- 1. From Business Model toFrom Business Model toStrategic
PlanStrategic Plan :Part 1 : Business ModelFrom Business Model
toFrom Business Model toStrategic PlanStrategic Plan :Part 1 :
Business ModelABDM4233 ENTREPRENEURSHIPABDM4233
ENTREPRENEURSHIPbyStephen OngStephen OngPrincipal Lecturer
(Specialist)Principal Lecturer (Specialist)Visiting Professor,
ShenzhenVisiting Professor, Shenzhen
2. The social enterprise MissionThe social enterprise
Missionstatementstatement It should be clear and succinctIt should
be clear and succinct It should explain:It should explain: What the
enterprise will doWhat the enterprise will do How it is
entrepreneurialHow it is entrepreneurial Why it is importantWhy it
is important This should occur before planningThis should occur
before planningactivitiesactivities A mission statement has goals
andA mission statement has goals andmeasures of progress towards
goalmeasures of progress towards goal 3. EMBRACEEMBRACE VISION
:VISION : Every woman andchild has an equal chance for ahealthy
life. MISSION :MISSION : Advancing MaternalAdvancing Maternaland
Child Healthand Child Health by providingby providing
innovativeinnovativesolutionssolutions to the worlds mostto the
worlds mostvulnerable populationsvulnerable populations 4. What a
mission statementWhat a mission statementshould specifyshould
specify What the enterprise will and will not doWhat the enterprise
will and will not do How it creates and measures valueHow it
creates and measures value How an enterprise innovates or adaptsHow
an enterprise innovates or adapts How success will be measuredHow
success will be measured 5. $80 for 15cents$80 for 15cents 6. Keep
it to 3 WordsKeep it to 3 Words 7. MISSIONMISSIONNIKE 2012NIKE 2012
3 KEY WORDS3 KEY
WORDSINSPIRATIONINSPIRATIONINNOVATIONINNOVATIONATHLETEATHLETE 8.
One Laptop per ChildOne Laptop per
Childhttp://one.laptop.orghttp://one.laptop.org MISSIONMISSION ToTo
empowerempowerthe worldsthe
worldspoorestpoorestchildrenchildrenthroughthrougheducationeducationWe
aim toWe aim toprovide eachprovide eachchild with achild with
arugged, low-rugged, low-cost, low-power,cost, low-power, 9.
Benefits of a good missionBenefits of a good
missionstatementstatement It provides focusIt provides focus Social
entrepreneurs can stay on target asSocial entrepreneurs can stay on
target asthey develop the conceptthey develop the concept It helps
to attract supportIt helps to attract support As a marketing tool,
it brings otherAs a marketing tool, it brings otherresources into
the enterpriseresources into the enterprise For example,
volunteers, donors, partnersFor example, volunteers, donors,
partners 10. From social mission to businessFrom social mission to
businessmodelmodel Business model a plan for howBusiness model a
plan for howthe mission will be achieved andthe mission will be
achieved andhow the enterprise will create valuehow the enterprise
will create value A general description of how theA general
description of how theenterprise will operate:enterprise will
operate: Its missionIts mission Its strategic resourcesIts
strategic resources Its partnersIts partners How it will serve its
beneficiariesHow it will serve its beneficiaries 11. Business model
forBusiness model forEMBRACEEMBRACE 12. Threats to business
modelsThreats to business models Demand side threatsDemand side
threats A product or service that finds noA product or service that
finds nomarket people dont want itmarket people dont want it Its
value is not accepted by clientsIts value is not accepted by
clients Supply side threatsSupply side threats Too much capital
needed, or tooToo much capital needed, or toomuch ongoing cost to
sustain itselfmuch ongoing cost to sustain itself Either threat can
derail anEither threat can derail anenterpriseenterprise 13. Many
social enterprises failMany social enterprises fail Persistent lack
of income is a commonPersistent lack of income is a
commonreasonreason A supply explanation would be thatA supply
explanation would be thatcosts are too highcosts are too high A
demand explanation would be thatA demand explanation would be
thatrevenues are too lowrevenues are too low Both flaws can be
examined in theBoth flaws can be examined in thebusiness
modelbusiness model 14. What is a Business Model?What is a Business
Model? ModelModel A model is a plan or diagram thats used to make
orA model is a plan or diagram thats used to make ordescribe
something.describe something. Business ModelBusiness Model A firms
business model is its plan or diagram for how itA firms business
model is its plan or diagram for how itcompetes, uses its
resources, structures its relationships,competes, uses its
resources, structures its relationships,interfaces with customers,
and creates value to sustaininterfaces with customers, and creates
value to sustainitself on the basis of the profits it
generates.itself on the basis of the profits it generates. The term
business model is used to include all theThe term business model is
used to include all theactivities that define how a firm competes
in theactivities that define how a firm competes in
themarketplace.marketplace. 15. Changing Business ModelsChanging
Business Models 16. Dells Business ModelDells Business Model1 of 21
of 2 Beyond Its Own BoundariesBeyond Its Own Boundaries Its
important to understand that a firms businessIts important to
understand that a firms businessmodel takes it beyond its own
boundaries.model takes it beyond its own boundaries. Almost all
firms partner with others to make theirAlmost all firms partner
with others to make theirbusiness models work.business models work.
