Unit III Flashcards
(27 cards)
What is a business model?
A business model is an outline for how your company plans to make money. In general, a business model explains four things:
* What product or service a company will sell.
* How it intends to market(or deliver) that product or service.
* What kind of expenses the company will face.
* How the company expects to turn a profit.
What are the types of business mode
- Product based
- Subscription based
- Freemium
- Marketplace
- Platform
- Advertising
- Manufacturer Model
- Retailer Model
What is Marketplace Business model?
Connects buyers/sellers, earns fees (e.g., Amazon). Scales via network effects, uses design thinking for user experience.
What is Platform Business model?
Enables interactions via tech (e.g., Uber). Relies on creative solutions for gaps and resource mobilization for tech infrastructure.
What is Retailer model?
A retailer is the last and main person in business. He is the last entity of the supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.
What is Manufacturer model?
A manufacturer is responsible for sourcing raw materials and producing finished goods with the help of internal labour, machinery and equipment. They sell those products to distributors, retailers, or directly to consumers.
What is meant by creating value proposition?
A value proposition is a concise statement that articulates how a product or service solves a customer’s problem, delivers specific benefits, and stands out from competitors.
What are the steps to create a strong value proposition?
reasearch your market
identify the core problem
define your solutions
hilight key benifits
differentitate from competitors
craft a clear statedment
test and refine
- Research Your Market:
◦ Conduct customer interviews, surveys, or analyze market trends to understand your audience’s pain points and preferences.
◦ Study competitors to identify gaps or areas where you can outperform.- Identify the Core Problem:
◦ Pinpoint the most pressing issue your target customers face. For example, if you’re launching a meal delivery service, the problem might be lack of time to cook healthy meals. - Define Your Solution:
◦ Explain how your product or service addresses the problem. Be specific—e.g., “Our meal delivery service provides chef-prepared, healthy meals delivered in under 30 minutes.” - Highlight Key Benefits:
◦ Focus on benefits, not features. Instead of “We use organic ingredients,” say, “Enjoy guilt-free, healthy meals made with organic ingredients.” - Differentiate from Competitors:
◦ Emphasize what sets you apart. This could be price, quality, convenience, innovation, or a unique approach. For example, “Unlike other meal services, we offer fully customizable menus tailored to your dietary needs.” - Craft a Clear Statement:
◦ Combine the above into a concise, compelling statement. A popular framework is:
“For [target customer] who [problem/need], our [product/service] provides [key benefit] because [reason/differentiation].”
Example: “For busy professionals who want healthy meals but lack time to cook, our service delivers chef-prepared, customizable meals in under 30 minutes, using organic ingredients tailored to your diet.” - Test and Refine:
◦ Share your value proposition with potential customers, mentors, or advisors to get feedback.
◦ Iterate based on responses to ensure it resonates and is easy to understand.
- Identify the Core Problem:
What are teh examples of strong value proposition
- Slack: “Slack transforms the way teams communicate, making work simpler, more pleasant, and more productive.”
◦ Targets teams, addresses communication challenges, emphasizes simplicity and productivity.- Uber: “The smartest way to get around. One tap and a car comes directly to you.”
◦ Focuses on convenience and speed for people needing transportation. - Airbnb: “Book unique homes and experiences all over the world.”
◦ Highlights unique, personalized travel options for adventurous travelers.
- Uber: “The smartest way to get around. One tap and a car comes directly to you.”
What is conventional industry logic?
Conventional industry logic refers to the established set of beliefs, assumptions, and practices that dominate how businesses within a specific industry operate. It’s the “way things are done” in an industry, shaped by historical norms, accepted strategies, and common approaches to creating and delivering value.
What factors that form the “Conventional Industry Logic”
- Historical Success: Practices that worked in the past (e.g., mass production in manufacturing) become the default.
- Market Leaders: Dominant companies set standards that others follow to compete.
- Regulation and Norms: Laws, industry standards, or cultural expectations shape behavior (e.g., pharmaceutical companies focusing on patented drugs due to regulatory incentives).
- Customer Behavior: What customers are willing to accept or demand reinforces the logic.
Examples of Conventional Industry Logic
- Automotive Industry:
◦ Historically, the logic was that cars are sold through dealerships, powered by internal combustion engines, and owned by individuals. Tesla challenged this by selling directly to consumers, focusing on electric vehicles, and emphasizing software-driven features.- Publishing Industry:
◦ Conventional logic favored physical books sold through bookstores, with publishers controlling distribution. Amazon disrupted this with e-books, self-publishing platforms, and online retail. - Hospitality Industry:
◦ The assumption was that travelers needed standardized hotel rooms booked through travel agents. Airbnb broke this logic by offering unique, peer-to-peer accommodations booked online.
