Asyma E3 Conference

1. Taking it to the Next Level:
What’s your Business Model
R. Bruce Thurston – Management Resource Services

2. Key Activities Customer
Key Resources Relationships Value
Propositions
Customer
Key Partners
Segments
Channels
Cost Structure Revenue Streams

3. Key Activities –
what it takes to get
the product out to
Key Partnerships – the market; the how
network of suppliers &
partners that surround the
business
Key Resources – the
assets required to
create the product
Cost Structure –
expenses related to
product/service
creation

4. Relationships – going the
Value Proposition – the end extra mile to retain
product; meeting the customer loyalty
needs/demands of the customer
Customer Segments –
who are your customers
Channels – how the
brand gets to the
customer
Revenue Streams – why,
what, how customers are
paying; Cash generation

5. Customer Segment: who are your customer?
Customer Groups represent separate segments if:
– Their needs require and justify a distinct offering
– They are reached through different Distribution
Channels
– They require different types of relationships
– They have substantially different profit abilities
– They are willing to pay for different aspects of the
offer

6. Customers ‐ for whom are we creating value?
Who are our most important customers?
– Mass Market ‐ no distinction between segments
– Niche Market ‐ specialized Customer Segments
– Segmented ‐markets segments with slightly different
needs and problems
– Diversified ‐ two unrelated customer segments with very
different needs and problems

7. Channels: how the brand gets to the customer
Describes how the company communicates with and reaches
its Customer Segments to deliver Value Proposition, the
company’s interface with customers.
Channels serve several functions:
– Raising awareness among customers about a company’s Product
and Services
– Helping customers evaluate a company’s Value Proposition
– Allowing customers to purchase specific products and services
– Delivering a Value Proposition to customers
– Providing post‐purchase customer support.

8. Channels: how the brand gets to the customer
• 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?
• How are we integrating them with customer
routines?

9. Channels: touch points!
Channel Types:
• Own / Partner
– Direct ‐ Sales Force
– Web Sales
• Own Stores
• Indirect ‐ Partner Stores
• Wholesaler

10. Channels: phases
Awareness – How do we raise awareness?
Evaluation – How do we help customers evaluate
our proposition?
Purchase – How do we allow customers to purchase
specific services?
Delivery – How do we deliver a Value Proposition to
customers?
After Sales – How do we provide post‐purchase
customer support?

11. Customer Relations: going the extra mile to
retain customer loyalty
A company should clarify the type of relationship it wants to
establish with each Customer Segment
Relationships can range from automated to personal and
driven by the following motivations:
– Customer Acquisitions
– Customer Retention
– Boosting Sales (Upselling)
The customer relationships called for by a company’s business model
deeply influences the overall customer experience.

12. Customer Relations
• What type of relationship does each of our Customer Segments expect us to
establish and maintain them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of our business model?
Customer Relationship categories:
– Personal Assistance – human interaction, to get help during the sales process or after
purchase.
– Dedicated Personal Assistance – Dedicating a customer rep specifically to an individual client.
– Self‐service – no direct relationship.
– Automated Service – mixes a more sophisticated form of customer self service with
automated processes. For ex. Online personal profiles gives customers access to customized
services.
– Communities – user communities
– Co‐creation – with customers, engage customers in design.

13. Customer Relations
• For what value are our customers really willing to
pay?
• For what do they currently pay?
• How are they paying?
• How would they prefer to pay?
• How much does each Revenue Stream contribute to
overall revenues?

14. Revenue Stream: why, what, how customers
are paying; Cash Generation
If Customers are the heart of each business then Revenue Streams are the
arteries.
A company must ask:
For what value is each Customer Segment truly willing to pay?
Successfully answering this question allows the firm to generate one or more
Revenue Streams from each Customer segment.
Each Revenue Stream may have different pricing mechanisms, such as fixed
list price, bargaining, auctioning, market dependent, Volume dependent,
or yield management.