In Dells case, it needs the cooperation of its suppliers,In Dells
case, it needs the cooperation of its suppliers,customers, and many
others to make its business modelcustomers, and many others to make
its business modelwork.work. 17. Dells Business ModelDells Business
Model2 of 22 of 2Dells Approach to Selling PCs versus Traditional
Manufacturers 18. The Importance of Business ModelsThe Importance
of Business ModelsHaving a clearly articulated business model is
importantbecause it does the following: Serves as an ongoing
extension of feasibility analysis. A businessmodel continually asks
the question, Does this business makesense? Focuses attention on
how all the elements of a business fittogether and constitute a
working whole. Describes why the network of participants needed to
make abusiness idea viable are willing to work together.
Articulates a companys core logic to all stakeholders, includingthe
firms employees. 19. Diversity of Business ModelsDiversity of
Business ModelsDiversity or Variety inBusiness Models There is no
standard businessmodel for an industry or fora target market within
anindustry. However, over time, the mostsuccessful business
modelsin an industry predominate. There are always opportunitiesfor
business model innovation. 20. How Business Models EmergeHow
Business Models Emerge1 of 31 of 3 The Value ChainThe Value Chain
The value chain is the string of activities that moves aThe value
chain is the string of activities that moves aproduct from the raw
material stage, throughproduct from the raw material stage,
throughmanufacturing and distribution, and ultimately to
themanufacturing and distribution, and ultimately to theend
user.end user. By studying a products or services value chain, anBy
studying a products or services value chain, anorganization can
identify ways to create additionalorganization can identify ways to
create additionalvalue and assess whether it has the means to do
so.value and assess whether it has the means to do so. Value chain
analysis is also helpful in identifyingValue chain analysis is also
helpful in identifyingopportunities for new businesses and in
understandingopportunities for new businesses and in
understandinghow business models emerge.how business models emerge.
21. How Business Models EmergeHow Business Models Emerge2 of 32 of
3The Value Chain 22. How Business Models EmergeHow Business Models
Emerge3 of 33 of 3 The Value Chain (continued)The Value Chain
(continued) Entrepreneurs look at the value chain of a product or
aEntrepreneurs look at the value chain of a product or aservice to
pinpoint where the value chain can be madeservice to pinpoint where
the value chain can be mademore effective or to spot where
additional value canmore effective or to spot where additional
value canbe added.be added. This type of analysis may focus on:This
type of analysis may focus on: A single primary activity such as
marketing and sales.A single primary activity such as marketing and
sales. The interface between one stage of the value chain and
another,The interface between one stage of the value chain and
another,such as the interface between operations and outgoing
logistics.such as the interface between operations and outgoing
logistics. One of the support activities, such as human resourceOne
of the support activities, such as human
resourcemanagement.management. 23. Potential Fatal Flaws in
Business ModelsPotential Fatal Flaws in Business Models Fatal
FlawsFatal Flaws Two fatal flaws can render a business model
untenableTwo fatal flaws can render a business model untenablefrom
the beginning:from the beginning: A complete misread of the
customerA complete misread of the customer Utterly unsound
economicsUtterly unsound economics 24. JOBS to be DoneJOBS to be
Done Video :What JOB does a Milkshake Do?Video :What JOB does a
Milkshake Do? Prof. Clayton M. Christensen,Prof. Clayton M.
