Faculty of Engineering &
Information Technology
An-Najah National University
Innovation and
Entrepreneurship
(10631300)
2024-2025
Instructor Name: Dr.Basheer Shaheen
B.Shaheen@najah.edu
Office: 11-2-660
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Part 6
Developing an
Effective
Business Model
Prepared By:
• Yahya Saleh
• Suliman Duaifi
• Maher Abu Baker
• Mohammad J. Dweikat
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Business Model
Innovation and Entrepreneurship ---- An-Najah National University
➢What is a Business Model?
“A business model is what a
business does and how it
makes money.”
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Business Model
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➢What is a Business Model?
Concept
describes the
opportunity and
strategy
Value
measures the
benefit to
investors and other
stakeholders
Adapted from Applegate et al, Corporate Information Strategy and Management, McGraw-Hill/Irwin 2003
Capabilities
define resources
needed to
execute
strategy
Business Model
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➢Lets is now define a Start-up
– A startup is a human institution designed to create a new product or
service under conditions of extreme uncertainty.
– A startup is a temporary organization that is in search of a
repeatable and scalable (‫ )قابل للتطوير‬business model
Business Model
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➢What a start-up is NOT
– A startup is not a smaller version of a large company (i.e. it is not a
doll house).
– Why is a startup not a smaller version of a large company?
Business Model
Innovation and Entrepreneurship ---- An-Najah National University
➢ Startup vs everything else
– Startup
o Problem: Unknown (Market? Customers? Need?)
o Solution: Unknown (What are we going to build?)
– Everything else
o Problem: Known
o Solution: Known
• Known: Small business? Clone of an existing business?
• Existing market, waterfall product development
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Business Model
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➢What is everything else?
– Small businesses
– Large companies
– Social entrepreneurship
– Disruptive
companies
large companies
within
Business Model
Innovation and Entrepreneurship ---- An-Najah National University
➢
Startups
• New products/ services
• Innovation driven
• New technology
• New business model
• High growth / potential
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or
SMEs
• Replicate current product /
services
• Innovation is limited
• Growth is limited ( for most)
Business Model
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➢ Value Creation
Transformational
Entrepreneurship
High Growth
Entrepreneurship
Oil &Gas
Companies
Economic
Impact
Advertising
Fast food
Starbucks
Social
Games
Management
Consulting
Liquor Stores
Hair Dressers
1 for 1 Marketing
Campaigns
Laundromats
Crowdfunding
Renewable
Energy
Collaborative
Consumption
Facebook
Google
Data
Infrastructure
Apple
Microfinance
Amazon
Cheap Mobile
Phones
Twitter
Wikipedia
Fighting
Terrorism
Most Aid & Charity
Small Business
Long Term Social Impact
Disease Treatment
& Prevention
Social Entrepreneurship
Business Model
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➢Business Model
– A business model is a firm’s plan or recipe for how it creates,
delivers, and captures value for its stakeholders.
– The proper time to develop a business model is following the
feasibility analysis stage and prior to fleshing out the operational
details of the company.
– A firm’s business model is integral to its ability to succeed both in the
short and long term.
Business Model
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➢Standard Business Models
– The first category is standard business models.
– Standard business models depict existing plans or recipes firms can
use to determine how they will create, deliver, and capture value.
– There are a number of standard or common business models, which
are shown on the next two slides.
Business Model
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➢ Standard Business Models
Business Model
Representative Companies
Advertising Business Model
Google, Facebook
Advertising is a business model that relies on the use of paid
advertisements to promote products or services
Auction (‫ )مزاد علني‬Business Model
eBay, uBid.com (jewelry)
is based on participative pricing: in other words, the price of a product
is not determined solely by the vendor, but rather by the buyers
Bricks and Clicks Business Model
Apple, Barnes & Noble (Books)
Franchise (‫)إمتيازات تجارية‬Business Model
Panera Bread, 24-Hour Fitness
you run a physical store as well as an online store
is a contractual business model or relationship whereby an
established brand, known as the 'franchisor,' allows an
independent business owner, or franchisee, to use its branding,
business model, and other intellectual property
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Business Model
Representative Companies
Freemium Business Model
Dropbox, Pandora
Low-Cost Business Model
Southwest Airlines,
Walmart
that offers basic features of a product or service to users at no
cost and charges a premium for supplemental or advanced
features
is based on a strategy by which the business offers low prices in
order to instigate demand thus, gaining market share
Fitbit (shipping), Tesla
manufacturers produce their own goods and may or may not sell Motors
Manufacturer/Retailer Business Model
them directly to the public, whereas retailers buy goods to later
resell to the public
Peer-to-Peer Business Model
A peer-to-peer (P2P) economy is a decentralized model whereby
two individuals interact to buy sell goods and services directly
with each other or produce goods and service together, without
an intermediary third-party or the use of an incorporated entity or
Airbnb(‫)سياحة‬, Uber
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Business Model
Representative Companies
Razor and Blades Business Model
Game Consoles and Games,
Printers and Ink Cartridges
in which one item is sold at a low price (or given away) in order to increase sales of
a complementary good, such as consumable supplies.
