Business Models PPT

8/13/2019 Business Models PPT

http://slidepdf.com/reader/full/business-models-ppt 1/21



3

Elements of Business Model Design



In essence, a business model is a conceptual,

rather than a financial, model.

4

Business model innovation can itself be a pathway to competitive

advantage if the model is sufficiently differentiated and hard to

replicate for incumbents and new entrants alike.

The way in which companies make money nowadays is differentfrom the industrial era, where scale was important.

True for Internet Companies. (Music Industry/ Google search/

Shopping etc.)

Internet is causing many ‘bricks and mortar’ companies to rethink

their distribution strategies



The concept of a business model has no

established theoretical grounding in economics or

in business studies.

5

Inventions are often assumed to create value naturally and, enjoying

protection of iron-clad patents.

Firms can capture value by simply selling output in competitive market

prices.

Customers don’t just want products; they want solutions to their

perceived needs.

In some cases, markets may not even exist, so entrepreneurs may have

to build organizations in order to perform activities for which markets

are not yet ready.



Examples of business models

6

A striking early American example of 19th century business model innovation was

Swift and Company’s ‘reengineering’ of the meat packing industry.Prior to the 1870s, cattle were shipped live by rail from the Midwestern stockyard centers likeOmaha, Kansas City and Chicago to East Coast markets where the animals were slaughteredand the meat sold by local butchers.

Gustavus Swift sensed that if the cattle could be slaughtered in the Midwest and shipped todistant markets in refrigerated cars, great economies in production/centralization andtransportation could be achieved, along with an improvement in the quality of the final product.

Swift’s new business model quickly displaced business models involving a network of shippers,East Coast butchers and the railroads. His biggest challenge was the absence of refrigeratedwarehouses to store the beef near point of sale, which were not part of the existingdistribution system.

Swift set about creating a nationwide web of refrigerated facilities, often in partnerships withlocal jobbers. Once Swift overcame the initial consumer resistance to meat slaughtered daysbefore in distant places, his products found a booming market because they were as good as

freshly butchered meats and were substantially cheaper. Swift’s success attracted imitators.



Examples…

7

Containerization

Low cost Airlines

The ‘razor-razor blade model’

Sports Sponsorship

Performing Artists

Investment Banking



Information/ Internet Industry

8

Music Industry



Business Model, Strategy and Sustainable

Competitive Advantage

9

Coupling competitive strategy analysis tobusiness model design requires segmenting the

market, creating a value proposition for each

segment, setting up the apparatus to deliver that

value, and then figuring out various ‘isolatingmechanisms’ that can be used to prevent the

business model/strategy from being undermined

through imitation by competitors or

disintermediation by customers. Unless the business model survives the filters

which strategy analysis imposes, it is unlikely to

be viable, as many business model features are

easily imitated.



Steps to a Sustainable Business Model

11



Barriers to imitating business models

12

Walmart implementing a business model may require systems,processes and assets that are hard to replicate such was thesituation with potential entrants into the towns too small tosustain a Wall-mart competitor

Dell Computer’s direct-to-user :- when Gateway

Computers tried to implemented a similar model

Netflix pioneered delivery of DVDs by mail using a subscriptionsystem, Blockbuster video responded with a similar offering.(Netflix accused Blockbuster of infringing because of patent byNetflix)

If it is transparently obvious how to replicate a pioneer’s business model,incumbents in the industry may be reluctant to do so if it involvescannibalizing existing sales and profits or upsetting other important businessrelationships.



Business models to capture value from

technological innovation

14

Clearly technological innovation by itself does notautomatically guarantee business or economic

success.

Good business model design and

implementation, coupled with careful strategic

analysis, are necessary for technological

innovation to succeed commercially.



Examples

15

Xerox (the personal computer)

Eli Whitney’s 1793 invention

(Cotton extraction)

Thomas Edison with his portfolio of 1000+ patents andpersonal fame from inventing a durable electric light

bulb



‘Public’ goods and the bundling and

unbundling of inventions and products

16

As there is no good (private) business model that can

support value capture, government funding and/or

philanthropy is required and provided.

The most common business model to capture value

from inventions is to embed them in a product, rather

than simply trying to sell designs or intellectual

property. (eg. Mobile phones Cameras, etc.)



Business models as innovation

17

The capacity of a firm (or nation) to capture value will be deeplycompromised unless the capacity exists to create new businessmodels.

Thomas Edison (Electricity Bulb)

Dell didn’t bring any improvements to the technology of thePersonal Computer

Southwest Airlines, Virgin, Virgin Blue, and JetBlue in the airpassenger transport sector.

Payment card industry (the core of which is credit and debitcards). The card companies provide network services, associatewith banks who issue the cards, and associate with acquirers

who sign up merchants to accept credit cards. Early on in the lifeof the industry, merchants were unwilling to accept a paymentcard that few consumers carried, just as card holders didn’twant cards that merchants did not accept.



A provisional business model must be evaluated

against the current state of the business ecosystem,

and against how it might evolve

18

Long-lived structural elements choices made

perhaps decades ago in different environments

need to be scrutinized especially thoroughly.



19

Designing good business models is an ‘art’ .. the

chances are greater if entrepreneurs and managers

have a deep understanding of user needs and are goodlisteners and fast learners.

The business environment itself is a choice variable:

firms can select a business environment or be selectedby it: they can also shape it.



Conclusion

20

A business model is that it crystallizes customer needsand ability to pay

Entices customers to pay for value

Must be honed to meet particular customer needs

Non-imitable in certain respects

Great technological achievements commonly fail

commercially because little attention has been given

to designing a business model to take them to marketproperly. This can and should be remedied.



21

Thank You

Business Models PPT

Documents

Transcript of Business Models PPT