Topic 2: Social Enterprise Flashcards
(22 cards)
Positive Cash Flow
Money coming into a business is greater than that moving out i.e. Inflow > Outflow
Burn Rate
The rate at which a company is spending initial capital
Maximum Financing Needs
The peak amount of funding required by the business
Cash Breakeven
Inflow of cash is equal to outflow of cash
Web 1.0 Business Cash Flow
Follows traditional business models:
1. Cash flow is negative (spending money)
2. Cash flow bottoms out at the maximum financing needs before increasing
3. Cash breakeven is reached
4. Cash flow becomes positive
Web 1.0 E-Commerce
E-commerce followed the same business model as their physical counterparts
E-commerce Revenue Models
- Transaction Fees Model: Commission is charged on transactions facilitated through a web platform
- Subscription Model: A fixed, recurring fee is charged for access to a service
- Advertisement Model: Other businesses pay to display advertisements on a site
- Affiliate Model: Earn commission by referring traffic to patterner sites
- Sales Model: Direct revenue from selling goods or services
Web 1.0 Search Business Model
Search business model relies on advertising
Web 2.0 Business Cash Flow
Reduces maximum financing needs relative to Web 1.0 due to
- Easier to Acquire Customers
- Reduced Product Costs: Digital content is less expensive to manufacture than real-world goods
- Reduced Development Costs: Iterative development cycles lead to continuous improvement rather than significant (but infrequent) product releases
- Network Effects
The Long Tail Model
A business model focusing on low volume selling in multiple niche markets rather than high volume selling in one popular market (combining many sales from many low-volume markets can be as profitable as selling in one high-volume market)
The Web & The Long Tail Model
The web caters to the long tail business model as websites can have much wider reach than a small niche store in only one city. So niche businesses can reach more customers online
Network Effect
A phenomenon where a service becomes more valuable as more users join, creating a positive feedback loop
Direct Network Effects
The value of the service increases as more people use it
e.g. Facebook becomes more valuable to users as more users join
Indirect Network Effects
The value of a service increases as a result of a complementary service growing
e.g. An operating system’s value increases are more software is developed for it
Cross-network Effects
The rise of one group of users increase the value for another group of users
e.g. the value to viewers on Flickr increases as the number of photographers grows
Social Network Effects
The value of a service increases to a user as the number of other users, with which the original user has a relationship with, increases. i.e. The value depends on the relationship of users, not volume.
e.g. Facebook’s release was successful due to the reliance on social network effects. The site was exclusive to university campuses, ensuring users with relationships used the app together, increase the value to each user
Network Effects & Market Entry
Network effects make it challenging for new competitors to break into the market. Taking advantage of the long tail model can help.
Social Enterprise Characteristics of Web 3.0
- Crowdsourcing: Enlisting the services of a number of people to obtain information
- Decentralisation: Systems are more resilient and power is less concentrated
- Fostering of Network Effects: Utilises interactions and connections with others
The Tipping Point
A critical moment when an idea, trend, or behaviour crosses a threshold and rapidly spreads
Influencer Types in The Tipping Point
- Connectors: People with vast social networks, linking different groups
- Mavens: Knowledgeable individuals who gather and share valuable information
- Salesperson: Persuasive communicators who influence others to adopt something
The right people in a network can lead to widespread adoption of a product or service
Rogers’ Adoption Criteria
Criteria that determines the adoption of new products and technologies:
- Relative Advantage: Is the product better than what it replaces?
- Compatibility: Does it align well with existing values, needs, and experiences?
- Complexity: How easy is it to use?
- Trialability: Can someone try the product before fully adopting it?
- Observability: How visible is the benefits to others to encourage further adoption?
Bass Diffusion Model
A model that describes how new products are adopted in a population based on
- Innovators: Early adopters who are driven by external influencers such as advertising
- Imitators: Later adopters who follow based on social influence and word-of-mouth
The number of users over time follows and S-curve with innovators making up the first half, and imitators making up the second half
