PurposeBuild a common language for

Purpose

Build a common language for founders participating in our startup ecosystem

What’s the difference between business transition or change management? Not much but if we have to determine that we are speaking about the same topic we are wasting time. That is why a common vocabulary is important.
Using a common language we can facilitate discussion with ease.
Without a shared language:
It is difficult to systematically challenge assumptions.
It is difficult to innovate successfully.

So, what is a Business Model?

“A Business Model describes the rationale of how an organization creates, delivers, and captures value.” – Business Model Generation by Alex Osterwalder and Yves Pigneur
#1: The Customers

Customer Groups Represent Different Segments if:

Their needs require and justify a distinct offer
They are reached through different Distribution Channels
They require different types of relationships
They have substantially different profitability
They are willing to pay for different aspects of the offer Mass Segments include:
Mass – Don’t Distinguish; All Focus on One Large Group; Consumer Electronics
Niche – All aspects of distribution, relationship, value etc are tailored to the specific
Segmented – Slightly different needs and problems in market segments; Banking: Private Client Groups cater to those with $500,000 or more vs general consumer banking
Diversified – Serve two totally unrelated market segments; Amazon is in retail but also is selling infrastructure
Multi-Sided – Serve two more interdependent segments; Credit card companies need both a large base of card holder and a large base of merchants; News Paper – readership and advertisers
For whom are we creating value?
Who are our most important customers?

#2: Value Proposition

Why customers chose your company over others
Solves problem or satisfies a need
Caters specifically to the customer segment
What value do we deliver to the customer?
Which problem are we solving?
Which needs are we satisfying?
What are we offering?

The answers include:

Newness – New set of needs that customers previously didn’t perceive because there was no similar offering
Performance – Improving product or service performance: PC sector used to rely on this factor to bring more and more powerful machines to market. Recently failed to produce customer demand
Customization – Tailoring products or services to specific needs/problems
Getting the Job Done
Design
Brand/Status
Price
Cost reduction
Risk reduction
Accessibility
Convenience/Usability – Customer co-creation, mass customization

#3: Channels

Which channels do our customers want to be reached on?
Which channels work best?
Which ones cost less?
How are they integrated into customer routines?
Direct vs Indirect
Salesforce vs. Wholesale
Partner vs Own
Partner Stores vs Own Stores
Where does Web Sales Fall – Own and Direct

Channel Phases

Awareness – How do we raise awareness about our company?
Evaluation – How do we help customers evaluate our organization’s Value Proposition?
Purchase – How do we allow customers to purchase specific products and services?
Delivery – How do we deliver a Value Proposition to customers?
After Sales – How do we provide post-purchase support?

#4: Customer Relationships

For Customer Acquisition
Customer Retention
Boosting Sales
What type of relation is established and maintained?
How costly are they?
How do they integrate with Business Model?

#5: Revenue Streams

For what value is each customer segment truly willing to pay?
What do they currently pay?
How are they paying?
What would they prefer?
Transaction vs Recurring
Fixed vs Dynamic

#6: Key Resources

What Key Resources do our Value Propositions require?
Physical – Buildings, Machines, POS, Trucks
Intellectual – Brand, patents, microchip design
Human – Pharma needs scientists; Pharma needs skilled salesforce
Financial – Cash, lines of credit, stock option pool; Borrow funds from bank to provide vendor financing to downstream customers.
Our Distribution Channels?
Customer Relationships?
Revenue Streams?

#7: Key Activities

What Key Activities do our Value Propositions require?
Distribution Channels? Relationships?
Revenue Streams?
Production
Design, making, delivering
Manufacturing
Problem Solving
Come up with solutions to individual customer problems
Knowledge management and training
Platform/Network
Match Making
Platform Promotion, Service, Management

#8: Key Partnerships

Strategic Alliances between Non-Competitors
Coopetition: Alliances between Competitors
Joint ventures to develop new business
Buyer-supplier relationships to assure reliability
Who are our Key Partners?
Who are our Key Suppliers?
Which Key Resources are we acquiring?
Which Key Activities do others perform?

#9: Cost Structure

Important costs incurred by while operating
What are the important costs inherent to our business model?
Cost-Driven – Minimize cost; No Frills Airlines
Value Driven – Premium Value Propositions; Luxury hotels
Fixed Costs – Remain the same despite changes in volume of goods or services produced; Physical plant
Variable Costs – Vary proportionally with the volume of goods or services produced; Ticketing
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Economies of Scale
As output expands cost advantages arrive
Bulk purchases
Economies of Scope
Cost advantages due to larger scope of operation
Use the same distribution channel for multiple products