BUSINESS MODEL & A BUSINESS CASE

Presented By Karanveer Singh Saurabh Thakral Shweta Rani Sweta Sharma Soumya Ranjan Dalai Archit Malhotra

PRN 12020541103 12020541127 12020541131 12020541139 12020541148 12020541154

Business Model

What is a business model?

A business model involves: 1. The products and services a firm offers 2. The infrastructure and network of partners 3. The customer relationship capital 4. And the financial aspects

We define a business model as consisting of two elements: (a) what the business does, and (b)How the business makes money doing these things What does it do? It provides a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets.

Types of business models

The Business Model Canvas (Osterwalder & Pigneur) The Four-Box Business Model (Johnson) The STOF model (Bouwman, De Vos & Haaker) Business Model Schematics (Weill & Vitale) Technology/market mediation (Chesbrough & Rosenbloom) Entrepreneurs business model (Morris, Schindehutte & Allen) e3-value (Gordijn & Akkerman)

The Business Model Canvas (Osterwalder & Pigneur)

1. The Business Model Canvas is design- and innovation-oriented.
2. Osterwalder and Pigneur stress the role of design in business to imagine that which does not exist and want to offer support in the form of design tools and techniques. 3. They address a number of design techniques and tools: customer insights, ideation, visual thinking, prototyping, storytelling and scenarios. 4. Visualisation also allows for clearer discussions and changes because the model becomes more concrete and tangible.

The Four-Box Business Model (Johnson, 2010)

Assumptions

Knowledge
1. Four-Box Business Model focuses on companies entering the white space where there is a poor fit with the current organization and where new customers or existing customers served in fundamentally different ways are targeted. 2. Four Box business model should provide a structure to reveal and categorize all of the issues that must be must be addressed in the white space where, relatively speaking, assumptions are high and knowledge is low.

 An offering that helps customers more effectively, reliably, conveniently, or affordably solve an important problem (or satisfy a job-to-be-done) at a given price

Revenue Model Cost Structure Target Unit Margin Resource Velocity

VALUE PROPOSITION

KEY PROCESSES

People Technology Products Facilities Equipment Funding & Brand

PROFIT FORMULA

KEY RESOURCES

Processes
(Design, product development, sourcing, manufacturing, marketing, hiring & training, IT)

Business rules & success metrics Behavioural Norms

Comparison of the two models

Business Model Canvas makes the use of a visualization template which is not the case for the Four-Box Business Model. This visualization is a major strength when it comes to designing and communicating business models.

Johnson positions business rules, behavioral norms and success metrics as part of the key processes and also sees them as connecting the boxes of the business model and keeping it in proper balance. They ensure that the customer value proposition can be delivered in a repeatable and predictable way while fulfilling the profit formula. This links the business model to the day-to-day operations.

The Current Scenario

Fierce competition from cable companies Cable companies entering into Telcos domain

80% of large European telecom operators looking into providing IPTV Telcos to compensate for falling revenues

They can leverage on brand equity and offer bundled services Unclear IPTV Business model

The STOF Model

Successfully designed business models for mobile services, insurance intermediaries & ecommerce How a group of organizations can create and capture value form innovative services 4 domains External factors

External Factors
Technological Drivers
Increase in effective distribution capacity Increase in the ability to process user feedback Increase in the storage and processing power controlled by viewers Separation of applications from transport

Market Drivers and Conditions

Market demand Convergence of the information, telecommunication and TV industries Competition

Regulatory Drivers

Spectrum scarcity to abundant channels Dumb to intelligent terminals

IPTV Business Model (Utilizing STOF Framework) SERVICE DOMAIN

SERVICE DOMAIN
Description of a firms service provision
Specific Market Segments & Customers

Telecom operators perspective: Need for value proposition Indicate Technical & Financial feasibility Market Analysis to understand Customers Minimize Gap between Perceived & Delivered

Expected Value to IPTV Customers

Delivered Not exceed Tech & Fin Capability of Organization

Telcos can Enhance services & meet expectations by: Adding more channels Adjusting tariffs Defining KPIs & KQIs Improving user-friendliness

Resources & Finances required to deploy IPTV Services by Telcos, the three possible types of leverage:1) Bundling of video services with broadband & Voice 2) Offering VAS (e.g. Interactive services, VoD, PVR) 3) Attractive service portfolio - exclusivity or long tail niche channels

Compete with Satellite & Cable IPTV as Mass Market Service Leverage Current Expertise & Customer Loyalty Presence in Voice & Broadband Arena

IPTV Business Model (Utilizing STOF Framework) TECHNICAL DOMAIN

TECHNOLOGY DOMAIN (Area of Functionality) TRANSPORT
ACCESS NETWORK

MIDDLEWARE
VIDEO ON DEMAND Influence

CONTENT

BACKBONE

DEVICES

BILLING

CRM

Content Layer

Infrastructure Meeting Transmission Requirements

SERVICE DESIGN

Three Levels Influence the Financial as well as the Organizational Domain

Bandwidth

The telecom operators can use design approaches: Adding large capacity immediately Gradually increasing the capacity

Enhancing Quality of Service: Better transmission infrastructure High End Encoding/Decoding equipment Offer different service levels to different customers.

