Succesful business models Workshop business models to scale

Succesful business models Workshop business models to scale up eco-innovations by SMEs (ETAP nov 2010) Author: Coen Bertens Date: November 29, 2010 email: cbe@eim. nl and you can find me at Linked. In

Questions What business models are (succesfully) used in scaling up eco-innovations and can governments support these business models? How different are they from ‘regular’ innovations? Which factors determine the business models? How can/ do financing parties, intermediaries and subsidies support these business models? How can/ do governments support these business models?

What dinstinguishes eco business models? Not always different from regular Eco-marketing businesses deals with a wide variety of stakeholders In complex eco-innovations often a variety of companies System (eco-)innovations have a different scope of focus (go beyond products and services) Different values are part of the business model

Value Drivers Core Strategy Value Proposition 1. Mission 2. Vision 3. Differentiation Corporate Strategy Vision, mission, Positioning, targets and goals Cliënt Surplus ‘Fit’ Efficiency Cliënt Interface Value Network Architectural Layer 1. Distribution Channels 1. Supply chain of market components 2. Client-Relation Structure 2. Revenue Model 3. Capital Model 4. Price Structure Uniqueness Strategic Resources Configuration of Activities 1. Core competencies 1. Systems/Processes 2. Strategic Advantages/Goods 2. Organization Structure 3. Core Processes 3. People 4. Cost Structure and revenu structure Corporate Organisation Work processes and systems, organization structure, supply chain Entrepreneurial Boundaries Source: Houtgraaf en Bekkers, 2010

Value network Price Structure Setting the price compared to the competition Supply chain The value for all participants in the supply chain necessary or useful for the developing and exploitation of the final value for the customers Revenue Model Future flows of revenues and the structure of these flows towards the eco-innovation Capital Model The way an eco-innovation is funded, money is used and returned to investors

Characteristics eco business models From linear to circular business models Wider business models incorporating several value chains How are social values incorporated in the models? Some eco-innovations are not market dependant but create new markets Services instead of products: eco-innovation does not have to get a central place in the business model (is this a strength or weakness? )

Present renevue models 1 Type of Revenue Model Examples Description Subscription System Magazines, phone companies, newspapers, memberships, etc. Different sorts varying from products to services and memberships. With a fixed price or a basic price with or without a premium. User Model Water, gas. Based upon offsetting measured use. The opposite of a subscription system. Vendor Lock-in (Razor and blade) Razorblades, mobile phones, printers, Playstation, software updates. Luring users with extremely cheap starting models and relatively high costs related to the use of the product. Freemium Model Skype Product or service which in itself is extremely cheap or even for free, but the attractive upgrades or expanded versions do cost extra money. Tied Selling Often illegal, a toned down version relates to sets of magazines. A popular product is tied to a less popular product, that way customers are ‘forced’ to buy both. Service Model Car industry Product itself is sold for a price which equals production costs, earnings are derived from financing the sale or supplying support and maintenance services.

Present renevue models 2 Type of Revenue Model Examples Description Advertising Model Google Ads, Search engines. Banners or links on websites that attract bulk or specialized visitors on the web through content or service. Earning models: sponsorships, priceper-click or auctioning. Brokerage Model Christies, Pay. Pal, Real estate brokers, EBay, Fairs, Expedia, etc. Brokers connecting buyers and sellers and facilitating transactions. For example: auctions, fairs, search agents, impresarios, model agencies. Promising when search/locate and transaction costs are high. Several models of earnings possible. Market data Broker System Nielsen, Double. Click, vergelijk. nl Earning revenues through the supply of data to organisations, concerning internet surf-, search- and buy behaviour of consumers. Possible through direct sales or assistance on providing market insights. Yield Management Hotel, car rentals, Aviation industry. Price of the service varies and is changing and adapting to demand the available supply of a temporary available good.

Factors determing the choice Supply side factors Impact of the eco-innovation on the production process (B 2 B) or the use (B 2 C) by the customer Demand side factors Market acceptance of/ barriers of the eco-innovation by the user Political/ institutional side factors Barriers or drivers from political/ institutional regime

Factors framework Type of Innovation vs Barrier of Acceptance Good Housekeeping (Efficient organisation) Focus: Product/Service End-of-Pipe actions Focus: Product/Service Product/Proces s Innovation Focus: Product/Service Integral Supply chain Management Focus: Product/Service System Innovations Focus: Systematic Split. Incentives Green=Expensive Investment Profiles (TCO) Infrequent Decisions

Support by financing parties They play safe: entrance to finance is difficult for SMEs in general Sceptical on the issue of climate change Are not very familiar with eco-innovations Credit ratings are often pessimistic on revenues Actor mislink: think mainly within the boundaries of the core business of the companies (conventional innovations) Lack of engagement

Support by government parties Set an example: launching customer (procurement) Publicity creates attention Support helps to interest financing parties Connecting parties (through a frontrunners window) Regulation (setting clear frameworks) Deregulation (adjusting standards) Price setting (incorporate environmental costs) Be visionary!

We need: Better insight in (succesful) business models Better insight in best practices of supporting financing parties and governments Awareness raising Appropriate instruments by government/EU in exchange for innovation efforts Common vision, objectives and targets from all stakeholders