Business Models &
Business Model Canvas
ME2603 Entrepreneurship
6.0 credits
2014
Serdar Temiz temiz@kth.se 2014

Serdar Temiz,
temiz@kth.se

Some Questions
• What is Invention
• What is Innovation

Serdar Temiz temiz@kth.se 2013

There are many inventions, but far fewer
innovations.
An invention is a novel idea
Innovation is the commercialization of that
novel idea

Serdar Temiz temiz@kth.se 2013

Types of Innovation
1.
2.
3.
4.

Technology innovation
Process innovation
Product & service innovation
Business Model innovation

Serdar Temiz temiz@kth.se 2014

Process innovation
Implementati
on of a new
or
significantly
improved
production or
delivery
method

Serdar Temiz temiz@kth.se 2013

Technology innovation

Serdar Temiz temiz@kth.se 2014

Product / service innovation

Serdar Temiz temiz@kth.se 2014

Business Model Innovation
It can be, even more, important than tech
innovation!

Serdar Temiz temiz@kth.se 2014

Business Model Innovation
Finding and executing the right business model
can be the only/ main reason of the success

Serdar Temiz temiz@kth.se 2014

What is this?

Serdar Temiz temiz@kth.se 2013

What is this?

Haloid Model 914
Xerox

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Why business models matter?
Joan Magretta

• Who is the customer and what does the customer
value?
• How do we make money from the business?
• How can we deliver value to the customer at an
appropriate cost?
• Writing a new story
• A better way than existing alternatives
• Making the number add up
• Tweaking on the fly based on feedback
Serdar Temiz temiz@kth.se 2013

Business Model Warfare
Langdon Morris

• Business mortality is high
• Technology innovation by itself has rarely
been sufficient to ensure the future.
• Similar products and services
• Advantages resulting from a successful
business models are fleeting. Models need to
be continuously reviewed and updated when
necessary
Serdar Temiz temiz@kth.se 2013

How Business Models Emerge
(1 of 3)

Raw Material

Value Chain
Primary &
Secondary
Activities +
Margin

Product /
Service

– The value chain is the string of activities that moves a
product from the raw material stage, through manufacturing
and distribution, and ultimately to the end user.

Primary activities are directly concerned with the
creation or delivery of a product or service.
Support activities help to improve the effectiveness or
efficiency of primary activities
Serdar Temiz temiz@kth.se 2013

How Business Models Emerge
(2 of 3)

The Value Chain (again)

"Competitive Advan tage: Creating andSustaining superior Performance" (1985).

Serdar Temiz temiz@kth.se 2013

How Business Models Emerge
(3 of 3)

The Value Chain (continued)
– Entrepreneurs look at the value chain of a product
or a service to pinpoint where the value chain can
be made more effective or to spot where
additional “value” can be added.

Serdar Temiz temiz@kth.se 2013

A business Model is..
The business model is a strategic plan to be
implemented through organizational structures,
processes, and systems in order to need
customer needs.

Serdar Temiz temiz@kth.se 2013

Simple Business Model

Value
Proposition

Revenue
Model

Production
Model

Serdar Temiz temiz@kth.se 2013

Delivery
Model

10

Delivery Model

10

Production Model

10

Revenue Model

Value Proposition

Simple Business Model

10

HOW MANY OPTIONS DO WE HAVE?

Serdar Temiz temiz@kth.se 2013

Forces affecting the business model
•
•
•
•
•

Customer needs
Competition
Technological change
Social change
Legal environment

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Source: PwC, The future of mobility, October 2013
Serdar Temiz temiz@kth.se 2013

Basic Business Model Map
Product/Service
Ecosytem

Customer
EcoSystem

Value
Finance

Serdar Temiz temiz@kth.se 2014

There are different type of Business Model Maps

Serdar Temiz temiz@kth.se 2014

By Alexander Osterwalder & Yves Pigneur

Serdar Temiz temiz@kth.se 2014

The 9 building blocks for Business Model
Canvas
1.
2.
3.
4.
5.
6.
7.
8.
9.

Customer Segments
Value proposition
Channels
Customer Relationships
Revenue Streams
Key Resource
Key Activities
Key Partnerships
Cost Structure
Serdar Temiz temiz@kth.se 2014

1. Customer Segment
• For whom are we creating value?
• Who are our most important customers?
• Customer Segments
– Mass Market
– Niche market
– Segmented - related customer segments: frequent
flier program, bank customers with big assets
– Diversified: Unrelated customer segments: Amazon
– Multi sided: free newspaper-readers and advertisers
Serdar Temiz temiz@kth.se 2013

Find a Customer-I
• Why?
• Who is your customer?
Grave, School, hospital, apotek, free
newspaper
• Can everyone be your customer?
• "people who want to buy a flat,"
• "anyone needs job"
• “Everyone who goes to university”
Serdar Temiz temiz@kth.se 2014

Find a Customer-II
• Find a customer for solving a pain
• Use the Customer Profile
• Describe who is making purchasing decision?
IT ? Operations Group? Management?
• Make sure they are happy
• Market is important but 
-do not only think market
• Billion dollar market does not start in few minutes
Serdar Temiz temiz@kth.se 2014

Q’s for Customer
IDENTIFIABLE – what distinguishes them?
MEASURABLE – how many belong to your target
segment?
REACHABLE – how to reach, communicate with each
segment
WILLING– do they want it?
ABLE– they want but can they afford it?

