UC Berkeley: Advocating Open Business Models

Getting Started: Introduction to Open Business Models

“Companies that keep their intellectual property too close to the vest risk missing out on critical business innovations that idea-sharing could generate. Open business models foster collaboration with customers and suppliers to everyone's benefit.

The more companies learn about open business models, the more they realize how much they have to change their own innovation activities to take full advantage of these paradigms. It's not simply a matter of searching for new technologies. To thrive, companies must adapt their business models to make them more open to external ideas and paths to market.”

(To read the article on http://openinnovation.berkeley.edu, please click here)

Book on Business Models

Business Models Made Easy: Don Debelak

List Price: $19.95 | Paperback: 228 pages | ISBN: 1599180413

Don’t Just Plan—Zero In on a Winning Business Model!

Before you write a business plan, before you start marketing, before you look for funding, you should develop the most important tool in your business arsenal: a business model. A great business model sets amazing successes apart from failures.

Don Debelak reveals how to create a winning business concept, develop a business plan around it, and turn it into a successful business venture. Whether you’re starting a new business or looking to revitalize an existing operation, you’ll learn:

• What a model is, why it’s important, how it works and how it can improve your business
• How to maximize your chances of success with an easy-to-use scoring system
• How to use your business model to increase your chances of receiving funding
• Strategies for using your model to write a business plan that really works

Author Info

Don Debelak is president of DSD Marketing, an inventor assistance firm in Minneapolis. Debelak writes an invention column for Entrepreneur magazine and is the author of How to Bring a Product to Marketing for Less Than $5,000 and Total Marketing: Capturing Customers with Marketing Plans That Work, among other books. Debelak lives in New Brighton, Minnesota.

 

To see the article on www.entrepreneurpress.com, please click here)

Community Supported AgriBusiness Model

Direct marketing of locally grown or raised farm products is provingto be an excellent way for 'new' farmers to enter the business of farming.

CSA'sare part of the Small Farm Movement growing across Europe and North America.Those that do not wish to or have large scale agriculture production seek outopportunities on small acreages, as low as 3 acre or less. They mainly fallinto three categories - new/young farmers; lifestyle farmers; and secondcareer farmers. All these folks have different needs and expectations from afarm business perspective.

• Source of technical expertise and practical experience: CRAFT Ontario (The Collaborative Regional Alliance for Farmer Training in Ontario); Farm Start; FarmLINK Ontario; Future Farmers Internship program; Farmers' Growing Farmers; and Incubator Farms across Ontario and North America. 
• Who are the new farmers: Many new or soon to be farmers hadn't grown up on a farm. They were energetic and eager about obtaining farm land, often just 3 acres or less to begin a CSA program. They are passionate about environmentally sustainable agriculture, supporting their local community and growing food that directly connects them to the consumer. 
• Economic resources used efficiently: Would be farmers have very few capital resources including land, buildings, equipment etc. Some set up unique arrangement with existing farmers to farm just a few acres on the farm which often includes the use of buildings and equipment. They start off experimenting with crops suitable for the soil type and local market. Initially, many sell at local farmers' markets to test out what products the consumer is looking for, followed by building clientele and launching into a CSA. 
• Business model: The CSA model mostly involves fresh fruits and vegetables. Shares are sold to consumers at the beginning of the year and containers of fresh food are delivered weekly during the growing season depending on yield and variety. CSA farmers consider the relationship they have with their customers the most important part of their business model. There is a great deal of trust on the part of both the farmer and customer. If it is a 'bad' year e.g. too dry or too wet, both the farmer and the customer share the results of the harvest. 
• Communication: Many CSA farmers have monthly newsletters or email correspondence with their customers informing them of what crops they intend to plant, how the crops are progressing, pick-up and payment arrangements, etc. CSA farmers' report that their clients are very loyal and feel connected to a farm operation even though they often live in urban areas. 
• Lessons learnt: I came away from the conference very encouraged about a new crop of farmers emerging in the province through small farm agricultural practices. From a farm business perspective the lesson learned was the importance of marketing and customer loyalty in this type of farm model. Direct marketing comes with many challenges and opportunities, however CSA farmers are committed to facing the challenges and providing urban consumers with access to fresh farm products.

 Toread the article on www.omafra.gov.on.ca, please clickhere)

Do Your Own Research: Don't Listen to Experts

Don't believe what experts say (including the one writing this article!): Do your own research.

Market research companies had once predicted that sales of digital cameras would level off while there would be a boom in camera phones (shown in the form of a graph). (The writer of this article was also involved in making this projection). While it did seem like a logical evolution, this was not what happened. For instance, while we started to watch a lot more video on our computers, we still bought larger and better television sets. The same happened in the camera phone/digital camera business. In fact, IDC now calls it a myth that “That camera phones will replace digital cameras.” According to their Mobile Imaging Survey, “The camera phone is more of a gateway product in the U.S., and creates, rather than destroys digital camera users.”

What does it mean for the Business Modeler?

• Don’t believe everything that analysts and experts (including yours truly) say, and particularly, when they forecast. These guys are no better at forecasting than a psychic or a monkey is.
• Human behavior is impossible to predict. So do not base your business model on a certain expected change. Incorporate unexpected scenarios in your business planning so that if things do not turn out the way they were predicted, you can still survive. The dot-com taught us that lesson really well.
• Do your own research. Use multiple sources of data and add your own research to it. And once you are done, don’t just sit back and hope that things will turn out the way they were predicted. Stay on top of trends and keep refining your forecasts based on continuous research.

