Business Model

Canvas
Windiaprana Ramelan, M.Sc
 Why Business Model?

• New business model is preferable than product or process

innovation (EIU survey involving 4,000 senior managers
worldwide)
• “Competitive pressures have pushed business model innovation
much higher than expected on CEO’s priority lists” (IBM global
study of 750 corporate and public sector leaders)
• BMI is an under-utilized source of future value
• Competitors are difficult to imitate entirely novel business
model than product or processes
• BMI is potentially powerful competitive tool, managers must pay
attention to what competitors do in this area

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Apple vs. HTC

Apple’s net income

increased after several
business model
innovations

• Introduced iTunes
• Launched iPhone
• Launched iPad

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Apple vs. HTC

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 Session 1.
Business Model Canvas
What you will learn in this session

• Understand definition(s) of business model

• Understand the nature of business model via business
model canvas
• Discuss some business model examples
• Identify important factors contributing to successful
business models

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What is Business Model

Business model
means differently to
different people

It mostly means
business
exploitation,
business plan,
and business map
George and Bock (2011)

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What is Business Model

In non-business environment, business model has also been

used to analyze
• Political party (Faucher-King, 2008)
• Macroeconomic models of the US economy (Cappelli,
2009)

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What is Business Model

“A business model
describes the rationale of
how an organization
creates, delivers, and
captures value” – Osterwalder
et al (2010)
Osterwalder et al 2010

Osterwalder et al 2010
“The system of
interdependent activities
performed by a focal firm
and its partners and the
mechanisms that link these
activities to each other” –
Amit and Zott (2015)

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What is Business Model

How a company “does

business” with its
customers, partners, and
vendors – Amit and Zott (2012)

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Key Terms
• Value
• Perceived use value – value is subjective, defined by customers,
based on their perceptions of the usefulness of the product on offer
• Exchange value – realized when the product is sold; the amount
paid by the buyer to the producer for the perceived use value
• Value Creation
• New use value is created by the actions of organizational members,
who combine to transform the use values that the organization has
acquired
• Value Capture
• Exchange value and profit – exchange value realized on sale is
superior to the sum of the prices of the inputted resources
(including wages)
• (Potential) profit differentials between firms

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Key Terms
• Value Proposition
• The benefits customers (or users) can expect from the offered
products and services

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Value Capture in Amazon: Profit or …..

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… market size as value capture

http://www.visualcapitalist.com/extraordinary-size-amazon-one-chart/

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What Business Model is not

• Financial or Revenue Model

• Financial model describes the ways in which a focal firm receives
their revenue. Revenue model is usually part of a business model.
• Product Design
• Product design/innovation specifically focuses on the new features of
a particular product, for example: 3D face identification in iPhone X

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Business Model Canvas – Describing Business Models

Osterwalder et al 2010

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Value Proposition
Describes the bundle of products and services that create value for
a specific customer segment
• Each value proposition consists of a selected bundle of products and/or
services that caters a specific customer segment
• It is an aggregation or bundle of benefits that a company offers to
customers

A Value Proposition can offer some of the following examples:

• Newness
• Performance
• Customization
• “Getting the job done”
• Design
• Brand/Status
• Price
• Cost Reduction
• Risk Reduction
• Accessibility
• Convenience/usability

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Customer Segments

Defines the different groups of Examples of customer

people or organizations an
enterprise aims to reach and
serve
• A business model may define
one or several large or small
customer segments
• An organization must make a
conscious decision about
which segments to serve and
which segment to ignore
segments:
• Mass market segment
• Niche market segment
• Segmented
• Diversified
• Multi-sided markets

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Customer Relationship

Describes the types of Some examples of

relationships a company customer relationship
establishes with specific activities:
customer segments • Personal assistance
• A company should
clarify the type of • Self-service
relationship it wants to
establish with each
• Automated services
customer segment • Co-creation
• Communities

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Channels

Describes how a company communicates with and reaches its

customer segments to deliver a Value Proposition
• Channels are customer touch points that play an important role in
the customer experience

