Published on February 24, 2014
Key Elements of Business Models Different Scenarios and Successes Some Thoughts based on Global Learning and Industry Experience Raman Roy Chairman & MD New Delhi 21st February 2014 #
Quatrro Confidential 2 www.Quatrro.com
Facebook buys WhatsApp for $19 billion 5 years ago he sat down and created a Business Model and wrote a business plan…..and then executed Quatrro Confidential 3 www.Quatrro.com
Lets begin with the basics… What is a Business Model ? A Business Model is the cornerstone of any business and gives an overview of the business to both the potential investors and customers alike ! Business Model – Set of planned activities designed to result in a profit in a marketplace Business Plan – Document that describes a firm’s business model All the planned activities form the “Core Building Block” of a Business Model and need to be co-related for achieving the desired business outcome Quatrro Confidential 4 www.Quatrro.com
Understanding the key aspects of Business Models Key Aspects of Business Models “Inherent Aspects” and the “Facilitating Aspects” “Inherent Aspects” “Facilitating Aspects” These aspects have remained unchanged over the years irrespective of the type of business – B2B or B2C These aspects have gained into prominence over the last decade due to widespread adoption of technology The adoption of “Facilitating aspects” seem to have emerged as the critical success factor for the 21st century businesses! Quatrro Confidential 5 www.Quatrro.com
“Understanding the Inherent Aspects”: Key Elements of a Business Model 1 V A L U E 2 R E V E N U E 3 M A R K E T O P P O R T U N I T Y 4 C O M P E T I T I V E E N V I R O N M E N T 5 C O M P E T I T I V E A D V A N T A G E 6 M A R K E T 7 O R G A N I Z A T I O N A L 8 M A Quatrro Confidential N A P R O P O S I T I O N M O D E L G E S T R A T EG Y M E N T 6 D E V E L O P M E N T T E AM www.Quatrro.com
Essential Elements of a Business Model: 1 Value Proposition Value Proposition The Business Model should answer: “Why should the customer buy from you?” Some of the successful e- commerce value propositions can be the following: Personalization / customization Reduction of product search, price discovery costs Facilitation of transactions by managing product delivery Quatrro Confidential 7 www.Quatrro.com
Christensen’s model of Disruptive innovation Sustaining Strategy – bring better product into an established market Performance CURRENT CONSUMERS t1 Produc t2 Produc t3 Produc t4 Produc ts in ra y st lth on ea ls log C W il no Sk ch ss T e ce Ac e Tim Innovation vel pectation le Minimum ex New Market Disruptive Innovation NON CONSUMERS Time • What are we going to sell? • Who are we gong to sell to? • How are we going to sell - approach to Market ? • Differentiating Factors • •Differentiating Factors • SME segment • • SME segment • Platform based decisions • Platform based decisions • Leveraged buying acquisitions • Leveraged buying acquisitions • Building BPO around core competencies • Building BPO around core competencies • Direct to Customers (TSG) • Direct to Customers (TSG) 8 Quatrro Confidential Low End – Disruptive Innovation - Address overserved customers with a lower cost business model Off Shore BPO Differentiators • SME segment • Platform based Services • Leveraged acquisitions 8 8 www.Quatrro.com
“Improvement”, “Innovation” & “Disruptive Innovation” are all Opportunities Improvement Innovation • Improvement refers to doing the same thing better • Innovation is the creation of better or more effective products, processes, services, technologies, or ideas that are readily available to markets, governments, and society • A Disruptive Innovation is an innovation that helps create a new market and value network Source: Wikipedia Source: Wikipedia • There are a number of techniques which businesses achieve this such as Six Sigma and Lean Technologies Source: Wikipedia Disruptive Innovation • This is done by improving a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market. While Improvement & Innovation do not result in a paradigm shift in the existing business order, disruptive innovation does manage to do that Quatrro Confidential 9 www.Quatrro.com
Essential Elements of a Business Model: 1 Value Proposition 2 Revenue Model Value Proposition The Business Model should answer: “Why should the customer buy from you?” Some of the successful e- commerce value propositions can be the following: Personalization / customization Reduction of product search, price discovery costs Facilitation of transactions by managing product delivery Revenue Model The Business Model should answer: “How will the firm earn revenue, generate profits, and produce a superior return on invested capital?” Major types of Revenue Models: Quatrro Confidential 10 Advertising revenue model Subscription revenue model Transaction fee revenue model Sales revenue model Affiliate revenue model www.Quatrro.com
An Overview of Different Revenue Models Advertising Revenue Model Subscription Revenue Model Transaction Revenue Model Company charges fees from advertisers in exchange for advertisements Company charges fees from subscribers in exchange for access to content or services Company receives a fee for enabling or executing a transaction Example Example Example Sales Revenue Model Company derives revenue by selling goods, information, or services to customers Company steers business to an “affiliate” and receives a referral fee or percentage of the revenue from any resulting sales Example Quatrro Confidential Affiliate Revenue Model Example 11 www.Quatrro.com
Existing B2C Business Models Quatrro Confidential 12 www.Quatrro.com
Existing B2B Business Models Quatrro Confidential 13 www.Quatrro.com
Essential Elements of a Business Model: 3 Market Opportunity 4 Competitive Environment Market Opportunity The Business Model should answer: “What marketspace do you intend to serve and what is its size?” Marketspace: Area of actual or potential commercial value in which company intends to operate Realistic market opportunity: Defined by revenue potential in each market niche in which company hopes to compete Competitive Environment The Business Model should answer: “Who else occupies your intended marketspace?” Other companies selling similar products in the same marketspace Includes both direct and indirect competitors Competitive Environment is influenced by: Number and size of active competitors Each competitor’s market share Competitors’ profitability Competitors’ pricing Quatrro Confidential 14 www.Quatrro.com
