31/03/2020

HOW TO USE CANVAS?

Paola Vola

KEY PARTNERS KEY ACTIVITIES VALUE CUSTOMER CUSTOMER

PROPOSITION RELATIONSHIPS SEGMENTS

KEY RESOURCES CHANNELS

COST STRUCTURE REVENUE STREAMS

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PATTERNS

similarities = business model patterns

5 business model patterns

1. Unbundling
2. The Long Tail
3. Multi-Sided Platforms
4. FREE
5. Open Business Models
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1. THE UNBUNDLING BUSINESS MODELS

The concept of the “unbundled” corporation implies that there are three different types of businesses:
a) Customer Relationship businesses
b) Product innovation businesses
c) Infrastructure businesses.

à different economic, competitive, and cultural imperatives.

The three types may co-exist within a single corporation, but ideally they are unbundled into separate
entities in order to avoid conflicts or undesirable trade-offs.

References :
1. Hagel, John, Marc, Singer. Unbundling the Corporation. Harvard Business Review, March–April 1999.
2. Treacy, Michael, Wiersema, Fred. The Discipline of Market Leaders: Choose Your Customers, Narrow Your
Focus, Dominate Your Market. 1995. 4

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CASE STUDIES

First example à conflicts and undesirable trade-offs created by a “bundled” business model within the
private banking industry. PRIVATE BANKING: THREE BUSINESS IN ONE

Second example à how mobile telecom operators are unbundling and focusing on new core businesses.
MOBILE TELCO

2. THE LONG TAIL

A large number of niche products, each of which sells relatively infrequently.

Long Tail business models require low inventory costs and strong platforms to make niche content readily
available to interested buyers.

References:
1. Anderson, Chris. The Long Tail: Why the Future of Business Is Selling Less of More. 2006.
2. Anderson, Chris. The Long Tail. Wired Magazine. 2004.

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The Long Tail concept was coined by Chris Anderson to describe a shift in the media business from selling a
small number of “hit” items in large volumes toward selling a very large number of niche items, each in
relatively small quantities.

Anderson believes three economic triggers gave rise to this phenomenon in the media industry:

1. Democratization of tools of production

2. Democratization of distribution:

3. Falling search costs to connect supply with demand

Anderson’s research focuses primarily on the media industry (i.d. Netflix)

but also outside the media industry as well (i.d. eBay)

Focus on a large number of products, each selling in low volumes

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CASE STUDIES

First example à The Transformation of the Book Publishing Industry

Second example à LEGO®’s New Long Tail

3. MULTI-SIDED PLATFORMS

Multi-sided platforms bring together two or more distinct but interdependent groups of customers.

A multi-sided platform grows in value to the extent that it attracts more users à network

References
1. Eisenmann, Parker, Van Alstyne. Strategies for Two-Sided Markets. Harvard Business Review.
October 2006.
2. Evans, David, Hagiu, Schmalensee. Invisible Engines: How Software Platforms Drive Innovation
and Transform Industries. 2006.
3. Evans, David. Managing the Maze of Multisided Markets. Strategy & Business. Fall 2003. 10

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The Visa credit card, the Microsoft Windows operating system, the Financial Times, Google, the Wii game
console, and Facebook are just a few examples of successful multi-sided platforms.

The platform’s value for a particular user group depends substantially on the number of users on the
platform’s “other sides.”

à “chicken and egg” dilemma

Some multi-sided platforms solve this problem is by subsidizing a Customer Segment.

Though a platform operator incurs costs by serving all customer groups, it often decides to lure one
segment to the platform with an inexpensive or free value proposition in order to attract users of the
platform’s “other side.”

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CASE STUDIES

First example à Google

Second example à Wii versus PSP/ Xbox

Third example à Apple

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4. FREE

In the free business model at least one substantial Customer Segment is able to continuously benefit
from a free-of-charge offer.

Different patterns make the free offer possible.

Non-paying customers are financed by another part of the business model, often by another Customer
Segment.

References
1. Anderson, Chris. Free! Why $0.00 is the Future of Business. Wired Magazine. February 2008.
2. Anderson, Chris. Free: The Future of a Radical Price. 2008.

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In recent years free offers have exploded, particularly over the Internet.

What about sustainability?

The so-called freemium model, which provides basic services free of charge and premium
services for a fee, have become popular in step with the increasing digitization of goods and
services offered via the Web.

