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EMC - Handout - Week 1 - AC - 2020-2021
EMC - Handout - Week 1 - AC - 2020-2021
and Startups
Andre Calmon
Assistant Professor of Technology and Operations Management
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Outline of the Week
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Traditional View of Innovation
New technology
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Sources:
1. TechCrunch: https://techcrunch.com/2017/08/25/business-models-will-drive-the-future-of-autonomous-vehicles/
2. Wall Street Journal: https://www.wsj.com/articles/real-estate-firm-says-malls-need-a-new-business-model-1504640111
3. Harvard Business Review: https://hbr.org/2016/07/how-chinese-companies-disrupt-through-business-model-innovation
4. Financial Times: https://www.ft.com/content/381e27ee-c685-11e6-8f29-9445cac8966f
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What is a business
model ?
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There Are Many Definitions of a “Business Model”…
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There Are Many Definitions of a “Business Model”…
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A Few Famous Innovative Business Models
Toyota
Zara
Ford
Image sources:
1. Ford Model T: https://en.wikipedia.org/wiki/File:1910Ford-T.jpg
2. Toyota Model AA: https://www.autoevolution.com/news/jay-leno-drives-first-toyota-ever-the-1936-aa-video-50625.html
3. Zara store: http://www.lagazzettadelmezzogiorno.it/news/home/743355/Aperti-gli-store-Zara--protesta.html
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There Are Many Definitions of a “Business Model”…
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What is a
startup ?
A startup is a temporary
organization that exists to
find a business model that
is scalable
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Finding a Scalable Business Model Is Challenging
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Analysing Business Models
First steps
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Value Creation Analysis
Identify points of comparison:
• Alternative business models
• Next best option for customers
• Organization with closest Demand side analysis: Why will customers
operational systems purchase your product or service rather
• Other industries where the than other products or services? What are
business model works the risks for these customers?
02 04
01 03 05
Use Business Model Use the BMC to map the difference Profitability and risk analysis:
Canvas (BMC) to map between the business model and the • Will you be able to provision the promised
the business model points of comparison. You should do product in a profitable way? Is the business
this for each of the organizations model more profitable than alternatives?
identified in the previous step • How does the business model manage the
consumer's risks?
• What are other big risks for this business
model? How can you manage or mitigate these
risks?
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Business Model Canvas
Source: https://assets.strategyzer.com/assets/resources/the-business-model-canvas.pdf
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Source: https://hbr.org/2013/05/why-the-lean-start-up-changes-everything
Copyright © INSEAD 2020/2021. All rights reserved. These materials are prepared by INSEAD for academic usage only. These materials may not be reproduced, re-distributed or used in any way whatsoever without formal written authorization from INSEAD.
Using the Business Model Canvas to Plan a Startup
C ustomer segment
For whom are we creating value?
Who are our most important customers?
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
V alue propositions
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
Newness
Performance
Customisation
“Getting the Job Done”
Design
Brand/Status
Price
What bundles of products and services are we offering to each Cost Reduction
Customer Segment? Risk Reduction
Which customer needs are we satisfying? Accessibility
Convenience/Usability
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Business Model Canvas: Demand Side
C ustomer relationships
What type of relationship does each of our Customer Segments
expect us to establish and maintain with them?
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
How costly are they? Co-creation
C hannels
Through which Channels do our Customer Segments
want to be reached?
Awareness?
Evaluation?
Purchase?
Delivery?
Which ones work best? After sales?
Which ones are most cost-efficient?
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Business Model Canvas: Demand Side
R evenue streams
For what value are our customers really willing to pay?
For what do they currently pay?
How much does each Revenue Stream contribute to overall revenues?
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Business Model Canvas: Supply Side
K ey resources
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Physical
Intellectual (brand
patents, copyrights, data)
Human
Revenue Streams? Financial
K ey activities
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Production
Problem Solving
Platform/Network
Customer Relationships? Revenue streams?
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Business Model Canvas: Supply Side
K ey partnerships
Who are our Key Partners?
Who are our key suppliers?
Motivations for Partnerships:
Optimisation and economy
Reduction of risk and uncertainty
Acquisition of particular resources
Which Key Resources are we acquiring from partners? and activities
Which Key Activities do partners perform?
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Business Model Canvas: Supply Side
C ost structure
What are the most important costs inherent in our business
model?
