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How to Describe and Improveyour Business ModelOpeninnovation, Dublin, 24 Oct 2007 Arvetica, September 2007

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photos are from flickr under a creative commons license - authors are referenced in the comment section

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Business model innovation matters and it is a top priority of CEOsIBM Global CEO Survey

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How Do We Describe Business Models Today?

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Going to War without a Map Karl von Clausewitz (~1800)

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Insufficiently Well

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The Result

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Could it Be Different?

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It Exists in Business Process Modeling

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A Management Toolbox for Business Model Design and Innovation

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A Template to Describe Business Models42941 downloads

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSDescribe a Business Model: 9 Building Blocks OFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESPARTNER NETWORKREVENUEFLOWSDISTRIBUTION CHANNELSKEY ISSUES TO SOLVE

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSExample: Bizner BankOFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESPARTNER NETWORKREVENUEFLOWSentrepreneursautomatized relationshipBizBallance (integrated banking and accounting)monthly feeReeleezeeIT infra mgmt account mgmt, transactions, etc.IT infrastructure, marketing, partnership costsDISTRIBUTION CHANNELSWebKEY ISSUES TO SOLVEIT, accounting, banking

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSXerox 914 Business ModelOFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESPARTNER NETWORKREVENUEFLOWSDISTRIBUTION CHANNELSKEY ISSUES TO SOLVElarge companiestransactionalsales team1 time sales feephotocopiersR&D manufacturingregularlarge companieslease high-end photocopierssales teamslease & 4ct per copy (2k+)financing & billing

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REVENUESCOSTSKEY ISSUES TO SOLVEACTIVITIESPARTNERSRELATIONSOFFERCLIENTSCHANNELStotal remanufacturing solutions of high end IT platformsmanufacturinglong term deep integrationbrand manufacturers customers basemanufacturingIT brand manufacturerssales commissionre-marketinginventory managementsystems knowledgemanage secondary supply chainreverse logisticsmanufacturinginventorysales teambrand manufacturers of high end IT platformsflat feeMultis Example

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The Process

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find a way to play poker to unlock these models

Prof Henry Chesbrough, Berkeley

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5 Steps to Business Model Design & Renewal describe existing business model

assess strengths and weaknesses brainstorm on improvements & opportunities turn new model into a project roadmap1243VISUALIZEASSESSRENEWPLAN5IMPLEMENT implement project roadmap

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Visualize

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Visualizing

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Visualizing Amazon.com

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REVENUESCOSTSKEY ISSUES TO SOLVEACTIVITIESPARTNERSRELATIONSOFFERCLIENTSCHANNELSselling stuffon the WebIT infraautomatized relationshipsmass customerdata servicesAmazon.com data gridpartnersselling stuffAmazon.comwarehousing & distributiondistributioncontent managementproduct selectionproduct searchmarketingaffiliates

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Assess, Design & Renew

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good ideas are widely distributed, nobody has a monopoly on innovation

Prof Henry Chesbrough, Berkeley

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Assessing Amazon.comwhere are some of Amazon.coms highest costs located?

what are some of Amazon.coms core competencies?

how could they leverage these competencies?

how could they leverage investments?

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REVENUESCOSTSKEY ISSUES TO SOLVEACTIVITIESPARTNERSRELATIONSOFFERCLIENTSCHANNELSselling stuffon the WebIT infraautomatized relationshipsmass customerdata servicesAmazon.com data gridpartnersselling stuffAmazon.comwarehousing & distributiondistributioncontent managementproduct selectionproduct searchmarketingaffiliates

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Leveraging IT at Amazon.com

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REVENUESCOSTSKEY ISSUES TO SOLVEACTIVITIESPARTNERSRELATIONSOFFERCLIENTSCHANNELSselling stuffon the WebIT infraautomatized relationshipsmass customerdata servicesAmazon.com data gridpartnersselling stuffAmazon S3Amazon.comInternet APIWeb2.0 companieswarehousing & distributiondistributioncontent managementproduct selectionA9 product searchdata storage feesproduct searchsearch engine revenuese-commerce sitesInternetmarketingaffiliates

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Changing the Business Model: Examples

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSBuilding on Existing Customer Relationships:Walmart ClinicsOFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESPARTNER NETWORKREVENUEFLOWSDISTRIBUTION CHANNELSKEY ISSUES TO SOLVEshoppersfrequent relationshipWalmartClinicshealth servicesmedical knowledge and staff

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSChanging the Game:Cirque de SoleilOFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESPARTNER NETWORKREVENUEFLOWSDISTRIBUTION CHANNELSKEY ISSUES TO SOLVEtheater & opera visiitorsartistic circus without lionsstage & manage spectacle & logisticscreate art & atmospherehigher ticket prices