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The Free Business Model, in which one Customer Segment continuously benefits from the free-of-charge offer, can be
represented by

three patterns are

(1) free offer based on multi-sided platforms (advertising-based)
(2) free basic services with optional premium services (the so-called “freemium” model)
(3) the “bait & hook” model whereby a free or inexpensive initial offer leads customers to repeat purchases

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CASE STUDIES

First example à advertising-based à Metro

Second example à Freemium à Skype

Third example à “bait & hook” à Gillette

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5. OPEN BUSINESS MODEL

open business models can be used by companies to create and capture value by systematically
collaborating with outside partners.

This may happen from the “outside-in” by exploiting external ideas within the firm, or from the “inside-
out” by providing external parties with ideas or assets lying idle within the firm.

References
1. Chesbrough, Henry. Open Business Models: How to Thrive in the New Innovation Landscape. 2006.

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CASE STUDIES

First example à GlaxoSmithKline

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BUSINESS PLAN: conceptual tools.

From strategy to business model
- Business model Canvas
Paola Vola

What is strategy?

- A strategy is a plan of action designed to achieve a specific goal.

- Strategy is all about gaining or at least attempting to gain, a position of
advantage over competitors.

à Strategy is more about a set of options or "strategic choices" than a

fixed plan.

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Strategic choices in terms of

- Products/services provided to customers

- Customers segment to target
- Operating activities to carrie out (i.d. all the activities of a manufacturig process or just some of them?)
- Organizational structure

à Business model
à Plan of actions to achieve objectives: business plan

Business model is like a blueprint for a strategy to be implemented

BUSINESS MODEL CANVAS

represents the business model of an organization

A business model can best be described through nine basic building

blocks
customers
offer
infrastructure
financial viability

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Nine building blocks

1. Customer segments
2. Value propositions
3. Channels
4. Customer relationships
5. Revenue streams
6. Key resources
7. Key activities
8. Key partnership
9. Cost structure

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CUSTOMER SEGMENTS

different groups of people or organizations an enterprise aims to reach and serve

Customer groups represent separate segments if:

• Their needs require and justify a distinct offer

• They are reached through different Distribution
Channels
• They require different types of relationships
• They have substantially different profitabilities
• They are willing to pay for different aspects of the offer

VALUE PROPOSITIONS

bundle of products and services that create value for a specific Customer Segment

The Value Proposition is the reason why customers turn to one company over another.
It solves a customer problem or satisfies a customer need.

A Value Proposition creates value for a Customer Segment through a distinct mix of elements

- quantitative or
- qualitative values

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• Newness
• Performance
• Customization
• “Getting the job done”
• Design
• Brand/Status
• Price
• Accessibility

CHANNELS

how a company communicates with and reaches its Customer Segments to deliver a Value Proposition

Channels serve several functions, including:

• Raising awareness among customers about a company’s products and services

• Helping customers evaluate a company’s Value Proposition
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers
• Providing post-purchase customer support

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CUSTOMER REATIONSHIPS

the types of relationships a company establishes with specific Customer Segments

A company should clarify the type of relationship it wants to establish with each Customer Segment.

Customer relationships may be driven by the following motivations:

• Customer acquisition
• Customer retention
• Boosting sales (upselling)

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We can distinguish between several categories of Customer Personal assistance

- Personal assistance
- Dedicated Personal assistance
- Self-services
- Automated services
- Communities
- Co-creation

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REVENUE STREAMS

represents the cash a company generates from each Customer Segment (costs must be subtracted from
revenues to create earnings).

A business model can involve two different types of Revenue Streams:

1. Transaction revenues resulting from one-time customer payments

2. 2. Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers
or provide post-purchase customer support

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There are several ways to generate Revenue Streams:

- Asset sale
- Usage fee
- Subscription fees
- Renting/Leasing
- Licensing
- Brokerage fees
- Advertising

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KEY RESOURCES

Key resources can be physical, financial, intellectual, or human, owned or leased by the company or
acquired from key partners.

Main categories:

• Physical
• Intellectual
• Human
• Financial

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KEY ACTIVITIES

describes the most important things a company must do to make its business model work.

They are required to create and offer a Value Proposition, reach markets, maintain Customer
Relationships, and earn revenues.

• Production
• Problem solving
• Platform/Network

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KEY PARTNERSHIP

describes the network of suppliers and partners that make the business model work models.

Four different types of partnerships:

1. Strategic alliances between non-competitors

2. Coopetition: strategic partnerships between competitors
3. Joint ventures to develop new businesses
4. Buyer-supplier relationships to assure reliable supplies

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Motivations for creating partnerships:

• Optimization and economy of scale

• Reduction of risk and uncertainty

• Acquisition of particular resources and activities

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COST STRUCTURE

The Cost Structure describes all costs incurred to operate a business model.

