Nuts and Bolts of New
Ventures/Business Plans
MIT Course 15.S21
Business Models
Richard Kivel
• Chairman Rhapsody Biologics
• Former Chairman MIT Enterprise Forum & Senior
Manager Bridgewater Associates
• kivel@mit.edu / Twitter: @Kivel1
January 23rd 2013
The Business Model
"A business model is nothing else than
a representation of how an organization
makes (or intends to make) money.“
Peter Drucker
A business model describes the rationale of
how an organization creates, delivers and
captures value
Business Model Generation
Highly Complex
Simplified
Your Business Model is NOT
your Business
Business Model Innovation is
critical to developing a quality
business, attacking new
markets and driving profitability
Components of the
Business Model
Components of the
Business Model
1.
2.
3.
4.
5.
6.
7.
Value Proposition
Market Segment
Value Chain Structure
Position in the Value Network
Revenue Generation and Margins
Competitive Strategy
Stage of Development
Value Proposition
•
•
•
A description of the customer problem
The solution that addresses the problem
The value of this solution from the
customer's perspective (price, speed,
design)
Market Segment
•
•
The target audience
Recognizing that different market
segments have different needs
Value Chain Structure
•
•
•
The firm's position in the value chain
Activities in the value chain
How the firm will capture part of the
value that it creates in the chain.
Position in the Value Network
•
•
•
Identification of competitors
Identify complementary companies and
technology
Identify network-effects that can be
utilized to deliver more value to the
customer.
Revenue Generation and Margins
•
How revenue is generated
(sales, leasing, subscription, support, etc.)
•
•
The cost structure
Target profit margins.
Competitive Strategy
•
•
How will the company attempt to develop
a sustainable competitive advantage?
How will it use that advantage to improve
the competitive position in the market?
Different types of Customer
Segments
Mass
Market
Niche
Market
Segmented
Market
Diversified
Multi-sided
Platforms
Different Types of Customer
Segments &
Different Models to Evaluate
Different Models to Evaluate
Direct
Mass Media
Retail
Telemarketing/ Phone
Sales
Channels, Distributors
and Partners
Trade Shows and
Conferences
OEM Channels
Internet - Web
Direct Sales
Consumer or Business
•
•
•
•
•
Positives:
High Contact
Customer relations
More Control
Multi Purpose
Experts in the field
•
•
•
•
Negatives:
Free Consulting
May not like rep or rep
leaves firm
High Cost
Retention
Distributors & Channel Partners
•
•
•
•
•
Positives:
Cost of Sale is Low
Hands-off Sales
Exposure in new
markets
Credibility
Competitive Edge
•
•
•
•
•
•
Negatives:
Up-front fees
No control
Distant clients
Performance
Technical Pressure
Require lots of
attention and
training
OEM Channels
(Original Equipment Manufacturer)
•
•
•
•
•
Positives:
Prestige and
Publicity
List Sharing
Royalties / steady
revenue stream
Increase Market
Presence
Technical Control
•
•
•
•
Negatives
Competitor envy
Technical pressure
Channel Conflict
Your reputations
are linked
Other Examples
• Retail
• Internet
• Service Providers…….
What Business Model and Why?
What Business Model and Why?
•
•
•
•
•
•
•
•
Apple - Dell
Citibank - American Express
SouthWest - Virgin Air
Patek Philippe - Swatch
Cuisinart – Nespresso
Bentley – Cadillac
Vertu – Nokia
AT&T vs. SKYPE
Standard Coffee Maker vs.
Keurig
Nespresso…
http://www.youtube.com/watch?v=DfyeXrdZZ
1o
Swatch vs. Movado…
Super high-end
Summary
•
•
•
•
•
•
•
Value Proposition
Market Segment
Value Chain Structure
Position in the Value Network
Revenue Generation and Margins
Competitive Strategy
Stage of Development
Thank you
Richard Kivel
kivel@mit.edu
Twitter: @kivel1