Master Class:

Business Modeling
Prof. Alon Rozen ENPC MBA Paris 29 May 2013

Biz model: the Heart of Any Business

Prof. Alon Rozen 2013

Business modeling
Representing how a company orchestrates diverse activities to:

(1) deliver value

(2) to customers (3) in a sustainable manner.

Prof. Alon Rozen 2013

Business model vs Strategy

There is a general confusion between the

notions of business models and strategy.

Business Model

Strategy

Focus = value orchestration

Prof. Alon Rozen 2013

Focus = outdo competitors

Business Modeling (made simple)

1/ Create a model 2/ Test it 3/ Revise

Narrative Test

Numbers Test Does the story make cents?

Does the story make sense?

Prof. Alon Rozen 2013

Why is the biz model so important?

If done right
Creates a virtuous cycle that is difficult to copy

Generates super-profits and a competitive moat

Ex. Apr 23: Apple sees profits fall for first time in a

decade but cash pile rises to $145bn

If done wrong:
It doesnt make sense, cents or profits It is not sustainable Ex: May 9: Sony makes 1st net profit in 5 years
Prof. Alon Rozen 2013

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Prof. Alon Rozen 2013

Business Model - examples

Subscriptions (gym, magazine, public transport, cinema)
Razor & blades (razors, printers, cell phones) Bricks & Clicks (retail + online) (Gap, FNAC, Apple) Loyalty (frequent flyer miles) Industrialization of services (restaurant tickets, vouchers) Low-cost (EasyJet, LIDL, IKEA) Crowdsourcing - (mymajorcompany, Kickstarter) Freemium (free+paid services) (online newspapers)
Prof. Alon Rozen 2013

Modern business model = Freemium

Freemium = free + premium
End-user is given a free hook and then sold

(upsold) to paid extras (e.g. apps)

The Global Guru (financial newsletter)

Free newsletter (200,000 subscribers)
Paid newsletter $100/year (15,000) Premium newsletter $1000/year (1,000)

Prof. Alon Rozen 2013

One term, many approaches

Geoffrey Moore Volume- or complexity-based models
Alexander Osterwalder Business model canvas Ash Maurya Lean business model canvas Alon Rozen Business model worksheet
Prof. Alon Rozen 2013

Meta Business Model Worksheet (A. Rozen)

Prof. Alon Rozen 2013

Business Modeling: your turn! Cacau Show

Growth model How will the business grow? Speed? Scalability? Organic growth or M&A? Selffinanced or new investment needed? Sales & Marketing model

Customer model Who are the customers? Who are the end-users? Early adopters?

Revenue model How is revenue generated who pays what, when?

Volume-based Complexity-based Mixed

Business Model

Cost model What are the main costs? Are costs mostly variable or fixed? How do they scale?

Approach to sales and marketing? Sales model? Distribution? Marketing model?

General description of the business model including the 6 Ws (what, who, where, how, when, and why

Margin model A high margin or low margin business by nature? Margin structure?

Working K model Operating model What type of Cash positive operations? Logistics? Alon Rozen 2012 business? Cash flow Outsourcing? HR? issues (CAPEX, OPEX? CCC)?

Business modeling: old and new

Deconstruct an

existing business
Model a business

from scratch: start-ups

Prof. Alon Rozen 2013

Biz model description: Cacau Show

Cacau Show operates a volume-based business model by which it sells branded chocolate to its franchisees, to department stores and, recently, to supermarkets (what) indirectly to mass-market class C and even B consumers (who), using in-store direct sales via franchises (captive market) and intermediated distribution via supermarkets and department stores (how & where). This allows Cacau Show to optimize inventory (a base of guaranteed sales) all year long and maximize sales during peak seasons (Easter) (when), thus allowing Cacau Show to practice low margins while maintaining healthy cash flow, strengthening the brand, attracting new franchises (+franchise management fees) and easily fund future growth (why).
Prof. Alon Rozen 2013

Biz model: a truly key success factor!

Biz model optimization is a KSF! Two types of successful biz model:
Simple and efficient Innovative

The true heart of any business

A weak heart means a weak business Even if it looks healthy!

But no magic business models

They have to evolve over time!

Thank you!