Cost Structures can have the following characteristics:

- Fixed costs

- Variable costs

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KEY PARTNERS KEY ACTIVITIES VALUE CUSTOMER CUSTOMER

PROPOSITION RELATIONSHIPS SEGMENTS

KEY RESOURCES CHANNELS

COST STRUCTURE REVENUE STREAMS

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1) THE CONCEPT OF STRATEGY

Around the concept of strategy...

1) THE CONCEPT OF STRATEGY

Strategy = matching firm's resources and

capabilities to the opportunities that arise in the
external environment.

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1) THE CONCEPT OF STRATEGY

Common elements in successful strategies

1) THE CONCEPT OF STRATEGY

Successful strategy = superior perfomance

= superior profitability

Sources :
a) industry attractiveness
b) competitive advantage of the firm

Firm's industry environments have become more unstable, so

internal resources and capabilities rather than external market
factors has been viewed as a secure base for formulating
strategy.

It has become apparent that competitive advantage rather than

industry attractiveness is the primary source of superior
profitability
RESOURCE-BASED VIEW OF THE FIRM
(RBV)
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1) THE CONCEPT OF STRATEGY

The greater the rate of change in a firm's external environment,

the more likely is that internal resources and capabilities will be
provide foundation for long-term strategy.

Eastman Kodak's dominance of the world market for

photographic products based on chemical imaging has been
threatened by digital imaging. Over the past 25 years, Kodak
has invested bilions of dollars developing digital technologies
and digital imaging products. Yet profits and market leadership
in digital imaging remain elusive for Kodak. Might Kodak have
been better off sticking with its chemical know-how and
developing its interests in specialty chemicals, healthcare?

1) THE CONCEPT OF STRATEGY

The RB approach has a profound implications for

companies' strategy formulation:

- focus on industry selection and positioning

• similar strategies for companies

- RBV
• emphasy on the uniqueness of each company
• key to profitability: exploiting differences

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2) THE RESOURCES OF THE FIRM

Resources versus capabilities

Resources = productive assets owned by the firm

Capabilities = what a firm can do

Individual resources do not confer competitive advantage,

they must work together

to create organizational capability

2) THE RESOURCES OF THE FIRM

Competitive Industry key

Strategy success factors
advantage

Organizational
capabilities

Resources
Tangible Intangible Human
* Financial * Technology * Skills/Know how
* Physical * Reputation * Capacity for communication
* Culture and collaboration
* Motivation

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3) APPRAISING RESOURCES AND CAPABILITIES

The profit that a firm obtains from its resources and capabilities
depends on three factors: their abilities

a. to establish a competitive advantage;

b. to sustain the competitive advantage;
c. to appropriate the returns to that competitive advantage.

3) APPRAISING RESOURCES AND CAPABILITIES

Scarcity
The extent of the
competitive advantage
established Relevance

Durability
THE PROFIT-
EARNING Sustainability of
competitive Transferability
POTENTIAL OF A
advantage
RESOURCE OR Replicability
CAPABILITY
Property rights

Relative bargaining
Appropriability power

Embeddedness

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4) DEVELOPING RESOURCES AND CAPABILITIES

Focus on:

a. Relationship between resources and capabilities

b. Replicating capabilities
c. Developing new capabilities
d. Capability as a results of early experiences
e. Organizational capability: rigid or dynamic?

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1) MANAGEMENT PROCESS

Is the process of planning, organizing, leading and controlling

the efforts of company members and of using all other company
resources to achieve stated company goals.

PLANNING

CONTROLLING FUNCTIONAL ORGANIZING

AREAS

DIRECTING

1) MANAGEMENT PROCESS

A) Planning
What to do?
How to do?

Plans:
(1) Top management: long term plans, strategic plans
(2) Middle level management: medium term plans
(3) Front line managers: operational plans (short term
plans)
(4) Workers: carry out the plan

B) Organizing
Allocating work, authority and resources among company
members so they can achieve company goals; define
organizational structure.

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1) MANAGEMENT PROCESS

C) Directing

Directing involves directing, influencing and motivating

employees to perform essential tasks.

D) Controlling

1) Establishing standards of performance

2) Measuring current performance
3) Comparing this performance to the established standards
and
4) Taking corrective action if deviations are detected

2) MANAGERIAL ROLES AND LEVELS

Managerial roles

a) Interpersonal roles
b) Informational roles
c) Decisional roles

Levels
Top managers

Middle managers

First line managers

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3) CORPORATE AND STRATEGIC PLANNING

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3) CORPORATE AND STRATEGIC PLANNING

1. Using SWOT analysis to formulate strategy

- exploiting an organization's opportunities and strengths while
neutralizing its threats, and
- avoiding (or correcting) its weaknesses.
2. Formulating business level strategies

3) CORPORATE AND STRATEGIC PLANNING

2. Formulating business level strategies

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The drivers of cost advantage

The potentiality of differentiation: the demand side

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4) ORGANIZATIONAL STRUCTURE

Organization is the way a business follows its goals by using a

particular pattern of structure, people, tasks and techniques.

