1. PATTERN1. Unbundling Business Models 2. The Long Tails3. Multi-Sided Platforms 4. FREE as a Business Model 5. Open Business Model

2. Pattern in architecture is theidea of capturing architecturaldesign ideas as archetypal andreusable descriptions. Christopher Alexander, Architect 3. pattern similar characteristics, similar arrangementsor similar behaviors, we call thesesimilarities business model patterns. the goal in defining and describing thesebusiness model patterns is to recast well-known business concepts in a standardizedformat 4. 1. Unbundling Business Models The concept of the unbundled corporation holds thatthere are three fundamentally different types of businesses:(1) Customer Relationship businesses, (2) Productinnovation businesses, and (3) infrastructure businesses. Each type has different economic, competitive, and culturalimperatives. The three types may co-exist within a single corporation,but ideally they are unbundled into separate entities inorder to avoid conflicts or undesirable trade-offs. Example: mobile telecom industry, private banking industry 5. Private Banking:Three Businesses in OneThree Businesses in One Situation: Swiss private banking, the business of providing banking services to the very wealthy, was long known as a sleepy, conservative industry. vertically integrated and performed tasks ranging from wealth management to brokerage to financial product design. 6. Private Banking: Three Businesses in One Three Businesses in One But the environment changed. Secrecy became less of an issue with the demise of the mystique surrounding Swiss banking practices outsourcing became attractive with the breakup of the banking value chain due to the emergence of specialty service providers The former focus exclusively on handling banking transactions, while the latter concentrate solely on designing new financial products. 7. Zurich-based private banking has unbundled its business model. It spun off its transaction-oriented platformbusiness into a separate entity called IncoreBank, Incore Bank offers banking services toother banks and securities dealers that nowfocuses solely on building CustomerRelationships and advising clients 8. Private Banking:Three Businesses in OneThree Businesses in One 9. Trade Offs1.The bank serves two dierent markets with very dierent dynamics. Advising the wealthy is a long-term, relationship-based business. Selling financial products to private banks is a dynamic, fast-changing business.2.The bank aims to sell its products to competing banks in order to increase revenuesbut this creates a conflict of interest.3.The banks product division pressures advisors to sell the banks own products to clients. This conflicts with client interest in neutral advice. Clients want to invest in the best products on the market, regardless of origin. 10. Trade Offs4.The cost- and efficiency-focused transaction platform business conflicts with the remuneration- intensive advisory and financial products business, which needs to attract costly talent.5.5 The transaction platform business requires scale to drive down costs, which is diicult to achieve within a single bank.6.6 The product innovation business is driven by speed and quick market entry, which is at odds with the long-term business of advising the wealthy. 11. 2. Unbundling the Mobile Telco Mobile telecommunication firms have startedunbundling their businesses. Traditionally they competed on network quality, butnow they are striking network sharing deals withcompetitors or outsourcing network operationsaltogether to equipment manufacturers. Why? Because they realize that their key asset is nolonger the networkit is their brand and theirCustomer Relationships. 12. Equipment Manufacturers Telcos such as France Telecom, KPN, and Vodafone have outsourcedoperation and maintenance of some of their networks to equipmentmanufacturers such as Nokia Siemens Networks, Alcatel-Lucent, andEricsson. Equipment manufacturers can run the networks at lower cost because theyservice several telcos at a time and thus benefit from economies of scale. 13. Unbundled Telco After unbundling its infrastructure business, a telco can sharpen its focus on branding andsegmenting customers and services. Customer relationships comprise its key asset and its core business. By concentrating oncustomers and increasing share of wallet with current subscribers, it can leverage investmentsmade over the years acquiring and retaining customers. One of the first mobile telcos to pursue strategic unbundling was Bharti Airtel, now one ofIndias leading telcos. It outsourced network operations to Ericsson and Nokia SiemensNetworks and IT infrastructure to IBM, allowing the company to focus on its core competency:building Customer Relationships. 14. Content Providers For product and service innovation, the unbundled telco can turn to smaller, creative firms. Innovation requires creative talent, which smaller and more dynamic organizations typically doa better job of attracting. Telcos work with multiple third-parties that assure a constant supply of new technologies,services, and media content such as mapping, games, video, and music. Two examples areMobilizy of Austria and Swedens tat. Mobilizy focuses on location-based service solutions for smartphones (it developed a popularmobile travel guide), and tat concentrates on creating advanced mobile user interfaces. 15. 2. The Long Tail 16. Long Tail Business Models are about selling less of more... They focus on offering a large number of nicheproducts, each of which sells relativelyinfrequently or low volumes. focusing on hit products can produce (evenexceeding) revenues. Long Tail business models require low inventorycosts and strong platforms to make niche contentreadily available to interested buyers. 17. Three Economics Triggers(by Chris Anderson)(by Chris Anderson) 3 economics triggers gave rise to thisphenomenon in media industry... Democratization of tools of production Democratization of distribution Falling search costs to connect supply with demand 18. Examples: Netflix eBay YouTube Facebook Lulu.com 19. TheTransformation of theBook Publishing Industry The traditional book publishing model is built(Lulu.com) on a process of selection(Lulu.com) whereby publishers screen many authors and manuscripts and select those that seem most likely to achieve minimum sales targets. Publishers are most interested in books they Old Model can print in quantity for sale to large audiences. 20. TheTransformation of the enabling anyone topublish. Book Publishing Industry(Lulu.com) is based on helping nicheand amateur authorsbring their work tomarket. providing authors thetools to craft, print, anddistribute their workthrough an onlinemarketplace. A New Model authors becomecustomers. 21. LEGO Factory:Customer-Designed KitsCustomer-Designed Kits 22. Long Tail Pattern 23. Long-Tail Pattern The value proposition of a Long Tail businessmodel is characterized by offering a wide scope ofnon-hit items that may co-exist with hitproducts. Long Tail business models may alsofacilitate and build on user-generated content. Long Tail business models focus on nichecustomers, can serve both professional andamateur content producers, and may create amulti-sided platform catering to users andproducers alike. 24. Long-Tail Pattern Long Tail business models usually rely on theInternet as a customer relationship and/ortransaction channel. Niche content providers (professional and/or user-generated) are the key partners in this pattern. The key resource is the platform; key activitiesinclude platform development and maintenance andniche content acquisition and production. 25. Long-Tail Pattern The main costs incurred cover platformdevelopment and maintenance This model is based on aggregating small revenuesfrom a large number of items. revenue streamsvary; they may come from advertising, product sales,or subscriptions. 26. Tasks... please define and create a long tail businessmodel and pattern for eBay, YouTube andFacebook each group choose one source example(eBay or YouTube or Facebook) 27. 3. Multi-Sided Platforms next week session.....