Business Model Generation - Chapter 2

What different economic, cultural and competition objectives do the different unbundled businesses have?

- Economic o Customer Relationship: economies of scope is key, since acquiring customers hinders economies of sclae o Product innovation: early market entry enables big market share -> speed is key o Infrastructure: high fixed costs -> scale is key - Cultural o Customer Relationship: battle for scope o Product innovation: battle for talent o Infrastructure: battle for scale - Competition o Customer Relationship: service orientated o Product innovation: Employee centered o Infrastructure: cost focused

In what three main areas does a Multisided Platform create value?

1. Attracting users 2. Matchmaking between the two sides 3. Reducing cost by channeling transactions

What is the main reasons behind the development of the Long Tail Business model?

1. Democratization of tools of production - technologies for digital production have become cheaper 2. Democratization of distribution - internet has made digital content distribution a commodity 3. Falling search costs to connect supply and demand - increased number of search engines and evaluation websites.

What are the two main metrics to observe in a Freemium Business model?

1. The average cost for each free user 2. The conversion rate from free to paying user

What is an Open Business Model? What variants of it exists?

An Open Business Model is about how a business could create and capture value by collaborating with external parties. Two main variants: - "Inside-out" - Value is created internally and then delivered to external parties - "Outside-in" - Value is created by external parties and then exploited internally.

Which Channel do the Long Tail Business Model often use?

An internet-based platform.

How do Multisided Platforms attract users?

By making sure that there is a balance between the two sides of the platform. This is often done by subsidizing one side of the platform.

What is the Free Business Model?

In the Free business model, one big Customer Segment is able to benefit from a free-of-charge offer. This is financed by another part of the business model or another Customer Segment.

What is a Multisided Platform?

It brings multisided and independent parties together by facilitating interactions between them.

What is the Unbundling Business Model?

It means that there are three main types of businesses: Customer Relationship businesses, product innovation businesses and infrastructure businesses. Each type has diferent economic, competitive, and cultural imperatives.

What is Network Effects?

It's the phenomena about how the platform increases its value by attracting more and more users.

What customer segment is the Long Tail Business Model targeted at?

Niche segments.

What is the reason for distinguish three different businesses in the Unbundling Business Model?

Since the three business has different objectives and focus, they should be separated ("unbundled") to not create conflict within the organization. The three different objectives are: - Customer Relationship businesses should find & acquire customers and build relationships with them - Product Innovation businesses should develop new and attractive products and services - Infrastructure businesses should build and develop platforms for high volume and repetitive tasks.

What are the Key Resource in a Freemium Business model and how does the Cost Structure look like?

The Key Resource is the platform and the Cost Structure is built up by a big portion of fixed costs and almost zero in marginal costs.

What is the Long Tail Business model?

The Long Tail business model is all about selling less of a broader portfolio of niche products. This is a counter-strategy to selling a lot of "hit products".

What is the key to succeed with a Bait & Hook business model? What does it imply?

The key is to lock-in the customers to the initial product and it implies for example that Gillette has a lot of patents on their razors.

What are the three main possible strategies/patterns to create revenue streams in a Free Business Model?

Through: 1. Multi-sided platforms (advertising based) - Example: Metro 2. Freemium - Basic functions are free, but premium functions cost 3. Bait & Hook - attractive, inexpensive or free initial offer that leads to future & recurring revenues. Example: Gillette