TELCOS FACE ISSUES

Middleware improvement involves: Integrating platforms Customer relationship management Balance b/w advanced STBs & middleware Cost effective & Stable technology deployment User Friendly Equipment New Revenue Models still a Question Mark?

Quality of Service

Middleware Capability

IPTV Business Model (Utilizing STOF Framework) ORGANIZATION DOMAIN

VALUE NETWORK

Actors
Content Providers Equipment Providers Middleware providers Advertisers Consumers

CONTENT PRODUCE or PURCHASE ??? Maintain the Physical Network, Hardware and Software CORE RESPONSIBILITY: Distribute the content(Video) Middleware provides a seamless service to the end-user System Integrator + Telco Operators = Efficient Middleware

Advertisement small revenue

Vertical Integration

IPTV Business Model (Utilizing STOF Framework) FINANCIAL DOMAIN

TECHNICAL DESIGN CAPITAL COST
Divide over actors according to

OPERATION COST
SERVICE REVENUE SOURCE

PERFORMANCE INDICATORS

FINANCIAL ARRANGEMENT Co-Determine

Divide over actors according to

REVENUE COMPETITION PRICING MODEL

RISK

Co-Determine
FINANCIAL PERFORMANCE : Result of COST & REVENUE PRICING depends on: Market Competition Operational Costs Company Strategy FIXED COST : Technical & Service design High availability : High end Servers Interactive Services: Network Equipment

TARIFFS
Available Models : Flat Rate (Subscription) Pay-per-View Advertising (VoD) Customization & Personal Services (Future scope)

Design Issues and Trade-offs (1 of 2)

Service Design
Service Design issues Service Domain Other Domains

Service Bundling
Values added services Current portfolio

Triple play, quartet play

New and unique services

Complex organization structure

Large investments and risk of failure

Content through only available platform Requires cost-effective network and advanced middleware complex organization arrangement

Organizational Design
Organizational Design issues Organization domain Other domain

Vertical Integration
Horizontal Integration

Vertical integrated firm

Horizontal integrated firm

Bundling service
Cost revenue sharing

Technical Issues
Technical design issues Bandwidth Quality of Service Technical domain Higher Bandwidth High QoS Other domain Large investment on Infrastructure Large investment or extra customization

Middleware capability

Extensive capability for interacting, conditional access, security, CRM

Large investment or low revenue generation

Financial Design
Financial Design issues Revenue/cost sharing Finance domain Other domain Horizontal integration Content portfolio Middleware capability

Revenue model

Value added service Content portfolio Horizontal/Vertical Integration

IPTV BUSINESS MODEL SCENARIOS

Scenario 1: Telecom operators Mammoth Scenario 2: Head- to- head competition Scenario 3: Market deadlock Scenario 4: Back to basics

SCENARIO DIMENSIONS, SCENARIOS & CRITICAL ISSUES

SCENARIO 1: TELECOM OPERATORS MAMMOTH

MEASURES CRITICAL ISSUES/ CHALLENGES

Introduce bundled products Horizontal integration Pricing strategy: Aggressive approach

Limited resource Co-ordination between newly established unit & other unit Seamless bundles & efficient billing system

SCENARIO 2: HEAD- TO- HEAD COMPETITION

MEASURES CRITICAL ISSUES

Operators able to satisfy peoples individual choices & provide value in the long-tail IP- based distribution technology

Ability to create content diversity

High distribution cost

SCENARIO 3: MARKET DEADLOCK

Several large merger deals create natural monopolies. Regulators propose bringing back strict anti-trust policies. Cable and satellite companies take advantage of the regulatory environment. They consolidate their businesses and become dominant and vertically integrated national players.

In this scenario, consumers are already quite experienced with digital TV and they are interested in new services.

CHALLENGES
Hard to generate profit for telecom operators in a stagnating market.

The key critical design issue has to do with providing new value-added services.
Conflict with content oriented firms in case they open up long tail strategy for value added services (e.g. :- PVR services).

MEASURES
To embed advertisements in programs that consumers are willing to watch.

Provide entertaining or informative advertising that consumers do not want to miss.

Reward consumers who watch advertisements. Telecom operators can also agree to tolerate consumers copying contents and avoiding advertisements if the value-added services manage to attract enough new subscribers.

SCENARIO 4: BACK TO BASICS

In this scenario, regulators adopt strict anti-trust policies toward the big telecom operators in the market. Several vertically integrated and global companies dominate the television market. Most consumers are satisfied with the television services currently provided by cable and satellite companies. There is little demand for interactive services and internet TV.

Consumers have decided to use bundling services for reasons of convenience and to facilitate easier configuration.

CHALLENGES
In this scenario, regulatory barriers and consumer indifference make it hard for telecom operators to offer IPTV services. Bundling may still be an effective strategy, however it will be difficult to persuade consumers to switch from cable companies to telecom operators. The potential market is limited.

The content supply side is dominated by several vertically integrated global companies.

MEASURES
To make better use of the existing technologies, services and resources that are there to support IPTV development. Better program quality and customer service.

Secondly, telecom operators should leverage their customer base in the broadband and telephony market.
Thirdly, they can create complementary programs and content on the television and broadband platforms.