Simple rules for business models презентация

Business Models, by Sayan Chatterjee*
Professor of Strategy, Weatherhead School of Management

what a business does (core objectives) and what it invests in based on the logic that drives profits (profit logic)
The business model must help figure out not only the value chain, but also the value proposition to the customer and the value capture mechanism

Business Model

Core Objectives

Profit Logic

easy and popular (perhaps because they are easy) templates that can describe your business model
Ask yourself: can you really understand how these templates help you to make money – you profit logic
A truly insightful business model will show you how the components of your business model will interact to deliver profits
And by the way these components are NOT the same for all business models
At the end of this presentation we give an example of how a business model can
Deliver clarity about how to win and what to do
Simplify complexity

model category

Understand how to capture value

Identify core objectives

Map necessary activities

Identify necessary resources

Validate capabilities and resources

GO

OK

Update

Start

could use?
What patterns exist that could be applicable to this business case?
What capabilities we have that could be leveraged in a new business model?
What are the potential competitors and how strong they can be?

in time and place to maximize efficiency
Exploit cross-elasticity of complementary offerings to smooth demand
Unlock capacity (maximize asset usage)
Price discrimination
Challenge pricing orthodoxies (reduce price to increase asset utilization) – only possible if there’s demand but price is too high for the market

Commodities

Market defines price

Highly competitive

Market characteristics

Core Objectives:
Be more efficient than competitors
Optimize asset utilization (human and/or capital resources)
Process innovation culture

premium

Perceived objective or subjective value

Market characteristics

Rules:
Predict value
Make visible outputs that create “want” (even if they are invisible)
Identify and target the influencers who can create and drive the “want” for the product
Focus on desired outcomes (problem to solve), not just apparent needs
React to market changes
Rapid prototyping and fast time to market
Co-opt / engage the customer
Invest in building blocks that can be used by multiple products
Reduce cost without sacrificing “want”

Core Objectives:
Create “want” for the business output
Reduce risk of output not being valued by the market
Follow the value and realize the profit

of value based model

Market characteristics

Rules:
Co-opt niche customers, rivals and stakeholders
What can loyal customers, potential rivals and stakeholders do for you
Get big slowly (under the radar of competitors)
Keep imitators out, start with the segment of higher loyalty potential
Keep loyal customers engaged
Retain a critical mass of loyal customers that drive repeat purchases
Minimize customer acquisition costs

Core Objectives:
Attract a critical mass of loyal customers
Keep churn down, increase repeat purchases
Keep potential rivals out

volume

Maintain efficiency of transactions

Market characteristics

Rules:
Unlock ecosystem capacity
Build value for stakeholders to come and stay
Enable efficiency for givers and takers
Evangelize the collaborative logic that attracts customers
Convince givers (sellers) of the value of “growing the pie”

Core Objectives:
Maximize volume of transactions (and profit from each one)
Attract loyal givers (sellers) and takers (buyers) to a common hub
Win-Win relationships

Network efficiency (Hub) based models

and place to maximize efficiency
Smooth demand exploiting cross-elasticity of complementary offerings
Unlock capacity (maximize asset usage)

Price discrimination
Unlock capacity (maximize asset usage)
Challenge pricing orthodoxies (reduce price to increase asset utilization) – only possible if there’s demand but price is too high for the market

Create “want” (predict value)
Make visible outputs that create “want” (even if they are invisible)
Engage influencers to create and drive the “want” for the product
Focus on desired outcomes (problem to solve), not just apparent needs

React to market changes
Rapid prototyping and fast time to market
Co-opt / engage the customer
Invest in building blocks that can be used by multiple products
Reduce cost without sacrificing “want”

Reduce customer acquisition costs while keeping rivals out
Co-opt niche customers, rivals and stakeholders - what can they do for you?
Get big slowly (under the radar of competitors)

Reduce churn
Retain a critical mass of loyal customers that drive repeat purchases
Minimize customer acquisition costs

Grow the pie in the core business
Unlock ecosystem capacity
Build value for stakeholders to come and stay
Enable efficiency for givers and takers

Grow the pie in related businesses
Evangelize the collaborative logic that attracts customers
Convince givers (sellers) of the value of “growing the pie”

Be more efficient than competitors
Optimize asset utilization (human and/or capital resources)
Process innovation culture

Create “want” for the business output
Reduce risk of output not being valued by the market
Follow the value and realize the profit

Attract a critical mass of loyal customers
Keep churn down, increase repeat purchases
Keep potential rivals out

Maximize volume of transactions (and profit from each one)
Attract loyal givers (sellers) and takers (buyers) to a common hub
Win-Win relationships

value based perspective, and as time progress they move, morph or migrate towards the others.
Migrations are complicated and possibly painful, but properly executed have proven to be critical for long term sustainability of businesses.
As business environment is always evolving, companies should regularly review their business models and analyze if a migration should be considered.

trust or implicit agreements with your customer base
When additional growth would put the company beyond its natural size
When a change could fundamentally affect your business ecosystem

at the very low-price range with high quality products
Has a very loyal following in Germany and is creating similar loyalties in the US
First understand the desired Attributes of the typical Aldi Customers
Simple rule for developing core objectives:
Unlocking Capacity
Complementary Products (cross elasticity of demand)
Challenge Pricing Orthodoxies
From these simple rules you can develop Core Objectives for Aldi – how to win
Now you can develop the Activities and Resources to deliver (what to do) the Core Objectives. The entire model can be represented using the COAR map.
Note: Once you study this framework, you will realize Aldi has many similarities with Costco’s profit logic even though it targets a different customer segment. You will be able to see these patterns once you master these concepts

And COAR map

designing Business Models – California Management Review, Vol 55, No 2, Winter 2013, CMR.BERKELEY.EDU
Sayan Chatterjee is a Professor of Strategy at Weatherhead School of Management
Other references are included in Sayan’s work.
The four quadrant graph is my representation of the four business models defined by Sayan in his work

Axel Rodriguez