Christensen, Harvard Business SchoolHarvard Business School 25.
Osterwalders Business ModelOsterwalders Business Model 26.
http://www.businessmodelgeneration.com/canvashttp://www.businessmodelgeneration.com/canvas
27. 9 Components of Business Model9 Components of Business
Model(Osterwalder 2010)(Osterwalder 2010)1.1.
CustomerCustomerSegmentsSegments2.2.
ValueValuePropositionsPropositions3.3.
CustomerCustomerRelationshipsRelationships4.4. ChannelsChannels5.5.
Key ActivitiesKey Activities6.6. Key ResourcesKey Resources7.7. Key
PartnersKey Partners8.8. Revenue StreamRevenue Stream9.9. Cost
StructureCost Structure 28. 1. Customer Segments1. Customer
Segments For whom are weFor whom are wecreating value?creating
value? Who are our mostWho are our
mostimportantimportantcustomers?customers? Mass Market/ NicheMass
Market/ NicheMarket/ Segmented/Market/ Segmented/Diversified/
Multi-sidedDiversified/ Multi-sidedPlatformPlatform What are JOBS
toWhat are JOBS tobe done?be done? Customer Gains?Customer Gains?
Customer Pain?Customer Pain? 29. 2. Value Propositions2. Value
Propositions What value do we deliverWhat value do we deliverto the
customer?to the customer? Which one of ourWhich one of ourcustomers
problems arecustomers problems arewe helping to solve?we helping to
solve? What bundles of productsWhat bundles of productsand services
are weand services are weoffering to each Customeroffering to each
CustomerSegment?Segment? Which customer needsWhich customer
needsare we satisfying?are we satisfying? Get the JOBS done?Get the
JOBS
done?characteristicscharacteristicsNewnessNewnessPerformancePerformanceCustomizationCustomizationGetting
the Job DoneGetting the Job
DoneDesignDesignBrand/StatusBrand/StatusPricePriceCost
ReductionCost ReductionRisk ReductionRisk
ReductionAccessibilityAccessibilityConvenience/UsabilityConvenience/Usability
Gain creators?Gain creators? Pain relievers?Pain relievers? 30. 3.
Customer Relationships3. Customer Relationships What type of
relationshipWhat type of relationshipdoes each of ourdoes each of
ourCustomer SegmentsCustomer Segmentsexpect us to establish
andexpect us to establish andmaintain with them?maintain with them?
Which ones have weWhich ones have weestablished?established? How
are they integratedHow are they integratedwith the rest of ourwith
the rest of ourbusiness model?business model? How costly are
they?How costly are they?ExamplesExamplesPersonal
assistancePersonal assistanceDedicated PersonalDedicated
PersonalAssistanceAssistanceSelf-ServiceSelf-ServiceAutomated
ServicesAutomated
ServicesCommunitiesCommunitiesCo-creationCo-creation 31. 4.
Channels4. Channels Through which Channels doThrough which Channels
doour Customer Segmentsour Customer Segmentswant to be reached?want
to be reached? How are we reaching themHow are we reaching
themnow?now? How are our ChannelsHow are our
Channelsintegrated?integrated? Which ones work best?Which ones work
best? Which ones are most cost-Which ones are most
cost-efficient?efficient? How are we integrating themHow are we
integrating themwith customer routines?with customer
routines?channel phases:channel phases:11. Awareness :. Awareness :
How do weHow do weraise awareness about ourraise awareness about
ourcompanys products /services?companys products /services?2.2.
Evaluation :Evaluation : How do we helpHow do we helpcustomers
evaluate ourcustomers evaluate ourorganizations Valueorganizations
ValueProposition?Proposition?3.3. Purchase :Purchase : How do we
allowHow do we allowcustomers to purchase specificcustomers to
purchase specificproducts/services?products/services?44. Delivery
:. Delivery : How do we deliverHow do we delivera Value Proposition
toa Value Proposition tocustomers?customers?5.5. After sales :After
sales : How do weHow do weprovide post-purchaseprovide
post-purchasecustomer support?customer support? 32. 5. Key
Activities5. Key Activities What Key ActivitiesWhat Key
Activitiesdo our Valuedo our
ValuePropositionsPropositionsrequire?require? Our DistributionOur
DistributionChannels?Channels?
