CHAPTER 12

• Business model


  Describes the value an organisation offers to its customers. It illustrates the capabilities and resources required to create, market and deliver this value and to generate profitable, sustainable revenue streams.
• Value proposition


  A description of the customer problem, the product that addresses the problem and the value of the product from the customer's perspective.
• Market segment


  The group of customers to target; sometimes the potential of an innovation is unlocked only when a different market segment is targeted
• Value chain structure


  The firm's position and activities in the value chain and how the firm will capture part of the value that it creates in the chain
• Revenue generation and margins


  How revenue is generated (sales, leasing, subscription, support, etc.), the cost structure and target profit margins
• Position in value network


  Identification of competitors, partners and any network effects that can be utilised to deliver more value to the customer
• Competitive strategy


  How the company will attempt to develop a sustainable competitive advantage, for example by means of a cost, differentiation or niche strategy
• Lender


  Wants to assess whether its customers will be able to repay the loan
• Revenue/pricing model


  Change how revenue is generated through new value propositions and new pricing models (to take advantage of economies of scale)
• Enterprise model


  Specialise and configure the business to deliver greater value by rethinking what is done in house and through collaboration
• Industry model


  Redefine an existing industry, move into a new industry or create a new industry
• Types of business models

  • Entrepreneur (serial entrepreneur)
  • Manufacturer
  • Inventor/creator
  • Financial trader
  • Wholesaler/retailer
  • IP trader
  • Financial landlord
  • Physical landlord
  • Intellectual landlord
  • Contractor
  • Financial broker
  • Physical broker
  • IP broker
  • HR broker
• Revenue models


  Establishing a price for the product and clearly will be dependent on reliable market intelligence
• Revenue model types


  • Advertising
  • Subscription
  • Transaction fee
  • Retail
  • Affiliate
• Industry models


  When one emerges, it creates much publicity and disruption
• Switching costs


  The time, effort or money a customer has to spend to switch from one product or service provider to another
• Scalability


  Describes how easy it is to expand a business model without equally increasing its cost base
• Recurring revenues


  Best explained through a simple example. When a newspaper earns revenues from the sales at a news stand, they are transactional, whilst revenues from a subscription are recurring
• Cashflow


  Specifically, the more the business can earn before spending, the better
• Intellectual property (IP)


  A company asset and should be treated and managed as such. Owning and acquiring IP will not overcome poor business strategy and make a company successful
• License


  A consent by the owner to the use of IP in exchange for money or something else of value
• Royalty rates


  Percentage of sales/payment per unit