Your Business Model

how to identify and improve it

La Trobe University, Melbourne, July 2007
what’s on

the menu
today?
the alchemy of business model
innovation
first: what are your
expectations for today?
 example of
business model
innovation
waste water treatment systems
waste water Canadian
distribution customer
treatment
offer sales force mining
channel segment
system sites

revenue
one time
stream
sales fee
idea!
total waste water
sell waste water Canadian
treatment sales force
treatment system mining sites
management

recurring
one time
service fee
sales fee
let’s do
an exercise
to understand
 offers distribution client
channels segments

personal banking
your client
consulting
your offers your channels
network executives
segments

banking dedicated banking

knowledge website professionals

training
program
 partner client
suppliers follow-up
network relationship

sell waste
water build
core water Canadian
treatment core
treatment
activities sales force
capabilities treatment mining sites
knowledge systems
system

production one time

costs
costs sales fee
 suppliers follow-up
call center

water build total waste water

error free Canadian
treatment dispatch
treatment treatment sales force
systems mining sites
knowledge repair teams
systems management
development

variable costs
production recurring
ofcosts
repair service fee
services
 business model template

INFRASTRUCTURE OFFER CUSTOMER

PARTNER CUSTOMER
NETWORK RELATIONSHIP
CORE VALUE TARGET
CAPABILITIES PROPOSITION CUSTOMER
VALUE DISTRIBUTION
CONFIGURATION CHANNEL

COST FINANCE REVENUE

STRUCTURE STREAMS

http://business-model-design.blogspot.com
 the basics of
identifying and
improving business
models
 4. implement
1. describe it 2. discuss it 3. improve it
it
1. describe
it
1% 18%
Strategy
300%
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blandit. Curabitur augue est, suscipit sed, egestas sit amet, vehicula vitae, tellus. Maecenas nec metus vel nisi interdum pellentesque.

Development plan
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12%
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Words
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we don’t really know how to

sodales. Aenean non justo nec magna lobortis volutpat.
2. discuss it
but there is no common
language
3. improve
it
we don’t really
have the tools
4. implement
it
 Here Ok

Here

CEOs
10°

Managers
60°

everything else than Staff

360°
planned
 the
main
challenge
think outside-of-the
box
“ insanity: doing the same
thing over and over again
and expecting different
results ”
Albert Einstein
enabling business
model innovation
user-
centered
creativity &
exploration
interdisciplinary
approach
strategic fit
more examples
what’s the connection?
 partners client
relationship

precision
mechanical luxury
micro- activities channels patients
joints
watches buyers
engineering

revenue
costs
streams
Cemex example
 partners client
relationship

cement delivered
oncore
time fleet cement by
activities during time channels builders
competencies
delivery management cubic meter
window

revenue
costs
streams
the business
model design
process
1. identify interdisciplinary
stakeholders
-> set-up team
2. understand (business)
environment
–> frame problem
3. suspend reality
-> ideate
4. bring back
reality ->
prototype
5. chose suitable
design
-> decide
6. execute
-> project portfolio
7. evaluate, learn and
redesign
-> manage improvement
Alexander Osterwalder, PhD
alex@arvetica.com
www.arvetica.com
all photos from Flickr
under a creative commons license
authors indicated in comment page of
ppt
annex I
other
 the business
modeler’s toolbox
co-creation
ideation
visualization
prototyping
some examples
 Goldcorp

“geology prize” CUSTOMER

500’000 $US RELATIONSHIPS
exploiting CUSTOMER
mining
mines SEGMENTS
DISTRIBUTION
research
CHANNELS

low costs through REVENUE

open exploration STREAMS

Goldcorp publicly shared all of its geological data and

offered US$ 500’000 in prizes for determining where they
might find the next 6 million ounces of gold
from copyright to creative
commons
Skyp
e

“eBay” website
deliver voice & free VoIP & value global
video quality added services (non segmented)
software
internet
development

software large scale

development low margin

free voice-over-IP VoIP telephony &

value-added services
1291 Cityhomes low-cost hotel/rental in New York City

young
curious
Swiss
CUSTOMER
RELATIONSHIPS
apartment
owners

keep down
low cost
costs renting out DISTRIBUTION the cost
accommodation
rooms CHANNELS sensible
New York
find demand

low cost rents

 Tecnovate

“import” young
curious CUSTOMER
Europeans to RELATIONSHIPS
India to work

low-cost multi-
keep down ACTIVITY lingual call DISTRIBUTION European
costs CONFIGURATION center CHANNELS corporations
outsourcing

