Fielt - Business models and the BMG Canvas

An introduction into Business Models and the BMG Canvas

Erwin Fielt

2010 October2010, October

See also the blog Fieltnotes at http://fieltnotes.blogspot.com/

Business models?Business models?

2Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

What about?What about?

• Razor and blade (Gillette)• Direct sales and build to order (Dell)( )• Power-by-the-hour (Rolls Roys)• From product to service company (IBM)• From product to service company (IBM)• Music experience (Apple’s iPod and iTunes)

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]3

Business & ModelBusiness & Model

Business ModelBusiness Model

4Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Business & ModelBusiness & Model

"the activity of providing goods and

services involving

"a simplified description and

representation of aservices involving financial, commercial

and industrial aspects"

representation of a complex entity or

process"

Source: Osterwalder, Pigneur & Tucci (2005)

5Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Addressing basic fundamental questionsAddressing basic, fundamental questions

• A good business model answers Peter Drucker’s age old• A good business model answers Peter Drucker s age-old questions: – Who is the customer? o s t e custo e– And what does the customer value?

• It also answers the fundamental questions every manager must ask: – How do we make money in this business? – What is the underlying economic logic that explains how we can

deliver value to customers at an appropriate cost?’de e a ue to custo e s at a app op ate cost

Source: Magretta (2002, HBR)

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]6

Business model essentialsBusiness model essentials

• It is about creating and capturing value – Use value and exchange value

• It captures business logic/rationaleIt captures business logic/rationale– Narrative or conceptual model

• It relates to an organizational entity Si l i ti t k f i ti– Single organisation or network of organisations

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]7

Business logicBusiness logic

• Proposition oriented

– Customer/value/offeringCustomer/value/offering

• Organization oriented • Integration oriented– Role/activity/architecture

Fi i t d

g

– Holistic/balance/

• Finance oriented

– Revenue model

synergy

8Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Business models and innovationBusiness models and innovation

• Innovations need business models

• Business models can be innovated

– Turning ideas into marketable products

d

(business model innovation)

and processes– Mediates between

new technology and

– New for the organization, the

k t/i d t d/new technology and economic value

market/industry and/or totally newOften driven by or– Often driven by or enabled by IT

9Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Business & ModelBusiness & Model

Referring to the way a company

Emphasizing the modelway a company

does business the model

aspect

Stories,

sketches

Formal models,

business modelling

Source: Osterwalder, Pigneur & Tucci (2005)

10Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Business Model Canvas

OfferingInfrastructure Customer

FinanceFinance

11Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder (2004) ; Osterwalder & Pigneur (2009)

Business Model Canvas

Customer

Value

Key activitiesCustomer 

relationships

CustomerValue propositions

Key partnersCustomerSegments

KeyKey resources

Channels

Revenue streamsCost structure Revenue streamsCost structure

12Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

CustomerCustomer

• An organization serves one or several Customer Segments.– Customer groups represent separate 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 profitabilities• They have substantially different profitabilities• They are willing to pay for different aspects of the offer

– Examples: Mass markets, niche markets, segmented,Examples: Mass markets, niche markets, segmented, diversified, multi-sided

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]13

Source: Osterwalder & Pigneur (2009)

OfferingOffering

• It seeks to solve customer problems and satisfy customer needs with Value Propositions.– Each Value Proposition consists of a selected bundle

of products and/or services that caters to the i t f ifi C t S trequirements of a specific Customer Segment.

– Examples: Newness, performance, customization, “getting the job done ” design brand/status pricegetting the job done, design, brand/status, price, cost reduction, risk reduction, accessibility, convenience/usabilityconvenience/usability

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]14

Source: Osterwalder & Pigneur (2009)

CustomerCustomer

• Customer Relationships are established and maintained with each Customer Segment.

E l A l th ffili t d? P l di t d?– Examples: Arm-length or affiliated? Personal or mediated? Communities? Co-creation?

• Value Propositions are delivered to customers through communication, distribution, and sales Channels.– Examples: Own or partner channels? Direct or indirect

channels? Full service or self-service?

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]15

Source: Osterwalder & Pigneur (2009)

InfrastructureInfrastructure

• Key resources are the assets required to offer and deliver the previously described elements…

• …by performing a number of Key Activities.y p g y

• Some activities are outsourced and someSome activities are outsourced and some resources are acquired outside the enterprise via Key Partnershipsvia Key Partnerships.

