Digital Business Model Notes (3)
Digital Business Model Notes (3)
● Definition: A business model describes how a company creates, delivers, and captures
value. It focuses on the core logic of the business and how it operates.
● Purpose: Explains what the business does and how it makes money.
● Scope: High-level framework; includes elements like:
○ Value Proposition (What problem are you solving?)
○ Revenue Streams (How do you make money?)
○ Cost Structure (What are your major expenses?)
○ Target Customers (Who do you serve?)
○ Channels (How do you reach customers?)
○ Key Partners (Who helps you operate?)
● Examples:
○ A subscription-based model (like Netflix).
○ A freemium model (like Spotify).
○ A marketplace model (like Airbnb).
● Format: Often visual and summarized, e.g., using a Business Model Canvas.
Business Plan
● Definition: A business plan is a detailed document that outlines the strategy, goals, and
steps for building and running a business. It also includes financial projections and
operational plans.
● Purpose: Serves as a roadmap for the business and is often used to secure funding or
communicate with stakeholders.
● Scope: Comprehensive and in-depth, covering:
○ Executive Summary (overview of the business).
○ Market Analysis (industry trends, competitors, target market).
○ Marketing and Sales Strategy (how you will attract and retain customers).
○ Operations Plan (logistics, processes, team structure).
○ Financial Projections (budget, profit/loss, cash flow).
○ Funding Request (if seeking investment).
● Examples: A 20-page document detailing how a startup will enter the tech market and
grow over five years.
● Format: Text-heavy and structured into sections.
Key Differences:
Aspect Business Model Business Plan
Focus How the business operates and Detailed strategy for achieving business
earns money. goals.
Purpose Clarify value creation and Guide execution, attract investors, secure
revenue streams. funding.
In short, a business model is the "what" and "how," while a business plan is the "what,"
"how," "why," and "when."
Business Model canvas
The Business Model Canvas was created by Alexander Osterwalder, a Swiss business
theorist, author, and entrepreneur. He introduced the model in his 2004 doctoral thesis, which
focused on business model innovation and strategic management. The concept gained
widespread attention after he co-authored the book "Business Model Generation" in 2010,
along with Yves Pigneur and contributions from a global community of business thinkers and
designers.
A Business Model Canvas (BMC) is a strategic tool used to develop, visualize, and analyze
business models. It provides a structured, one-page overview of how a company creates,
delivers, and captures value. The framework is simple yet powerful and helps entrepreneurs,
business leaders, and teams collaborate and iterate on business strategies effectively.
The canvas is divided into nine building blocks, each representing a key component of a
business model:
1. Customer Segments: The groups of people or organizations a business aims to serve.
○ Who are your target customers?
○ What are their needs and problems?
2. Value Propositions: The unique value or benefit the business offers to customers.
○ What problem are you solving?
○ Why should customers choose you over competitors?
3. Channels: How the business delivers its value proposition to customers.
○ Through what touchpoints do you communicate and deliver value (e.g., online,
retail, etc.)?
4. Customer Relationships: How the business interacts with and retains customers.
○ What type of relationship do you establish (e.g., self-service, personal,
automated)?
5. Revenue Streams: The ways the business earns income.
○ How do you monetize your product/service (e.g., subscriptions, sales, licensing)?
6. Key Resources: The assets required to deliver the value proposition.
○ What do you need (e.g., human, intellectual, physical, financial resources)?
7. Key Activities: The most important tasks and actions required to operate successfully.
○ What must you do to create, deliver, and maintain your value proposition?
8. Key Partnerships: The external companies, suppliers, or partners that help the
business succeed.
○ Who can you collaborate with to reduce risk, acquire resources, or access
customers?
9. Cost Structure: The major expenses associated with running the business.
○ What are your biggest costs, and how are they tied to key activities and
resources?
Example:
Characteristics of a Digital Business Models
1. Access-Based Models
● Definition: Basic services or products are free, but premium features or advanced
capabilities are offered at a cost.
● Pros:
○ Rapid acquisition of users.
○ Potential for upselling premium features.