CustomerCustomerRelationships?Relationships? Revenue
streams?Revenue
streams?categoriescategoriesProductionProductionProblem
SolvingProblem SolvingPlatform/NetworkPlatform/Network 33. 6. Key
Resources6. Key Resources What KeyWhat KeyResources do ourResources
do ourValue PropositionsValue Propositionsrequire?require? Our
DistributionOur DistributionChannels?Channels?
CustomerCustomerRelationships?Relationships? Revenue
Streams?Revenue Streams?types of resourcestypes of
resourcesPhysicalPhysicalIntellectual (brandIntellectual
(brandpatents, copyrights,patents,
copyrights,data)data)HumanHumanFinancialFinancial 34. 7. Key
Partners7. Key Partners Who are our KeyWho are our
KeyPartners?Partners? Who are our keyWho are our
keysuppliers?suppliers? Which KeyWhich KeyResources are weResources
are weacquiring fromacquiring frompartners?partners? Which Key
ActivitiesWhich Key Activitiesdo partners perform?do partners
perform?motivations formotivations
forpartnerships:partnerships:Optimization andOptimization
andeconomyeconomyReduction of risk andReduction of risk
anduncertaintyuncertaintyAcquisition ofAcquisition ofparticular
resourcesparticular resourcesand activitiesand activities 35. 8.
Revenue Stream8. Revenue Stream For what value are ourFor what
value are ourcustomers really willing tocustomers really willing
topay?pay? For what do they currentlyFor what do they
currentlypay?pay? How are they currentlyHow are they
currentlypaying?paying? How would they prefer toHow would they
prefer topay?pay? How much does eachHow much does eachRevenue
Stream contributeRevenue Stream contributeto overall revenues?to
overall revenues?types:types:Asset saleAsset saleUsage feeUsage
feeSubscription FeesSubscription FeesLending/ Renting/
LeasingLending/ Renting/ LeasingLicensingLicensingBrokerage
feesBrokerage feesAdvertisingAdvertisingfixed pricingfixed
pricingList PriceList PriceProduct feature dependentProduct feature
dependentCustomer segment dependentCustomer segment dependentVolume
dependentVolume dependentdynamic pricingdynamic pricingNegotiation
(bargaining)Negotiation (bargaining)Yield ManagementYield
ManagementReal-time-MarketReal-time-Market 36. 9. Cost Structure9.
Cost Structure What are the mostWhat are the mostimportant
costsimportant costsinherent in ourinherent in ourbusiness
model?business model? Which KeyWhich KeyResources are mostResources
are mostexpensive?expensive? Which Key ActivitiesWhich Key
Activitiesare most expensive?are most expensive?is your business
more:is your business more:Cost DrivenCost Driven (leanest
cost(leanest coststructure, low price valuestructure, low price
valueproposition, maximumproposition, maximumautomation,
extensiveautomation, extensiveoutsourcing)outsourcing)Value
DrivenValue Driven ( focused on( focused onvalue creation, premium
valuevalue creation, premium
valueproposition)proposition)characteristics:characteristics:Fixed
Costs (salaries,Fixed Costs (salaries,rents, utilities)rents,
utilities)Variable costsVariable costsEconomies of scaleEconomies
of scaleEconomies of scopeEconomies of scope 37. Business Model
Test DriveBusiness Model Test Drive1.1. How much doHow much do
switching costsswitching costs prevent yourprevent yourcustomers
from churning?customers from churning?2.2. HowHow scalablescalable
is your business model?is your business model?3.3. Does your
business model produceDoes your business model produce
recurringrecurringrevenues?revenues?4.4. Do youDo you earnearn
before you spend?before you spend?5.5. How much do you getHow much
do you get others to doothers to do the work?the work?6.6. Does
your business model provide built-inDoes your business model
provide built-inprotection from competitionprotection from
competition??7.7. Is your business model based on a gameIs your
business model based on a gamechangingchanging cost structurecost
structure?? 38. Business Model of FacebookBusiness Model of
Facebook 39. Business Model of ZyngaBusiness Model of Zynga 40.
