Business Model

Jul. 5
Sookmyung Women’s University
Prof. Yoo-Jin Han
 Contents
• Famous Entrepreneurs

• Business Models

• Types of Business Models

• How Business Models Emerges

• Components of Business Model

• Business Model Canvas

 Famous Entrepreneurs: Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
 Famous Entrepreneurs: Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
 Famous Entrepreneurs : Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
 Famous Entrepreneurs : Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
 Famous Entrepreneurs : Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
 Famous Entrepreneurs : Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
 Famous Entrepreneurs : Global

https://ishanmishra.in/the-25-most-famous-entrepreneurs-in-the-world/
https://startupmindset.com/the-40-greatest-entrepreneurs-of-our-time/
Famous Entrepreneurs : Korea
Famous Entrepreneurs : Unicorn Companies in Korea
• Yellow Mobile
• L&P Cosmetic
• Dunamu ---Upbit
• Viva Republica
• Yanolja
• Wemep(WeMakePrice)
• GP Club
• Musinsa
• Aprogen
• SoCar
• Kurly
• Timon
• ZigBang
• CarrotMarket
• Bucketplace
• Ridi
• IGAWorks
• Company A
• Timon
• Carrot Market
• Bithumb
• Megazone Cloud
• With Innovation
• Oasis
• ShiftUp
 Business Models

• Learning Objectives

1. Describe what a business model is.

2. Analyse existing and proposed businesses to determine what

business models they are applying and what business models they
plan to apply.

3. Develop and analyze alternative business models for new

entrepreneurial ventures.
 Business Models
• A startup is a temporary organization in search of a scalable,
repeatable, profitable business model(Blank & Dorf, 2012).

• Today countless innovative business models are emerging. Entirely new

industries are forming as old ones crumble. Upstarts are challenging the
old guard, some of whom are struggling feverishly to reinvent
themselves.

• How do you image your organization’s business model might look two,
five, or ten years from now? Will you be among the dominant players?
Will you face competitors brandishing formidable new business models
(Osterwalder, Pigneur, & Clark, 2010, p. 4)?
 Business Models
• Model
- A model is a plan or diagram that’s used to make or describe
something.
• Business Model
- A firm’s business model is its plan or diagram for how it competes,
uses its resources, structures its relationships, interfaces with
customers, and creates value to sustain itself on the basis of the
profits it generates.
- The term “business model” is used to include all the activities that
define how a firm competes in the marketplace.
 Business Models
• Having a clearly articulated business model is important
because it does the following:
- Serves as an ongoing extension of feasibility analysis. A
business model continually asks the question, “Does this
business make sense?”
- Focuses attention on how all the elements of a business fit
together and constitute a working whole.
- Describes why the network of participants needed to make a
business idea viable are willing to work together.
- Articulates a company’s core logic to all stakeholders,
including all employees.
Types of Business Models: Traditional
Types of Business Models: Contemporary
• Free – the core product is free but derivatives (e.g. data collected from the free
registration and use) are monetized. Example – the business of search engines and
free games and social media networks. The question posed is how can we make a
turnover from a product for free?
• Freemium – The basic product is free, but the upgraded functionalities are with
charge. For example, Spotify. The question posed here is: how can we profit from a
free basic product and charge for premium services.
• Subscription – These refer to software or video streaming products, use of content for
a monthly or annual payment. How can we provide free basic service and charge for
premium services.
• Lock-in – Examples of products and services that provide customers with access to
other services, like better shipping, better video products and streaming and increase
cost of cancellation. For example, Amazon prime. How can we force loyalty from
customers by high changing costs.
• Solution provider - How can we provide complete solutions to clients/customers?
Example, Heidelberger in Germany
Types of Business Models: Contemporary
• Rent instead of buy – Offers customers time-limited usage rights for a modest price. For
example, car rental, computer rentals for long-term period. How can we offer limited
usage rights instead of a product.
• Long tail – How can we provide niche products in large numbers. Example iTunes (buying
individual songs)
• User designed – companies delegate their creative work to their customers. How can we
make our customers invent and sell their products?
• Orchestrator – actively coordinating partners and service providers (outsource) while the
business concentrates in their core competencies. How can we outsource everything
except our core competence?
• Platform business – user groups are brought together to interact with each other. For
example Google, through their search engines bring together users, advertisers, and
websites. E-bay functions as a marketplace for buyers and sellers. How can we bring
market partners together on a platform?
 How business models emerge
• The Value Chain
- 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.
- By studying a product’s or service’s value chain, an
organization can identify ways to create additional value
and assess whether it has the means to do so.
- Value chain analysis is also helpful in identifying
opportunities for new businesses and in understanding
how business models emerge.
 How business models emerge
• The Value Chain
 How business models emerge
• The Value Chain
- 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.
- This type of analysis may focus on:
✔ A single primary activity such as marketing and sales.
✔ The interface between one stage of the value chain and
another, such as the interface between operations and
outgoing logistics.
✔ One of the support activities, such as human resource
management.
 Diversity of Business Models
• There is no standard business model for an industry or for
a target market within an industry.
• However, over time, the most successful business models
in an industry predominate.
• There are always opportunities for business model
innovation.
• Example
- Netflix is an example of a business model innovator.
 Components of Business Model
• Core strategy
- Business mission: A firm’s mission, or mission statement, describes
why it exists and what its business model is suppose to accomplish.
- Product/market scope: A company’s product/market scope defines the
products and markets on which it will concentrate.
- Basis for differentiation: It is important that a new venture differentiate
itself from its competitors in some way that is important to its
customers. If a new firm’s products or services aren’t different from
those of its competitors, why should anyone try them?
 Components of Business Model
• Strategic resources
- Core competencies : A core competency is a resource or
capability that serves as a source of a firm’s competitive
advantage. Examples include Sony’s competence in
miniaturization and Dell’s competence in supply chain
management.
- Strategic assets: Strategic assets are anything rare and
valuable that a firm owns. They include plant and
equipment, location, brands, patents, customer data, a
highly qualified staff, and distinctive partnerships.
 Components of Business Model
• Strategic resources

