10 Entrepreneurial Business Models

Introduction A business model describes the rationale of how an organization creates, delivers, and captures value. On the other hand, a business plan is how you execute the business model. If the business model does not work, the business is unlikely to do well.

The Four-Box Business Model

Customer Value Proposition The overall value of a CVP depends on these three key metrics: 1.How important the ‘job’ or the problem is to the customer 2.How satisfied are the customers with the current solutions 3.What is the relative advantage of the new offering, compared to the previous offerings

Nike id

Profit Formula Revenue model Cost structure Target unit margin Resource velocity

Key Resources People Technology Raw materials Equipment Information Channels Partnerships and alliances Funds Licenses or permits

Key Processes Processes Business rules and success metrics Behavioural norms

Osterwalder’s Business Model Canvas

How canvas differs from 4-box Introduction of ‘Strategic partnerships’ Splitting customers into: – Customer segments – Customer relationships – Channels Costs and revenues are in different components

Types of Business Models Currently Employed

Niche Compatibility of niche needs and product features Size of niche Willingness to pay accessibility

Perfint Vision: Become a respected emerging player in providing 'Niche Imaging Solutions' that help address Clinical Productivity needs

Long Tail Make everything available Have a low price Help find products

Founded by Sachin and Binny Bansal in October 2007 Both had worked for Amazon Growth: – 4 cr (2009) – 20 cr (2010) – 75 cr (2011)

Mass Customisation Combines the low unit costs of mass production processes with the flexibility of individual customization Modularize products Delay assembly Use configurators to capture customer preferences Assemble and deliver

Myntra.com Started by Mukesh Bansal and Sankar Bora in 2006 Started as a site for personalised products Now into sales of branded clothing One of the top 10 e-commerce sites in India

Freemium Feature limited Time Limited Capacity limited Seat limited Customer Class Limited

Zoho Based in Chennai

Unbundling Breakup a product into independent components Strip away add-ons Sell components as a complete product Up sell add-ons Increase in prices is possible

Zoho 1.Zoho Assist 2.Zoho Business 3.Zoho Books 4.Zoho Calendar 5.Zoho Challenge 6.Zoho Chat 7.Zoho Creator 8.Zoho CRM 9.Zoho Discussions 10.Zoho Docs 11.Zoho Gadgets 12.Zoho Wiki 13.Zoho Writer 14.Zoho Invoice 15.Zoho Mail 16.Zoho Viewer 17.Zoho Meeting 18.Zoho Mobile 19.Zoho Notebook 20.Zoho People 21.Zoho Personal 22.Zoho Planner 23.Zoho Polls 24.Zoho Projects 25.Zoho Recruit 26.Zoho Reports 27.Zoho Search 28.Zoho Share 29.Zoho Sheet 30.Zoho Show 31.Zoho Support

Bundling There are economies of scale in production, There are economies of scope in distribution, Marginal costs of bundling are low Production set-up costs are high, Customer acquisition costs are high. Consumers appreciate the resulting simplification

Tringme Enterprise wide telephony and messaging solutions – Mobile VOIP – Audio conferencing – IVR & Voice PHP Pricing encourages purchase of bundled solutions

No Frills Low prices are driven by low costs Rarely will small firms have lower costs than large firms Decrease costs by removing ‘frills’ which are costly but are not valued much by customers

No Frills

Premium Uber Premium Mass Class

Vardenchi Charges a premium of about two lakhs over the price of a Royal Enfield

Open Business Models Open source software Crowd sourcing – Crowdfunding – Crowdcreation – Crowdvoting – Crowd wisdom

Problems can be explored at comparatively little cost, and often very quickly Payment is by results or even omitted The entrepreneur can tap a wider range of talent Entrepreneurs gain first-hand insight on their customers' desires The community may feel a brand-building kinship with the entrepreneur

I Am 400 people financed the movie by Onir Dhar

Multi Sided Platforms The entrepreneur acts like a go-between To be effective, a sufficiently large pool is needed on both sides. A strong value proposition needs to be crafted for both sides Usually there are high network effects

Redbus Turnover of 150 crores Walked into a space other had failed in Success after they realised that bus operators were customers too

Social Enterprises Working on business-minded solutions to social problems Vijay Mahajan – “Single goal optimization is a 20 th century anacronism”

Social Enterprises

Business Model Innovation There are five strategic circumstances that often need a change in business model: The opportunity to address the needs of a group of customers who have been shut out of a market because existing solutions are too expensive or too complex to address their needs. There is a new promising technology and there is an opportunity to capitalize on it by using an innovative business model. The opportunity to bring a job-to-be-done focus in a market where it does not exist as yet. The need to counter low cost competitors. There is a need to respond to a shifting basis of competition.