Strategic Business ModelStrategic Business Model(Barringer &
Ireland 2012)(Barringer & Ireland 2012)Four Components of the
Business Model 41. Core StrategyCore Strategy1 of 31 of 3 Core
StrategyCore Strategy The first component of a business model is
the coreThe first component of a business model is the
corestrategy, which describes how a firm competes relativestrategy,
which describes how a firm competes relativeto its competitors.to
its competitors. Primary Elements of Core StrategyPrimary Elements
of Core Strategy Mission statementMission statement Product/market
scopeProduct/market scope Basis for differentiationBasis for
differentiation 42. Core StrategyCore Strategy2 of 32 of 3Primary
Elements of Core StrategyMissionStatementProduct/MarketScopeA
companys product/market scope defines theproducts and markets on
which it willconcentrate.A firms mission, or mission
statement,describes why it exists and what its businessmodel is
supposed to accomplish. 43. Core StrategyCore Strategy3 of 33 of
3Primary Elements of Core StrategyBasis ofDifferentiationIt is
important that a new venture differentiateitself from its
competitors in some way that isimportant to its customers. If a new
firmsproducts or services arent different fromthose of its
competitors, why should anyonetry them? 44. Strategic
ResourcesStrategic Resources1 of 31 of 3 Strategic
ResourcesStrategic Resources A firm is not able to implement a
strategy withoutA firm is not able to implement a strategy
withoutresources, so the resources a firm has affect its
businessresources, so the resources a firm has affect its
businessmodel substantially.model substantially. For a new venture,
its strategic resources may initially beFor a new venture, its
strategic resources may initially belimited to the competencies of
its founders, the opportunitylimited to the competencies of its
founders, the opportunitythey have identified, and the unique way
they plan to servethey have identified, and the unique way they
plan to servetheir market.their market. The two most important
strategic resources are:The two most important strategic resources
are: A firms core competenciesA firms core competencies Strategic
assetsStrategic assets 45. Strategic ResourcesStrategic Resources2
of 32 of 3Primary Elements of Strategic
ResourcesCoreCompetenciesStrategicAssetsA core competency is a
resource or capability thatserves as a source of a firms
competitive advantage.Examples include Sonys competence
inminiaturization and Dells competence in supply
chainmanagement.Strategic assets are anything rare and valuable
that afirm owns. They include plant and equipment,location, brands,
patents, customer data, a highlyqualified staff, and distinctive
partnerships. 46. Strategic ResourcesStrategic Resources3 of 33 of
3 Importance of Strategic ResourcesImportance of Strategic
Resources New ventures ultimately try to combine their coreNew
ventures ultimately try to combine their corecompetencies and
strategic assets to create a sustainablecompetencies and strategic
assets to create a sustainablecompetitive advantage.competitive
advantage. This factor is one that investors pay close attention
toThis factor is one that investors pay close attention towhen
evaluating a business.when evaluating a business. A sustainable
competitive advantage is achieved byA sustainable competitive
advantage is achieved byimplementing a value-creating strategy that
is uniqueimplementing a value-creating strategy that is uniqueand
not easy to imitate.and not easy to imitate. This type of advantage
is achievable when a firm hasThis type of advantage is achievable
when a firm hasstrategic resources and the ability to use
them.strategic resources and the ability to use them. 47.