Subscription Business Model
Birchbox, Netflix
Traditional Retailer Business Model (‫)األعمال التجارية بالتجزئة‬
Amazon, Whole Foods Markets
Subscription business models are based on the idea of selling a product
or service to receive monthly or yearly recurring subscription revenue. They
focus on customer retention over customer acquisition.
purchases products directly from a wholesale or distributing company,
then sells the inventory directly to the public. Retailers often utilize a brickand-mortar location for points of sale. Examples of retailers include
grocery stores, clothing stores, and department stores.
Business Model
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➢ Disruptive Business Models ‫نماذج أعمال مزعزعة ألعمال قائمة‬
– The second category is disruptive business models.
– Disruptive business models, which are rare, are ones that do not fit the
profile of a standard business model.
– They are impactful enough that they disrupt or change the way business is
conducted in an industry or an important niche within an industry.
– The next slides depict four business models that were disruptive when they
were introduced.
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•Communication. Smartphones combine mobile connectivity, internet
access, and messaging apps, revolutionizing how we connect with others.
•Photography. Advanced camera capabilities in smartphones have made
standalone cameras less popular.
•Music. Smartphones have replaced portable music players with music
streaming apps, leading to a decline in physical music formats and a rise in
digital streaming.
•Computing. Smartphones offer features traditionally associated with
computers, resulting in a decreased demand for desktops and laptops.
Business Model
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➢Disruptive Business Models
Business Model
Company or Companies That Introduced It
Direct-to-Consumer Computer Sales (which allowed
consumers to customize their computers)
Dell
Online Text Ads on Search Engines (allowed advertisers to
place ads for products that searchers were already searching
for)
Yahoo, Google
Software as a Service (SaaS) (By moving software to the
cloud, allowed users to access the software and their data
from anywhere there was an Internet connection)
Salesforce.com
Cloud-based Service to Connect Riders and People Willing
to Provide Rides (Provided riders with an app that connects
them with the owners of private cars)
Uber, Lyft
Business Model
Innovation and Entrepreneurship ---- An-Najah National University
➢What is a business model again?
– Diagram of flows between company and customers
– Scorecard of hypotheses testing
– Dynamic: Allows rapid change with each iteration and pivot
– Founder-driven
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
key activities
COST STRUCTURE
value proposition
customer relationships
key partners
cost structure
key resources
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customer
segments
what is the resulting cost structure?
which key elements drive your costs?
channels
revenue streams
Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
1.0 CUSTOMER SEGMENTS
which customers and users are you serving?
which jobs do they really want to get done?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
2.0 VALUE PROPOSITIONS
what are you offering them? what is that
getting done for them? do they care?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
3.0 CHANNELS
how does each customer segment want to be
reached? through which interaction points?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
4.0 CUSTOMER RELATIONSHIPS
what relationships are you establishing with each
segment? personal? automated? acquisitive? retentive?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
5.0 REVENUE STREAMS
what are customers really willing to pay for? how?
are you generating transactional or recurring
revenues?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
6.0 KEY RESOURCES
which resources underpin ‫ تدعم‬your business
model? which assets are essential?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
7.0 KEY ACTIVITIES
which activities do you need to perform well in
your business model? what is crucial?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
8.0 KEY PARTNERS
which partners and suppliers leverage ‫ يؤثروا‬your model?
who do you need to rely on?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
9.0 COST STRUCTURE
what is the resulting cost structure?
which key elements drive your costs?
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢Business Model Components
Channels
Value Proposition
Customer Segments
• Value is delivered to
customers through
communications,
distribution, and sales
channels.
• Seeking to solve customer
problems and meet their
needs through value
added.
• The Business serves one or
several customer Segment.
Key Resources
Revenues
• The main resources are the
assets needed to deliver
the items already
described ...
• Revenue is generated by
delivering value
proposition successfully to
customers.
Customer
Relationships
Cost Structure
Partners
Key Activities
• The implementation of the
business model elements
results in the cost structure.
• Some activities are given
to third parties and some
resources are obtained
from outside the
organization.
• All this is done by
conducting a number of
key activities.