(To read the article on www.iproceed.com, please click here)

Making Sense to Kids: Business Models

Jay Dwivedi, is a Vice President at eCreativa. He explains business models in a series of articles.

In my opinion, a business leader should be able to describe her or his company's business model on a single piece of paper in way it makes sense to a sixth-grade kid. If that is not possible, something is terribly wrong with your business model and you need to fix it.

And if you start with a simple business model and it became complicated later on, you need to simplify by destroying it.  Jack Welch used to call it "destroy-your-business". It is perfectly fine to break a business into more than one so that they both have simple business models.

The concept of business model is not always clear to many business leaders. 

I have even run into senior level executives of Fortune 500 companies that have only a hazy idea of what a business model is. Almost everyone knows about all the major elements of the business model (though usage of several terms is pretty standard, and quite acceptable), not many understand the framework in which the key elements need to exist and tie together with each other. In addition to that, it should also be understood that a business model is not a business plan. You will provide an outline of your business model in your business plan, but the two are totally different.

(To read the article on www.iproceed.com, please click here)

Xerox: Business Model Case Study

Chesbrough and Rosenbloom illustrate the importance of the business model with a case study of Xerox Corporation's early days in the copy machine business with its Xerox Model 914 copier.

The Model 914 used the relatively new electrophotography process, which is a dry process that avoids the use of wet chemicals. In seeking potential marketing partners, Xerox repeatedly was turned down by the likes of Kodak, GE, and IBM, who had concluded that there was no future in the technology as seen through the lens of the then-prevalent business model. While the technology was superior to earlier copy methods, the cost of the machine was six to seven times more expensive than alternative technologies. The model of selling the equipment below cost and making up the difference by large margins in the sale of supplies was not viable because the cost of the supplies was about the same as that of the alternatives, so there was little room to maneuver.

Xerox then decided to market the new product itself and developed a new business model to do so. The new model leased the equipment to the customer at a relatively low cost and then charged a per copy fee for copies in excess of 2000 copies per month. At that time, the average business copier produced an average of only 15-20 copies per day. For this model to be profitable to Xerox, the use of copies would have to increase substantially.

Fortunately for Xerox, the quality and convenience of the new copy technology proved itself and companies began to make thousands of copies per day. As a result, Xerox sustained a compound annual growth rate of 41% over a 12 year period. Without this business model, Xerox might not have been successful in commercializing the innovation.

(To read the aticle on www.quickmba.com, please click here)

Defining Business Models

What is Business Model?

Business model converts innovation toeconomic value for the business. The business model spells-out how a companymakes money by specifying where it is positioned in the value chain. It drawson a multitude on business subjects including entrepreneurship, strategy,economics, finance, operations, and marketing.

Simply put, a business model describes howa business positions itself within the value chain of its industry and how itintends to sustain itself, that is to generate revenue. 

In the most basic sense, a business modelis the method of doing business by which a company can sustain itself – thatis, generate revenue.

Six Components of the Business Model 

(according to Henry Chesbrough and Richard S. Rosenbloom)

1. Value Proposition – a description of the customer problem, the solution that addresses the problem, and the value of this solution from the customer's perspective.
2. Market Segment – the group to target, recognizing that different market segments have different needs. Sometimes the potential of an innovation is unlocked only when a different market segment is targeted.
3. Value Chain Structure – the firm's position and activities in the value chain and how the firm will capture part of the value that it creates in the chain.
4. Revenue Generation and Margins – how revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins.
5. Position in the Value Network – identification of competitors, complementors, and any network effects that can be utilized to deliver more value to the customer.
6. Competitive Strategy – how the company will attempt to develop a sustainable competitive advantage and use it to improve the enterprise's competitive position in the market.

(To read the article on www.1000ventures.com, please click here)

Michael Rappa: Business Models on the Web

As a professor at North Carolina State Universityand the founding director of the Institute for Advanced Analytics, Rappa is bestknown to millions around the world as the creator of "Managing the DigitalEnterprise", an innovative and award-winning educational Web site devotedto the study of management in the digital world.

Here he describes what a businessmodel is:

Business models are highly discussed but leastunderstood. In the most basic sense, a business model is a method of doing businessby which a company can sustain itself - that is, generate revenue. The businessmodel spells-out how a company makes money by specifying its position in thevalue chain.

Some models are quite simple. A companyproduces a good or service and sells it to customers. If all goes well, revenues from sales exceed the cost of operation and the company realizes aprofit.

Other models can be more complex.Broadcasting is a good example. Radio and later television programming has beenbroadcasted over the airwaves free to anyone with a receiver for much of thepast century. The broadcaster is part of a complex network of distributors,content creators, advertisers (and their agencies), and listeners or viewers.Who makes money and how much is not always clear at the outset. The bottom linedepends on many competing factors.

Business models have been defined and categorizedin many different ways. This is one attempt to present a comprehensive andcogent taxonomy of business models observable on the web. The proposed taxonomyis not meant to be exhaustive or definitive. Internet business models continueto evolve. New and interesting variations can be expected in the future. Thebasic categories of business models discussed in detail in a table include: Brokerage, Advertising, Infomediary, Merchant, Manufacturer (Direct), Affiliate, Community, Subscription and Utility

(To read thearticle on http://digitalenterprise.org, please click here)