REVENUE
low cost
STREAMS

business process outsourcing “up-side down” in India

from bloated head to the long
tail
 PARTNER CUSTOMER
NETWORK RELATIONSHIP
INFRASTRUCTURE CUSTOMER
mobile network regular ad
CORE OFFER
CAPABILITIES operator that messages via
“rents out” mobile phone
increasing the capacity to Blyk VALUE TARGET
number of mobile PROPOSITION CUSTOMER
phone users with DISTRIBUTION
FREE advertising the young and the
the right profile to CHANNEL
supported mobile hip
increase the VALUE
telephony subscribers fill
value for CONFIGURATION
advertisers out profile on the advertisers
finding and access to a pool Internet
contracting of targeted young
advertisers advertising public
sales force
marketing to
mobile users with
an interesting
advertising profile

paying mobile
phone minutes
FINANCE
marketing
COST advertising fees
STRUCTURE

REVENUE
STREAMS
 annex II
business model
template
INFRASTRUCTURE OFFER CUSTOMER
PARTNER CUSTOMER
NETWORK RELATIONSHIP
CORE VALUE TARGET
CAPABILITIES PROPOSITION CUSTOMER
VALUE DISTRIBUTION
CONFIGURATION CHANNEL

COST FINANCE REVENUE

STRUCTURE STREAMS

a business model describes the value an organization offers to

various customers and portrays the capabilities and partners
required for creating, marketing, and delivering this value and
relationship capital with the goal of generating profitable and
sustainable revenue streams
 describing a company’s business model

INFRASTRUCTURE PARTNER CUSTOMER CUSTOMER

NETWORK RELATIONSHIP
OFFER
CORE TARGET
portrays the network of explains the
CAPABILITIES cooperative relationships a
CUSTOMER
agreements with other VALUE company establishes
companies with its customers
outlines the capabilities PROPOSITION
describes the
required to run a
customers a company
company's business
wants to offer value to
model DISTRIBUTION
VALUE gives an overall view of
CONFIGURATION a company's bundle of CHANNEL
products and services

describes the channels

describes the to communicate and
arrangement of get in touch with
activities and resources customers

sums up the monetary describes the revenue

consequences to run a
COST FINANCE REVENUE streams through which
business model STRUCTURE STREAMS money is earned
describing a company’s offer

OFFER

VALUE
PROPOSITION

value proposition 1
value proposition 2
…
describing who a company offers value to

OFFER CUSTOMER

VALUE TARGET
PROPOSITION CUSTOMER

value proposition 1 target customer 1

value proposition 2 target customer 2
… …
 describing how a company reaches its customers

OFFER CUSTOMER

VALUE DISTRIBUTION TARGET

PROPOSITION CHANNEL CUSTOMER

value proposition 1 distribution channel 1 target customer 1

value proposition 2 distribution channel 2 target customer 2
… … …
 describing the relationships a company builds

OFFER CUSTOMER

VALUE CUSTOMER TARGET

PROPOSITION RELATIONSHIP CUSTOMER

value proposition 1 relationship type 1 target customer 1

value proposition 2 relationship type 2 target customer 2
… … …
 describing how a company makes money

OFFER FINANCE CUSTOMER

VALUE REVENUE TARGET

PROPOSITION STREAM CUSTOMER

value proposition 1 revenue stream 1 target customer 1

value proposition 2 revenue stream 2 target customer 2
… … …
describing what capabilities are required

INFRASTRUCTURE OFFER

CORE VALUE
CAPABILITIES PROPOSITION

core capability 1 value proposition 1

core capability 2 value proposition 2
… …
 describing what activities are required

INFRASTRUCTURE OFFER

CORE VALUE VALUE

CAPABILITIES CONFIGURATION PROPOSITION

core capability 1 activity 1 value proposition 1

core capability 2 activity 2 value proposition 2
… … …
describing the partners that leverage the business model

INFRASTRUCTURE OFFER

CORE PARTNER VALUE

CAPABILITIES NETWORK PROPOSITION

core capability 1 partner 1 value proposition 1

core capability 2 partner 2 value proposition 2
… … …
 describing the costs of a business model

INFRASTRUCTURE FINANCE OFFER

CORE COST VALUE

CAPABILITIES STRUCTURE PROPOSITION

core capability 1 cost account 1 value proposition 1

core capability 2 cost account 2 value proposition 2
… … …