Business Model Canvas

Epicenters of Business Model Innovation

*Resource-Driven* resource-driven innovations originate from an organization's existing infrastructure or partnerships, e.g. Amazon Web Services. *Offer-Driven* offer-driven innovations create new value propositions, e.g. Cemex delivery time promise. *Customer-Driven* Customer-driven innovations are based on customer needs, facilitated access, or increased convenience, e.g. 23andMe personalized DNA testing. *Finance-Driven* Innovations driven by new revenue streams, pricing mechanisms, or reduced cost structures, e.g. Xerox leased copy machines. *Multiple-Epicenter Driven* Innovations driven by multiple epicenters, e.g. Hilti rented tool-sets.

Business Model Environment Analysis

*The ________ describes the context, drivers and constraints of the business model* - Market Forces - Industry Forces - Key Trends - Macroeconomic Forces

Open Business Models

*_______ can be used by companies to create and capture value by systematically collaborating with outside partners.* This may happen from the "outside-in" by exploiting external ideas within the firm, or from the "inside-out" by providing external parties with ideas (IP) or assets lying idle within the firm. Examples of ________ are P&G's collaborative R&D with technology entrepreneurs, Internet platforms, and retirees; GlaxoSmithKline's Patent Pools

Design Tools & Techniques

- "What If" Questions - Customer Insights (Empathy Map) - Ideation(~Brainstorming) - Visual Thinking - Prototyping - Storytelling - Scenarios

Execution side of the Business Model Canvas

— Key Activities (KA) — Key Resources (KR) — Key Partners (KP) — Cost Structure (CS)

Value side of the Business Model Canvas

— Value Propositions (VP) — Customer Segments (CS) — Customer Relationships (CR) — Channels (CH) — Revenue Streams (RS)

Multi-Sided Platforms

*________ create value by bringing together two or more distinct but interdependent groups of customers.* Such ________ are of value to one group of customers only if the other groups of customers are also present. A ________ grows in value to the extent that it attracts more users, a phenomenon known as the network effect. Credit cards, for example, link merchants with cardholders; computer operating systems link hardware manufacturers, application developers, and users; newspapers link readers and advertisers; video gaming consoles link game developers with players.

Business Model Patterns

- Unbundling Business Models - The Long Tail - Multi-Sided Platforms - FREE as a Business Model - Open Business Models

Business Model

*A ________ describes the rationale of how an organization creates, delivers, and captures value*

Business Model Canvas

*A shared language for describing, visualizing, assessing, and changing business models.* Components of the ________ are: — Value Propositions (VP) — Customer Segments (CS) — Customer Relationships (CR) — Channels (CH) — Revenue Streams (RS) — Key Activities (KA) — Key Resources (KR) — Key Partners (KP) — Cost Structure (CS)

Prototyping

*A ________ is a thinking tool that helps us explore different directions in which we could take our business model.* *Napkin Sketch* draw a simple business model canvas. describe the idea using only key elements (Idea, Value Proposition and main Revenue Streams). *Elaborated Canvas* Develop a more elaborate canvas to explore all the elements needed to make the business model work. *Business Case* Create a full Canvas and run financial scenarios based on different assumptions and key data. *Field-Test* Prepare a well-justified business case, approach prospective and/or actual customers and test the Value Proposition, Channels, pricing mechanism, and/or other elements in the marketplace.

Strategy Development

- Business Model Environment Analysis - Regular Business Model Assessment - Blue Ocean Strategizing

Empathy Map

*Customer insight tool to develop a better understanding of a customer's environment, behaviour, concerns, and aspirations.* - What does the customer *see* in his environment? - What does the customer *hear* in his environment? - What does the customer *say and do*? - What does the customer *think and feel*? - What is the customer's *pain*? - What does the customer *gain*?

Visual Thinking

________ is the use of tools such as pictures, sketches, diagrams, and Post-it notes to construct and discuss meaning. *Post-it notes* Post-it notes function like idea containers that can be added, removed, and easily shifted between business model building blocks. Here are three simple guidelines: (1) use thick marking pens, (2) write only one element per Post-it note, and (3) write only a few words per note to capture the essential point. *Drawings, Sketches* Even crude drawings, sincerely rendered, make things tangible and understandable. Visualization helps to understand the essence, enhance dialog, explore ideas and improve communication

Customer Development

*Search* - Customer discovery: Business model development and testing of hypotheses - Customer validation: Testing whether the business model is repeatable and scalable *Execution* - Customer creation: Building end-user demand and ramping up sales - Company creation: Transitioning from a start-up to a company focused on executing a validated model

Revenue Streams (RS)

*________ represents the cash a company generates from each Customer Segment.* ________ may have different pricing mechanisms, such as fixed list prices, bargaining, auctioning, market dependent, volume dependent, or yield management.

