Wyche Innovation Centre Business Models & Introduction to Business Modelling

Learning Objectives Understand the difference between common business models Compare and contrast common business models when applied to a business

Business Models A business models is the system that transforms intangible business ideas into products/services that have value in the market place (Hedman and Kalling, 2003) Business models define: How a firm works Who its customers are What the customer values How a firm makes money How value can be delivered to the customer cost effectively Magretta (2002)

Classifying Business Models Business models provide a framework creating and delivering value to the end consumer. This can be done in the following ways: Product/service provider Offers an end product or service to the customer Ownership and rent of key assets Offers customers the use of a product/service Finance provider Offers customers access to money and capital and associated services Tidd & Bessant (2013)

Classifying Business Models Systems integrator Pulls together components on behalf of customers Platform provider Offers a platform from which other businesses can create value Network provider Offers access to a network Skills provider Rents or sells access to knowledge or human resources Outsourcer Offers to take responsibility for a non core/key activity for another business

Business Model Classification Discussion Come up with an existing business which could be categorised under each of the business model categorises What business benefits could be gained from categorising businesses based on their business model? Do you think it is a good idea for a single business to adopt several business models? How/why have you come to this conclusion? Is one business model more sustainable than other? The categorisation of a business based on their business model can potentially help a business focus on how they add value and reflect on where their value proposition actually is. This can help to inform future decisions regarding their development. Some researchers argue that focusing on one business model, can help the business focus better and not get lost between business models. However, others argue as long as a business is clear about how it adds value and in what different ways, having more than one business model can increase revenue, differentiate and create vertical integration between activities. Business models are normally dependent on how a business integrate their resources and activities.

Case Study: Wyche Innovation Centre In their own words: Managed by Key IQ An innovation and technology hub in Worcestershire. They provide workspaces and business services Flexible to suit the needs of both small and growing businesses. Operating an easy in and easy out policy

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Case Study Discussion Questions What type of business model(s) would you classify the Wyche Innovation Centre of currently following? How/why have you come to this conclusion? What are the benefits for the Wyche Innovation centre of having two different business models? Are there ever any potential dangers with operating more than one business model in a single business? The Wyche Innovation Centre could be classified as having both an Ownership and Rent of Key Assets and a Product/Service Provider business model. They started off having an Ownership and Rent of Key Assets business model, before branching out into providing augmented services. Having two business models helped them to even out the cash flow. The Ownership and Rent of Key Assets model provides a lower steady cash flow, whilst the Product/Service Provider business model provides higher returns but is less predictable and the cash flow fluctuates. The two modules complement each other as the Product/Service Provider model offers additional value added services to the existing customer.

Mapping the Key Elements of a Business Model Many tools exist to help with the mapping and visual representation of a business (including the Business Model Canvas) When mapping the key elements of a business it is important to consider the following: What is the value proposition offered by the business? What are the key activities and resources required to realise the value proposition? Who is the customer segment is? How will the firm will generate revenue money? Depending on the time available and level of the class the full Business Model Canvas could be presented and discussed and used in the following activity.

Mapping the Key Elements of a Business Model Activity Answer the following questions for the case of the Wyche Innovation Centre in order to map out the key elements of their business plan Pick a business and answer the following questions for that business in order to map out the key elements of their business plan What is the value proposition offered by the business? What are the key activities and resources required to realise the value proposition? Who is the customer segment is? How will the firm will generate revenue money?

References Hedman, J., Kalling, T. (2003) The Business Model Concept: Theoetical underpinnings and empirical illustrations, European Journal of Information Systems, 12(1), 42-59 Magretta, J. (2002) Why Business Models Matter?, Harvard Business Review, 80(5), 86-92. Tidd, J., Bessant, J. (2013) Managing Innovation: Integrating Technological, Market and Organizational Change, John Wiley & Sons: Chichester.