BUSI 660 - Business Models Economics - Better Place -DIST

7/31/2019 BUSI 660 - Business Models Economics - Better Place -DIST

1/42

BUSI660: Business Models

Prof. Brent GoldfarbRobert H. Smith School

of Business


2/42

Lesson Plan Intro

Project Better Place Value Chains

Experiments


3/42

QuestionsAddressed

Where do great entrepreneurial

ideas come from? Is an idea worth pursuing?

Economically? Strategically?

How do you get support for a newventure?

How do you improve an idea?

How do you help a new venturegrow?

Business Models(Early Focus)

EntrepreneurialToolkit(Later Focus)

Today


4/42

Business ModelDevelopment

InitialIdea

AnalyzeIdea

ImproveIdea

Pursue

Business Models:Economics and Strategy


5/42

Part I: Business Model Economics Lecturette recap

20 min


6/42


7/42

Business ModelEconomicAnalysisTakeaways

Ventures generally a few critical

success factors that drive profits Fishbone analysis helps identify

Ventures often have multipleofferings / activities

Relative profitability not alwaysintuitive

Analysis helps target efforts & selectpricing schemes


8/42

Why the price difference?


9/42

Music IndustryValue Chain

Creation

Discovery Labels

Distribution CDs

Manufacturing

Stores

Consumption

Device

Liveperformances


10/42

Music IndustryValue Chain

Creation

Discovery Labels

Distribution iTunes

Consumption

iPod

Live performances

Creation

Discovery

Distribution

Live performances


11/42

Revenue: ~$8BProfit: ~$1.2B


12/42


13/42

$1.375B

# Customers

47m

Value/Customer

$25.2+$4=$29.2

Songs

$4

# songs: 40

Revenue/Song

$0.1

Hardwarevalue/customer

$25.2

iPod/Customer

1.2

Value of iPod

$21

iPod Fishbone

(sketch)

I t t T ffi


14/42

Internet Traffic


15/42


16/42

Kodak?


17/42

Part II: Project Better Place

Business Model Economics

90 minutes


18/42

Project BetterPlace


19/42

Revenge of the Electric Car:Trailer

http://youtu.be/VR3oLV4fdcEhttp://smithinisrael.blogspot.com/search/label/better%20place
http://smithinisrael.blogspot.com/search/label/better%20placehttp://smithinisrael.blogspot.com/search/label/better%20placehttp://smithinisrael.blogspot.com/search/label/better%20placehttp://smithinisrael.blogspot.com/search/label/better%20placehttp://smithinisrael.blogspot.com/search/label/better%20placehttp://smithinisrael.blogspot.com/search/label/better%20place


20/42

PBPQuestions

Where would you invest and why?

Take vote

Transportation Industry


21/42

Transportation Industry

C I d t


22/42

Car Industry


23/42

MSRP Ford Fusion: 2010 + Mileage


24/42

What is the mostimportant barrier toadoption of EVs?

1. Battery technology (i.e., range per cost, charging time)

2. Performance (i.e., HP, acceleration)

3. Infrastructure (i.e., charging and service)

4. Cost (i.e., acquisition, life cycle)5. Model type availability (i.e., nothing suits me)

6. Uncertainty (i.e., early adopter?)

Comparison


25/42

ComparisonChart

Issue BaselineICE

Hybrid PHEV EV BP / EV

RangeAnxiety

n/a n/a n/a High n/a

Number ofGas StationVisits

No Change(3x/month)

Few(


26/42

PBPQuestions

Q1) What is the businessmodel?

