Business

Models

Dr. Daniela Ruiz Massieu

 In this session we will learn

What business models are

A few Frameworks
Key elements of Business Models

Considerations to choose a Business model

Overall objectives:
1. Learn about the key elements of a business model
2. Choose a business model for your business idea 2
What is a Business
Model?
 Business Model…..what is it?
In an entrepreneurial context, a business model is an integrated array of
distinctive choices specifying a new Venture’s unique value proposition and how
it will configure activities to deliver that value and earn sustainable profits.
A business model:
▪ Illuminates a new venture’s path to economic self-sufficiency
▪ Forces a realistic appraisal of the gap between available and required resources
▪ Stimulates creative thinking about ways to reduce resource requirements
▪ Makes explicit the key assumptions in a new venture’s profit-making logic

4
Source: Business Model Analysis for Entrepreneurs. Thomas Eisenman. Harvard Business School
Multiple Business Models Options for every idea

vs.
Spend time designing
your business model;
it is extremely difficult
to change it once you
vs. have established it

vs.
vs.
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Frameworks
Multiple frameworks to design a Business Model
Disciplined Entrepreneurship: 24
Steps:
Business Model Canvas Lean Canvas

Alexander Osterwalder Adapted from Alexander Osterwalder by Ash Maurya

7
Bill Aulet
 Business Model Canvas

WHAT?

HOW? WHO?

Profitability ?
8
https://www.strategyzer.com/canvas
9
 Lean Canvas

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https://leanstack.com/leancanvas
 11
Source: https://litslink.com/
 Disciplined Entrepreneurship: 24 Steps

Step 15!!! 12
Key Elements of a
Business Model
 Key Elements of a Business Model
It doesn’t matter which framework you use all share key elements to design a
business model

1. Who is your customer / Customer segment

2. Value Proposition
3. Distribution Channels
4. Resources
5. Monetization

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Who is your
customer
 Who is your Customer / Customer segment
1.
Customer
segment

Develop a well-defined Target

Customer profile. This describes
the buyer/user* in the market
segment you have chosen to focus
on. It is a general description of the
group but specific enough so that it
is meaningful.

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Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
 Profile a Persona
1.
Customer
segment

What? Identify one actual real end

user in your beachhead market
that best represents your end user
profile

What are your customers’

Why? Will help you see the world highest priorities?
through the eyes of the customer! What are your customers
trying to achieve when they
Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet. use your product/Service? 17
 Step 1: Market Segmentation Exercise
1.
Customer
segment

• Make a list, via brainstorming, identify as many (more is better) of the following as possible in 5
minutes
• Do not worry if they are good or not – and crazy ideas are welcome to open people’s mind
• Do NOT worry about solution, just get who would benefit from this (i.e., the specific market
segment)
• Be fast and high volume

General Description of Mkt End User What would they use it for? General benefits
Segment

The more the better!!!

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 Next Exercise: Narrow the Field How do You Chose Them?

• List your top 3 candidates • Personal filter

1. _________________________ • Technology fit filter (i.e., competitive
2. _________________________
strength)
3. _________________________
• Market attractiveness
• Odds of success
• Strategic value
• But it was not really a detailed analysis …

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 Knowing the Customer is NOT enough
1.
Customer
segment

You have to know WHAT are your customers’

problems, and HOW to solve their problems

Problem
20 Solution

Problem-solution fit 20
Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
 1.
Customer
segment
How are you going to know your customers?

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Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
Value Proposition
 2.
Value
Proposition
Value Proposition
“Customers”

Understand, really
understand, what the
customers need, want,
desire.

“Differentiators”
Recognize one or two
things that your business
is going to do better “Problem & solution”
(Aligned with customer’s What is the problem you
priorities). Identify what are solving? What is the
the current solutions (the solution you are
competition!) are doing proposing?
wrong.

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Source: Adapted from Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
 2.
Value
Differentiators: Recognize one or two things that
your business is going to do better
Proposition

More
Easier
More Variety Better
Faster Accessible quality
More
Exclusive More Less
Simpler More Efficient Time
convenient
But…….these must be aligned with the customers’ highest priorities 24
 2.
Value
Proposition
Differentiators: Identify what the current
solutions are doing wrong
(A few examples)

Think of the early

days…. vs.

vs.

vs.
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 Value
Proposition
2.
Differentiators: Chart your competition
Don’t forget to use your customer’s perspective!

Your startup Your startup Competitor 1 Competitor n

Customer’s priority #1

(Logo) (logo) (logo) (logo)

Attribute 1
Attribute 1

Competitor 1
(Logo)
or (Customer’s
priority)
Attribute 2
Competitor 2
(Logo)
(Customer’s
priority)
x
Competitor n Attribute 3
(Logo) (Customer’s
priority)
x x
- Attribute 2 +
(Customer’s priority #2)

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 2.
Value
Proposition
Differentiators: Chart your competition
Don’t forget to use your customer’s perspective!

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 2.
Value
Proposition

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 Quantify the Value Proposition
2.
Value
Proposition

How much value are really you bringing to the customer?

1. Take your persona’s priorities and think how to measure them

quantitively, and what units to measure it in.

2. Take that quantitative measures and map out how the persona
currently operates in the “as is state”.

3. Define the possible state in the same terms as you did for the as-
is state with your proposed new product/service
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Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
 2.
Value
Proposition

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 2.
Value
Proposition Clearly State the Value Proposition

“In a concrete and concise way, summarize the

value your product/service will create for the
targeted end users”

Don’t forget to do it from the customer’s perspective!

