Corporate Management and Entrepreneurship

> describe the most important assets required to make a business model work
> can be owned or leased by the company or acqured from key partners

• Key questions
  • What key resources do our value propositions require?
  • ... our distribution channels?
  • ... customer relationships?
  • ... our revenue streams?
• Categories of Key resources
  • Physical
  • Intellectual
    • Intellectual property rights = copyrights, patents, trademarks, and trade secrets
    • proprietary knowledge, data and routines = databases, software, algorithms
    • exclusive partnerships
  • Human 
  • Financial

> describe the most important things a company must do to make its business model work
> are required to create and offer a value proposition, reach markets, maintain customer relationships, and earn revenues

• Types
  • Production of goods
  • Provision and delivery of services
  • Problem solving -> e.g. consultancy, hospitals, ... ("advanced services")
  • Platform/network services

> describe the network of suppliers and partners that make the business model work

• Key questions
  • Who are our key partners?
  • Who are our key suppliers?
  • Which key resources are we aquiring from partners?
  • Which key activities do partners perform?
• Relevant activities and resources
  • Make (own company/organization)
  • Buy (spot market)
  • Ally (collaboration, enduring relationships)

• Types of relationships
  • Strategic alliances = partnerships between non-competitors
  • Cooperation = strategic partnerships between competitors
  • Joint ventures = to develop new businesses
  • Buyer-supplier relationships to assure reliable supplies
• Motivations
  • Optimization and economies of scale
  • Reduction of risks and uncertainty
  • Acquisition of particular resources and activities

> describes all costs incurred to operate a business model
> importance and ambition depend on general approach: cost-driven vs. value driven

• Key questions
  • What are the most important costs inherent in our business model?
  • Which key resouces are most expensive?
  • Which key activities are most expensive?
• Cost types
  • Fixed costs
  • Variable costs
• Origins of cost advantages
  • Economies of scale
  • Economies of scope

• Digital Transformation is an 
  • ongoing change in society as well as individuals and organizations within it
  • triggered and driven by developments in digital technologies
• Digital transformation (relevant developments)
  • Increasing connectivity of actors
  • Generation, processing, analysis of data
  • Increasing automation and autonomy of machines (software & hardware)
  • Data-based decisions -> data-based actions & changes
  • Blurring / disappearing of organizational boundaries

• Digital connections of members
  • individual social media accounts
  • Professional platforms for ideas, content, collaboration or open source development
• Mixing roles
  • Professional/privat -individual social media
  • Consumers vs. producers -> prosumers, co-creation
  • Proprietary activities (within the comnpany) vs. public good / scientific research & development
• Fragmented value chains
  • Complex combinations of core competencies, collaboration & competition ("make, buy or ally")

A digital ecosysettem is " ... an open, loosely coupled, domain clustered, demand-driven, self-organizing agents' environment, where each specie is proactive and responsive for its own benefit of profit" (Chang&West 2006

Stage 0: Before the internet

Stage 1: Web 1.0 (Internet, E-Commerce, Email, ...)

Stage 2: Web 2.0 (Social Media, SaS, ...)

Stage 3: Mobile-/Smartphones, Tablets, Mobile Apps

Stage 4: The development Continues ...

1. Stage 0: Before the internet
   > Relationships and interactions primarily through physical presence
   > Organizations mainly phisically present
   1. Within organizsations:
      1. Software installed locally, many local data stores
      2. Installation and maintenance of software on individual computers via floppy disks/CD-ROM's
      3. Word-of-mouth in private, small circles
      4. Spatial proximity important for coordination, learening, culture, community, ...
   2. Outside/between organizations:
      1. Marketing, communication, public relations via non-digital media: phone calls, faxes, letters, newspapers, magazines, radio, television, ...
      2. Word-of mouth in private, small circles
      3. Paid advertising and public relations as more or less the only ways to reach the public

1. Stage 1: Web 1.0 (Internet, E-Commerce, Email, ...)
   > Email, Intra-/Internet as new communication channels
   > First functions of the Internet: Read Only network
   1. Within Organizations:
      1. Increasing communication via internal data exchange, software systems, EMails
      2. Increasing independence from physical proximity
   2. Outside/between Organizations:
      1. Internet organized content-oriented: Earliest as registers, then search
      2. More communication via new online channels -> proceeds similar to former activities on non-digital channels:
         1. Own website, online store, email (owned media)
         2. Advertising banners, online public relations (paid media)

1. Stage 2: Web 2.0 (Social Media, SaS, ...)
   > New internet functions: Read, write, connect -> Social Media
   > Software & data are increasingly stored on cloud servers and used via a browser
   > Accordingly software is invreasingly being sold less as a product and more as a service
   1. Within organization:
      1. Internal social media environments and collaboration tools
      2. increasingly more communication via platforms insted of email = more open documentation
      3. Central, integrated data repositories and iterative updating of software in the background
   2. Outside / between organizations
      1. Switch from WOM to eWOM (social media)
      2. (Private) individuals communicate about organizations via social media (earned media)
      3. People are reached by content they did not search for -> social instead of search, push instead of pull

1. Stage 3: Mobile-/Smartphones, Tablets, Mobile Apps
   > Portable computers with mobile internet connection
   > Enormous increase in availability
   > Higher intensity of use
   > Mobile application on site / geo-localization
   > Change in interaction: with computers, with other people
   1. Within organizations:
      1. Employees (theoretically) are constantly reachable via private channels
      2. Relevant communication of the organization runs via third-party providers
   2. Outside / between organizations:
      1. Mobile apps offer extended channels to target groups (especially cutomers)
      2. Fast evaluation of customer reactions & behaviour
      3. Apps and user data allow customized service delivery
      4. Adaptation of digital services in real time

