berkeley.edu/i243/s08/lectures/243-07-20080213.pdf

• http://www.youtube.com/watch?v=hPVX-zqt3LI