Unbundling Business Models

*The concept of the ________ corporation holds that there are three fundamentally different types of businesses: Customer Relationship businesses, product innovation businesses, and infrastructure businesses.* Each type has different economic, competitive, and cultural imperatives. The three types may co-exist within a single corporation, but ideally they are ________ into separate entities in order to avoid conflicts or undesirable trade-offs. Examples of ________ are Private Banking and Mobile telecommunication.

Key Activities (KA)

*________ are the most important actions a company must take to operate successfully. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.* ________ can be categorized as follows: - Production, i.e. designing, making, and delivering a product in substantial quantities and/or of superior quality - Problem solving, e.g. consultancies, hospitals, and other service organizations. - Platform/network, e.g. Visa, eBay, amazon

Key Resources (KR)

*________ allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different ________ are needed depending on the type of business model.* ________ can be categorized as follows: - Physical, e.g. manufacturing facilities, buildings, vehicles, machines, systems, point-of-sales systems, and distribution networks - Intellectual, e.g. brands, proprietary knowledge, patents and copyrights, partnerships, and customer databases - Human, i.e. people with specific skills - Financial, e.g. cash, lines of credit and a stock option pool

Blue Ocean Strategy

*________ is about creating completely new industries through fundamental differentiation as opposed to competing in existing industries by tweaking established models.* *Four Actions Framework*: - Which of the factors that the industry takes for granted should be eliminated? - Which factors should be reduced well below the industry standard? - Which factors should be raised well above the industry standard? - Which factors should be created that the industry has never offered?

The Long Tail

*________ business models are about selling less of more: They focus on offering a large number of niche products, each of which sells relatively infrequently.* Aggregate sales of niche items can be as lucrative as the traditional model whereby a small number of bestsellers account for most revenues. ________ business models require low inventory costs and strong platforms to make niche content readily available to interested buyers. Examples of ________ are self-publishing solutions (e.g. amazon, lulu.com, YouTube), etsy, eBay, Netflix.

Business Model Assessment

*________ is used to analyze an organization's strengths and weaknesses and identify potential opportunities and threats.* Regular ________ is the basis for incremental business model improvements, and it might trigger a serious intervention. A structured *SWOT Analysis* of a business model's building blocks yields two results: It provides a snapshot of the current situation (strengths and weaknesses) and it suggests some future trajectories (opportunities and threats).

FREE as a Business Model

*In ________ at least one substantial Customer Segment is able to continuously benefit from a free-of-charge offer.* Different patterns make the ________ possible. Non-paying customers are financed by another part of the business model or by another Customer Segment. We can distinguish between three different types of ________: - Free Advertising: Pattern of Multi-Sided Platforms - Freemium: Get the Basics for Free, Pay for More - Bait & Hook: The "Loss Leader" or "Razor & Blades" Model Examples of ________ are 20 Minuten (free paper), Flickr, Open Source Software, Skype, Google, Free Mobile Phones

Storytelling

*________ can serve as a powerful tool to make new business models more tangible. A good ________ is a compelling way to quickly outline a broad idea before getting caught up in the details.* Depending on the audience, ________ can be done from the perspective of the company (employee observer) or customer (customer jobs). Common ________ techniques include talk and images, video clips, role playing, text and images, and comic strips.

Cost Structure (CS)

*________ describe all costs incurred to operate a business model. Creating and delivering value, maintaining Customer Relationships, and generating revenue all incur ________.* ________ can be value-driven or cost-driven and can have the following characteristics: - Fixed, i.e. salaries, rents, and physical manufacturing facilities. - Variable, i.e. varies proportionally with the volume of goods or services produced - Economies of scale, i.e. advantages that a business enjoys as its output expands. - Economies of Scope, advantages that a business enjoys due to a larger scope of operations.

Pricing Mechanisms

*Fixed Pricing* - List price: Fixed prices for individual products, services, or other Value Propositions. - Product feature dependent: Price depends on the number or quality of Value Proposition features. - Customer segment dependent: Price depends on the type and characteristic of a Customer Segment. - Volume dependent: Price as a function of the quantity purchased. *Dynamic Pricing* - Negotiation, e.g. bargaining: Price negotiated between two or more partners depending on negotiation power and/or negotiation skills. - Yield Management: Price depends on inventory and time of purchase. Normally used for perishable resources such as hotel rooms or airline seats. - Real-time-market: Price is established dynamically based on supply and demand. - Auctions: Price determined by outcome of competitive bidding.