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]16

Source: Osterwalder & Pigneur (2009)

FinanceFinance

• Revenue Streams result from Value Propositions successfully offered to Customer Segments.– Examples: Asset sale, Usage fees, Subscription fees,

Lending/renting/leasing, Licensing, Brokerage fees, Advertising

• The business model elements result in the Cost Structure.

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]17

Source: Osterwalder & Pigneur (2009)

Apple’s iPod and iTunesApple s iPod and iTunes

18Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Apple iPod/iTunes

Customer

Value

Key activitiesCustomer 

relationships

TargetSeamlessValue propositions

Key partnersTarget 

customers

Key Customer

Seamless music

experience

Key resources

Customer channels

Revenue streamsCost structure Revenue streamsCost structure

19Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Apple iPod/iTunes

Customer

Value

Key activitiesCustomer 

relationships

TargetMassSeamlessValue propositions

Key partnersTarget 

customers

Key Customer

Massmarket

Seamless music

experience

Key resources

Customer channels

Revenue streamsCost structure Revenue streamsCost structure

20Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Apple iPod/iTunes

Customer

Value

Key activitiesCustomer 

relationships

TargetMassSeamlessValue propositions

Key partnersTarget 

customers

Key CustomerRetail stores

Massmarket

Seamless music

experience

Key resources

Customer channels

iTunes store

Apple.comApple stores

Revenue streamsCost structure

iTunes store

Revenue streamsCost structure

21Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Apple iPod/iTunes

Customer

Value

Key activitiesCustomer 

relationships

TargetMassSeamlessValue propositions

Key partnersTarget 

customers

Key CustomerRetail stores

Massmarket

Seamless music

experience

Key resources

Customer channels

iTunes store

Apple.comApple stores

Revenue streamsCost structure

iTunes store

LargeRevenue streamsCost structure Some musicrevenues

Largehardwarerevenues

22Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Apple iPod/iTunes

Customer

Value

Key activitiesCustomer 

relationships

Target

Record companies

O MassSeamlessValue propositions

Key partnersTarget 

customers

Key Customer

OEMs

Retail stores

Massmarket

Seamless music

experience

Key resources

Customer channels

iTunes store

Apple.comApple stores

Revenue streamsCost structure

iTunes store

LargeRevenue streamsCost structure Some musicrevenues

Largehardwarerevenues

23Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Apple iPod/iTunes

CustomerHardware

design Love mark

Value

Key activitiesCustomer 

relationships

Target

Record companies

O

Marketing Switching costs

MassSeamlessValue propositions

Key partnersTarget 

customers

Key Customer

OEMs

Apple brand

iPodPeople

Retail stores

Massmarket

Seamless music

experience

Key resources

Customer channels

iPod hardware

iTunes software

Content & agreements

iTunes store

Apple.comApple stores

Revenue streamsCost structurePeople Manufacturing Marketing &

iTunes store

LargeRevenue streamsCost structurePeople ManufacturingManufacturing sales Some musicrevenues

Largehardwarerevenues

24Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Business Model Canvas

Customer

Value

Key activitiesCustomer 

relationships

CustomerValue createsValue propositions

Key partnersCustomerSegments

Key

Value creates revenue

Key resources

Channels

Revenue streamsCost structure Revenue streamsCost structure

25Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Business Model Canvas

Customer

Value

Key activitiesCustomer 

relationships

CustomerCreating value Value propositions

Key partnersCustomerSegments

Key

C eat g a uerequires infrastructureKey 

resourcesChannelsinfrastructure

Revenue streamsCost structure Revenue streamsCost structure

26Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Business Model Canvas

Customer

Value

Key activitiesCustomer 

relationships

CustomerInfrastructure Value propositions

Key partnersCustomerSegments

Key

Infrastructuregenerates

costsKey resources

Channelscosts

Revenue streamsCost structure Revenue streamsCost structure

27Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Business Model Canvas

Customer

Value

Key activitiesCustomer 

relationships

CustomerValue propositions

Key partnersCustomerSegments

KeyKey resources

Channels

Revenue streamsCost structure The sweet spot Revenue streamsCost structure The sweet spot

28Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

More information on the CanvasMore information on the Canvaswww.businessmodelgeneration.com

29Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

Source: Osterwalder & Pigneur (2009)

Business model patternsBusiness model patterns

L t il ( Bl kb t )• Long-tail (vs. Blockbuster)• Free/freemium

B tt f th P id• Bottom of the Pyramid• Bundling/Unbundling• Servitization• Total Solution• Intermediation• Platform• Open (source/innovation)• ...

Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]30

FreeFree

31Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]

The Long TailThe Long Tail

32Introduction into business models (Fielt, 2010) [see also http://fieltnotes.blogspot.com/]