Which Key Resources are most expensive? Typical Elements:
Which Key Activities are most expensive? • Fixed Costs (salaries, rents,
utilities)
• Variable costs
Is your business more: • Economies of scale
• Cost Driven (leanest cost structure, low price value • Economies of scope
proposition, maximum automation, extensive
outsourcing)
• Value Driven (focused on value creation, premium value
proposition)
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Origins of the Auto Industry
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Image source: https://en.wikipedia.org/wiki/Henry_Ford#/media/File:Henry_ford_1919.jpg
Who
Is This Man ?
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Value Creation Analysis of Ford’s Business Model
Identify points of comparison:
• Alternative business models
• Next best option for customers
• Organization with closest Demand side analysis: Why will customers
operational systems purchase your product or service rather
• Other industries where the than other products or services? What are
business model works the risks for these customers?
02 04
01 03 05
Use Business Model Use the BMC to map the difference Profitability and risk analysis:
Canvas (BMC) to map between the business model and the • Will you be able to provision the promised
the business model points of comparison. You should do product in a profitable way? Is the business
this for each of the organizations model more profitable than alternatives?
identified in the previous step • How does the business model manage the
consumer's risks?
• What are other big risks for this business
model? How can you manage or mitigate these
risks?
Copyright © INSEAD 2020/2021. All rights reserved. These materials are prepared by INSEAD for academic usage only. These materials may not be reproduced, re-distributed or used in any way whatsoever without formal written authorization from INSEAD.
01 Step 1: Business Model Canvas
Fast
Add-ons and
accessories
Cost driven:
Car sales
Raw material costs
Manufacturing costs (tools, salaries, training)
Spare parts & maintenance
Distribution costs
Economies of scale and scope
Image sources:
1. Benz & Cie.: http://emercedesbenz.com/May08/14_001142_Celebrating_100_Years_At_The_Mercedes_Benz_Manheim_Plant_Mercedes_Benz_Plant_In_Manheim_Waldorf.html
2. Horse and buggy: https://en.wikipedia.org/wiki/Horse-drawn_vehicle#/media/File:Horse_and_buggy_1910.jpg
3. DAC delivery truck: https://en.wikipedia.org/wiki/Detroit_Automobile_Company#/media/File:Detroit_Automobile_Company_Delivery_Truck_1900.jpg
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03 Step 3: Mapping Differences
Cleaner (?)
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05 Step 5: Profitability and Risk Analysis
"Any customer can have a car painted Assembly Line Production Vertical Integration
any color that he wants so long as it vs Artisanal Production
is black"
Image sources:
1. Ford Model T: https://www.britannica.com/technology/Model-T
2. Ford Model T production line: https://squiretothegiants.wordpress.com/tag/model-t/
3. Newspaper header: http://www.autonews.com/article/20140106/OEM01/140109924/remembering-henry-fords-$5-day-for-line-workers
Copyright © INSEAD 2020/2021. All rights reserved. These materials are prepared by INSEAD for academic usage only. These materials may not be reproduced, re-distributed or used in any way whatsoever without formal written authorization from INSEAD.
05 Step 5: Profitability and Risk Analysis
Focus on cities
Reduce cost
Continuous
Employee retention experimentation and
scientific management
Image sources:
1. Newspaper header: http://www.thetruthaboutcars.com/2014/10/henry-ford-paid-workers-5-day-wouldnt-quit-afford-model-ts/
2. Assembly line: https://commons.wikimedia.org/wiki/File:Ford_assembly_line_-_1913.jpg
3. Henry Ford short bio: https://en.wikipedia.org/wiki/Henry_Ford
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Wrap-up: Value Creation Analysis
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Disintermediation
The innovation
• Cut out sales channel – Sell direct or
through alternate channel
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Marketplaces/Intermediaries
Price Regulation
Haggling, prices adjust to match supply with demand
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The Marketplace that Started It All
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Sellers Buyers
Product A Product A
50% 50%
Product B Product B
50% 50%
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Sellers Buyers
Product A Product A
50% 50%
Product B Product B
50% 50%
…
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Role #1: Increase Incidence of Supply-Demand Matches
(due to risk pooling)
70
60
50
0 10 20 30 40 50
Size of Market
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Marketplaces/Intermediaries
Price regulation
Haggling, prices adjust to match supply with demand
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Role # 2: Create Trust in Transactions
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Recap
Price regulation
Haggling, prices adjust to match supply with demand
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Wrap-up
Source: https://en.wikipedia.org/wiki/File:1910Ford-T.jpg
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Wrap-up
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Wrap-up
Be a system
designer!
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Business Models
and Startups
Andre Calmon
Assistant Professor of Technology and Operations Management
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