Serdar Temiz temiz@kth.se 2013

Q’s for Customer - Macro Level
•
•
•
•
•
•
•
•
•

Population size
Population character
Disposable income levels
Educational background
Primary languages
Infrastructure
Regulations
Political affiliation
And so on…
Serdar Temiz temiz@kth.se 2013

Keep In Mind -Paradox
• Customer is important but you can not give all
they want
• Learn to stay No,
• Learn to focus
• Learn to ”change and adopt”
• They may not know what they want: buying
process is mysterious

Serdar Temiz temiz@kth.se 2013

2.Value Proposition
• a bundle that meets that meets a customer's
needs or solve his/her problem. 
• benefits can be tangible and intangible
• Reason why customers pick one business or
another.
• can be
– innovative, new disruptive offer
– similar to existing offers but just added feature or
attribute in some sort of way
Serdar Temiz temiz@kth.se 2013

Some Elements that may add to value
•
•
•
•
•

newness
customization
getting job done
support
price

•
•
•
•
•

design
status/ brand
Accessibility
risk deduction
usability

Serdar Temiz temiz@kth.se 2013

2. Value Proposition - Q’s to answer –
•
•
•
•

What pain do we solve for customer?
What do we deliver for customer?
What value do we develop for customer
Which need of customer do we satisfy?

Serdar Temiz temiz@kth.se 2013

3. Channels

Value
Proposition

• Awareness of products
and services,
Evaluation of value
proposition, Purchase,
Delivery, After sales
• Direct: Brick and
mortal stores,
websales, sales force
• Indirect: wholesales
partner stores,

Serdar Temiz temiz@kth.se 2013

Customer
Segment

3. Channels- Qs
• Through which Channels do our Customer
Segments want to be reached?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones work best?
• Which ones are most cost-efficient?

Serdar Temiz temiz@kth.se 2013

4. Customer Relations

Value
Proposition

• Customer
acquisition
• Customer
retention
• Boosting sales
(upselling)

Serdar Temiz temiz@kth.se 2013

Customer
Segment

Example Customer Services
Can you give some example companies?
• (Dedicated)Personal assistance
• Self Service
• Community
• Co-creation
• Automated

Serdar Temiz temiz@kth.se 2013

4. Customer Relationships
• What type of relationship does each of
our Customer Segments expect us to
establish and maintain with them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of
our business model?

Serdar Temiz temiz@kth.se 2013

5. Revenue Streams
• For what value are our customers really willing
to pay?
• One time/ recurring?
• For what do they currently pay?
• How are they currently paying?
• How would they prefer to pay?
• How much does each Revenue Stream
contribute to overall revenues?
Serdar Temiz temiz@kth.se 2013

5.Revenue Streams
Value
Proposition
•
•
Dynamic •
pricing •
•
•
•

• Channels

Asset sale
Usage fee: use more, pay more
Subscription: monthly, yearly
Leasing/Lending/Renting
Licensing: patents, license fee
Brokerage fees
Advertising

Serdar Temiz temiz@kth.se 2013

Customer
Segment
Fixe
d
pric
ing

5.Revenue Streams
Fixe
d
pric
ing

Dynamic
pricing

•
•
•
•

•
Yield management : hotels,
•
airlines
Real-time-market :supply
•
and demand
Auctions Price
•
Negotiation

List price
Product feature
dependent
Customer segment
dependent
Volume dependent

Serdar Temiz temiz@kth.se 2013

6. Key Resources
physical
financial
intellectual
human

Value
Proposi
tion

Key resources can be owned or leased by the
company or acquired from key partners.
Serdar Temiz temiz@kth.se 2013

6. Key Resources
• What Key Resources do our Value
Propositions require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue Streams?
• What physical resources, intellectual,
human, financial resources do we have?

Serdar Temiz temiz@kth.se 2013

7. Key Activities
• What Key Activities do our Value Propositions
require?
• Our Distribution Channels?
• Customer Relationships?
• Revenue streams?
• Production- Microsoft
• Network/Platform: Facebook, ebay, Visa

Serdar Temiz temiz@kth.se 2013

8. Key Partnerships
Why Partnership?
– reduce cost,
– Reduction of risk and uncertainty: Web standards
– Acquisition of particular resources and activities: Nokia
Windows, HTC phones

• Strategic alliances between non-competitors
• Coopetition: strategic partnerships between
competitors
• Joint ventures to develop new businesses
• Buyer-supplier relationships to assure reliable supplies
Serdar Temiz temiz@kth.se 2013

8. Key Partnerships -II
• Who are our Key Partners?
• Who are our Key suppliers?
• Which Key Resources are we acquiring from
partners?
• Which Key Activities do partners perform?

