1. CCT 355: E-Business Technologies Class 8: BMG: Business Model Patterns and Strategic Factors

2. Administration Proposal/final project questions This/next week, BMG book Potential guest lectures Nov 21 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 types – innovation, customer relations, infrastructure management

5. Product Innovation Enables early market entry Speed is key Premium products/pricing Creative talent as key resource

6. Customer Relationship Management Acquisition of new customers expensive – aim to retain customers High Scope/high touch orientation – customer comes first orientation

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)

8. Investment banking as example Product innovations? Customer relations? Infrastructure? Other examples?

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

10. Multi-sided platforms Different approaches to different customer segments E.g. Google – one model for advertisers, another for web users and content owners Revenue from advertisers dependent on market share in search, affiliate relationship with content owners (e.g., Adwords)

11. LEGO An example of both long-tail and multiple segements 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

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

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

14. 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?

15. Open/Closed Business Models Internal and external talent and R&D welcome Avoids “not invented here” issues Open market of IP – not afraid to acquire others if required Believes best in field are local already R&D as internal process Control of innovation process essential – prying eyes must be kept away

16. 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?

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

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

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

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

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

22. Weekly Assignment Apple as example -> tight coupling between software/hardware, devices Closed vs. open innovation model What are benefits and drawbacks to this approach?

23. Next week Design and evaluation of business models