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Key Elements of Business Models
Different Scenarios and Successes
Some Thoughts based on
Global Learning and Industry
Experience
Raman Roy
Chairman & MD
New Delhi
21st February 2014
www.Quatrro.com 3 Quatrro Confidential
Facebook buys WhatsApp for
$19 billion
5 years ago he sat down and created a Business Model and wrote a business plan…..and then executed
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Lets begin with the basics…
What is a Business Model ?
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All the planned activities form the
“Core Building Block”
of a Business Model
and need to be co-related for achieving
the desired business outcome
Business Model –
Set of planned activities designed
to result in a profit in a marketplace
Business Plan –
Document that describes a firm’s
business model
A Business Model is the cornerstone of any business and gives an overview of the business to both the
potential investors and customers alike !
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Understanding the key aspects of
Business Models
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“Inherent Aspects”
“Facilitating Aspects”
The adoption of “Facilitating aspects” seem to have emerged as the critical success factor for the 21st century businesses!
Key Aspects of Business Models “Inherent Aspects” and the “Facilitating Aspects”
These aspects have
remained unchanged over
the years irrespective of
the type of business –
B2B or B2C
These aspects have gained into
prominence over the last decade
due to widespread adoption of
technology
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“Understanding the Inherent Aspects”:
Key Elements of a Business Model
1
2
3
4
5
6
7
8
V A L U E P R O P O S I T I O N
R E V E N U E M O D E L
M A R K E T O P P O R T U N I T Y
C O M P E T I T I V E E N V I R O N M E N T
M A R K E T S T R A T E G Y
O R G A N I Z A T I O N A L D E V E L O P M E N T
M A N A G E M E N T T E A M
C O M P E T I T I V E A D V A N T A G E
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Essential Elements of a Business Model:
Value Proposition
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The Business Model should answer:
“Why should the customer
buy from you?”
Some of the successful e- commerce value
propositions can be the following:
Personalization / customization
Reduction of product search, price discovery costs
Facilitation of transactions by managing product delivery
1
Value Proposition
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Christensen’s model of Disruptive innovation
Innovation
8
Product 1
Product 2
Product 3
Product 4
Performance
Time
NON CONSUMERS
CURRENT CONSUMERS
• What are we going to sell?
• Who are we gong to sell to?
• How are we going to sell - approach to Market ?
New Market
Disruptive
Innovation
Sustaining Strategy
– bring better
product into an
established market
Low End – Disruptive
Innovation
- Address overserved
customers with a lower cost
business modelMinimum expectation level
• Differentiating Factors
• SME segment
• Platform based decisions
• Leveraged buying acquisitions
• Building BPO around core competencies
• Direct to Customers (TSG)
• Differentiating Factors
• SME segment
• Platform based decisions
• Leveraged buying acquisitions
• Building BPO around core competencies
• Direct to Customers (TSG)
Const
rain
ts-
Wea
lth
Skills
Technolo
gy
Acc
ess
Time
•
• Differentiators -
• SME segment
• Platform based Services
• Leveraged acquisitions
Off Shore
BPO
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“Improvement”, “Innovation”
& “Disruptive Innovation” are all Opportunities
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While Improvement & Innovation do not result in a paradigm shift in the
existing business order, disruptive innovation does manage to do that
• Improvement refers to doing
the same thing better
• There are a number of
techniques which businesses
achieve this such as Six
Sigma and Lean
Technologies
Improvement
Source: Wikipedia
• Innovation is the creation of
better or more effective
products, processes,
services, technologies, or
ideas that are readily
available to markets,
governments, and society
Innovation
Source: Wikipedia
• A Disruptive Innovation is
an innovation that helps
create a new market and
value network
• This is done by improving a
product or service in ways
that the market does not
expect, typically first by
designing for a different set of
consumers in the new market
and later by lowering prices
in the existing market.
Disruptive Innovation
Source: Wikipedia
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Essential Elements of a Business Model:
Value Proposition Revenue Model
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The Business Model should answer:
“Why should the customer
buy from you?”
Some of the successful e- commerce value
propositions can be the following:
Personalization / customization
Reduction of product search, price discovery costs
Facilitation of transactions by managing product delivery
1 2
The Business Model should answer:
“How will the firm earn
revenue, generate profits, and
produce a superior return on
invested capital?”
Major types of Revenue Models:
Advertising revenue model
Subscription revenue model
Transaction fee revenue model
Sales revenue model
Affiliate revenue model
Value Proposition
Revenue Model
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An Overview of Different Revenue Models
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Advertising Revenue Model Subscription Revenue Model Transaction Revenue Model
Company charges fees from
advertisers in exchange for
advertisements
Company charges fees from
subscribers in exchange for
access to content or services
Company receives a fee for
enabling or executing a
transaction
Sales Revenue Model Affiliate Revenue Model
Company derives revenue by
selling goods, information, or
services to customers
Company steers business to an
“affiliate” and receives a referral
fee or percentage of the revenue
from any resulting sales
Example
Example
Example
Example
Example
www.Quatrro.com 14 Quatrro Confidential
Essential Elements of a Business Model:
Market Opportunity Competitive Environment
The Business Model should answer:
“What marketspace do you intend to
serve and what is its size?”
Marketspace: Area of actual or potential commercial
value in which company intends to operate
Realistic market opportunity: Defined by revenue
potential in each market niche in which company
hopes to compete
3
The Business Model should answer:
“Who else occupies your intended
marketspace?”
Other companies selling similar products in the same
marketspace
Includes both direct and indirect competitors
Competitive Environment is influenced by: Number and size of active competitors
Each competitor’s market share
Competitors’ profitability
Competitors’ pricing
4
Market Opportunity
Competitive Environment
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Essential Elements of a Business Model:
Competitive Advantage Market Strategy 5 6
Competitive Advantage
Market Strategy
The Business Model should answer:
“What special advantages does your
firm bring to the marketspace?”