Serdar Temiz temiz@kth.se 2013

9. Cost Structure-I
• Business model Cost Structures:

Premium
Value
Propositions
and a high
degree of
personalized
service
value-driven

cost-driven

minimizing
costs
wherever
possible

Serdar Temiz temiz@kth.se 2013

9. Cost Structure-II
• Cost Structure Characteristics:
Fixed costs

• minimizing costs wherever possible

Variable costs

• Premium Value Propositions and a high
degree of personalized service

Economies of
scale

• average cost per unit to fall as output
risesThe same Distribution

Economy of
Scope

• Channels for different products and
servicesmay support multiple products.
Serdar Temiz temiz@kth.se 2013

9. Cost Structure
• What are the most important costs inherent in
our business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

Serdar Temiz temiz@kth.se 2013

By Alexander Osterwalder & Yves Pigneur

Serdar Temiz temiz@kth.se 2014

Problems with this canvas?

Team, Social Value, Enviromental cost etc.

Serdar Temiz temiz@kth.se 2013

By Alexander Osterwalder & Yves Pigneur

Serdar Temiz temiz@kth.se 2014

By Alexander Osterwalder & Yves Pigneur

Serdar Temiz temiz@kth.se 2014

• Strategic Mission?
• Customer Segments are Hypotesis for startups
• Fits to New and Existing Business but does it
work in Start ups?
• Metrics?
• Competition? Organisational Structure?
• Unfair Advantage over competitors?
Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Mark Johnson

Serdar Temiz temiz@kth.se 2013

Spotify Business Model

Serdar Temiz temiz@kth.se 2013

Business Model Canvas – Spotify- September 2014

Key Partners

Key Activities
•

•
•
•

Labels,
aggregators (e.g merlin
network )
Facebook

•
•

• Automated
Customer
Relationships
service
• self service (FAQ)
• Community forum
• Customer Service

Value Propositions

Keep technology up and
running
Adding more music,
label, artists to Spotify
offering
Launching Spotify in
different countries

• .
• Legal music for free or
minimum payment
• Be social when you listen
• Music based on mood

•
•

Key Resources

•
•
•
•

Music,
Server,
Brand
Employees

• Targeted
advertisement• commercials
between songs:
make listeners
sure to listen

Customer Segments

Listeners

self service : on learning
how ads are located in
the spotify etc.
personal assistance: to
put ad, advertisers
should get in touch
directly

Advertisers

Channels

• Awareness at social
media
• Mobile application
• Desktop application
• Spotify.com

Revenue Streams
• Awareness with social media

Cost Structure

partners (fb, msn)
• Customer center representative

•
•
•

Serdar Temiz

License fee
Salaries
Technology cost

Subscription of unlimited
and premium customers

Stockholm-Sweden
Serdar Temiz temiz@kth.se 2013

Advertisement
revenue

Are we done?

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Business Model Canvas – Spotify- September 2014

Key Partners

Key Activities
•

•
•
•

Labels,
aggregators (e.g merlin
network )
Facebook

•
•

Value Propositions

Keep technology up and
running
Adding more music,
label, artists to Spotify
offering
Launching Spotify in
different countries

•

Customer
• Automated
Relationships
service
• self service (FAQ)
• Community forum
• Customer Service

.

• Legal music for free or
minimum payment
• Be social when you listen
• Music based on mood

•
•

Key Resources

•
•
•
•

Music,
Server,
Brand
Employees

• Targeted
advertisement• commercials
between songs:
make listeners
sure to listen
Can add music to their code

Listeners

self service : on learning
how ads are located in
the spotify etc.
personal assistance: to
put ad, advertisers
should get in touch
directly

Advertisers

Channels

• Awareness at social
media
• Mobile application
• Desktop application
Spotify.com
• •Awareness with social media

partners (fb, msn)
• Customer center representative
Revenue Streams

Cost Structure

•
•

•
•
•

License fee
Salaries
Technology cost

developer.spotify.com/
physical meetups

Subscription of unlimited
and premium customers

????

++?

Serdar Temiz

Customer Segments

Stockholm-Sweden
Serdar Temiz temiz@kth.se 2013

Advertisement
revenue

Facebook’s Canvas?

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

iTune’s Canvas

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Twitter’s Canvass

Serdar Temiz temiz@kth.se 2013

Serdar Temiz temiz@kth.se 2013

Thank you
Serdar Temiz
serdar_temiz
temiz@kth.se

Serdar Temiz temiz@kth.se 2014