Adela Michea & Claus Varnes - Presentation from the CBS workshop 'Creating Value through Design'.

1. Designing business models
Adela Michea
* am.om@cbs.dk
Claus J. Varnes
* cv.om@cbs.dk

2. 2
DESIGNING
BUSINESS
MODELS

3. Types
of
BMs:
Tradi(onal
BM
(Produce-­‐Sell)
Razor-­‐and-­‐Blade
Model
(Cross-­‐subsidiza(on)
Reverse
Razor-­‐and-­‐Blade
Model
Pla<orm
Business
Models
Freemium
No-­‐frills
model
Groupon
Model
Subscrip(on
Franchise
Model

4. Most
business
leaders,
when
asked
to
explain
their
company’s
business
model,
would
not
have
a
ready
answer
to
give,
and
when
they
do
come
up
with
one
they
will
most
likely
describe
their
organiza(onal
structure
and
networks.
Linder
and
Cantrell,
2000;
Taran,
2011
14
november
2014
4

5. • A
business
model
defines
how
the
enterprise
creates
and
delivers
value
to
customers,
and
then
converts
payments
received
to
profits
(Teece,
2010)
• A
way
of
telling
a
story
about
the
business
(MagreRa,
2002)
• The
mind-­‐set
of
the
company
(Linder
and
Cantrell,
2002)
• A
business
model
is
the
media<on
between
technical
input
and
economic
output
(Chesbrough
and
Rosenbloom,
2002)
5
What
is
a
business
model?
How
do
I
create
Value?
To
whom?
How
do
I
capture
value?

6. Agreement about BM?
• Means everything (Magretta, 2002; Seddon et al, 2004)
• Language and background - management background,
people rather use the term strategy (Seddon et al, 2004)
• A practical distinction describes business models as a
system that shows how the pieces of a business fit together,
while strategy in addition includes competition (Magretta,
2002).
• Strategy seems to be more concerned with competitive
positioning whereas business models are more concerned
with the ‘core logic’ (Linder & Cantrell, 2000).
• Creation of value for the business versus creation of value
for the shareholder (Linder & Cantrell, 2000 - strategy
capture stakeholder value better (Chesbrough &
Rosenbloom, 2002).
• A firm’s strategy is unique whereas a business model
applies to various firms (Seddon et al, 2004).

7. “A
mediocre
technology
pursued
within
a
great
Business
Model
may
be
more
valuable
that
a
great
technology
exploited
via
a
mediocre
business
model.”
(Chesbrough,
2006)
7
Performance
of
Business
Models
BM
Innova(on:
The
New
Route
To
Compe<<ve
Advantage,
IBM,
2006

8. New
perspec(ve:
ü Outside-in than inside-out
ü Experimentation rather than planning
ü Discovery driven approch: impossible to know in
advance which design will winn
ü Any competitive advantage is a temporary advantage!

9. • Experiment:
investment-­‐
depended
strategy
McGrath,2010

10. Barriers
for
a
discovery
driven
approch
• Dominant
logic:
treat
BM
as
a
constant,
instead
of
a
variable
• Lack
of
an
incen(ve
scheme
for
explora(on
• Too
much
focus
on
planning
and
es(ma(on
of
financial
projec(ons

11. ”A business model reflects the
management’s hypothesis about what
customers want, how they want it, and
how the enterprise can organize to best
meet those needs, get paid for doing
so, and make a profit.”
Business model definition (Teece, 2010:172)
11

12. Club
8
to
BoConcept
-­‐
RTA-­‐furniture
to
conceptmaker

14. model of a business.
In essence, a business model embodies nothing less than the organizational and financial ‘archi-tecture’
of a business.2 It is not a spread sheet or computer model, although a business model might
Teece (2010)
well become embedded in a business plan and in income statements and cash flow projections. But,
clearly, the notion refers in the first instance to a conceptual, rather than a financial, model of a busi-ness.
It makes implicit assumptions about customers, the behavior of revenues and costs, the
Figure 1. Elements of business model design
14

16. Chesbrough (2006)
Chesbrough and Rosenblom (2002)
16

17. 14
november
2014
Osterwalder
et
al.
(2010):
Business
Model
Canvas
17

18. 14
november
2014
18
Shafer
et
al.
(2004)

19. Sinfield
et
al,2012

20. Q&AJ

22. Template
Sinfield
et
al.
(2012)

23. Example

24. Redesign
the
Business
Model
of
SAS
Focus
Ques(ons:
• Fill
out
the
components
for
each
column
• You
can
choose
up
to
four
for
each
column
Start
with
using
analogies
from
other
industries
(e.g.
Freemium,
GilleRe?)
And
include
the
following
ques(ons:
•
Should
we
sell
a
product
or
a
service?
•
Should
it
be
standard
or
customizable?
•
Will
its
benefits
be
tangible
or
intangible?
•
Will
we
sell
a
generic
or
branded
offering?
•
Should
it
be
a
durable
or
a
consumable?