10 Entrepreneurial Business Models

Introduction

• A business model describes the rationale of how an organization creates, delivers, and captures value.

• On the other hand, a business plan is how you execute the business model. If the business model does not work, the business is unlikely to do well.

The Four-Box Business Model

Customer Value Proposition

The overall value of a CVP depends on these three key metrics:

1.How important the ‘job’ or the problem is to the customer

2.How satisfied are the customers with the current solutions

3.What is the relative advantage of the new offering, compared to the previous offerings

Nike id

Profit Formula

• Revenue model• Cost structure• Target unit margin• Resource velocity

Key Resources• People• Technology• Raw materials• Equipment• Information• Channels• Partnerships and alliances• Funds• Licenses or permits

Key Processes

• Processes• Business rules and success metrics • Behavioural norms

Osterwalder’s Business Model Canvas

How canvas differs from 4-box

• Introduction of ‘Strategic partnerships’• Splitting customers into:

– Customer segments– Customer relationships– Channels

• Costs and revenues are in different components

Types of Business Models Currently Employed

Niche

• Compatibility of niche needs and product features

• Size of niche• Willingness to pay• accessibility

Perfint

Vision:Become a respected emerging player in providing 'Niche Imaging Solutions' that help address Clinical Productivity needs

Long Tail

• Make everything available• Have a low price• Help find products

• Founded by Sachin and Binny Bansal in October 2007

• Both had worked for Amazon • Growth:

– 4 cr (2009)– 20 cr (2010)– 75 cr (2011)

Mass Customisation

Combines the low unit costs of mass production processes with the flexibility of individual customization

• Modularize products• Delay assembly• Use configurators to capture customer

preferences• Assemble and deliver

Myntra.com

• Started by Mukesh Bansal and Sankar Bora in 2006

• Started as a site for personalised products• Now into sales of branded clothing• One of the top 10 e-commerce sites in India

Freemium

• Feature limited• Time Limited• Capacity limited• Seat limited• Customer Class Limited

Zoho

• Based in Chennai

Unbundling

• Breakup a product into independent components

• Strip away add-ons• Sell components as a complete product• Up sell add-ons• Increase in prices is possible

Zoho1. Zoho Assist2. Zoho Business 3. Zoho Books 4. Zoho Calendar5. Zoho Challenge6. Zoho Chat7. Zoho Creator8. Zoho CRM9. Zoho Discussions10. Zoho Docs11. Zoho Gadgets12. Zoho Wiki 13. Zoho Writer14. Zoho Invoice15. Zoho Mail

16. Zoho Viewer17. Zoho Meeting18. Zoho Mobile 19. Zoho Notebook20. Zoho People21. Zoho Personal22. Zoho Planner23. Zoho Polls24. Zoho Projects 25. Zoho Recruit26. Zoho Reports27. Zoho Search28. Zoho Share29. Zoho Sheet30. Zoho Show31. Zoho Support

Bundling

• There are economies of scale in production,• There are economies of scope in distribution,• Marginal costs of bundling are low• Production set-up costs are high,• Customer acquisition costs are high.• Consumers appreciate the resulting

simplification

Tringme

• Enterprise wide telephony and messaging solutions– Mobile VOIP– Audio conferencing– IVR & Voice PHP

• Pricing encourages purchase of bundled solutions

No Frills

• Low prices are driven by low costs• Rarely will small firms have lower costs than

large firms• Decrease costs by removing ‘frills’ which are

costly but are not valued much by customers

No Frills

Premium

• Premium• Uber Premium• Mass Class

VardenchiCharges a premium of about two lakhs over the price of a Royal Enfield

Open Business Models

• Open source software• Crowd sourcing

– Crowdfunding– Crowdcreation– Crowdvoting– Crowd wisdom

• Problems can be explored at comparatively little cost, and often very quickly

• Payment is by results or even omitted• The entrepreneur can tap a wider range of

talent• Entrepreneurs gain first-hand insight on their

customers' desires• The community may feel a brand-building

kinship with the entrepreneur

I Am

400 people financed the movie by Onir Dhar

Multi Sided Platforms

• The entrepreneur acts like a go-between• To be effective, a sufficiently large pool is

needed on both sides.• A strong value proposition needs to be crafted

for both sides• Usually there are high network effects

Redbus

• Turnover of 150 crores• Walked into a space other had failed in• Success after they realised that bus operators

were customers too

Social Enterprises

Working on business-minded solutions to social problemsVijay Mahajan – “Single goal optimization is a 20th century anacronism”

Social Enterprises

Business Model InnovationThere are five strategic circumstances that often need a change in business model:

• The opportunity to address the needs of a group of customers who have been shut out of a market because existing solutions are too expensive or too complex to address their needs.

• There is a new promising technology and there is an opportunity to capitalize on it by using an innovative business model.

• The opportunity to bring a job-to-be-done focus in a market where it does not exist as yet.

• The need to counter low cost competitors.• There is a need to respond to a shifting basis of competition.