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Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
Distribution Channels
 3.
Distribution
Channels
Distribution Channels
Your Channels are customer touch points that play an important role in the customer
experience.

Your Channels describe how your company

communicates with and reaches your
Customer Segments to deliver your Value
Proposition.

Questions to ask
Through which Channels do your customers
want to be reached?
How are they being reached now?
Which ones are most cost-efficient?
How are we integrating them with customer
routines?
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Source: Business Model Generation. Alexander Osterwalder
Resources
 4.
Resources Resources
Your Key Resources describe the most important assets required to make your
business model work.
Every business model requires Key Resources. Your resources allow your enterprise to
create and offer a Value Proposition, reach markets, maintain relationships with Customer
Segments, and earn revenues.
Different Key Resources are needed depending on the type of business model.
Questions to ask
What Key Resources do our Value
Propositions require? $
Our Distribution Channels? Physical Intellectual Human Financial
Property
Customer Relationships?
Revenue Streams?
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Source: Business Model Generation. Alexander Osterwalder
Consider that a Business Model impacts the financial needs and unit
economics of your startup
Think about these different business models:

▪ What would be the requirements in terms of

resources, assets, activities, etc.?
• How does it impact the initial investment and
financial statements? 36
Business Model
 5.
Monetization How is your company going to make money?
Determine the way in which you will get paid and by whom

Business Model = Method to extract Value for your company

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Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
Is it that easy?

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 5.
Monetization

Entrepreneurs must consider different ways to

get paid for the product and choose THE ONE
BEST ALIGNED with all the stakeholder’s
interests, starting with the customer’s
perspective.
WHY? A wise selection of a value extraction of a business model can
dramatically affect the business’ adoption, unit economics, competitive
advantage, and financing.
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Source: Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
 5.
Monetization

Keep it simple!

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 5.
Monetization

“Thinking through some of the common

types of business models helps to get a
better sense of which is the best fit for
your business”
-Bill Aulet-

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 5.
Monetization What is the business model category for each of
these companies? How do they make money?

And so much more!

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 5.
Monetization
There are multiple ways to generate revenues
There are four general categories

Free for the user Value Proposition

Third party pays the bills Pricing Tactics

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Source: Board of Innovation. 30 revenue models. https://www.boardofinnovation.com/guides/revenue-model-cards-b2b/
A few examples…

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Source: Board of Innovation. 30 revenue models. https://www.boardofinnovation.com/guides/revenue-model-cards-b2b/
What business model is right for you?

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 What business model is right for you?
Key Factors in choosing a Business Model
• Who gets the value?
• What is their capacity to pay?
Does the economic buyer favor
one-time charges or smaller • Quantify the value proposition. How
ongoing charges? much does your customer get?
• What are the current standards • When do they get it?
and habits the customers have,
Customer Value Creation • What is the risk that they won't get
and how entrenched are those as much value as they thought?
habits?
• Who will be taking the decision?

Key
• What models do your competitors have? factors
• How entrenched are your competitors?
• Could you gain a competitive advantage • What type of resources do you
with your target customer by using a need to deliver the value
different business model than your proposition?
competitors use? Competition • Physical?
• Could your competitors respond to that? Financials • Intellectual?
• How difficult would it be for them to do • Human Financial? How will the
so? unit economics be affected:
LTV? CAC?

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Source: Adapted from Disciplined Entrepreneurship: 24 steps to a successful startup. Bill Aulet.
 Key Takeaways
1. Make sure you spend time knowing and understanding your customer! Conduct as much
PMR as possible!
2. Spend time on deciding what your business model for value capture will be and don’t just
default on the current standard in your industry.
3. Spend time designing your business model; it is extremely difficult to change it once you
have established it
4. Evaluate your business model through your customer’s perspective.
5. Consider testing different options before you settle in on the business model
6. Identify your value proposition, aligned with the customer’s highest priorities
7. The business model you choose will directly impact the financing needs for your
company. Different Key Resources are needed depending on the type of business model
and thus, the initial investment is impacted too.
Teamwork
 Deliverables: 6 slides
1. Briefly describe your business idea (1-2 sentences)
Worksheet 1
2. Clearly state the problem you are trying to solve
Market 3. Define your customer segment (you have a few options
segmentation
exercise from exercise 1), AND describe who is your primary
Worksheet 2
customer
4. State your value proposition and how exactly your product
will create value for your customer.
Worksheet 3 5. Competition chart. What business models do your
competitors use?
6. Identify your business model: the way your company will
make money
Notes:
-The worksheets are just guides to help you with the process. You do not have to present the worksheets, just the slides. 50
-Don’t worry about designing your slides. Focus on the content!
Worksheet 1

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 Market Segmentation Exercise
1.
Customer
segment

• Make a list, via brainstorming, identify as many (more is better) of the following as possible in 5
minutes
• Do not worry if they are good or not – and crazy ideas are welcome to open people’s mind
• Do NOT worry about solution, just get who would benefit from this (i.e., the specific market
segment)
• Be fast and high volume

General Description of Mkt End User What would they use it for? General benefits
Segment

The more the better!!!

52
 Next Exercise: Narrow the Field How do You Chose Them?

• List your top 3 candidates • Personal filter

1. _________________________ • Technology fit filter (i.e., competitive
2. _________________________
strength)
3. _________________________
• Market attractiveness
• Odds of success
• Strategic value
• But it was not really a detailed analysis …

53
Worksheet 2

54
Worksheet 3

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