Innovation & Business Model & Business Model Canvas 2014
1. Business Models &
Business Model Canvas
Serdar Temiz,
temiz@kth.se
ME2603 Entrepreneurship
6.0 credits
2014
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
Terrence Brown
terrence@kth.se
2. Some Questions
• What is Invention
• What is Innovation
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
3. There are many inventions, but far fewer
innovations.
An invention is a novel idea
Innovation is the commercialization of that
novel idea
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
4. Types of Innovation
1. Technology innovation
2. Process innovation
3. Product & service innovation
4. Business Model innovation
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
7. Product / service innovation
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
8. Business Model Innovation
It can be, even more, important than tech
innovation!
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
9. Business Model Innovation
Finding and executing the right business model
can be the only/ main reason of the success
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
15. Why business models matter?
Joan Magretta
• Who is the customer and what does the customer
value?
• How do we make money from the business?
• How can we deliver value to the customer at an
appropriate cost?
• Writing a new story
• A better way than existing alternatives
• Making the number add up
• Tweaking on the fly based on feedback
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
16. Business Model Warfare
Langdon Morris
• Business mortality is high
• Technology innovation by itself has rarely
been sufficient to ensure the future.
• Similar products and services
• Advantages resulting from a successful
business models are fleeting. Models need to
be continuously reviewed and updated when
necessary
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
17. How Business Models Emerge
(1 of 3)
– The value chain is the string of activities that moves a
product from the raw material stage, through manufacturing
and distribution, and ultimately to the end user.
Primary activities are directly concerned with the
creation or delivery of a product or service.
Support activities help to improve the effectiveness or
efficiency of primary activities
Raw Material
Value Chain
Primary &
Secondary
Activities +
Margin
Product /
Service
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
18. How Business Models Emerge
(2 of 3)
The Value Chain (again)
"Competitive Advan tage: Creating andSustaining superior Performance" (1985).
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
19. How Business Models Emerge
(3 of 3)
The Value Chain (continued)
– Entrepreneurs look at the value chain of a product
or a service to pinpoint where the value chain can
be made more effective or to spot where
additional “value” can be added.
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
20. A business Model is..
The business model is a strategic plan to be
implemented through organizational structures,
processes, and systems in order to need
customer needs.
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
23. Forces affecting the business model
• Customer needs
• Competition
• Technological change
• Social change
• Legal environment
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
25. Source: PwC, The future of mobility, October 2013
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
26. Basic Business Model Map
Product/Service
Ecosytem
Customer
EcoSystem
Finance
Value
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
27. There are different type of Business Model Maps
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
28. Serdar Temiz & Terrence Brown KTH
Stockholm 2014By Alexander Osterwalder & Yves Pigneur
29. The 9 building blocks for Business Model Canvas
1. Customer Segments
2. Value proposition
3. Channels
4. Customer Relationships
5. Revenue Streams
6. Key Resource
7. Key Activities
8. Key Partnerships
9. Cost Structure
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
30. 1. Customer Segment
• For whom are we creating value?
• Who are our most important customers?
• Customer Segments
– Mass Market
– Niche market
– Segmented - related customer segments: frequent
flier program, bank customers with big assets
– Diversified: Unrelated customer segments: Amazon
– Multi sided: free newspaper-readers and advertisers
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
31. Find a Customer-I
• Why?
• Who is your customer?
Grave, School, hospital, apotek, free
newspaper
• Can everyone be your customer?
• "people who want to buy a flat,"
• "anyone needs job"
• “Everyone who goes to university”
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
32. Find a Customer-II
• Find a customer for solving a pain
• Use the Customer Profile
• Describe who is making purchasing decision?
IT ? Operations Group? Management?
• Make sure they are happy
• Market is important but
-do not only think market
• Billion dollar market does not start in few
minutes
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
33. Q’s for Customer
IDENTIFIABLE – what distinguishes them?
MEASURABLE – how many belong to your target
segment?
REACHABLE – how to reach, communicate with each
segment
WILLING– do they want it?
ABLE– they want but can they afford it?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
34. Q’s for Customer - Macro Level
• Population size
• Population character
• Disposable income levels
• Educational background
• Primary languages
• Infrastructure
• Regulations
• Political affiliation
• And so on…
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
35. Keep In Mind -Paradox
• Customer is important but you can not give all
they want
• Learn to stay No,
• Learn to focus
• Learn to ”change and adopt”
• They may not know what they want: buying
process is mysterious
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
36. 2.Value Proposition
• a bundle that meets that meets a customer's
needs or solve his/her problem.