- Publishing Industry:
How can entrepreneurs can challenge conventional industry logic
- Question Assumptions:
◦ Ask, “Why does the industry operate this way?” and “What if we did it differently?” For example, Dollar Shave Club questioned why razors needed to be expensive and sold in stores, offering affordable subscriptions online.- Focus on Unmet Needs:
◦ Identify customer pain points ignored by the industry. For instance, Warby Parker addressed the high cost of eyeglasses by selling directly to consumers online with a try-at-home model. - Leverage Technology:
◦ Use new tools or platforms to rethink processes. Spotify disrupted the music industry’s logic of physical CDs or paid downloads by offering streaming subscriptions. - Redefine Value:
◦ Shift what customers perceive as valuable. For example, budget airlines like Ryanair redefined air travel by prioritizing low fares over amenities, appealing to cost-conscious travelers. - Experiment and Iterate:
◦ Test new approaches on a small scale to validate ideas that break from convention, reducing risk while refining the model.
- Focus on Unmet Needs:
What is Value Innovation logic?
Value innovation logic is a strategic approach in entrepreneurship and business that focuses on creating new market spaces by simultaneously delivering exceptional value to customers and reducing costs for the business.
What are the characteristics of value innovation logic?
- Focus on Non-Customers:
◦ Instead of targeting existing customers in a crowded market, value innovation targets non-customers—people who are underserved or ignored by the industry. For example, Cirque du Soleil attracted theater-goers and adults, not just traditional circus audiences.- Redefining Value:
◦ It rethinks what customers truly value, often by eliminating features the industry takes for granted and creating new ones. For instance, budget airlines like Southwest eliminated in-flight meals but offered low fares and frequent flights. - Simultaneous Pursuit of Differentiation and Low Cost:
◦ Value innovation achieves both high customer value (through unique offerings) and low costs (by streamlining operations). This dual focus creates a leap in value for customers while maintaining profitability. Example: IKEA offers stylish furniture at low prices by simplifying design and using flat-pack shipping. - Breaking Industry Assumptions:
◦ It challenges conventional industry logic by questioning long-held assumptions about how value is created and delivered. For example, Netflix disrupted the video rental industry by moving from physical rentals to streaming, eliminating late fees and store visits. - Creating New Demand:
◦ Instead of fighting over existing demand, value innovation creates new demand by appealing to new customer segments or needs. For example, the Nintendo Wii expanded the gaming market to families and casual gamers, not just hardcore gamers.
- Redefining Value:
How does value innovation logic works?
Value innovation logic is often implemented using the Four Actions Framework:
1. Eliminate: Remove industry-standard features or practices that add little value to customers. (E.g., Southwest eliminated assigned seating to reduce costs.)
2. Reduce: Scale back factors that are overemphasized in the industry. (E.g., Starbucks reduced the complexity of coffee menus to focus on quality and experience.)
3. Raise: Enhance elements that the industry underdelivers on. (E.g., Apple raised design and user experience in smartphones with the iPhone.)
4. Create: Introduce entirely new elements that the industry has never offered. (E.g., Tesla created over-the-air software updates for cars.)
examples of value innovation logic
- Cirque du Soleil:
◦ Conventional Logic: Circuses focused on animal acts and low-cost family entertainment, competing on price and spectacle.
◦ Value Innovation: Eliminated animal acts and clowns, reduced reliance on star performers, raised theatrical elements (music, storytelling), and created a premium, artistic experience. This attracted a new audience (adults and theater-goers) and commanded higher ticket prices while keeping costs lower than traditional circuses.- Nintendo Wii:
◦ Conventional Logic: Gaming consoles competed on graphics and processing power for hardcore gamers.
◦ Value Innovation: Eliminated high-end graphics, reduced complex controls, raised accessibility with motion-based controls, and created a fun, family-oriented gaming experience. This opened gaming to casual players, creating massive new demand. - Yellow Tail Wine:
◦ Conventional Logic: The wine industry targeted connoisseurs with complex flavors and high prices.
◦ Value Innovation: Eliminated wine jargon and pretension, reduced variety to a few simple options, raised ease of selection, and created a fun, approachable brand. This attracted casual drinkers, expanding the market.
- Nintendo Wii:
How entrepreneurs can apply value innovation logic?
- Analyze Non-Customers:
◦ Identify groups who avoid your industry (e.g., people who don’t buy because of cost, complexity, or lack of appeal). Ask: Why are they not buying?- Use the Four Actions Framework:
◦ Map out what your industry takes for granted and apply the eliminate-reduce-raise-create actions to rethink your offering. - Challenge Assumptions:
◦ List the industry’s “rules” (e.g., “restaurants need dine-in spaces”) and brainstorm ways to break them (e.g., food trucks or cloud kitchens). - Test and Validate:
◦ Prototype your value innovation (e.g., a new product or service model) and test it with potential customers to ensure it resonates. - Communicate the Value Proposition:
◦ Clearly articulate how your offering delivers unique value, using simple messaging that highlights benefits over competitors.
