1. CCT 355: E-Business Technologies Class 8: Patterns and Strategic Considerations in Business Models

2. Administration Proposal/final project questions This/next week, BMG book Final project presentation (in Ignite format) Nov 28

3. Review Customer Segments Value Propositions Channels Customer Relationships Revenue Streams Key Resources Key Activities Key Partnerships Cost Structure

4. Bundling/unbundling Large organizations = multiple models of operation Unbundling helps understand of different business models operating simultaneously Three core business foci – innovation, customer relations, infrastructure management – can operate in synergy but they have their own structures and priorities

5. Product Innovation Enables early market entry Speed to market is key Premium products/pricing often the result, but that’s OK Creative talent as key resource

6. Customer Relationship Management Acquisition of new customers expensive – aim to retain customers and keep them satisfied High touch orientation – customer comes first orientation Low touch – KISS – works just fine in some industries where efficiency, not emotion, is the key Perception of quality is important – e.g., SERVQUAL and service “gaps”

7. Infrastructure Economies of scale to reduce fixed costs Low unit costs as priority – transactional rationalization vs. customer relations or innovation Cost focus – stressing standardization, predictability and efficiency What many MBA/CMA programs stress – rationalization vs. innovation or engagement – which is why business run only by MBAs or accountants may not be successful!

8. Long Tail Models Mass or niche market? Profit through volume vs. profit through higher margins and specialization Often depends on customer segments

9. Multi-sided platforms Different approaches to different customer segments E.g. Google – one model for advertisers, another for web users, another for content creators, another for software development, would be another still for hardware Can link together – vertical integration to cross-populate platforms

10. Example: LEGO An example of both long-tail and multiple segments Certainly a mass market – both in product and spinoffs (e.g., Legoland theme parks, partnerships with major cultural products) Long tail – “hard to get” sets for adult enthusiasts (approximately 1/3 of market!) Mass customization – LEGO DesignByMe

11. Free (At least one) customer segments receives services/goods for free Advertising model a common example – e.g., broadcast TV, search engines, increasingly newspapers

12. Freemium Basics free, pay for more Allows for sampling and basic use, targeting power users for cost recovery Examples?

13. Bait and Hook Free/inexpensive – with a catch “loss leader” hooks customer in and keeps them locked into product Razor blades example – stick could be given away for free, since $$$ is in the replacement blades Others?

14. Open/Closed Business Systems Internal and external talent and R&D welcome Avoids “not invented here” issues Open market of IP – not afraid to acquire (or steal?) if required Often open for others to do same Believes best in field are local already R&D as internal process Control of innovation process essential – prying eyes must be kept away

15. Inside-Out/Outside-In Inside-out – orgs main purpose is R&D, will sell, license core ideas out for commercialization Outside-in – weak commitment to internal R&D, will acquire or partner with outside resources to innovate Examples?

16. Strategic forecasting Business models must change over time Factors that influence change include: Key Trends Industry Forces Macroeconomic Forces Market Forces

17. Key Trends Effect of new/emerging technologies? Changes in regulatory frameworks? Social, cultural, demographic changes?

18. Industry Forces Changes in #/size of competitors? Threat of new entrants Substitute products/services? Changes in suppliers/supply chain?

19. Macroeconomic Factors Access to capital? Global market conditions? Commodity pricing for key resources? Infrastructure issues?

20. Market Forces Changes in customer segments? Changes in value propositions? Changes in revenue/cost structures?

21. Next week Design and evaluation of business models