Essential Elements of a Business Model: 5 Competitive Advantage Competitive Advantage 6 Market Strategy The Business Model should answer: “What special advantages does your firm bring to the marketspace?” Important points to consider: Is your product superior to or cheaper to produce than your competitors? Does your product enjoy First-mover advantage? Are there complementary resources? Market Strategy The Business Model should answer: “How do you plan to promote your products or services to attract your target audience?” Important points to consider: Details on how a company intends to enter market and attract customers Best business concepts will fail if not properly marketed to potential customers Quatrro Confidential 15 www.Quatrro.com
Essential Elements of a Business Model: 7 Organizational Development 8 Management Team Organizational The Business Model should answer: Development “What types of organizational structures within the firm are necessary to carry out the business plan?” Describes how firm will organize work Typically, divided into functional departments As company grows, hiring moves from generalists to specialists Management Team The Business Model should answer: “What is the professional experience / background of the company’s leaders?” A strong management team: Can make the business model work Can give credibility to outside investors Has market-specific knowledge Has experience in implementing business plans Quatrro Confidential 16 www.Quatrro.com
While the “Inherent Aspects” of a Business Model remain as relevant for both B2B and B2C businesses today as they were a decade ago…… ….however the widespread adoption of technology / cloud has ensured that the “Facilitating Aspects” have emerged as key determinants to success for global businesses in the 21st century ! Quatrro Confidential 17 www.Quatrro.com
Key Facilitating Aspects that need to be built into the 21st Century Business Models… 1 F U N C T I 2 C O N V E N I 3 I 4 O P T I O N A L I E N C E N N O V A T I M A L T Y V E N E S S P R I C E P O I N T S Emerging Entrepreneurs in both the B2C and B2B space will need to ensure that the “Facilitating Aspects” are built into their new revenue and profit models for them to remain relevant ! Quatrro Confidential 18 www.Quatrro.com
Off late, Social Media has taken the lead in Cloud Adoption in the B2C businesses globally “Usability” has played a critical role in the adoption of Cloud Technology across businesses as most of their content is hosted over the cloud ! 1 Functionality 2 Convenience 3 Innovativeness 4 Optimal Price Points Knowingly or unknowingly we all are using “Cloud” not because of its architecture benefits but on the account of innovative applications that are residing on Cloud Quatrro Confidential 19 www.Quatrro.com
In the B2B Context, Functionality and Innovativeness are driving Cloud Adoption Leading Applications provided by global B2B Cloud Service Providers US based Cloud Service Providers have taken the lead in providing Cloud Solutions to leading businesses across the world. However, Latin America and Asia Pacific are leading the way for Cloud Adoption owing to growing number of Large and SMB businesses rating Speed and Agility as the most important factors for Cloud Adoption. In Essences, both in B2B & B2C the functionality and innovativeness of apps that reside on the “Cloud Architecture” are driving cloud adoption rather than the Cloud Architecture itself Quatrro Confidential 20 www.Quatrro.com
Cloud Providers penetration in India is lagging on account of absence of Innovative Apps Even though Social & Professional Networking Sites such as Facebook and LinkedIn have maximum number of users based out of India still it doesn’t result in significant service penetration to Indian Businesses The need of the hour is incubation of more and more innovative apps hat cater to “Indian Business Needs” that will leverage Cloud Infrastructure and bring economies of Scale Quatrro Confidential 21 www.Quatrro.com
Initial signs are encouraging in the Indian B2B space but there is a long way to go… While we still have a long way to go to rival the ranks of Facebook and Twitter(B2C market) in India, there are early signs of apps that leverage Cloud Architecture We need to incubate “Game Changing” Service Apps in B2B that will rewrite Cloud adoption and bring Affordable Technology to Indian Business Quatrro Confidential 22 www.Quatrro.com
My Journey as an Entrepreneur… The role played by the “Inherent” and “Facilitating Aspects” Pioneering Business Processing Services (2006 and beyond) (2000-2005) (1996-2000) Pioneered real time processing and voice (1992-1996) Pioneered 3rd Party operations Multi faceted services Acquired by Wipro Established India’s largest multi process captive unit Pioneered off-shoring to India Established India’s first captive unit for Finance/Accounting Quatrro provides cost effective and innovative solutions through a combination of tools, platforms and business processes S P E C T R A M I N D Targeting uncontested service spaces and pioneering new service lines Started and led Spectramind into India’s largest third party BPO company Formerly GECIS India established as the premier global offshoring destination for call center and BPO Indian BPO industry was in its nascent stage (only sign of BPO in India was data entry) Created four winning businesses Quatrro Confidential 23 www.Quatrro.com
Key attributes that helped me during my Entrepreneurial journey Formerly GECIS S P E C T R A M I N D Platform based Right-shoring (Mid Market) Specialization Offshoring Offshoring 3rd Party Outsourcing Ideas Bank Shared Services Shared Services B2LB Services B2SMB B2C Services Capital Corporate Capital Corporate Capital Private Equity Own Capital (Majority) Team Almost same management team Innovative Business Models Price per seat Price per FTE Technology Corporate Technology Corporate Technology Quatrro Confidential 24 24 Price per minute Platform as a Service Client Technology Internally Developed + 3rd Party Technology www.Quatrro.com
Thank You ! Happy to Answer Questions Raman Roy Chairman & Managing Director Email: email@example.com | Quatrro Confidential 25 Website: www.quatrro.com www.Quatrro.com
All of us use the following…. Aeroplanes World Wide Web (WWW) Automobiles Mobile Telephony Lets think about the time when the products were introduced. These innovations were disruptive at the time they came into existence during the last century They have ceased to be disruptive now but improvements and innovations Continue!! 26 www.Quatrro.com
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