Describes the concepts of a Value Network, the Osterwalder Canvas Model and the absolute basics of a financial plan in order to build a viable business model

1. A passionatetalk on building a business model Lightbulb Sessions II - Erik Vanhauwaert

2. New business / product / service - “Is this a profitable venture?” ? ? ? ? ? ? ? ? Can I make money with this?

3. Definition Business Model Linked to a (set of) products/services! ≠ Business Strategy Long term, broader scope ≠ Business Plan Implementation plan with financial evaluation “ describes how one creates, delivers and capturesvalue ”

4. Road guide to the money question 3 frameworks that don’t give you answers, but that let you ask the right questions. i. Value Network

5. Value Network An eco-system of actors, which perform roles and who interact with others. Use: Identify all roles Identify possible actors Map actors on roles Indicate required interactions

6. Value Network Goal: Think about different configurations Are all roles fulfilled by a happy actor? Example 1: the anvil Finds resourcesBuilds anvilsGets paid Gets anvil Pays Delivery Create Buy & use  Payment  Instructions Company X Blacksmiths

7. Value Network Example 2: WebCo designs a site for clients to sell their products online, for a margin on the sales. Create site Buy product WebCo Consumers Payment Delivery Product info Margin share Handle sales Provide product Company X

8. Road guide to the money question ii. Canvas Model (Österwalder) i. Value Network

9. Business Model Canvas What? How? Who? $?

10. Business Model Canvas Price?Performance?Design?Newness?… Product OfferorValue Proposition How? Who? $?

11. Business Model Canvas Mass Market?Segmented?Multi-sided?Diversified? … Product Offer How? CustomerSegments $?

12. Business Model Canvas AwarenessEvaluationPurchaseDeliveryAfter-sale Product Offer How? CustomerSegments DistributionChannel $?

13. Business Model Canvas CRM Self-service?Personal assistance? Community?… Product Offer How? CustomerSegments DistributionChannel $?

14. Business Model Canvas CRM Product Offer How? Sale?Pay per use? Lease?License?… CustomerSegments DistributionChannel RevenueStreams

15. Business Model Canvas PhysicalHumanIntellectualFinancial CRM Product Offer CustomerSegments KeyResources DistributionChannel RevenueStreams

16. Business Model Canvas CRM ProductionProblem SolvingPlatform or network Product Offer KeyActivities CustomerSegments KeyResources DistributionChannel RevenueStreams

17. Business Model Canvas ResourcesRisk reductionEconomy of scale CRM Product Offer KeyActivities Key Partners CustomerSegments KeyResources DistributionChannel RevenueStreams

18. Business Model Canvas CRM Product Offer Cost vs. value drivenFixed vs. variableEconomies of scale & scope KeyActivities Key Partners CustomerSegments KeyResources DistributionChannel RevenueStreams Cost Structure

19. Business Model Canvas Detail of one actor in the Value Network CRM Product Offer KeyActivities Key Partners CustomerSegments KeyResources DistributionChannel RevenueStreams Cost Structure

20. Example: Apple CustomerSegments CRM KeyActivities Key Partners Product Offer Lovemark HW & SW design Record companies Seamless music experience Switching costs Marketing Mass market OEMs DistributionChannel KeyResources Apple brand People apple.com iPod hardware Retail stores Content and agreements iTunes store iTunes RevenueStreams Cost Structure Large hardware revenues Some music revenues People Marketing Manufacturing

21. Road guide to the money question iii. Business Plan ii. Canvas Model i. Value Network

22. Business Plan Internal planning + financial evaluation of Business Model CRM Product Offer KeyActivities Key Partners CustomerSegments KeyResources DistributionChannel RevenueStreams Cost Structure

23. Business Plan VISION What is the goal of the business? STRATEGY How will you reach it? Operations Legal Marketing Human Resources Financial PLANNING Plan of action, based on assumptions & estimates

24. Financial Business Plan - Costs Serve to create your product and sell your product  minimize costs + Revenues = price * amount sold  optimize price = Profit (loss) What is earned from the product  maximize profit

25. Financial / Accounting Company A: Creates anvils monthly for $1.000 and sells them for $800 Has $10.000 in cash and is debt-free. Company B Creates anvils monthly for $1.000 and sells them for $1.200 Has $5.000 in cash, but has a debt of $10.000 that expires next year Which company do you invest in?

28. Making a profit while losing cash Process: Buy raw materials = cash out Process materials into product = cash out Store finished goods = cash out Sale contract = official income realized (profit) Cash payment possibly 1-3 months later = cash in Specifically in times of rapid growth First three steps continuously demand more cash Each product sold at a profit, but still a cash drain

29. Cash Flow Model Part 1: Assumptions Estimates of all costs Estimate of consumer price Estimate of # goods sold (monthly, quarterly,…)

30. Estimate costs – what costs? Several phases in launching a product/service Company start-up? Legal requirement & costs Planning: decide what/how/when to act Design & implementation: preparations Operational phase: produce, sell & provide support  Don’t forget to take all of these into account

31. Revenues First test: Break-even analysis Revenues €  Total cost Variable  e.g. raw materials Fixed e.g. rent Break-even # products produced & sold

32. Timing issue Time = money, literally $1.000 today = $1.050 next year (5% interest rate) $1.000 next year = $952 today Ideally, we have a more detailed model of incoming and outgoing money  use a spreadsheet Valuet+n = Valuet * (1+rate)n

33. Cash Flow Model Part 1: Assumptions Estimates of all costs Estimate of consumer price Estimate of # goods sold (monthly, quarterly,…) Part 2: Time chart A row for each type of cost/revenue Production ≠ sale Sale ≠ immediate cash input

34. Example result Payback period How much money do I need to have/loan

35. Scenario analysis : e.g. price -25%

36. Conclusion iii. Business Plan ii. Canvas Model i. Value Network How will I organize myself?How do I earn / spend money?

37. Conclusion iii. Business Plan Who could/should be involved?What do they do? ii. Canvas Model i. Value Network

38. Conclusion iii. Business Plan ii. Canvas Model How much do I need to sell at what price to become profitable? i. Value Network