1. Stage 4: The development Continues ...
   >Increasingly all devices have sensors that transmit information to service providers and producers
   > More sophisticated automated processes/contracts (AI (nlp, voice processing, computer vision) and blockchain, "automated contracts")
   Outer boundaries of the organization continue to blur increasingly or disappear:
   1. Industry 4.0 = machines communicate directly with each other, increase in automation
   2. IoT = sensors provide data from external products and activities
   3. Wearables = clothing and add-on devices have sensors that capture movement patterns and behavioral information aboout users and transmit it to service providers
   4. AI cloud services = increasingly take over activities from employees, with task data captured locally // processed in the cloud via AI and the solution sent back to the company >> economies of scale
   5. Blockchain = automated data traffic / data storage on decentrally distributed databases

1. Ceratin geographical distances are replaced by virtual distances
2. High scalabitlity of digital activities
   1. Hiher fixed costs
   2. Massively reduced vriable costs
3. Extensive possibilities to cutomize sommunication and service delivery (targeting, retargeting, matching, customizing, mass-customization, individualization)
   1. small-scale decompostion into partial delivarables 
   2. smallö-scale merging of supply and demand = massively reduced transacton costs
4. Fast feedfback channels
5. Extensive availabitlity of digital data
6. Shifting of competencies relevant to the competition of established businesses
   1. New entrants from technical areas
   2. Fragmentation of value chains and value creation

• Main Patterns:
  • The Long Tail
  • Multi-Sided Platforms
  • Free
  • Feemium
  • Bait & Hook ("Racor & Blade")
• Further approaches:
  • Unbundling business models = separate or focus on selected ones:
    • Customer relationship business
    • Product innovation business
    • Infrastructure business
  • Open Innovation Business Models
    • Outside-In
    • Inside-Out

• Starting Point:
  • The value proposition of companies in an industry only targets the most profitable clients
• Challenge:
  • Targeting and serving less profitable segments with very specific products/services is too costly
• Solution:
  • The new additional products/services target a large number of historically less profitable, niche customers which in aggreagte are profitable
• Rational:
  • IT and operations management improvements allow delivering tailored products/services to a very large number of new customers at low costs -> matching of customers & products/content
• Example:
  • Amazon & Zalando, actually (on a low level) every online shop

• Starting Point:
  • One value proposition targets one customer segment
• Challenge:
  • Access to a customer segment provied actually vlue to other customer segments, but is not realized & monetized yet
• Solution:
  • Providing access to another customer segment as a stand-alone value proposition
• Rational:
  • Acting as an intermediary operating a platform between two or more customer segments -> matching of customers & other customers (of their products/services/content)
• Example:
  • Amazon & Zalando (currently with "Marketplace")
  • Video game consoles

• Starting Point:
  • Significant value propositions (high-value, high-cost) are only offered to paying customers
• Challenge:
  • The higher the prices the lower the customer numbers / sales volumes
• Solution:
  • Different value propositions are offered to different customer segments with different revenue streams AND at least one segment being free-of-charge (at least very low cost)
• Rational:
  • Non-paying customer segments are subsidized by paying customers in order to increase overall profit or make a business possible in the first place -> "selling" customers to other customers (of a different segment)
• Example:
  • Facebook (online social network), acutally all advertising-financed free-to-use services (mobile & internet), google search

• Rational:
  • Combining free product/service with paid premium service for similar customers
  • a large user base benefiting from a totally free offer (most of them most never become paying customers)
  • only a small portion (<10%) subscribe to the paid premium services
  • the small base of paying users subsidizes the free users
• Precondition:
  • Low marginal cost of serving addtional free users
• Metrics:
  • fix costs to maintain the digital service capability
  • marginal costs of serving a free & premium users
  • share of premium users
  • growth rates & churn rates of free & premium users
  • user & customer acquisition costs

• Rational:
  • an attractive, inexpensive, or free initial offer that
  • envourages continuing future purchases of related products or services (e.g. printer & cartridges)
• Precondition:
  • close link between the inexpensive or free initial product and the follow-up items (volume product)
  • customer "lock in"
  • closed system, fully control over it, proprietary technology, secured (e.g. patents)
• Further characteristics:
  • Key activities focus on delivery of follow-up products/services
  • Key resources are a strong brand and intellectual properties (e.g. patents)
  • initial product generates low or no revenues
  • profitabitlity depends on sales volume and profit margins of follow-up product/services

• Companies always must be able to pay (liquidity)
• Most start-up bankruptcies result out of finance- and liquitidy problems
• Profit and rentability are the "food" of the company whereas liquidity is the "oxygen"
• Companies need a finance plan (1-5 years) as well as an up-to-date liquidity plan
• For each project and company we need an optimal financing solution
• There are several financing sources with different characteristics

• Business Angels
• Venture Capital
• Corporate venture Capital
• Equity and debt of family and friends
• Crowdfunding
• Crowdinvesting
• Crowdlending
• Government funding
• Debt guarantee

• What do we need the capital for (Purpose)?
• For which period do we need the capital?
• What is the deal for the investor?
• Which returns can inbestors ecpext?
• Out of which sources of finance should the cash be derived?

• Shareholding instead of loans (Equity)
• Detailed check of company to be invested
• Active suppoort of the company's development (Management Support)
• Contractual form of collaboration
• Exit-Ragulations
• Do not invest their own money, they invest for others and are in charge for it
• VC = Financing Form for start-ups with a very high risk and return profile
• Known from big-tech companies like Aplle, Facebook, Uber, etc.