- Use the Four Actions Framework:
What is customer focussed Innovations?
Customer-focused innovation is a business approach that prioritizes developing products, services, or solutions by deeply align withing with the needs, preferences, and pain points of customers.
What are the core principles of customer focused innovation
- Empathy for Customers:
◦ Understand customers’ needs, behaviors, and emotions through methods like interviews, surveys, or observation.
◦ Example: Airbnb’s founders lived with hosts to understand their challenges, leading to features like user reviews and secure payments.- Customer-Centric Problem Solving:
◦ Focus on addressing specific pain points or unmet needs rather than pushing technology or features for their own sake.
◦ Example: Dyson’s vacuum cleaners were developed to solve the frustration of lost suction in traditional vacuums, prioritizing user pain points like effective cleaning. - Iterative Development:
◦ Use feedback loops to continuously refine solutions based on customer input, often through prototyping and testing.
◦ Example: Spotify regularly tests playlist algorithms with user data to improve music recommendations. - Personalization:
◦ Deliver tailored experiences or customizable solutions that resonate with individual customer preferences.
◦ Example: Netflix uses viewing history to suggest personalized content, enhancing user satisfaction. - Co-Creation with Customers:
◦ Involve customers in the innovation process through feedback, beta testing, or collaborative design.
◦ Example: LEGO Ideas allows fans to submit and vote on new set designs, directly involving customers in product development.
- Customer-Centric Problem Solving:
What are the steps to implement customer focused innnovation.
- Research and Understand Customers:
◦ Conduct qualitative research (e.g., interviews, focus groups) and quantitative research (e.g., surveys, analytics) to identify customer needs and pain points.
◦ Use tools like customer journey mapping to visualize touchpoints and pain points.
◦ Example: A restaurant might discover through surveys that customers want faster service, leading to a mobile ordering app.- Define the Problem Clearly:
◦ Articulate the specific customer problem or opportunity. For example, “Busy parents need quick, healthy meal options for their kids.”
◦ Avoid assumptions—validate the problem with real customer insights. - Ideate Solutions:
◦ Brainstorm ideas that address the problem, prioritizing customer benefits over technical feasibility initially.
◦ Use design thinking techniques like “How might we…” questions to spark creativity.
◦ Example: “How might we make healthy meals quick and appealing for kids?” - Prototype and Test:
◦ Create low-fidelity prototypes (e.g., mockups, MVPs) and test them with target customers.
◦ Gather feedback to refine the solution iteratively.
◦ Example: A startup might test a meal kit service with a small group of parents before scaling. - Implement and Scale:
◦ Launch the refined solution, ensuring it aligns with customer expectations.
◦ Monitor performance and continue gathering feedback for ongoing improvements.
◦ Example: After testing, the meal kit service might expand to include customizable menus based on dietary needs. - Measure Success:
◦ Use metrics like customer satisfaction (e.g., Net Promoter Score), retention rates, or sales to evaluate impact.
◦ Adjust based on data to ensure the solution remains customer-focused.
- Define the Problem Clearly:
Examples of cistomer focused innovation
Examples of Customer-Focused Innovation
1. Amazon:
◦ Problem: Online shopping was slow and inconvenient.
◦ Innovation: Amazon introduced 1-Click ordering and Prime’s fast shipping, prioritizing customer convenience based on feedback about delivery times.
◦ Outcome: Enhanced customer loyalty and market dominance.
2. Warby Parker:
◦ Problem: Eyeglasses were expensive and hard to try before buying.
◦ Innovation: Offered affordable glasses online with a home try-on program, directly addressing customer pain points around cost and fit.
◦ Outcome: Disrupted the eyewear industry by focusing on accessibility and convenience.
3. Zappos:
◦ Problem: Online shoe shopping felt risky due to fit concerns.
◦ Innovation: Introduced free shipping and returns with a 365-day return policy, removing barriers to purchase based on customer fears.
◦ Outcome: Built a loyal customer base through exceptional service.
explain what is building and analyzing business models?
Building and analyzing business models involves creating a structured framework that outlines how a company creates, delivers, and captures value, followed by evaluating its effectiveness and viability.
What are the core components of a business model?
Vision and mission: Overview ofwhat you want to achieveand how you will do it.
* Objectives:High-level goals that will support your vision and mission, along with how you will measure success.
* Customer targets and challenges:Description of target customers (written as archetypes orpersonas) and their pain points.
* Solution:How your offering will solve customer pain points.
* Differentiators:Characteristics thatdifferentiateyour product or service.
* Pricing:What your solution willcostand how it will be sold.
* Positioning and messaging:How you will communicatethe value of your offering to customers.
* Go-to-market:Proposed approach forlaunching new offeringsand services.
* Investment:Resources required to introduce your offering.
* Growth opportunity:Ways that you will grow the business over time.