Partnership NetworkPartnership Network1 of 31 of 3 Partnership
NetworkPartnership Network A firms partnership network is the third
component ofA firms partnership network is the third component ofa
business model. New ventures, in particular, typicallya business
model. New ventures, in particular, typicallydo not have the
resources to perform key roles.do not have the resources to perform
key roles. In most cases, a business does not want to do
everythingIn most cases, a business does not want to do
everythingitself because the majority of tasks needed to build
aitself because the majority of tasks needed to build aproduct or
deliver a service are not core to a companysproduct or deliver a
service are not core to a companyscompetitive advantage.competitive
advantage. A firms partnership network includes:A firms partnership
network includes: SuppliersSuppliers Other key relationshipsOther
key relationships 48. Partnership NetworkPartnership Network2 of 32
of 3Primary Elements of Partnership NetworkSuppliersOther
KeyRelationshipsA supplier is a company that provides parts
orservices to another company. Intel is Dells primarysuppler for
computer chips, for example.Firms partner with other companies to
make theirbusiness models work. An entrepreneurs ability tolaunch a
firm that achieves a competitive advantagemay hinge as much on the
skills of the partners ason the skills within the firm itself. 49.
Partnership NetworkPartnership Network3 of 33 of 3The Most Common
Types of Business Partnerships 50. Customer InterfaceCustomer
Interface1 of 31 of 3 Customer InterfaceCustomer Interface The way
a firm interacts with its customer hinges onThe way a firm
interacts with its customer hinges onhow it chooses to compete.how
it chooses to compete. For example, Amazon.com sells books over the
Internet whileFor example, Amazon.com sells books over the Internet
whileBarnes & Noble sells through its traditional bookstores
andBarnes & Noble sells through its traditional bookstores
andonline.online. The three elements of a companys customer
interfaceThe three elements of a companys customer
interfaceare:are: Target customerTarget customer Fulfillment and
supportFulfillment and support Pricing modelPricing model 51.
Customer InterfaceCustomer Interface2 of 32 of 3Primary Elements of
Customer InterfaceTargetMarketFulfillmentand SupportA firms target
market is the limited group ofindividuals or businesses that it
goes after or tries toappeal to.Fulfillment and support describes
the way a firmsproduct or service reaches its customers. It also
refersto the channels a company uses and what level ofcustomer
support it provides. 52. Customer InterfaceCustomer Interface3 of
33 of 3Primary Elements of Customer InterfacePricingStructureThe
third element of a companys customerinterface is its pricing
structure. Pricing modelsvary, depending on a firms target market
and itspricing philosophy. 53. Recap: The Importance of
BusinessRecap: The Importance of BusinessModelsModels Business
ModelsBusiness Models It is very useful for a new venture to look
at itself in aIt is very useful for a new venture to look at itself
in aholistic manner and understand that it must constructholistic
manner and understand that it must constructan effective business
model to be successful.an effective business model to be
successful. Everyone that does business with a firm, from
itsEveryone that does business with a firm, from itscustomers to
its partners, does so on a voluntary basis.customers to its
partners, does so on a voluntary basis.As a result, a firm must
motivate its customers and itsAs a result, a firm must motivate its
customers and itspartners to play along.partners to play along.
Close attention to each of the primary elements of aClose attention
to each of the primary elements of afirms business model is
essential for a new venturesfirms business model is essential for a
new venturessuccess.success. 54. Further ReadingFurther Reading
Scarborough, Norman, M. 2011.Scarborough, Norman, M. 2011.
Essentials ofEssentials ofEntrepreneurship and Small
BusinessEntrepreneurship and Small BusinessManagement.Management.
66ththedition. Pearson.edition. Pearson. Brooks, Arthur C.
(2006)Brooks, Arthur C. (2006) Social Entrepreneurship :Social
Entrepreneurship :A Modern Approach to Social Value Creation.A
Modern Approach to Social Value Creation.PearsonPearson Barringer,
Bruce R. & Ireland, R. Duane, 2011Barringer, Bruce R. &
Ireland, R. Duane, 2011Entrepreneurship Successfully launching
newEntrepreneurship Successfully launching newventuresventures
44ththedition, Pearson.edition, Pearson. Schaper, M., Volery, T.,
Weber, P. & Lewis, K. 2011.Schaper, M., Volery, T., Weber, P.
& Lewis, K. 2011.Entrepreneurship and Small
Business.Entrepreneurship and Small Business. 33rdrdAsiaAsiaPacific
edition. John Wiley.Pacific edition. John Wiley. Osterwalder, A.
& Piqneur,Y. 2011Osterwalder, A. & Piqneur,Y. 2011 Business
ModelBusiness ModelGenerationGeneration . Business Model Foundry..
Business Model Foundry.
