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Unbundling Business Models

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It is vital for an organization to focus on its core competency and outsource other functions. Scale, Scope and Speed can't go hand in hand.

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    Types of business Product innovation developing, introducing and accelerating the adoption of innovative products and services Customer relationship building deep relationships with a target set of customers ' sourcing the products and services that are most relevant and useful to them Infrastructure management high volume, routine processing activities like running basic assembly line manufacturing To keep costs to a minimum, try to make their activities and outputs routine and predictable
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    Bundled Corporation The management of all the processes are combined within a single company Interaction costs are eliminated Unbundled Corporation co-exist within a single corporation Increase agility and improve learning capacity Different economic, competitive, and cultural imperatives
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    Types of Business O O Product Innovation Early market entry Speed is key Battle for talent; low barriers to entry; many small players thrive centered Customer Relationship Customer acquisition economies of scope are key Battle for scope; rapid consolidation; a few big players dominate Highly service oriented; customer comes- first mentality Infrastructure management Achieve unit costs; economies of scale are key Battle for scale; rapid consolidation; a few big players dominate Cost focused; standardization, predictability, and efficiency
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    Tradeoffs Scope
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    Unbundling: Examples Yahoo: Customer Relationship Dell: ' 'pull" manufacturing system Newspaper Industry: Customer Relationship Amazon: Hybrid Strategy
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    Pictet:A bundled business Model O The product inndvätidfi busifiess is driven by speed and quick market entry, which is at odds with the long-term business of advising the wealthy. O The platform busing: dri'i'é Cists, which is difficult Id achieve wilhifi single bank o The and efficiency•fötused transaction platform business with the renufieratiin• Intensive advisory ard fifiütial products bi-siness, which needs to costly talenl 6 PRIVATE Relationship Business CUSTOM-TAILORED) PERSONAL PERSONAL NSACTIO PLATFORM [NANC Product innovation Business MANAGEMENT & ADVISORY Infrastructure Business O The bank serves two different markets with very different dynamics. Advising Iha wealthy is [ang•ternl, relationship•based business. Selling fifi2fitial products to private banks is dynamic, fast•changing business. O The bank aims 10 sell its 10 competing banks in Order 10 increase revenues—bul this creates a conflitl Of interest. O The bank's product division pressures advi• ser: to sell the bank's own products to clients. This conflicts with client ifiteresl in neutral advice. Clients want 10 invest in the best products on the market, regardless of origin.
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    Mobile Telco: Un-bundling the Business Model Infrastructur Management TELECOM SUPPLIERS wcrwoe« NETWORK SERVICES PROVISIONING g RAND cusYOMER 'ASE Product Innovation voccz DATA CONTENT 1 ACQUISITION INSTALLED CUSTOMER BASE CustomerR lationship DATA REVENUES
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    Un-bundled Processes Equipment Manufacturers Unbundled Telco Content Providers
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    The Long Tail O O O O Long Tail concept was coined by Chris Anderson. Business Model of "Selling Less of More". FOCUS is on covering large number of niche products which sell relatively infrequently. Require low inventory costs with strong platforms.
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    Tyranny of Locality O O O Physical Limitation (Shelf Space) Geographical Limitation Limitations of Broadcast Technologies.
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    Markets without End Rhapsody rnusic downloads (for number of titles equivalent to Wal-Mart inventory) 180,000 160,000 140,000 120.000 1 oo,ooo 80,000 60,000 40,000 20,000 5.000 10.000 Track 15,000 rank 20,000 25.000
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    The Tail? But it keeps going (rank 25,000 to 100,000) 800 700 600 500 400 300 200 100 25 35 45 55 65 75 85 95 Track rank (thousands)
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    The Long Tail? ...and going (rank 100,000 to 800,000) 140 120 100 80 60 40 20 100 200 300 400 500 600 (thousands) 700 800 Track rank
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    The New Growth Market : Inventory Total Inventory Total Inventory Total Inventory 5000000 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 Rhapsody • Total Inventory 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 6000000 5000000 4000000 3000000 2000000 1000000 0 Amazon Wal-mart Netflix Blockbuster Barnes & Noble Store • Total Inventory • Total Inventory
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    Better View Online rnusic popularity (Rhapsody. Dec. 2005) Songs available at VVa I a rt and Rhapsody Songs available only at Rhapsody o 25.000 Titles. 50.000 100.000 900.000 ranked by popularity
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    Unleashing The Hidden Majority O O O Democratization of Tools of Production Democratization of Tools of Distribution Falling Search Costs of connecting Demand and Supply
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    The Concept "When you can dramatically lower the costs of connecting supply and demand, it changes not just the numbers, but the entire nature of the market. This is not just a quantitative change, but a qualitative one, too. Bringing niches within reach reveals latent demand for noncommercial content. Then, as demand shifts toward the niches, the economics of providing them improve further, and so on, creating a positive feedback loop that will transform entire industries—and the culture—for decades to come.' Chris Anderson
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    Long Tail Business Model Key Partners Content Key Activities Platform management Platform promotion value Prapasitians Platform for niche content and services customer Relationships Online interaction and communities channels Internet customer segments Many niche segement producers Key Resources Platform Cost structure Platform maintenance and development Revenue streams Selling less of more
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