- Importance of strategic resources -

• New ventures ultimately try to combine their core competencies
and strategic assets to create a sustainable competitive
advantage.
• This factor is one that investors pay close attention when
evaluating a business.
• A sustainable competitive advantage is achieved by
implementing a value-creating strategy that is unique and not
easy to imitate.
• This type of advantage is achievable when a firm has strategic
resources and the ability to use them.
 Components of Business Model
• Partnership network
- Suppliers: A supplier is a company that provides parts or services to
another company. Intel is Dell’s primary suppler for computer chips,
for example.
- Partners: Firms partner with other companies to make their business
models work. An entrepreneur’s ability to launch a firm that achieves
a competitive advantage may hinge as much on the skills of the
partners as on the skills within the firm itself.
 Components of Business Model
• Customer interface
- Target customer: A firm’s target market is the limited
group of individuals or businesses that it goes after or
tries to appeal to.
- Fulfillment and support: Fulfillment and support describes
the way a firm’s product or service reaches it customers. It
also refers to the channels a company uses and what level
of customer support it provides.
- Pricing structure: The third element of a company’s
customer interface is its pricing structure. Pricing models
vary, depending on a firm’s target market and its pricing
Business Model Canvas
 Business Model Innovation
•What is an invention?
A technical concept, development, method or
composition of matter that :
- Is novel, non-obvious and useful
- Reflects creative thinking, makes a distinct contribution
to and advances the science

•Greatest inventions:
light bulb, wheel, computer, Internet, smartphone,
etc.
 Business Model Innovation
• All innovation begins with creative ideas . . . One definition
for innovation is the successful implementation of creative
ideas within an organization…
• Innovation is the process that translates knowledge into
economic growth and social well-being. It encompasses a
series of scientific, technological, organizational, financial
and commercial activities....
• It is the process whereby ideas for new (or improved)
products, processes or services are developed and
commercialized in the marketplace.

INNOVATION = INVENTION +
COMMERCIALIZATION
 Business Model Innovation
Innovation Funnel

Source: Rothaermel (2013)

 Business Model Innovation
Incremental(?) / Radical(?)
Business Model Innovation
<Types of Innovation>
Degree of
Technological What to Innovate
Difficulties/Changes

Incremental Product
Innovation(Low)

Radical Process
Innovation(High)
 Business Model Innovation
Outside-In
CEO
(Open Innovation(e.g. P&G’s Connect & Develop) )
• Customers
Top • Suppliers
Down Director Director Director Director • Government
• Community
• Retired
Manager Manager Manager Manager Manager Manager Manager Manager Employees
:
:
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Other
Companies
Peer-to
-Peer
 Business Model Innovation
<Paradigm Shifts in R&D>

1st Gen. R&D

Technology Push

R&D Market
(R&D Team)

2nd Gen. R&D

Demand Pull

Market R&D
(R&D Team)
 Business Model Innovation
<Paradigm Shifts in R&D>
3rd Gen. R&D
Portfolio

Corporate
Firm R&D Strategy Market
(R&D
team)

4th Gen. R&D

Integrative Activity

Corporate Market
Firm R&D Strategy/
Other
teams Customers
(R&D
team)
 Business Model Innovation
<Paradigm Shifts in R&D>

5th Gen. R&D

Network Open
Universities/
Innovation
Suppliers Distributors Research
Institutes

Corporate Market
Firm R&D Strategy/
Other
teams Customers
(R&D
team)

Retired
Community Competitors
Workers