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/]