Hello, today we are going to talk about Business Models. Since 1960, scholars and academics have tried to respond three or four fundamental questions related to business: The first one is: How is it that administrators and managers take decisions without having complete information? Two.- why is it that companies of the same industry or sector, are appreciated or look similar, but are not the same? The third is, how is it that some companies constantly have a better performance than others? And the last one is, why does change help some companies to improve and others are destroyed by this change or innovation? With these questions business scholars tried to explain in a more scientific way and through a concept and rational frame the way or method in which managers or directors take decisions. Originally in English the phrase “Model of Business” was used which in Spanish is understood as Model Business. Nevertheless, the strict word Business Model came up with an accelerated process derived from the creation of the Internet, from the birth of the internet, which itself had the birth of a new business model as a consequence known today as the dot com or e-commerce. As a matter of fact, the first time that the word “business model” appears is in 1993 as a consequence of the exponential growth that a company called IKEA was having. It is a Swedish furniture store founded by Ingvar Kampra and which was being analyzed by a man called Bob Lurie, of the Monitor Company Consultancy and who made a reference explaining that his “business model” (that is, IKEA) was not necessarily that innovative. It is thus that this word starts being heard and being mentioned frequently “Business Model” In 1999 Michael Lewis for the first time defines the term business model and somehow relates it with the word art, saying that a business model is something that you can feel, but cannot describe and he concludes by saying that a business model in the end is the way in which you plan a company makes money. In 2001 Amit and Zott, two great scholars of MIT University developed an analysis of this new phenomena called e-commerce as it is known in English, in their analysis they highlight how it is that this new e-commerce business model creates greater value more significantly than other business models. These authors define Business Model inside the company as something that represents the design and content of a transaction, the structure, the way they are ruled in such a way that it creates value through the exploitation of business opportunities. Later on Joan Magretta from Harvard University makes a deep study of the definition of business model and comes to the conclusion that thanks to the birth of the computer and the spreadsheet, it becomes much easier to make an analysis and a comparison of companies and thus explain the trends of what a business model is, arguing that the analysis of a business model can explain why a company outweighs or displaces others. Peter Drucker… whom you already know, and who is the great guru of business and of Harvard University, refers to the term as something that must answer three questions, that is, the Business Model must give answer to: The first one is: Who is your client? The second question a business model must answer is: What does your client value? What gives him value? And the third one is: How do you offer value at an adequate price? Another great teacher of innovation and professor at Harvard University itself, who is Clayton Christensen suggests that a Business Model must have four elements: The first one has to be a value proposition for the client The second one a profit formula The third, key resources And the fourth, key processes In other words, a Business Model is the organizational design used to take advantage of an opportunity to make money. For us, and in this class and summarizing all of the authors, A Business Model is a hypothetical description of how a company creates, submits and captures value; that is, how it works and how it makes money. The topic is quite relevant nowadays as undoubtedly in the world we live in it is more complicated every day to predict the future. The hegemony of companies, the leadership of companies, in the last century was of thirty-five years where now it is almost of fifteen, before a new business model displaces the previous one. International companies that you know such as Kodak, Blockbuster, Nokia, Compaq, the Encyclopaedia Britannica, or Sony Vaio, LG (the telephones), Motorola, Blackberry, to name some companies or international brands, are now extinct or almost extinct because they did not know how to innovate in their business models, allowing Facebook, Google, Apple, Amazon and Dell among others ,to come in, to now become incredibly relevant players in the business world, and, why? because they did not know how to innovate in their business model. Nowadays, the success of a company relies on their capacity to reinvent themselves from within to get involved with all the actors of an ecosystem having the capacity to develop a new business model which keeps it competitive at a global level, thus the relevance of business models. The speed in which businesses and information change make it very popular and necessary to study in depth the concept of business models and of how they are displacing other business models. And it’s funny because at the end of the first decade of this century, Alexander Osterwalder develops a methodology that allows in a simple and visual way, to fragment the components of a business model into nine blocks, generating a methodology called “Lean” or Canvas Methodology or Business Model, which in English is known as Business Model Canvas. Osterwalder defines Business Model as a collection of assumptions or hypotheses and he defines a more complete template upon which construct these hypotheses. Around this methodology of Osterwalder, combined with the concepts of Steve Blank and Eric Ries is what is known, as I have said, as the “Lean” Methodology or “Lean Startup Method” or “Lean Methodologies” widely used all over the world to develop entrepreneurships and which as you know is a cornerstone of this course. In order to understand better what a Business Model is what we know so far is as follows and we must think about this: A business model is Not a corporate strategy A business model is no good to assess an opportunity. It is not a document that only proves a profitability And interestingly enough, a business model is not tied to a yield What an innovative business model can generate it can generate large amounts of money and a business model is also of high risk precisely because it not only is the hypothesis but because other kinds of things must be validated. A business model cannot be viewed in isolation and a business model is as good as its implementation. The business models as far as we know also generate change and change is not easy either within the organizations because they really are not as subject or willing to change. The most important thing is that business models inside a company help you very much to find new opportunities. In a nutshell, successful business models work because the elements inside and outside the company are aligned to the process of creation of value. For the author Adam Brock, business models have four essential components and it is important that you memorize them: First, a business model must have resources It is the resources that you have at your disposal and depending on how difficult they are… or how easy to copy, that makes you have a competitive advantage. The second one is: the transactions or kinds of transactions that are done in your company both internal and external. The third important point is the value that your company has or generates both in costs as in sales. 275 00:09:25,680 --> 00:09:26,480 And the last one which is a very important topic is the Networking. The relationships of a business are important to make it grow and develop. The secret to analyze, and understand a business model and to develop a business model lies on detecting the pattern of that business model. Note that a pattern is a diagram or form which can be used as a guide to what you are doing. Similar patterns of business models that generate value and which are innovative are generally given a specific name which allows them to be identified 297 00:10:00,800 --> 00:10:02,520 in a specific industry. Let me give you an example: The word Freemium 300 00:10:05,160 --> 00:10:05,960 Have you heard it? Freemium is a business model. Subscription is a business model, fixed rate, or flat rate is a business model, crowdsourcing, cross-sales, e-commerce, franchises, long tail, open source, to mention some, are a sample of the relevance of understanding a business model and they are examples of business models. The importance lies on identifying patterns and this is what can really help you to understand what it means to create, capture, and communicate value. Thank you very much.
