Title: Commercialisation Date: 16/01/2020 Template: slidy Status: draft Tags: resource

16/01/2020

Enterprise & Leadership recap:

the innovation journey

  1. Design Thinking
  2. Ideation
  3. Entrepreneurial Innovation
  4. Market Validation
  5. Intellectual Property
  6. → Commercialisation
  7. New Venture Capital
  8. Risk Management
  9. Initiating Pathways
  10. Clusters & Networks

Commercialisation

Commercialisation is the process of turning your ideas into commercial potential. The models by which your enterprise will work are called Business Models. They explain how your enterprise works. Typically we try and cover four elements when thinking of business models:

  • a customer value proposition
  • key resources
  • a profit formula
  • key processes.

Source: Adapted from Harvard Business Review

Commercialisation

Your product, in itself, may be ready for presenting to investors or licensees but it will not be worth much to them, if you do not have a business model in place.

We must try to answer: How are you going to explain to anyone what your product does/intends to do and how it is going to add/create value for customers as well as the company ?

Commercialisation

The process of commercialisation goes hand in hand with identifying business models. # Business models ?

Michael Lewis, the author of The New, New Thing: A Silicon Valley Story, says that a business model is a “term of art”. Most people know it when they see it but cannot accurately describe it.

What is a Business Model ?

A Business Model is a conceptual structure that supports the viability of a product or company and explains how the company operates, makes money, and how it intends to achieve its goals. All the business processes and policies that a company adopts and follows are part of the business model.

Every business model intrinsically has three parts

  • everything related to designing and manufacturing the product
  • everything related to selling the product, from finding the right customers to distributing the product
  • everything related to how the customer will pay and how the company will make money

Different types of Business Models

Manufacturer

A manufacturer makes finished products from raw materials. It may sell directly to the customers or sell it to a middleman i.e another business that sells it finally to the customer. Examples – Ford, 3M, General Electric.

Distributor

A distributor buys products from manufacturers and resells them to the retailers or the public. Examples – Auto Dealerships.

Retailer

A retailer sells directly to the public after purchasing the products from a distributor or wholesaler. Examples – Amazon, Tesco.

Franchise

A franchise can be a manufacturer, distributor or retailer. Instead of creating a new product, the franchisee uses the parent business’s model and brand while paying royalties to it. Examples – McDonald’s, Pizza Hut.

Brick-and-mortar

Brick-and-mortar is a traditional business model where the retailers, wholesalers, and manufacturers deal with the customers face-to-face in an office, a shop, or a store that the business owns or rents.

eCommerce

E-Commerce business model is an upgradation of the traditional brick-and-mortar business model. It focuses on selling products by creating a web-store on the internet.

Bricks-and-clicks

A company that has both an online and offline presence allows customers to pick up products from the physical stores while they can place the order online. This model gives flexibility to the business since it is present online for customers who live in areas where they do not have brick-and-mortar stores. Examples – Almost all apparel companies nowadays.

More types of Business Models

Nickel-and-dime

In this model, the basic product provided to the customers is very cost-sensitive and hence priced as low as possible. For every other service that comes with it, a certain amount is charged. Examples – All low-cost air carriers.

Freemium

This is one of the most common business models on the Internet. Companies offer basic services to the customers for free while charging a certain premium for extra add-ons. Example — Dropbox, Fortnite, many mobile games

Subscription

If customer acquisition costs are high, this business model might be the most suitable option. The subscription business model lets you keep customers over a long-term contract and get recurring revenues from them through repeat purchases. Examples – Netflix, Dollar Shave Club.

Aggregator

Aggregator business model is a recently developed model where the company various service providers of a niche and sell their services under its own brand. The money is earned as commissions. Examples – Uber, Airbnb, Oyo.

Online Marketplace

Online marketplaces aggregate different sellers into one platform who then compete with each other to provide the same product/service at competitive prices. The marketplace builds its brand over different factors like trust, free and/or on-time home delivery, quality sellers, etc. and earns commission on every sale carried on its platform. Examples – Amazon, Alibaba.

Advertisement business models are evolving even more with the rise of the demand for free products and services on the internet. Just like the earlier times, these business models are popular with media publishers like Youtube, Forbes, etc. where the information is provided for free but are accompanied with advertisements which are paid for by identified sponsors.

Data Licencing / Data Selling

With the advent of the internet, there has been an increase in the amount of data generated upon the users’ activities over the internet. This has led to the advent of a new business model – the data licencing business model. Many companies like Twitter and Onesignal sell or licence the data of its users or users of users to third parties which then use the same for analysis, advertising, and other purposes.

Consolidating your business model

Building blocks :

Considering what business models to adopt or adapt (or combine) is a complex task. In the next few slides we will consider a few building blocks that might aid you to question how your product is going to meet the market.

These building blocks are small sets of questions to ask yourself to consider what parameters and key metrics you might want to develop or adapt.

  • Product window of opportunity
  • Distorting the product adoption curve
  • Calculating your break-even points (to inform your business model choices)

Charting your Window of opportunity

Your Window of Opportunity is a timeframe within which to achieve a return on investment (ROI) for your product/service.

Distorting the window of opportunity via Marketing

Pre-launch marketing distorts the lifecycle forward, helping to ensure ROI is achieved. It also increases overall sales by delaying pre-launch purchase decisions that may otherwise have been lost to competitors.

Window of opportunity example

FMCG: fast moving cosumer goods

Coordinating your departments

Coordinate marketing and new product development (NPD) schedules and build anticipation to drive a strong start of trading – for example, Apple iPhone.

Calculating your break-even point

  • Sales Income/unit : The money the business receives from its customers for selling 1 unit of product or delivering 1 unit of service

  • Fixed Cost/unit : Costs which are not dependent on activity or output- Rent, salaries, rates, etc.

  • Variable Cost/unit : The additional cost over and above overheads required to manufacture/deliver 1 unit of product/service

  • Overhead : Heat, light, rates, phone, salaried staff, etc

Calculating the break-even point