15. Revenue Stream: two methods
A business model can involve two different types of
Revenue Streams:
• Transaction Revenues resulting from one‐time
customer Payments.
• Recurring revenues resulting from ongoing payments
to either deliver a Value Proposition to customers or
provide post‐purchase customer support.

16. Revenue Stream: two types of pricing
mechanisms
Fixed Menu Pricing:
– Predefined prices based on static variables.
– List Price
– Product Feature Dependent
– Customer segment dependent
– Volume Dependent
Dynamic Pricing:
– Prices change based on market conditions
– Negotiation
– Yield Management – Inventory and timing (airlines)
– Real‐time‐market – supply and demand
– Auctions – Price determined by outcome of competitive bid.

17. Revenue Stream: options to generate revenues
streams
Asset Sale – selling rights to physical property
Usage fee – the more a service is used the more the customer pays.
Subscription fees – selling continuous access to a service
Lending/renting/Leasing – temporary grant someone exclusive rights
to use a particular asset for a fixed period in return for a fee
Licensing – Giving customers the permission to use protected
Intellectual property in exchange for licensing fee.
Brokerage fees – derived from intermediation services performed on
behalf of two or more parties.
Advertising – fees for advertising a certain product, service or brand.

18. Key Resources: the assets required to create
the product/service
• Most important assets required to make a business
model work.
• Key resources can be physical, financial, intellectual,
or human.
• Key resources can be owned or leased by the
company or acquired from key partners.

19. Key Resources: what key resources do our value
propositions require?
Our Distribution Channel?
Customer Relationships?
Revenue Streams?
Key Resources can be categorized as follows:
Physical – Building/Equipment
Intellectual – Brand, proprietary knowledge, patents, copyrights,
partnerships, customer database.
Human – critical in knowledge intensive/ creative industries
Financial – cash, line of credit, stock option pool for key employees.

20. Key Activities: what it takes to get the product
out to market; the how
The most important things a company must do
to make the business model work.
These are required to create and offer a Value
Proposition, reach markets, maintain customer
relationships, and earn revenues.

21. Key Activities: Process Improvement Example

22. Key Partnerships: the network of suppliers &
partners that surround the business
• Describes the network of suppliers and partners that make
the business model work.
• Companies create alliances to optimize their business
model, reduce risk, or acquire resources.
Four types:
– Strategic Alliances between non‐competitors
– Co‐opetition – strategic partnerships between competitors
– Joint Ventures – to develop new businesses
– Buyer‐supplier relationships to assure reliable supplies

23. Key Partners: who are our key partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
Three motivations for creating partnerships:
– Optimization of economy of scale – the most basic form
– Reduction of Risk and Uncertainty ‐ Insurance
– Acquisition of particular resources and activities – rely on other firms
– to furnish particular resources or perform certain activities.

24. Cost Structure: expenses related to
product/service creation
• Describes all the costs incurred to operate the business
model
• Creating and delivering value, maintaining Customer
Relations and generating revenue all incur costs.
• Costs can be calculated easier after defining Key
Resources, Key Activities, and Key Partnerships.
• Some models are more cost‐driven than others, ex.
Low cost airlines.

25. 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?
Two broad classes of business model cost structures:
– Cost Drive – minimize costs where ever possible
– Value Driven – focus on value creation – luxury
Cost Structures have the following characteristics:
– Fixed Costs – remain despite volume produced.
– Variable Costs – vary proportionately with the volume
– Economies of Scale – benefit from large volumes
– Economies of Scope – cost advantage due to larger scope of business

26. Key Activities Customer
Key Resources Relationships Value
Propositions
Customer
Key Partners
Segments
Channels
Cost Structure Revenue Streams

27. Taking it to the Next Level:
What’s your Business Model
QUESTIONS??

28. Taking it to the Next Level:
What’s your Business Model
R. Bruce Thurston – Management Resource Services