• Customer relationships are
established and
maintained with each
customer segment.
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Key Partners
Key Activities
Innovation and Entrepreneurship ---- An-Najah National University
Key Resources
Cost Structure
Value Propositions
Customer
Relationships
Channels
Revenue Streams
Customer Segments
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Key Partners
Key Activities
Key Resources
Cost Structure
Social & Environmental Cost
Value
Propositions
Customer
Relationships
Channels
Revenue Streams
Social & Environmental Benefit
Customer
Segments
Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 1.0 Customer Segments ‫شرائح الزبائن‬
– Customer segments identify different groups of people or organizations
that the company aims to reach and serve. Customers make up the heart
of any business model. Without a profit-generating client, no company
can survive.
– In order to better serve customers, the company grouping customers and
classifies them into distinct segments with common needs, behaviors or
other attributes. The business model may have one or several segments of
customers.
– The business must make a conscious decision on which segments to serve
and which ones to ignore. Once this decision is made, the business model
can be carefully designed around a strong understanding of customer
needs.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 2.0 Value Proposition
– Value proposition describes a group of products and services that create
value for a specific segment of customers.
– Value proposition is why customers turn from one company to another.
This part solves customer’s problem or satisfies a specific need.
– The value proposition consist of a selected package of products and / or
services that meet the requirements of a specific segment of customers.
Therefore, the added value is the compilation or package of benefits the
company offers to customers.
– Some values may be innovative and represent a new or revolutionary
offer, others may be similar to current market offerings, but with additional
features.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 3.0 Channels
– Channels describe how a company can communicate with and reach
customer segments to deliver value added, distribution and sales.
– Channels are customer communication points that play an important role
in customer experience.
The channels serve several functions, among them:
1.
Aware customers about the company's products and services
2.
Helping customers evaluate the value added proposition of the
company
3.
Enable customers to purchase specific products and services
4.
Provide customer support after sales.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 4.0 Customer Relationships
– Customer relationships describe the relationships that the company
establishes with specific segments of customers.
– The company should know the type of relationship it wants to establish
with each customer segment. The relationship could range from personal
to automated. Customer relationships may be driven by the following
motives: Customer acquisition, Retain customers, Increase Sales
– For example, in the early days of the mobile phone industry, customer
relationships were based on customer acquisition strategies involving
giving free mobile phones for new subscriptions. When they reached to
market saturation, they switched to focus on maintaining customers and
increasing average revenue from each customer.
– Customer Relations affect deeply the overall experience of the customer
with the company.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 5.0 Revenues – ‫اإليرادات‬
–
The cash revenue represents the income that comes from each customer segment
(costs must be subtracted from revenue to create profits).
–
If customers represent the heart of the business model, the sources of income
represent its arteries. The company must always ask itself how much money each
customer segment willing to pay for the value proposition? Successfully answering
this question allows the company to generate one or more income sources from
each customer segment.
–
Each revenue stream may have different pricing approach, such as fixed price list,
bargaining, auction or others. Pricing approaches depend on the market size and
demand.
–
The business model could involve two different types of revenue: 1. One-time
revenue for each customer transaction 2. Recurring revenue from payments to other
services that could be provided to deliver value added to customers or after sales
customer support.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 6.0 Key Resources
– Key resources describe the most important assets ( ‫ األصول‬/ ‫الممتلكات‬
)‫ )الثابتة‬needed to implement the business model
– Each business model requires specific core resources. These resources
allow the company to configure and deliver value proposition, market
access, maintain relationships with customer segments, and earn
revenue.
– The need for key resources varies depending on the type of business
model. For example, a computer processor chips factory needs to have
high capital production facilities, while an electronic design company
focuses more on human resources.
– Resources can be material, financial, intellectual, or human. Can be
owned or leased by the company or obtained from key partners.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 7.0 Key Activities
– The main activities illustrate the most important activities needed
to be implemented to have a successful business model.
– This is the most important activities that a company must do in
order to be successful. Like key resources, these activities are
required to create and deliver value, access markets, maintain
customer relationships, and earn revenue. Key activities vary
depending on the type of business model
– The
software
industry
focuses,
for
example,
on
software
development. Computer manufacturers focus on manufacturing
and supply chain management. Consulting companies focus on
solving problems for their customers.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 8.0 Partnerships ‫الشراكات‬
– Key partnerships describe a network of suppliers and partners that
succeed in the business model.
– Companies need partnerships for many reasons, partnerships have
become the cornerstone of many business models. Companies create
alliances to improve their business models, reduce risk, or access
resources.