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Revenue Streams

Represents the cash a company Some examples of

generates from each customer revenue streams
segment (costs must be • Asset sale
subtracted from revenues to • Subscription fees
create earnings) • Licensing
• A business model can involve two • Lending/Renting/L
different types of Revenue easing
Streams • Advertising
• Transaction revenues resulting
from one-time customer
payments
• Recurring revenues resulting
from ongoing payment to either
deliver a Value Proposition to
customers or provide post-
purchase customer support

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Revenue Streams

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Key Activities
Describes the most important things a company must do to
make its business model work
• Key activities are required to create and to offer value proposition,
reach markets, maintain customer relationship, and earn revenues
• Key activities differ depend on business model type

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Key Partnership
Describes the network of suppliers and partners that make
the business model work
• Partnership can take different forms:
• Strategic alliance between non-competitors
• Coopetition – strategic partnership between competitors
• Joint ventures to develop business
• Buyer-supplier relationships to assure reliable supply

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Key Resources

Describes the most important assets required to make a

business work
• Different key resources are needed depending on the type of
business model
• Key resources can be physical, financial, intellectual, or human

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Cost Structure
Describes all costs incurred to operate a business model
• Some examples of cost structure “strategy”
• Cost-driven
• Value-driven
• Fixed-costs
• Variable-costs
• Economies of scale
• Economies of scope

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The Configurations of 9 Building Blocks

Osterwalder et al 2010

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Value Drivers of Business Models (Amit and Zott, 2001)

• Configurations of business model 9 building block can

combine these value drivers
• These value drivers are sources of competitiveness in the
market
• Efficiency
• Novelty
• Lock-in
• Complementary

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Influencing Factors of Successful Business Models

• Environmental factors – Business model environmental “fit”

• Public forces
• Regulatory Trends
• Societal and Cultural Trends
• Public Ownership, Public Funding, Public Control
• Private forces
• Market Forces
• Industry Forces
• Private Ownership, Private Funding, Private Control
• Value goals – Value creation or value capture?
• Stakeholder (or audience) legitimacy – Template or new?

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Business Model “Fit” – Resource Dependence

Margiono et al. (2017)

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Environment Map – Identifying business model
environmental “fit”

Osterwalder et al 2010

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Foresight

Osterwalder et al 2010

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Competitive Analysis

Osterwalder et al 2010

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 Macroeconomics

Osterwalder et al 2010

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Market Analysis

Osterwalder et al 2010

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Value Goals - Value Creation vs. Value Capture?

Margiono et al (2017)

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Stakeholder (audience) Legitimacy

• “Liability of newness”
• New firms tend to fail because they are unable to attract resources
from other parties (stakeholder)
• New business model may present risks because audience
are not familiar
• Some strategies that new ventures often use
• Piggy-backing on template business model
• Using “storytelling” to increase legitimacy
• Getting endorsement from authorities (government, etc)

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Failure to gain Legitimacy

Failing to gain legitimacy from

stakeholders may result in the inability of
the focal firms to gain resources from the
market and regulators (investment,
customers, regulation support, etc)

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 Session 2.
Value Proposition Canvas
What you will learn in this session

• Understand the use of value proposition canvas to

complement business model canvas
• Experience using business model canvas and value
proposition canvas to map ASDP existing companies

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Value Proposition and Business Model

Osterwalder et al (2014)

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Business Model Canvas and VP Canvas

Osterwalder et al (2014)

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Understanding Your Offering and Customers

Osterwalder et al (2014)

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Customer Profile

• Gains describe the

outcomes customers wants
to achieve
• Pains describe bad
outcomes, risks, and
obstacles related to
customer jobs
• Customer jobs describe
what customers are trying
to get done in their work
and in their lives

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The Value Map

• Products and services

simply describe what you
offer
• Pains relievers describe
how exactly your products
and service alleviate
specific customer pains
• Gain creators describe
how your products and
services create customer
gains

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 Q3: How could
Q2: What
Q4: Who should these activities be
novel
perform these linked in a novel
activities?
activities? ways?

Q1: What customer

needs will the new
business model
address?

Q5: How will value

be created for
stakeholders?

Q6: What revenue

models can be
adopted?

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