MGN815: BUSINESS MODELS

AJAY CHANDEL
LEARNING OUTCOMES

Towards the end of this Lecture, You should be able to:

Understand the importance of creative imitation and recombination as a mean of Business

Model Innovation

Identify & exploit New Business Model Opportunities

Analyze existing Business Model Ecosystem to create New Business Models
CREATIVE IMITATION AND THE IMPORTANCE OF
RECOMBINATION

Innovations are often variations on something that has existed elsewhere – in

another industry, market or context.

There is no need to reinvent the wheel with every project and every innovation
initiative.

Research has shown that about 90 per cent of all successful business model
innovations recombine existing business model elements. 

The innovation lies in the understanding, translation, recombination and

transfer of the successful patterns to one’s own industry. 

This is not as easy as a simple copycat, but it enables a company to learn from
others and thereby reinvent its own industry.
TRY TO PERFECT IT THOUGH..!!
A TYPE OF BUSINESS MODEL WHEREIN A CUSTOMER PAYS
ON RECURRING BASIS IS KNOWN AS:
A. Freemium Based Model
B. Subscription Based Model
C. Loss leader Based Model
D. Brick& Mortar Based Model
E. None
MATTER BOX
WHICH OF THE FOLLOWING IS AN EXAMPLE OF "RAZOR &
BLADE" BUSINESS MODEL:

A. Gillette
B. Nestle Nespresso
C. Nestle BabyNes
D. Apple iTunes
E. HP
Razor-Blade Business Model
 STRATEGIES FOR NEW BUSINESS IDEAS
1. Transfer: An existing business model is ported to a new industry (e.g. Razor and Blade
to the coffee industry). Most companies use this strategy.
• Major advantages: Other companies serve as blueprints and their mistakes can
be avoided, enabling a company to become an innovation leader in an industry.
• Major challenge: leaving enough room for experimentation and adaptation.
 STRATEGIES FOR NEW BUSINESS IDEAS

2. Combine: Transfer and combine two business models. Especially innovative companies

can even use three business models simultaneously (for example, Nestlé uses the Razor and
Blade, Lock-in and Direct Selling patterns for Nespresso).
• Major advantage: Synergies decrease the likelihood that competitors will imitate your
business model. 
• Major challenge: Planning and execution become highly complex.
 STRATEGIES FOR NEW
BUSINESS IDEAS

3. Leverage: A company uses a successful business model for another product

range (e.g. from Nestlé Nespresso to Nestlé Special.T and Nestlé BabyNes). Only the most
innovative businesses can pull this off.
• Major advantages: Ability to capitalize on experiences and synergies; manageable risk.
• Major challenge: Balancing change and stability.
 Who? (customers) What? (value proposition)
• What customers and customer segments do we • What customer problems do we solve and what needs do we meet?
mainly serve? • What are the products and services we put in place to accomplish
this?
• What kinds of relationships do our customers
expect and how do we maintain them? • What is the perceived customer value? Usually this is not the same
thing as a product or service’s technical specifications.
• Who are our most important customers?
• What value or benefit do we create for customers? How do we
• Who are the other important stakeholders that communicate it?
need to be considered? • How do our offerings differ from those of our competitors? What
alternatives do customers have?
• What distribution channels do we use to serve our
customers? • Does our current business model meet our customers’ needs fully?

• Who influences our customers (opinion leaders,

stakeholders, users)?
• Do different departments address the same
customer segments differently?
 How? (value chain) Why? (profit mechanism)

• What key resources are behind our offerings • Why will the customer pay for our product or service?
and value proposition (e.g. physical, labor, • What are our main sources of income?
financial resources, intellectual property)? • How is the income generated? What are customers willing
• What competencies and key activities do we to pay for?
need? • What are our main costs and the most significant cost
drivers?
• Does our value chain make full use of our core
competencies? • What are the main financial risks in our current revenue
model?
• Who are our most important partners? What is
their relation to our business and what do they
bring us?
• Who are our most important suppliers and
partners and what do they contribute?
UNDERSTANDING THE
IMPORTANT ACTORS Largest Coffee-House Chain
on planet is:
Customers
A. Starbucks
• Existing

• Potential
B. Costa-Coffee

• Ex-customers C. Barista
• Competitors' customers D. Tim Horton's
• Non-users
________ INVOLVES OBTAINING WORK, INFORMATION, OR OPINIONS FROM A
LARGE GROUP OF PEOPLE WHO SUBMIT THEIR DATA VIA THE INTERNET,
SOCIAL MEDIA, AND SMARTPHONE APPS.
a) Crowdsourcing
b) Crowdfunding
c) Crowdcoding
d) Brainstorming
WORLD RENOWNED “CONNECT & DEVELOP”
INITIATIVE BELONGS TO:
A. P&G
B. ITC
C. HUL
D. None
Partners
COMPETITORS
 ANALYZING
INFLUENCING
FACTORS
 IDEATION

Similarity Approach Confrontation Approach

1. Identify similar industries 1. The first step involves the selection of

six to eight patterns from unrelated
2. Identify patterns in identified industries
industries.
3. Apply the identified patterns to your own
2. Next, challenge your business model
business model
with the patterns that have been
4. Should you fail to find a viable idea for selected.
business model innovation at the first
3. If you do not have enough good ideas
attempt, repeat the process.
after a first run, simply repeat the
above steps using different business
models as an impetus.
NABC APPROACH TO IDEA GENERATION