| What is a business model? | A business model describes the particular system how (a) customer value is created, (b) delivered, and (c) captured. It is part of the overall strategy. Competitors may have identical business models while their strategy differs greatly. |
| What are the components of a business model? | 1. Value creation. What is offered and how value is created for the buyer; how their needs are met.
2. Value configuration. How various interdependent resources and activities in the value chain are organised. Explains what activities create value, how they are linked and what (internal or external) participants perform them.
3. Value capture. The cost structure of resources and activities, and the source(s) of revenue. |
| What are the 3 business model archetypes? | • Razor & blade – named after the classic Gillette strategy of selling razors cheaply and profiting from sales of high priced blades (Hewlett Packard - printers; Nestle -Nespresso; etc)
• Freemium – combining ‘free’ and ‘premium’. Free attracts customers and create network effects, and some upgrade to premium services (e.g. Spotify; LinkedIn; etc)
• Peer-to-peer (disintermediation) – brings together people and/or businesses directly (via the Web/app) bypassing the traditional “middle-man” (GoMore; TransferWise) |
| What does business model (BM) innovation cover, and what is its consequences for the market? | New entrants often create new business models to ‘disrupt’ an industry, i.e. they change the dynamics of value creation, value delivery, and value capture. If it works, they own the superior positions in the new order (e.g. Uber, Spotify, etc.).
But note: BM innovation is as old as business itself: Ford ‘disrupted’ automobile production; Dell entered the PC and laptop industry in the 1990s by direct selling instead of via middlemen c.f. HP, IBM, etc
Awareness of new tech capabilities is often the key to business model innovation. |
| What is a platform business model? | A 2- or multi-sided platform is a business model that brings together two or more groups of participants via a common platform.
Note that it is not just Web/app platforms Platform may overlap with other business model patterns: (Airbnb also a peer-to-peer model. Netflix, a subscription model)
Some of the most valuable firms in the worlds is a platform (Microsoft, Apple, Amazon, Facebook, etc.) |
| What are four types of players in a platform business. model? | Platforms all have an ecosystem with the same basic structure, comprising four types of players:
1. Owners ‘own’ the network and establish its scope and governance;
2. Providers are platforms’ interface with users;
3. Producers create the offerings;
4. Consumers use those offerings |
| What does all platform business models have in common? | • Brings together 2 or more “market sides”
• Generate value from “network effects”
The network effect refers to Metcalf’s law, which says the more users of the platform the higher exponential value the platform provides to the users.
• Must solve a “chicken-or-egg problem”
You want as many users as possible, but the first users are difficult to get. For instance, Uber offered 2.100 USD for the first 300 trips taken by Uber drivers when they started in Boston. |
| What is the network effect? | The value of a platform increases the more users it have. Hence, a "network" effect. |
| What is Osterwals and Pigneur business model, and what is it commonly used to analyse? | The business model canvas, invented by Alex Osterwalder of Strategyzer, is made up of nine building blocks showing the logic of how a company intends to deliver value and make money. The nine blocks cover the three main areas of a business: desirability, viability and feasibility. The 9 building blocks can be seen in the canvas below:
Operational side: Key partners, activities, resources
Customer side: Customer relationships, channels, customer segments
Cost structure: What is total cost of production?
Revenue model: Where does revenue come from?
Value proposition: How do we create value? |