There is a strong relationship between these issues and human

resource (HR) activities.

While organizing the company, managers must take into account

two kind of factors:
• internal factors
- goals
- strategic plans
- needed capabilities
• external factors
- surrounding environment

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4) ORGANIZATIONAL STRUCTURE

Basic components of an organization:

a. the strategic apex

b. the operating core

c. the middle line

d. the technostructure

e. the support staff

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4) ORGANIZATIONAL STRUCTURE

Basic principles in organizational structuring :

a. specialization

b. coordination

c. departmentalization (grouping)

d. decentralization

e. planning and control

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4) ORGANIZATIONAL STRUCTURE
Functional structure : main features

Grouping by inputs

Decentralization selective

Coordination standardization

Relevant component top and middle management

Staff presence technostructure more developed than

support staff

Planning and control cost reduction

ADVATAGES - efficiency and economies of scale

- optimal allocation of resources
- knowledge and skills development

DISADVANTAGES - slow decision making

- hierarchy overload
- lack of communication
- restrictive view of goals

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4) ORGANIZATIONAL STRUCTURE
Divisional structure : main features
Grouping by outputs

Decentralization parallel

Coordination use of horizontal links

Relevant component middle management

Staff presence support more developed than

technostructure

Planning and control advanced

ADVATAGES - effectiveness
- coordination and fast decision making
- clear accountability

DISADVANTAGES - duplication of resources

- does not develop specific functional
skills
- focus on individual goals

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 1) THE COMPANY SYSTEM

All companies have some features in common:

- ensemble of different but connected elements
(people whose work, equipments, materials that are
transformed, etc.)
- complex system

all the elements operate to achieve the same

goal: create and sell an output (product or
service) to a customer

1) THE COMPANY SYSTEM

A company can be defined as an

- economic
- open
- dynamic
- social
system characterized by:
a. relationship between the various elements of the system
b. relationship between the company and the surrounding
environment

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 1) THE COMPANY SYSTEM

General environment:

- natural environment
- cultural background
- technological background
- social background
- economic background
- political and legislative background

1) THE COMPANY SYSTEM

Specific environment (depends on industry -sector):

- Acquisition
- Production
- Distribution

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COMPETITIVENESS
The company system must be competitive among the years.
Focus on:
1. appropriate definition of the company “business”
2. development of the “distinctive competencies”

From a managerial point of view, competitiveness means

- economic stability
- financial stability at the same time!!
- equity stability

1) THE COMPANY SYSTEM

Economic stability
Relation between:
• the flow of costs
• the flow of revenues

economic result (profit/loss)

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 1) THE COMPANY SYSTEM

Financial stability
Relation between:
• the cash inflows
• the cash outflow
and
• money invested by company in a certain period
• how these investments are financed

focus on time

1) THE COMPANY SYSTEM

Equity stability

Relation between the different sources of financing,

concentrating on their “origin” ... ...

… … equity or loans???

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 1) THE COMPANY SYSTEM

Financial statement

It provides information about the financial position,

performance and change in the financial position of an entity.
It presents the accounting information in the form of formal
reports which provide information on business performance
to interested stakeholders.

1) THE COMPANY SYSTEM

Financial statement

Financial statement is prepared at least once at year and this

is known as the accounting period.

31/12/2009 31/12/2010

Financial Financial
statement statement
accounting
period

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 1) THE COMPANY SYSTEM

Financial statement
The content of financial statement usually includes the
following documents:
- Balance sheet
- Income statement (or profit and loss account)
- Cash flow statement
- Notes and other documents

Financial statement under IAS/IFRS

1) THE COMPANY SYSTEM

Rules for Financial statements: IAS / IFRS.
4th and 7th European Directives adopted into national
legislation by most European countries during the 1980s.

* Fourth Directive • harmonisation in respect of formats, valuation

rules and note disclosure
* Seventh Directive • consolidated accounts on a common basis

International convergence with the objective to adopt

International Financial Reporting Standards (IFRS) in the
EU.

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 1) THE COMPANY SYSTEM

Rules for Financial statements: IAS / IFRS.

The Commission announced the adoption of International
Accounting Standards (IAS) for all European listed
companies reports by 2005.

The assumption governing financial statements IAS/IFRS

are:
- the accrual basis;
- going concern.