● Cons:
○ Conversion rates from free to paid customers can be low.
○ Requires careful balance between free and paid offerings.
● Examples: Canva, Dropbox, LinkedIn.
2. Transaction-Driven Models
These models focus on facilitating transactions between different parties, often through
digital platforms.
● Definition: Connects two or more interdependent user groups (e.g., buyers and
sellers) for transactions or interactions, without owning the products/services
directly.
● Pros:
○ High scalability due to asset-light operations.
○ Revenue streams through commissions, ads, or subscriptions.
● Cons:
○ Regulatory and data privacy issues.
○ Requires balancing the needs of multiple user groups.
● Examples: Facebook, Google Play, Zoho.
B. Marketplace Models
● Definition: Software with open access to source code, generating revenue through
support, consulting, or enterprise-level features.
● Pros:
○ Encourages community collaboration and innovation.
○ Cost-effective for widespread adoption.
● Cons:
○ Relies heavily on upselling ancillary services.
○ Intellectual property risks from misuse of open-source code.
● Examples: WordPress, ERPNext.
1. Cloud Computing
● Definition: AI involves creating intelligent systems that simulate human thinking and
decision-making.
● Why This Technology: Automates complex tasks, analyzes data for insights, and
enhances decision-making.
● About the Technology:
○ AI uses algorithms to process data, recognize patterns, and make predictions.
○ It learns from data to continuously improve its performance.
● Examples:
○ IBM Watson: Diagnoses diseases by analyzing medical data.
○ Chatbots: Automate customer service on websites like Vodafone.
● How They Enable Digital Business Models:
○ Streamlines operations by automating repetitive tasks.
○ Enhances customer experience through personalized interactions.
○ Helps businesses make data-driven decisions for growth.
● Definition: ML, a subset of AI, trains machines to learn from data and make decisions
without explicit programming.
● Why This Technology: Identifies patterns in data and continuously improves accuracy,
powering innovative applications.
● About the Technology:
○ Uses historical data to predict future outcomes.
○ Adapts to new data and improves over time.
● Types:
○ Supervised Learning: Trains on labeled data (e.g., fraud detection).
○ Unsupervised Learning: Finds patterns in unlabeled data (e.g., customer
segmentation).
○ Reinforcement Learning: Learns through feedback and rewards (e.g.,
self-driving cars).
● Examples:
○ Tesla Autopilot: Processes real-time data for autonomous driving.
○ Fraud Detection Systems: Analyze transactions to identify anomalies.
● How They Enable Digital Business Models:
○ Drives innovation in areas like autonomous vehicles and predictive analytics.
○ Optimizes customer targeting through behavior analysis.
○ Enhances operational efficiency by automating processes.
● Definition: IoT connects physical devices to the internet for data exchange and smart
decision-making.
● Why This Technology: It enables real-time monitoring, automation, and smarter
operations.
● About the Technology:
○ Involves sensors, connectivity, data processing, and user interfaces.
○ Devices collect, share, and act on data autonomously.
● Examples:
○ Smart Homes: Devices like Alexa control lighting and appliances.
○ Fitbit: Tracks health metrics like heart rate and activity.
● How They Enable Digital Business Models:
○ Creates new revenue streams through connected ecosystems.
○ Improves efficiency in manufacturing with predictive maintenance.
○ Personalizes customer experiences in smart home and wearable technology
markets.
5. Blockchain
● Definition: Refers to large, complex datasets that traditional methods cannot process
efficiently.
● Why This Technology: Provides actionable insights to improve decision-making and
customer experiences.
● About the Technology:
○ Characterized by the 5 Vs: Volume, Velocity, Variety, Veracity, and Value.
○ Combines structured and unstructured data for comprehensive analysis.
● Examples:
○ Walmart: Uses Big Data to manage inventory and offer personalized promotions.
○ Barcelona Smart City: Optimizes traffic and energy usage with data analysis.
● How They Enable Digital Business Models:
○ Improves operational efficiency by analyzing supply chains.
○ Enhances customer targeting through personalized insights.
○ Powers innovations in urban planning, healthcare, and retail.