Types of Revenue Streams

*Asset sale or Product* Selling ownership rights to a physical product, e.g. apples, vacuum cleaners and e-books) *Service or Usage Fee* Providing access to a service for a fee based on usage, e.g. hotel nights, text messages, haircuts *Subscription or Shared Resource* Providing continuous access to a tangible or intangible asset that can be used by many people, e.g. gym membership, world of warcraft. *Resale* Acquisition of an asset from a seller, followed by the sale of that asset to a buyer at a higher price, e.g. car dealership. *Lending/Renting/Leasing* Granting someone the exclusive right to use a particular asset for a fixed period of time in return for a fee, e.g. property rental. *Licensing* Providing permission to use protected intellectual property in exchange for licensing fees, e.g. patent fees. *Agency or Brokerage* Earning a fee or commision by establishing a new relationship between a source and a buyer, e.g. estate agents. *Audience Aggregation or Advertising* Selling access to a group of a people with similar characteristic, e.g. Google Ads.

Customer Segments (CS)

*_______ are the different groups of people or organizations an enterprise aims to reach and serve.* A business model may define one or several large or small ________. Once this decision is made, a business model can be carefully designed around a strong understanding of specific needs. Separate ________ are justified 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 profitabilities — They are willing to pay for different aspects of the offer Types of ________ are: — Mass market (e.g. consumer products) — Niche market (e.g. luxury items) — Segmented (e.g. retail banking) — Diversified market (e.g. Amazon) — Multi-sided markets (e.g. credit cards)

Channels (CH)

*________ describe how a company communicates with and reaches its Customer Segments to deliver a Value Proposition. Generally communication, distribution, and sales comprise a company's ________.* ________ serve several functions, including: — Raising awareness among customers about a company's products and services — Helping customers evaluate a company's Value Proposition — Allowing customers to purchase specific products and services — Delivering a Value Proposition to customers — Providing post-purchase customer support ________ have five distinct phases: — Awareness (How do we raise awareness about our company's products and services?) — 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 customer support?)

Customer Relationships (CR)

*________ describe how a company interacts with specific Customer Segments and can range from personal to automated.* ________ may be driven by the following motivations: — Customer acquisition — Customer retention — Boosting sales (upselling) We can distinguish between several categories of ________, which may co-exist: — Personal assistance (i.e. human interaction) — Dedicated personal assistance (e.g. key account managers) — Self-service (i.e. customers help themselves) — Automated services (i.e. customizable, tailored self-service) — Communities (e.g. online forums) — Co-creation (e.g. YouTube)

Key Partnerships (KP)

*________ describe the network of suppliers and partners that make the business model work. Companies create ________ to optimize their business models, reduce risk, or acquire resources.* We can distinguish between four different types of ________: - Strategic, i.e. between non-competitors - "Coopetition", i.e. strategic partnerships between competitors - Joint ventures to develop new businesses - Buyer-supplier, to assure reliable supplies It can be useful to distinguish between three motivations for creating ________: - Optimization and economy of scale, e.g. reducing costs, outsourcing and sharing infrastructure - Reduction of risk and uncertainty, e.g. developing market standards (such as Blu-Ray) - Acquisition of particular resources and activities, i.e. access to knowledge, licenses and/or customers

Ideation

*________ is the creative process of generating, developing, and communicating new ideas, where an idea is understood as a basic element of thought that can be either visual, concrete, or abstract.* *Team Composition* Assembling the right team is essential to generating effective new business model ideas. *Immersion* Ideally the team should go through an immersion phase. which could include general research, studying customers or prospects, scrutinizing new technologies, or assessing existing business models. *Expanding* During this phase the team expands the range of possible solutions, aiming to generate as many ideas as possible. The goal of this phase is quantity, not quality. *Criteria Selection* After expanding the range of possible solutions, the team should define criteria for reducing the number of ideas to a manageable few. *Prototyping* With criteria defined, the team should be able to reduce the number of ideas to a prioritized shortlist of three to five potential business model innovations.

Scenarios

*________ render the abstract tangible by making the design context specific and detailed* *Customer ________* They help us address issues such as which Channels are most appropriate, which relationships would be best to establish, and which problem solutions customers would be most willing to pay for. *Future ________* They kick-start our creativity by providing concrete future contexts for which we can invent appropriate business models.

Value Propositions (VP)

*________ solve customer problems and satisfy customer needs.* ________ may be quantitative (e.g. price, speed of service) or qualitative (e.g. design, customer experience). Each ________ consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment. Elements from the following non-exhaustive list can contribute to ________ creation: — Newness (e.g. technology related products) — Performance (e.g. faster PCs) — Customization (e.g. Freitag bag maker) — "Getting the job done" (i.e. endurance and reliability) — Design (e.g. Apple) — Brand/status (e.g. Rolex) — Price (e.g. Ryanair) — Cost reduction (e.g. Salesforce.com) — Risk reduction (e.g. extended warranty) — Accessibility (e.g. mutual funds) — Convenience/usability (e.g. iPod)