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Crafting Business Models. models.ppt. Business model components. Concept describes the opportunity. 1 Revenue Model. 2 Cost Model. Value measures the return to investors & other stakeholders. Capabilities define resources needed to turn concept Into reality. 3 Asset Model.

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business model components
Business model components

Conceptdescribes theopportunity

1Revenue Model

2Cost Model

Valuemeasures the returnto investors & otherstakeholders

Capabilitiesdefine resources neededto turn concept

Into reality

3Asset Model

business model components3
Business Model Components
  • Business concept defines strategy
  • Capabilities defines resources needed to execute strategy
  • A high-performing organization returns value to all stakeholders
  • Revenue Model based on sales, fees of many kinds
  • Cost Model based on: cost to acquire people, advertising, material & supplies, R&D, infrastructure
  • Asset Model based on: financial assets, property, plant & equipment, securities, real estate, relationships, brand, knowledge & expertise, agility and responsiveness, intellectual property, goodwill
concepts
Concepts
  • Market participants may assume 2 key value chain roles
    • Producer
    • Distributor – may or may not hold inventory
    • If vertically integrated, they do both
  • Networked business model framework distinguishes between
    • Focused distributors – much like off-line counterparts (e.g.,
    • Portals – provide gateways to broad array of content, services, products, solutions thru on-line or multi-channel distribution networks (e.g. Yahoo)
focused distributors
Focused Distributors
  • Offer products & services related to a specific market niche
  • 5 types of focused distributors:
    • Retailers
    • Marketplaces
    • Aggregators
    • Exchanges
    • Infomediaries
retailer business model
Retailer Business Model
  • Example: staples.com
  • Revenue model based on product/service sales
  • Cost model includes procurement, inventory management, order fulfillment, and customer service (including returns
  • Ratio of tangible to intangible assets much higher than firms that do not assume control of physical inventory.
marketplace business model
Marketplace business model
  • Example: E-Loan
  • Sell products & services
  • Do not hold inventory
  • Sell products with a non-negotiable price
  • Complete sales on line
  • Often link electronically to supplier databases & transaction systems to make sure transaction can be completed
  • Procurement & inventory costs lower
aggregator business model
Aggregator business model
  • Example: Autoweb car market
  • Provide information on products & services for sale by others in the channel
  • Buyer cannot complete final transaction inside website: http://www.autoweb.com
  • Revenue model based in referral fees & advertising
  • Customers often use such sites to comparison shop so aggregator cannot claim referral fee
infomediary business model
Infomediary business model
  • Example: Internet Securities http://www.securities.com/
  • Unites buyers & sellers of information-based products such as news, weather, sports & financial information
  • Transactions are complete online
  • May charge individual or corporate (if B2B) subscription fee for services
  • B2C infomediaries may provide information service free to consumers & make money from advertising revenues paid by sponsors or affiliates
  • Barriers to entry are low because information is readily available & cost of packaging & delivering it is low
    • Need to develop unique value-added content and analytical tools for which they charge users
    • Collect information about users of their systems & sell it
exchange business model
Exchange business model
  • Examples: eBay & marketplace
  • May or may not take control of inventory
  • May or may not complete final sales transaction online
  • Price is not set– key differentiating factor
  • Revenue, cost & asset models vary depending on whether online exchange assumes control of inventory & completes the transaction
portals
Portals
  • 3 types of portal business models
    • Horizontal
    • Vertical
    • Affinity
  • Differentiated by following questions
    • Gateway to full range of online & information services?
    • Provide access to deep content, products, & services within a vertical industry (e.g. travel)
    • Provide information to all users or defined group
horizontal portals
Horizontal portals
  • Examples: AOL.com, yahoo!.com, quicken.intuit.com
  • Provide gateway access to information
  • Broad range of tools to locate information, communicate, develop online communities
  • Original business model – tv type advertising
  • Switched to charges for revenues from transaction fees
  • Often partner with ISPs
vertical portals
Vertical portals
  • Example: covisint.com & webMD.com
  • Provide deep content
  • Place to conduct business, learn, shop, communication & community building tools
  • Variety of business models combined, each producing own revenue streams:
    • Subscriptions
    • Transaction charges
    • advertising
affinity portals
Affinity portals
  • Example: iVillage.com, realtor.com
  • Deep content, commerce & community features
  • Targeted toward specific market segment or specific event
  • Revenue, cost & asset models based on business models adopted by the portal
producers
Producers
  • Manufacturers – Ford Motors
  • Service providers – American Express
  • Educators – Cal Poly Pomona
  • Advisors – McKinsey
  • Information & News providers: Dow Jones
  • Producer portals support all aspects of production & distribution process via Internet
networked infrastructure providers
Networked Infrastructure Providers
  • Infrastructure distributors enable buyers & sellers to transact business
    • Infrastructure retailers – compusa.com
    • Infrastructure marketplaces - tech data, sell computer & network products, may have to keep inventory
    • Infrastructure aggregators – ZDNet.com, provides reviews of technology
    • Infrastructure exchanges – converge.com – auction new & used electronic equipment
infrastructure portals
Infrastructure Portals
  • Provide access to wide range of network, computing & application hosting services
    • Horizontal infrastructure portals: ISPs
    • Vertical infrastructure portals: also called ASPs (Application Service Providers)
      • IBM’s E-Business solutions
      • ASPs host & maintain software applications, enabling organizations to log in and use them on-line
      • Generate revenues from hosting & maintenance fees, consulting & system integration fees
infrastructure producers
Infrastructure Producers
  • Design, build, market & sell technology hardware, software, solutions, services
  • May provide after-market services
  • Types
    • Equipment/component manufacturers (IBM, Sony)
    • Software firms (SAP, Microsoft)
    • Customer software & integration providers (Accenture)
infrastructure service providers
Infrastructure Service Providers
  • Example: Fedex
  • Provide online/offline services to support logistics, marketing & other shared services
  • Revenues from subscription fees, service fees, transaction fees
  • Costs based on physical infrastructure & skilled professionals
evolving business models
Evolving Business Models
  • Example of amazon.com
  • Enhance current products/services
    • Added 1-click shopping & wireless device shopping
  • Expand into new product/service categories
    • Launched music & DVD/video in 1998
  • Extend products/services
    • 2 On-line auction stores (high end & low end)
    • Entered equity partnerships with other retailers
  • Exit – sell it or spin it off
    • Ended relationship with home living.com retailer when they went bankrupt in 2000
step by step analysis of business models
Step-by-Step analysis of business models
  • Profile current business models
  • Determine how to evolve current model and/or identify new models to pursue
  • Use business model analysis framework to prioritize new models 7 initiatives by evaluating
    • the concept (opportunity)
    • Capabilities & resources required
    • Value proposition (returns to stakeholders)
  • Use analysis in step 3 as benchmark to develop real-time performance monitoring system
  • Revise strategy, implementation plan, & performance measurement systems on ongoing basis.