Presented By:

Manish Kandpal (11EX-032)

 Introduction
 Deconstruction Phenomenon
 Business Model Concepts
 Dimensions of Business Models
 Configuration of Business Models
 Dynamics of Business Models
 Conclusion
 Business

Business
Model
Model

 A business model describes how an organization creates, delivers, and captures

value (economic, social, or other forms of value).

 So business model consists of two elements:

 What the business does?
 How the business makes money doing these things?
 Individual growth and development comes from competitive process of a
company.
 By bringing new ideas and practices company trigger the further development.
 In all over the world, different industries and companies introducing new business
models that focus on a specific step of the value chain.
 To focus on a specific step of the value chain called “Deconstruction” and it is
destroying the competitive advantage of firms with integrated value chain.
 As a result of this new BM’s are coming which are having distinctive characteristics
and transforming the established business and industries.

According to the paper, BM is defined along 3 dimensions:

 How value is created?
 How companies can create competitive advantage?
(market power of innovators vs. owners of complementary assets)
 Total revenue potential.
 At the end of 19th century, many industries follow construction of vertically
integrated value chains.
 At the end of 20th century, various industries undergone fundamental changes and
the deconstruction of these integrated business models can be observed.
 As a result integrated value chain converts into various smaller segments. This
business migration create new business and markets.
 Vertical integrated companies facing competition from companies who are
specialized in one step of value chain.
 “Deconstruction” can be considered as “a melting of the glue that binds” the
value chain together.
 Two main questions that the value chain framework address:
 What activities should firm perform and how?
 What is the configuration of the firm’s activities which would enable to add
value to the product and to compete in its industry?
 Hence the issue of deconstruction refers to splitting up the value chain and
redistributing the parts of the value chain to different players in corresponding
field.
 From this point of view, the industry is now more fragmented and has an
increasing number of specialized actors that each focus on their specific part of
the value chain.
 Deconstruction of value chain provides many opportunities for the creation of
new business.
 Each part of the value chain, can serve as the source of value creation and new
business models.
 Deconstruction phenomenon can be considered as a basic condition that allows
different business models to emerge.

 Information, service or product that is exchanged and the parties that engage in
the exchange are the components of business model.
 Customer interface, core strategy, strategic resources and value network are also
the components of business model.
(customer interface and value network indicate the linkage to buyer and supplier
side. Core strategy shows the mission of company and the scope of the products
offered. Strategic resources give the competitive advantage to firm).

 BM is a coordinated plan to design strategy along 3 vectors (customer interaction,

assets configuration and knowledge leverage).
 BM act as a value stream for business partners and the buyers. It also act as a
revenue stream and logistical stream.
 BM concept shifts from a single company to a network of suppliers, manufactures,
partners, investors and customers.

 BM is an architecture of product, service and information flows which include the

description of various business actors and their roles, potential benefits for the
various business actors and a description of the sources of revenues.

 BM explain how companies work and how value is created and delivered.

 In BM, “Business” refers to profit and “Model” refers to system which composed
of different elements and relationships between them. So BM gives a complete
picture of a company what it comprises and how it will create profit?
 ‘Total Revenue Potential’ of a firm depends upon how many steps
of the value chain firm is considering.
 If a company covers only one step, there is less revenue potential than if it covers
more steps of value chain.
 So the overall idea is that the more activities a company involved in, the higher
its revenue potential.
 ‘Customer focus’ is fourth basic condition for business model i.e. to define who
the customers are and how they should be addressed.
 Identify and develop resource capabilities is also a basic condition for BM and it
is crucial for sustainable competitive advantage and great customer satisfaction.
 How the company makes money
including the definition of
customers and how to address
From where the them?
competitive
advantage/market
power of the company
comes from?
How company is
positioned and
how it aims to
create value?
 Integrated
Model

Layer Player Business Market

Model Model Maker Model

Orchestrator
Model
Integrated Model
In this company covers the complete industry value chain, has a high total revenue
potential, and has access to all relevant complementary assets in-house (P&G,
Nestle, ExxonMobil).
Orchestrator Model
In this company concentrates on one or few steps of the industry value chain, has a
high total revenue potential and access to all relevant complementary assets via
collaborations (Nike, Adidas).
Layer Player Model
In this company specialized on one specific step of the industry value chain, has a relatively low
total revenue potential, and has a high market power as an innovator, so that it generates
demand for its business (Intel, Microsoft).
Market Maker Model
In this company creates an entirely new step in the industry value chain, has a relatively low
total revenue potential, and has a high market power as an innovator, so that it generates
demand for its business (Facebook, Google, Amazon, ).
 BM’s what we have seen exist at a given point in time, however, as the competition
and conditions change overtime, companies may face the immediate need to
change and adopt their business model in order to remain competitive.

 BM’s are somehow interdependent on each other.

Innovators (layer player or market maker) and the owners of the complementary
assets (integrator, orchestrator) are independent.
For ex:
If company is good in operations (Layer Player) but not having good distribution
network then how company could be able to push its products. So company
requires some capability of Integrator or Orchestrator. Vice-versa also applicable.

 To sum up: Firms will reconsider their existing business model time to time due to
internal (greater revenue, company growth) and external (new technologies)
drivers.

 A change from Layer Player or Market maker to the Integrated model promises the
highest revenue potential, but bears a large amount of risk as well as cost thus less
likely to happen.

 A change from Layer Player or Market Maker to the Orchestrator model promises
high revenue potential with a significant lesser risk and costs therefore , is more
likely to happen.
 Dynamic capability is need for almost in each sector and industries. That means to
seize new opportunities and to change BM by reconfiguring the value chain and
protecting knowledge assets, competence, technologies and resources.

 Layer Player and Market Maker can be very profitable but bears large risk.

 Orchestrator model can be considered as being the BM with the great potential in
long run, because it provides a high total revenue potential by participating in
different steps of value chain.

 No company will be able to cover the whole value chain on its own. Hence, the
orchestrator model has the highest profitability of becoming the dominant design in
term of business model.

 Companies are no longer reluctant in outsourcing activities that do not belong to

their core competencies.

 Outsourcing is no longer limited to the non-core competencies areas.

 Before adapting a BM, company needs to analyzed what activities should be carried
out inside or outside the company. What are strength and weakness, Decide which
activities should be outsourced. Is change in BM is required or not. Analyze the BM
of competitor is also require.