• benefits can be tangible and intangible
• Reason why customers pick one business or
another.
• can be
– innovative, new disruptive offer
– similar to existing offers but just added feature or
attribute in some sort of way
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
37. Some Elements that may add to value
• newness
• customization
• getting job done
• support
• price
• design
• status/ brand
• Accessibility
• risk deduction
• usability
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
38. 2. Value Proposition - Q’s to answer –
• What pain do we solve for customer?
• What do we deliver for customer?
• What value do we develop for customer
• Which need of customer do we satisfy?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
39. 3. Channels
• Awareness of products
and services,
Evaluation of value
proposition, Purchase,
Delivery, After sales
• Direct: Brick and
mortal stores,
websales, sales force
• Indirect: wholesales
partner stores,
Value
Proposition
Customer
Segment
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
40. 3. Channels- Qs
• Through which Channels do our Customer
Segments want to be reached?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones work best?
• Which ones are most cost-efficient?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
41. 4. Customer Relations
• Customer
acquisition
• Customer
retention
• Boosting
sales
(upselling)
Value
Proposition
Customer
Segment
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
42. Example Customer Services
Can you give some example companies?
• (Dedicated)Personal assistance
• Self Service
• Community
• Co-creation
• Automated
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
43. 4. Customer Relationships
• What type of relationship does each of
our Customer Segments expect us to
establish and maintain with them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of
our business model?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
44. 5. Revenue Streams
• For what value are our customers really willing
to pay?
• One time/ recurring?
• For what do they currently pay?
• How are they currently paying?
• How would they prefer to pay?
• How much does each Revenue Stream
contribute to overall revenues?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
45. 5.Revenue Streams
•ChannelsValue
Proposition
Customer
Segment
• Asset sale
• Usage fee: use more, pay more
• Subscription: monthly, yearly
• Leasing/Lending/Renting
• Licensing: patents, license fee
• Brokerage fees
• Advertising
Fixed
pricing
Dynamic
pricing
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
46. 5.Revenue Streams
Fixed
pricingDynamic
pricing
• List price
• Product feature
dependent
• Customer segment
dependent
• Volume dependent
• Yield management : hotels,
airlines
• Real-time-market :supply
and demand
• Auctions Price
• Negotiation
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
48. 6. Key Resources
• What Key Resources do our Value
Propositions require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue Streams?
• What physical resources, intellectual,
human, financial resources do we have?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
49. 7. Key Activities
• What Key Activities do our Value Propositions
require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue streams?
• Production- Microsoft
• Network/Platform: Facebook, ebay, Visa
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
50. 8. Key Partnerships
Why Partnership?
– reduce cost,
– Reduction of risk and uncertainty: Web standards
– Acquisition of particular resources and activities:
Nokia Windows, HTC phones
• Strategic alliances between non-competitors
• Coopetition: strategic partnerships between
competitors
• Joint ventures to develop new businesses
• Buyer-supplier relationships to assure reliable
supplies
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
51. 8. Key Partnerships -II
• Who are our Key Partners?
• Who are our Key suppliers?
• Which Key Resources are we acquiring from
partners?
• Which Key Activities do partners perform?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
52. 9. Cost Structure-I
• Business model Cost Structures:
cost-driven
minimizing
costs
wherever
possible value-driven
Premium
Value
Propositions
and a high
degree of
personalized
service
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
53. 9. Cost Structure-II
• Cost Structure Characteristics:
• minimizing costs wherever possibleFixed costs
• Premium Value Propositions and a high
degree of personalized serviceVariable costs
• average cost per unit to fall as output
risesThe same Distribution
Economies of
scale
• Channels for different products and
servicesmay support multiple products.
Economy of
Scope
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
54. 9. Cost Structure
• What are the most important costs inherent in
our business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
55. Serdar Temiz & Terrence Brown KTH
Stockholm 2014By Alexander Osterwalder & Yves Pigneur
56. Team, Social Value, Enviromental cost
etc.
Problems with this canvas?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
57. Serdar Temiz & Terrence Brown KTH
Stockholm 2014By Alexander Osterwalder & Yves Pigneur
58. Serdar Temiz & Terrence Brown KTH
Stockholm 2014By Alexander Osterwalder & Yves Pigneur
59. • Strategic Mission?