BP B i


27/42

BP BusinessModel


28/42


29/42

Part III: Investment & Technological Systems

t I d t


30/42

uto IndustryValue Chain


31/42

Internal Combustion AutosProduction IC Engine

Gearing Fuel delivery

Fuel delivery Gas tank Gas delivery

Other systems

Energy Dist Gas Station

Distribute Refine Extract Explore

Maintenance Parts Labor Warranty

Roads &Parking Construction Maintenance Financing

Govt Private

Legal LegislationAdministration Enforcement

InsuranceAccident Breakdown

Finance Leasing Loans

Traditional model


32/42

Traditional model

Internal Combustion AutosProduction IC Engine

Gearing Fuel delivery

Fuel delivery Gas tank Gas delivery

Other systems





Govt Private

Legal LegislationAdministration Enforcement



e g Prius


33/42

e.g., Prius

HybridProduction Power Source

IC Engine Gearing Fuel delivery

Electric Motor Power source

integration Fuel delivery

Gas tank Gas delivery

Batteries

Other systems





Govt Private

Legal Legislation

Tax Incentives Efficiency

regulationsAdministration Enforcement



Chevy Volt


34/42

Chevy Volt

Plug-in HybridProduction Power Source

IC Engine Gearing Fuel delivery

Electric Motor Power source

integration Fuel delivery

Gas tank Gas delivery

Batteries

Other systems



Charge points Local

electricalinfrastructure

Grid



Govt Private

Legal Legislation

Tax Incentivs Efficiency

regulations R&D

SubsidiesAdministration Enforcement



Nissan Leaf / Tesla


35/42

Nissan Leaf / Tesla

Electric CarProduction Power Source

Electric Motor Batteries

(Harder) Other systems

(Simpler)

Energy Dist Charge points

Local


Grid

BatteryProduction

Maintenance Parts Labor Warranty Battery life?


Govt Private

ChargingInfrastructure

Legal Legislation


regulations R&D

Subsidies Charging

Infrastructure Public?

Private?Administration

Enforcement



Project Better Place


36/42

Project Better Place

Electric CarProduction Power Source

Electric Motor Batteries

(Harder) Other systems

(Simpler)

Energy Dist Charge points

Local


Grid

BatteryProduction

Maintenance Parts Labor Warranty Battery life?


Govt Private

ChargingInfrastructure

Legal Legislation


regulations R&D

Subsidies Charging

Infrastructure Public?

Private?Administration

Enforcement


Finance Leasing Loans Battery

Financing

PBP


37/42

PBPQuestions

Do you want to change your vote?

The Electric Car: The Major Players (SM-175)

1. Has the time for EVs finally arrived? If yes, what factorshave led us to the transition from internal combustion tothe electric car? If no, what challenges will have to beovercome before successful mass adoption of EVs? Listthe three most significant barriers to adoption in order of

importance.

2. Comparing the various groups of firms described in thecase (i.e., incumbent manufacturers, startups, batterymakers, etc.), which group is best placed to succeed inthe automotive market? Why? Again, list the three mostsignificant factors informing your choice in order ofimportance.

3. If you had $1 to invest in any one of the companiesdescribed in the case, which one would you invest in?

Discussion


38/42

Discussion Where would you invest $100k?

$1m? $10m? $100m?

Battery electric vehicle (i.e., Tesla) Incumbent EREV / PHEV (i.e., GM /

Toyota)

Service system (i.e., Better Place,v2g)

Other (i.e., TIPS, t-bills) What are the competing business

models?

How does each model create and

capture value? What are the threats to each

business model?

Quotes


39/42

Quotes GMs plan is ambitious since the Volts viability

is dependent on the availability of a suitablebattery technology.(Economist , Aug 2008)

We want to see if we can find a radicallydifferent battery technology.IBMs R&D Manager on thecompanys effort for a battery breakthrough (BusinessWeek Online, June 2009)

GM is at least one generation behind Toyota

on advanced,green

powertrain development.

US Treasury departments Auto Task Force in its appraisal (Fortune, April2009)

We have been looking at the concept of theelectric car all wrong; it isnt just a product itsa service. - Shai Agassi, Founder of BetterPlace (Macleans April 2008)

Takeaways


40/42

Takeaways

???

Takeaways


41/42

Takeaways

Business Models vary across andwithin industries

Value comes from creating andcontrolling scarce resources

Not every part of the solution

generates profits

For your projects


42/42

y p j

Where does your business fall inthe value chain?

What are the mechanics of valuecreation

What is your key metric?

BUSI 660 - Business Models Economics - Better Place -DIST

Documents