Open 2021 L4 - Developing A Business Model - Upload

Entrepreneurship
L4 Business Models
Dr Magdalena Markowska
20210908
Today’s learning objectives
l Understand the importance of a business model
l Introduce the canvass business model
l To be able to use the canvass business model to

analyze a business idea
l Explain what is a business plan and how it differs

from business model
Business Model
A plan for how the venture
ü competes,
ü uses its resources,
ü structures it relationships,
ü interfaces with customers,
ü creates value to sustain itself on the basis of the profits
it generates.
In other words, a business model describes the

rationale of how an organization creates, delivers, and
captures value
Business Model
According to Barringer and Ireland…
…but it is not enough

Barringer/Ireland Business Model
Template
Business Model Canvas
1. Customer segments
l The Customer Segments
defines the different groups of
people or organizations an
enterprise aims to reach and
serve
l For whom are we creating

value?
l Who are our most important

customers?
2. Value proposition
• The Value Proposition describes
the bundle of products and
services that create value for a
specific Customer Segment.
• It solves a customer problem or

satisfies a customer need.
• What bundles of products or

services are we offering to each
Customer Segment?
• (e.g. newness, performance,
customization, status, price, cost
reduction, risk reduction, accessibility,
usability, customer experience).
3. Channels
• The Channels describe how

a company communicates
with and reaches its
Customer Segments to
deliver a Value Proposition.
• Communication, distribution,
and sales Channels comprise
a company's interface with
customers.
4. Customer relationships
• The Customer Relationships
describe the types of
relationships a company
establishes with specific
Customer Segments.
• What type of relationships does
each of our Customer Segments
expect us to establish and
maintain with them?
• Examples
• Personal assistance, dedicated
personal assistance, self-service,
automated services,
communities, co-creation
5. Revenue streams
• The Revenue Streams represent
the cash a company generates from
each Customer Segment (costs must
be subtracted from revenues to
create earnings).
• How are the customers paying?

• For what are our customers paying?
• Example
• Asset sale, usage fee, subscription fee,
lending, renting, leasing, licensing,
brokerage fees, advertising
Each Revenue Stream may have different pricing mechanisms.

There are two main types of pricing mechanism: fixed and dynamic pricing.
6. Key resources
• The Key Resources describe

the most important assets
required to make a business
model work.
• These resources allow an

enterprise to create and offer a
Value Proposition, reach
markets, maintain relationships
with Customer Segments, and
earn revenues.
• What key resources do our Value

Propositions require?
7. Key activities
• The Key Activities describes the
most important things a company
must do to make its business
model work.
• They are required to create and

offer a Value Proposition, reach
markets, maintain Customer
Relationships, and earn
revenues.
• They can include:

o Production
o Problem solving
o Platform/network
8. Key partners
• The Key Partnerships describe
the network of suppliers and
partners that make the business
model work.
• Companies create alliances to

optimize their business models,
reduce risk, or acquire resources.
• Four different types of

partnerships:
1. Strategic alliances
2. Coopetition
3. Joint ventures;
4. Buyer-supplier relationships
9. Cost structure
• The Cost Structure describes
all costs incurred to operate a
business model.
• What are the most important

costs inherent in our business
model?
• Which Key Resources incur
costs?
• Which Key Activities incur
costs?
• Their characteristics
– Fixed costs
Variations in cost structures
– Variable costs
Cost-driven – low price value proposition, leanest
cost structure
– Economies of scale
Value-driven – focused on value creation
– Economies of scope
Business model innovation
The ideas for business model innovation can

come from anywhere, most commonly from:
l Resource-driven
l Offer-driven
l Customer-driven
l Finance-driven
l Multiple-epicenter-driven
Formule 1 Hotel
l Started in 1984
l A budget hotel, a good night’s

sleep for a low price.
l Rooms at a Formule 1 hotel

are small and equipped only
with a bed and the bare
necessities—no stationery,
desks, or decorations.
Business model
vs.
business plan
What is Business Plan?
A Business Plan is a written narrative, typically 25 to 35
pages long, that describes what a new business plans to
accomplish.
For most new ventures, the business plan is a dual-purpose
document used both inside and outside the firm.
Business Plan Structure
l To make the best impression a business plan should
follow a conventional structure, such as the outline for
the business plan shown in the chapter.
l Although some entrepreneurs want to demonstrate
creativity, departing from the basic structure of the
conventional business plan is usually a mistake.
l Typically, investors are busy people and want a plan
where they can easily find critical information.
Business Plan
Structure
l Content
– The business plan should give clear and concise information on all the
important aspects of the proposed venture.
– It must be long enough to provide sufficient information yet short
enough to maintain reader interest.
– For most plans, 25 to 35 pages is sufficient.
l Types
Business Plan Outline
Structure
1. Executive Summary
2. Company Description
3. Industry Analysis
4. Market Analysis
5. The Economics of the Business
6. Marketing Plan
7. Design and Development
8. Operations
9. Management Team and Company Structure
10. Overall Schedule
11. Financial Projections
Opportunity
Problem summary
Describe very briefly why your business needs to
exist. What problem do you solve for your customer?
Solution summary
Briefly summarize what your company does. The
executive summary should be very short.
Market
Describe your target customer or market segments.
Again, keep things very brief in the executive
summary.
Competition
Summarize your key competition. Who will your
customers also consider?
Why us?
Write a brief overview of you and your tea. Why are
you the right people to build this business?
Expectations
Forecasts
Write a brief overview of your financial targets. How
much do you plan to see in the next year? What are
your long-term goals?
Today’s learning objectives
l Understand the importance of a business model
l Introduce the canvass business model
l To be able to use the canvass business model to

analyze a business idea
l Explain what is business plan and how it differs from

business model
Thank you !

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Entrepreneurship

l Understand the importance of a business model

l Introduce the canvass business model

l To be able to use the canvass business model to

l Explain what is a business plan and how it differs

In other words, a business model describes the

…but it is not enough

l For whom are we creating

l Who are our most important

• It solves a customer problem or

• What bundles of products or

• The Channels describe how

• How are the customers paying?

Each Revenue Stream may have different pricing mechanisms.

• The Key Resources describe

• These resources allow an

• What key resources do our Value

• They are required to create and

• They can include:

• Companies create alliances to

• Four different types of

• What are the most important

The ideas for business model innovation can

l A budget hotel, a good night’s

l Rooms at a Formule 1 hotel

l Understand the importance of a business model

l Introduce the canvass business model

l To be able to use the canvass business model to

l Explain what is business plan and how it differs from

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