By: Rajkumar Ashwini Deborah 1 Business Models, Business Strategy and Innovation
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 1/21
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 2/21
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 3/21
3
Elements of Business Model Design
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 4/21
In essence, a business model is a conceptual,
rather than a financial, model.
4
Business model innovation can itself be a pathway to competitive
advantage if the model is sufficiently differentiated and hard to
replicate for incumbents and new entrants alike.
The way in which companies make money nowadays is differentfrom the industrial era, where scale was important.
True for Internet Companies. (Music Industry/ Google search/
Shopping etc.)
Internet is causing many ‘bricks and mortar’ companies to rethink
their distribution strategies
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 5/21
The concept of a business model has no
established theoretical grounding in economics or
in business studies.
5
Inventions are often assumed to create value naturally and, enjoying
protection of iron-clad patents.
Firms can capture value by simply selling output in competitive market
prices.
Customers don’t just want products; they want solutions to their
perceived needs.
In some cases, markets may not even exist, so entrepreneurs may have
to build organizations in order to perform activities for which markets
are not yet ready.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 6/21
Examples of business models
6
A striking early American example of 19th century business model innovation was
Swift and Company’s ‘reengineering’ of the meat packing industry.Prior to the 1870s, cattle were shipped live by rail from the Midwestern stockyard centers likeOmaha, Kansas City and Chicago to East Coast markets where the animals were slaughteredand the meat sold by local butchers.
Gustavus Swift sensed that if the cattle could be slaughtered in the Midwest and shipped todistant markets in refrigerated cars, great economies in production/centralization andtransportation could be achieved, along with an improvement in the quality of the final product.
Swift’s new business model quickly displaced business models involving a network of shippers,East Coast butchers and the railroads. His biggest challenge was the absence of refrigeratedwarehouses to store the beef near point of sale, which were not part of the existingdistribution system.
Swift set about creating a nationwide web of refrigerated facilities, often in partnerships withlocal jobbers. Once Swift overcame the initial consumer resistance to meat slaughtered daysbefore in distant places, his products found a booming market because they were as good as
freshly butchered meats and were substantially cheaper. Swift’s success attracted imitators.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 7/21
Examples…
7
Containerization
Low cost Airlines
The ‘razor-razor blade model’
Sports Sponsorship
Performing Artists
Investment Banking
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 8/21
Information/ Internet Industry
8
Music Industry
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 9/21
Business Model, Strategy and Sustainable
Competitive Advantage
9
Coupling competitive strategy analysis tobusiness model design requires segmenting the
market, creating a value proposition for each
segment, setting up the apparatus to deliver that
value, and then figuring out various ‘isolatingmechanisms’ that can be used to prevent the
business model/strategy from being undermined
through imitation by competitors or
disintermediation by customers. Unless the business model survives the filters
which strategy analysis imposes, it is unlikely to
be viable, as many business model features are
easily imitated.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 10/21
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 11/21
Steps to a Sustainable Business Model
11
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 12/21
Barriers to imitating business models
12
Walmart implementing a business model may require systems,processes and assets that are hard to replicate such was thesituation with potential entrants into the towns too small tosustain a Wall-mart competitor
Dell Computer’s direct-to-user :- when Gateway
Computers tried to implemented a similar model
Netflix pioneered delivery of DVDs by mail using a subscriptionsystem, Blockbuster video responded with a similar offering.(Netflix accused Blockbuster of infringing because of patent byNetflix)
If it is transparently obvious how to replicate a pioneer’s business model,incumbents in the industry may be reluctant to do so if it involvescannibalizing existing sales and profits or upsetting other important businessrelationships.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 13/21
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 14/21
Business models to capture value from
technological innovation
14
Clearly technological innovation by itself does notautomatically guarantee business or economic
success.
Good business model design and
implementation, coupled with careful strategic
analysis, are necessary for technological
innovation to succeed commercially.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 15/21
Examples
15
Xerox (the personal computer)
Eli Whitney’s 1793 invention
(Cotton extraction)
Thomas Edison with his portfolio of 1000+ patents andpersonal fame from inventing a durable electric light
bulb
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 16/21
‘Public’ goods and the bundling and
unbundling of inventions and products
16
As there is no good (private) business model that can
support value capture, government funding and/or
philanthropy is required and provided.
The most common business model to capture value
from inventions is to embed them in a product, rather
than simply trying to sell designs or intellectual
property. (eg. Mobile phones Cameras, etc.)
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 17/21
Business models as innovation
17
The capacity of a firm (or nation) to capture value will be deeplycompromised unless the capacity exists to create new businessmodels.
Thomas Edison (Electricity Bulb)
Dell didn’t bring any improvements to the technology of thePersonal Computer
Southwest Airlines, Virgin, Virgin Blue, and JetBlue in the airpassenger transport sector.
Payment card industry (the core of which is credit and debitcards). The card companies provide network services, associatewith banks who issue the cards, and associate with acquirers
who sign up merchants to accept credit cards. Early on in the lifeof the industry, merchants were unwilling to accept a paymentcard that few consumers carried, just as card holders didn’twant cards that merchants did not accept.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 18/21
A provisional business model must be evaluated
against the current state of the business ecosystem,
and against how it might evolve
18
Long-lived structural elements choices made
perhaps decades ago in different environments
need to be scrutinized especially thoroughly.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 19/21
19
Designing good business models is an ‘art’ .. the
chances are greater if entrepreneurs and managers
have a deep understanding of user needs and are goodlisteners and fast learners.
The business environment itself is a choice variable:
firms can select a business environment or be selectedby it: they can also shape it.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 20/21
Conclusion
20
A business model is that it crystallizes customer needsand ability to pay
Entices customers to pay for value
Must be honed to meet particular customer needs
Non-imitable in certain respects
Great technological achievements commonly fail
commercially because little attention has been given
to designing a business model to take them to marketproperly. This can and should be remedied.
8/13/2019 Business Models PPT
http://slidepdf.com/reader/full/business-models-ppt 21/21
21
Thank You