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSDemand-Creating Alliances:Intel Processor PlatformOFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESPARTNER NETWORKREVENUEFLOWSDISTRIBUTION CHANNELSKEY ISSUES TO SOLVEend usersspeedy processorspartners with ever heavier applications

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Planning & Implemention

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CLIENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSCLIENTSEGMENTSIntroducing a Family Office Service through a PartnershipOFFERCOST STRUCTURECLIENTRELATIONSHIPSCLIENTSEGMENTSCOMPETENCIES, ACTIVITIES, RESOURCESREVENUEFLOWSDISTRIBUTION CHANNELSKEY ISSUES TO SOLVEaffluent clients (100k-1+mio)tight personal relationshipsbranches & bankerslocal private bankingmainly product revenuesultra high net worth individualsfamily office servicesrevenue sharing agreementlocal branch of family officetight relationships with UHNWIPARTNER NETWORKPARTNER NETWORKindependent multi-family office

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OFFERCLIENT RELATIONSHIPSCLIENT SEGMENTACTIVITIESPARTNERREVNUE STREAMSACQUISITION CHANNELSProject Roadmapfamily office servicesUHNWI relationshipsUHNWIclient trust, internal cooperationmutli-family office partnerrevenue sharingrelationship managers & new officedesign collaboration processtraining programdevelop marketing materialinternal concept presentationgenerate prioritized prospect listwork out client presentationestablish acquisition learning processrelationship manager collaboration processteam set-upclient reception areaprofit center set-upset-up CRM tool

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the only thing thats not designed is nature

Dave Kelly, IDEO

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business people dont just need to understand designers better; they need to become designers

Roger Martin, Dean Rotman School

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Thank You

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www.arvetica.combusiness-model-design.blogspot.com

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Alexander OsterwalderBefore joining Arvetica Alex founded Business Model Design, a consulting boutique specialized in business model innovation. Besides consulting the private sector he was also involved in building up a globally active NGO based in Thailand in the field of knowledge management, HIV/AIDS and malaria. Prior to consulting, Alex worked at the University of Lausanne, as an entrepreneur in the banking sector and as an online journalist for the major Swiss business magazine BILANZ. He holds a PhD and Masters degree of the HEC Business School of the University of Lausanne, Switzerland. Alex is an active member of the IMD based Open World Initiative (OWI).

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Waster Water Treatment Example

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offercustomer segmentrevenue streamdistribution channelwaste water treatment systemCanadian mining sitesone time sales feesales force

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sell waste water treatment systemCanadian mining sitesone time sales feesales forcetotal waste water treatment managementCanadian mining sitesrecurring service feesales force

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sell waste water treatment systemCanadian mining sitesone time sales feesales forcecore activitiescore capabilitiescostspartner networkclient relationshipbuild treatment systemswater treatment knowledgeproduction costssuppliersfollow-up

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build treatment systemswater treatment knowledgeproduction costssuppliersfollow-uptotal waste water treatment managementCanadian mining sitesrecurring service feesales forcedispatch repair teamserror free systems developmentcall centervariable costs of repair services

*http://www.flickr.com/photos/wrote/1496412666/creative commons attribution licenseMathias Klang***http://www.napoleonguide.com/maps_hmheilsberg.htm***http://en.wikipedia.org/wiki/Image:Brueghel-tower-of-babel.jpg*http://www.flickr.com/photos/barretthall/331459910/CC Attribution LicenseRobhttp://www.cutter.com/content-and-analysis/resource-centers/enterprise-architecture/sample-our-research/index/ear0503side02figb.gif*******Amazon S3Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer.

Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL.

Pricing is cheaper than anything else Ive seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects - meaning a lot of the front end services Ive previously profiled will be much better off moving their entire back end to S3.

******http://www.flickr.com/photos/framesniper/153464496/CC Attribution-NoDerivs LicenseJeff Ryan

**Amazon S3Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer.

Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL.

Pricing is cheaper than anything else Ive seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects - meaning a lot of the front end services Ive previously profiled will be much better off moving their entire back end to S3.

****Amazon S3Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer.

Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL.

Pricing is cheaper than anything else Ive seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects - meaning a lot of the front end services Ive previously profiled will be much better off moving their entire back end to S3.

*http://www.flickr.com/photos/fcrippa/884383108/Creative Commons Attribution LicenseFrancesco Crippa*Amazon S3Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer.

Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL.

Pricing is cheaper than anything else Ive seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects - meaning a lot of the front end services Ive previously profiled will be much better off moving their entire back end to S3.

************http://www.flickr.com/photos/judepics/378329050/Creative Commons Attribution LicenseJudith *****