Important points to consider:
Is your product superior to or cheaper to produce
than your competitors?
Does your product enjoy First-mover advantage?
Are there complementary resources?
The Business Model should answer:
“How do you plan to promote your
products or services to attract
your target audience?”
Important points to consider:
Details on how a company intends to enter
market and attract customers
Best business concepts will fail if not properly
marketed to potential customers
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Essential Elements of a Business Model:
Organizational Development Management Team 7 8
Organizational Development
Management Team
The Business Model should answer:
“What types of organizational
structures within the firm are
necessary to carry out the business
plan?”
Describes how firm will organize work
Typically, divided into functional departments
As company grows, hiring moves from generalists to
specialists
The Business Model should answer:
“What is the professional
experience / background of the
company’s leaders?”
A strong management team:
Can make the business model work
Can give credibility to outside investors
Has market-specific knowledge
Has experience in implementing
business plans
www.Quatrro.com 17 Quatrro Confidential
While the
“Inherent Aspects”
of a Business Model remain as relevant for both
B2B and B2C businesses today
as they were a decade ago……
….however the widespread adoption of technology /
cloud has ensured that the
“Facilitating Aspects”
have emerged as key determinants to success for
global businesses in the
21st century !
www.Quatrro.com 18 Quatrro Confidential
Key Facilitating Aspects that need to be built
into the 21st Century Business Models…
1
2
3
4
F U N C T I O N A L I T Y
C O N V E N I E N C E
I N N O V A T I V E N E S S
O P T I M A L P R I C E P O I N T S
Emerging Entrepreneurs in both the B2C and B2B space will need to ensure that the “Facilitating Aspects” are built into their new
revenue and profit models for them to remain relevant !
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Off late, Social Media has taken the lead in Cloud
Adoption in the B2C businesses globally
Functionality
Innovativeness
Convenience
Optimal Price Points
“Usability” has played a critical role in the adoption of Cloud Technology
across businesses as most of their content is hosted over the cloud !
1 2
3 4
Knowingly or unknowingly we all are using “Cloud” not because of its architecture benefits but on the account of innovative applications that
are residing on Cloud
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In the B2B Context, Functionality and Innovativeness
are driving Cloud Adoption
However, Latin America and Asia Pacific are leading the way for Cloud Adoption
owing to growing number of Large and SMB businesses rating Speed and
Agility as the most important factors for Cloud Adoption.
Leading Applications provided by global
B2B Cloud Service Providers
US based Cloud
Service Providers
have taken the lead in
providing Cloud
Solutions to leading
businesses across the
world.
In Essences, both in B2B & B2C the functionality and innovativeness of apps that reside on the “Cloud Architecture” are driving cloud adoption
rather than the Cloud Architecture itself
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Cloud Providers penetration in India is lagging on
account of absence of Innovative Apps
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The need of the hour is incubation of more and more innovative apps hat cater to “Indian Business Needs” that will leverage Cloud Infrastructure
and bring economies of Scale
Even though Social & Professional Networking Sites such as Facebook and LinkedIn
have maximum
number of users based out of India still it doesn’t result in significant service
penetration to Indian Businesses
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Initial signs are encouraging in the Indian B2B
space but there is a long way to go…
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While we still have a long way to go to rival the ranks of Facebook and
Twitter(B2C market) in India, there are early signs of apps that
leverage Cloud Architecture
We need to incubate “Game Changing” Service Apps in B2B that will rewrite Cloud adoption and bring Affordable Technology to Indian
Business
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My Journey as an Entrepreneur… The role played by the “Inherent” and “Facilitating Aspects”
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Pioneered real time
processing and voice
Established India’s largest
multi process captive unit
Pioneered 3rd Party
operations
Multi faceted services
Acquired by Wipro
Quatrro provides cost
effective and innovative
solutions through a
combination of tools,
platforms and business
processes
(1992-1996)
(1996-2000)
(2000-2005)
(2006 and beyond)
Created four winning businesses
Indian BPO industry
was in its nascent
stage (only sign of
BPO in India was data
entry)
Formerly GECIS
India established as
the premier global
offshoring destination
for call center and
BPO
S P E C T R A M I N D
Started and led
Spectramind into
India’s largest third
party BPO company
Targeting uncontested
service spaces and
pioneering new
service lines Pioneered off-shoring
to India
Established India’s first
captive unit for
Finance/Accounting
Pioneering Business Processing Services
23
www.Quatrro.com 24 24 Quatrro Confidential
Key attributes that helped me during my
Entrepreneurial journey
Specialization Offshoring Offshoring 3rd Party
Outsourcing
Platform based
Right-shoring (Mid
Market)
Ideas Bank Shared Services Shared Services B2LB Services B2SMB
B2C Services
Capital Corporate Capital Corporate Capital Private Equity Own Capital
(Majority)
Team Almost same management team
Innovative
Business Models Price per seat Price per FTE Price per minute
Platform as a
Service
Technology Corporate
Technology
Corporate
Technology Client Technology
Internally
Developed + 3rd
Party Technology
Formerly GECIS S P E C T R A M I N D
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Raman Roy Chairman & Managing Director
Email: [email protected] | Website: www.quatrro.com
Thank You !
Happy to Answer Questions
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They have ceased to be disruptive now but
improvements and innovations Continue!!
All of us use the following….
These innovations were disruptive at the time they came
into existence during the last century
Aeroplanes World Wide Web
(WWW) Automobiles Mobile Telephony
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Confidential
Lets think about the time when the
products were introduced.