– We can distinguish between four different types of partnerships:
o
Strategic alliances between non-competitive companies
o
Strategic partnerships between competitors (collaboration)
o
Joint ventures to develop new business
o
Relations between buyer and supplier to ensure the supply can be counted
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢ 9.0 Cost Structure ‫هيكلية التكاليف‬
– The cost structure describes all the costs incurred by the
company to run the business model. This brickwork describes
the costs of working under a particular business model to form
and deliver value, maintain customer relationships, and
generate income.
– These costs can be calculated relatively easily after identifying
key resources, key activities, and key partnerships.
– Some business models are more focused on reducing costs
than others. Some airlines, for example, have built business
models around low-cost structures.
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢Activity
In groups of 3-4 students, please use the business model canvas to
draw business models for one organization. Here are some options:
Your
university
Facebook/
youtube
Intel
Apple
Any
Microsoft business
you know
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➢Example
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Business model - 9 building blocks
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➢Example
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Business model - 9 building blocks
Source: http://ebizzadvertising.wordpress.com/2011/10/16/google-adwords/
Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢Example
https://businessmodelanalyst.com/businessmodel-canvas-examples/
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢Business Mission
– A business’s mission or mission statement describes why it exists
and what its business model is supposed to accomplish.
– If carefully written and used properly, a mission statement can
articulate a business’s overarching priorities and act as its
financial and moral compass.
– A well-written mission statement is something that a business
can continually refer back to as it makes important decisions in
other elements of its business model.
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➢Business Mission
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Business model - 9 building blocks
Innovation and Entrepreneurship ---- An-Najah National University
➢Business Mission
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Business model - 9 building blocks
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➢Business Mission
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Business model - 9 building blocks
Financials
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➢Financial
– The third component of a firm’s business model
focuses on its financials.
– This is the only section of a firm’s business model
that describes how it earns money—thus, it is
extremely important.
– For most businesses, the manner in which it makes
money is one of the most fundamental aspects of
its business model.
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Financials
Innovation and Entrepreneurship ---- An-Najah National University
➢ Revenue Streams
– A firm’s revenue streams describe the ways in which it makes money.
– Some businesses have a single revenue stream while others have
several.
– For example, most restaurants have a single revenue stream. Their
customers order a meal and pay for it. Other restaurants may have
several revenue streams—including meals, a catering service,
product sales (such as bottle barbeque sauce for a barbeque
restaurant), and apparel products with the name of the restaurant on
them.
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Financials
Innovation and Entrepreneurship ---- An-Najah National University
➢Revenue Streams
– Assets Sales
– Usage fee
– Subscription Fee
– Lending /Renting/Leasing
– Licensing
– Brokerage Fees ‫رسوم وساطة‬
– Advertising
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Financials
Innovation and Entrepreneurship ---- An-Najah National University
➢ Cost Structure
– A business’s cost structure describes the most important costs incurred
to support its business model.
– It costs money to establish a basis of differentiation, develop core
competencies, acquire and develop key assets, and so forth.
– Generally, the goal for this box in a firm’s business model template is
threefold:
– Identify whether the business is a cost-driven or value-driven business.
– Identify the nature of a business’s costs.
– Identify the business’s major cost categories.
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Financials
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➢ Financing/Funding
– Many business models rely on a certain amount of financing or funding to bring
their business model to life.
– At the business model stage projections do not need to be completed to
determine the exact amount of money that is needed.
An approximation is
sufficient.
– There are three categories of costs to consider:
o Capital costs.
o One-time expenses, such as building a Web site and training initial employees.
o Provisions for ramp-up expenses (most businesses incur costs before they earn
revenues).
Financials
Innovation and Entrepreneurship ---- An-Najah National University
➢Financing/Funding
– Some entrepreneurs are able to draw from personal resources to
fund their business. In other cases, the business may be simple
enough that it is funded from its own profits from day one.
– In many cases, however, an initial infusion of funding or
financing is needed.
– The business model template should indicate the appropriate
amount of funding that will be needed and where the money
will most likely come from.
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Concept Statement
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➢ Second, Administer a Concept Test for Product/Service Desirability
o A concept statement should be developed.
o A concept statement is a one-page description of a business that is
distributed to people who are asked to provide feedback on the
potential of the business idea.
o The feedback will hopefully provide the entrepreneur:
• A sense of the viability of the product or service idea.
• Suggestions for how the idea can be strengthened or “tweaked” ( - ‫إعادة بلورة‬
‫ )لف‬before proceeding further.
Feasibility Analysis
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➢ 1.1 Product/Service Desirability
– New Venture Fitness Drink’s
Concept Statement
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