• Customer Segments are Hypotesis for startups
• Fits to New and Existing Business but does it
work in Start ups?
• Metrics?
• Competition? Organisational Structure?
• Unfair Advantage over competitors?
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
63. Business Model Canvas – Spotify- September 2014
Key Partners Key Activities Value Propositions
• .
Customer
Relationships
Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Serdar Temiz Stockholm-Sweden
Listeners• Legal music for free or
minimum payment
• Be social when you listen
• Music based on mood
• Automated
service
• self service (FAQ)
• Community forum
• Customer Service
• Awareness at social
media
• Mobile application
• Desktop application
• Spotify.com
Advertisers
• self service : on learning
how ads are located in
the spotify etc.
• personal assistance: to
put ad, advertisers
should get in touch
directly
• Targeted
advertisement-
• commercials
between songs:
make listeners
sure to listen
• Keep technology up and
running
• Adding more music,
label, artists to Spotify
offering
• Launching Spotify in
different countries
• Music,
• Server,
• Brand
• Employees
• Labels,
• aggregators (e.g merlin
network )
• Facebook
• License fee
• Salaries
• Technology cost
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
• Awareness with social media
partners (fb, msn)
• Customer center representative
Advertisement
revenue
Subscription of unlimited
and premium customers
66. Business Model Canvas – Spotify- September 2014
Key Partners Key Activities Value Propositions
• .
Customer
Relationships
Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Serdar Temiz Stockholm-Sweden
Listeners• Legal music for free or
minimum payment
• Be social when you listen
• Music based on mood
• Automated
service
• self service (FAQ)
• Community forum
• Customer Service
• Awareness at social
media
• Mobile application
• Desktop application
• Spotify.com
Advertisers
• self service : on learning
how ads are located in
the spotify etc.
• personal assistance: to
put ad, advertisers
should get in touch
directly
• Targeted
advertisement-
• commercials
between songs:
make listeners
sure to listen
• Keep technology up and
running
• Adding more music,
label, artists to Spotify
offering
• Launching Spotify in
different countries
• Music,
• Server,
• Brand
• Employees
• Labels,
• aggregators (e.g merlin
network )
• Facebook
• License fee
• Salaries
• Technology cost
Serdar Temiz & Terrence Brown KTH
Stockholm 2014
• Awareness with social media
partners (fb, msn)
• Customer center representative
Advertisement
revenue
Subscription of unlimited
and premium customers
Can add music to their code
• developer.spotify.com/
• physical meetups
????++?
The Model 914 used the relatively new electrophotography process, which is a dry process that avoids the use of wet chemicals. In seeking potential marketing partners, Haloid repeatedly was turned down by the likes of Kodak, GE, and IBM, who had concluded that there was no future in the technology as seen through the lens of the then-prevalent business model. While the technology was superior to earlier copy methods, the cost of the machine was six to seven times more expensive than alternative technologies. The model of selling the equipment below cost and making up the difference by large margins in the sale of supplies was not viable because the cost of the supplies was about the same as that of the alternatives, so there was little room to maneuver.
Xerox then decided to market the new product itself and developed a new business model to do so. The new model leased the equipment to the customer at a relatively low cost and then charged a per copy fee for copies in excess of 2000 copies per month. At that time, the average business copier produced an average of only 15-20 copies per day. For this model to be profitable to Xerox, the use of copies would have to increase substantially.
Fortunately for Xerox, the quality and convenience of the new copy technology proved itself and companies began to make thousands of copies per day. As a result, Xerox sustained a compound annual growth rate of 41% over a 12 year period. Without this business model, Xerox might not have been successful in commercializing the innovation.
This type of analysis may focus on (1) a single primary activity of the value chain (such as marketing and sales), (2) the interface between one stage of the value chain and another (such as the interface between operations and outgoing logistics), or (3) one of the support activities (such as human resource management).
A niche market is a focused, targetable portion of a market.
By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. You can think of a niche market as a narrowly defined group of potential customers. In other words, a very specific market segment within a broader segment.
A niche market involves specialist goods or services with relatively few or no competitors.
Why Swedish start ups are global?
Number of Old people increasing..
Which language do you provide service,
Customer support language
No infrastructure for banking, telecom,