TEchNOLOGy TRaNSFER MODEL - Javna agencija

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2 BUSINESS <strong>MODEL</strong>S „A business model describes the structure of product, service and information flows and the roles of the participating parties. This includes potential benefits and sources of revenue to each of the parties. “ Exploring Corporate Strategy, G. Johnson, K. Scholes, R. Whittington, 8th edition, FT Prentice Hall, Pearson Education, 2008 2.3.2 Why we need business models: It is widely accepted that a strong business model can produce above average economic returns for the business owners. Welldesigned business models also foster technology innovation and help small businesses to be successful making a new technology commercially viable. When done right, business models provide transparency and contribute to a better understanding of how the pieces of a business link together. They also provide a basis for scenario simulation and effective strategy development which is a key factor when thinking about business model innovation. Business model innovation is extremely valuable when done right, creating new markets or transforming existing ones and generating billions of dollars of market value. Knowing a company’s business model provides more than insight into metrics and management levers. It can help illuminate an important, underutilized form of innovation that goes beyond product or process innovation. 2.3.3 Changing business models: A brief history of the development of business models might run as follows. The most known and most basic business model is the shopkeeper model. This involves setting up a store in a location where potential customers are likely to be and displaying a product or service. Over the years, business models have become much more sophisticated. The bait and hook business model (also referred to as the »razor and blades business model« or the »tied products business model«) was introduced in the early 20th century. This involves offering a basic product at a very low cost, often at a loss (the »bait«), and then charging compensatory recurring amounts for refills or associated products or services (the »hook«). Examples include: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook). An interesting variant of this model is a software developer that gives away its word processor reader free of charge but charges several hundred dollars for its word processor writer. Today, the type of business models might depend on how technology is used. For example, entrepreneurs on the internet have also created entirely new models that depend entirely on existing or emergent technology. Using technology, businesses can reach a large number of customers with minimal costs. 2.4 The 7-C Model to describe business models 2.4.1 Description of the model Business models can be developed and analyzed via the use of the 7-C model which was developed by the consulting company Horvath & Partners. The 7-C model describes business models via seven components, namely; the strategic core, customer perception, customer interface, value chain, co-operations, concepts for the future and human capital & corporate culture. Each component comprises several questions, which should be answered carefully when dealing with the concept of business models. In the following sub-chapters you’ll find a list of these questions for each component including some examples on how they can be answered. Customer Perception Human Capital & Corporate Culture Customer Interface Strategic Core Concepts for the future Value Chain Co-Operations Graph 1: The 7-C Model to describe business models 19
KNOWLEDGE FOR BUSINESS IN BORDER REGIONS 2.4.2 The Strategic Core The strategic core represents the “heart of your company”. When determining your business model, ask yourself the following questions: • What products/services do we offer? • Who are our most important customers? • What are our core competencies? These questions, although they seem very easy to be answered should be handled with extreme care. For example when evaluating core competencies, try to thoroughly examine all areas of your value chain in order to determine the particular strengths of your company relative to other organizations in the industry. Few companies are likely to build world leadership in more than five or six fundamental competencies. When determining your most important customers, the ABC-model has proven to be very successful. 2.4.3 Customer Perception Customer perception comprises the marketing side of your business model. The following main questions should be considered for your analysis: • What customer value do we offer? • What are our competitive advantages in terms of product-differentiation? • What‘s our positioning? • What‘s our image? • What‘s our promotion strategy? A key success factor in this context is to determine a clear unique selling proposition (USP) that describes in a simple and easy-tounderstand manner in what ways your product or service differs from that of your competitors. When trying to find a distinctive USP, the concept of the competitive innovation advantage (CIA) which was developed by Prof. Volker Trommsdorff, a professor at the technological university Berlin, has proven to be very successful. He describes the CIA via five different attributes including corresponding critical factors that should serve as a checklist for the assessment and the development of competitive innovation advantages. These attributes and critical factors are shown in the graph below: Graph 2: Defining the CIA – Competitive Innovation Advantage 20
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