1
00:00:00.240 --> 00:00:01.240
Hi

2
00:00:01.890 --> 00:00:03.690
We watched the video clip

3
00:00:03.690 --> 00:00:07.440
before we start this main topic today

4
00:00:08.080 --> 00:00:09.980
How about the interview of

5
00:00:09.980 --> 00:00:12.630
the founder of Kevya from the video?

6
00:00:12.780 --> 00:00:15.050
Is it insightful? Isn't it?

7
00:00:15.680 --> 00:00:17.780
Did you notice any

8
00:00:17.780 --> 00:00:20.580
unique business model from the Caviar?

9
00:00:20.880 --> 00:00:22.320
In my opinion,

10
00:00:22.320 --> 00:00:26.470
Caviar applied previous 
TaskRabbit business model

11
00:00:26.470 --> 00:00:28.650
into the high-end restaurant area

12
00:00:29.120 --> 00:00:32.770
Today, we are going to talk about

13
00:00:32.770 --> 00:00:34.020
the business model

14
00:00:34.420 --> 00:00:37.599
You probably heard about the term
of the business model

15
00:00:38.099 --> 00:00:41.449
In fact, the term of the business model

16
00:00:41.449 --> 00:00:43.940
is something that even people

17
00:00:43.940 --> 00:00:48.140
who are not interested in startup 
are quite familiar with

18
00:00:48.940 --> 00:00:49.989
But you know what?

19
00:00:50.560 --> 00:00:53.960
Surprisingly, there are few people

20
00:00:53.960 --> 00:00:56.449
who truly understand this exact meaning

21
00:00:56.549 --> 00:01:01.349
Actually, when I meet a student
preparing to start their businesses,

22
00:01:01.349 --> 00:01:04.610
many of them do not clearly know

23
00:01:04.610 --> 00:01:06.760
what a business model actually means

24
00:01:07.010 --> 00:01:10.239
Even as they plan their startup right away

25
00:01:12.239 --> 00:01:15.089
But for those of you attending this class,

26
00:01:15.189 --> 00:01:17.039
there's no need to worry

27
00:01:17.189 --> 00:01:17.739
Why?

28
00:01:17.739 --> 00:01:21.189
Because I'm going to explain it
very clearly and simply

29
00:01:22.539 --> 00:01:26.500
I'd appreciate it if you just focus

30
00:01:26.500 --> 00:01:28.650
for a moment from now on

31
00:01:29.350 --> 00:01:32.200
Let's begin right now

32
00:01:32.450 --> 00:01:34.469
So, what is the business model?

33
00:01:34.720 --> 00:01:39.570
The business model is 
a company's logic for creating value

34
00:01:39.820 --> 00:01:41.009
Pretty simple, isn't it?

35
00:01:41.199 --> 00:01:44.099
Second definition of 
the business model would be

36
00:01:44.099 --> 00:01:46.349
the way it operates

37
00:01:46.349 --> 00:01:50.580
and how it creates value
for its stakeholders

38
00:01:51.680 --> 00:01:52.980
Another one is

39
00:01:52.980 --> 00:01:56.670
business model is essence 
for the process of the businesses

40
00:01:59.439 --> 00:02:03.389
To sum up, the business model is

41
00:02:03.389 --> 00:02:06.089
the blueprint of the businesses

42
00:02:06.700 --> 00:02:10.860
Just as you need a blueprint
when you build a house,

43
00:02:10.860 --> 00:02:14.320
we need a big frame plan
before we do the businesses

44
00:02:15.320 --> 00:02:17.370
This is the business model

45
00:02:18.170 --> 00:02:20.370
It is very simple, right?

46
00:02:21.570 --> 00:02:23.939
But my second question is

47
00:02:23.939 --> 00:02:27.289
Why is the business model important?

48
00:02:28.039 --> 00:02:31.039
I think there are three main reasons

49
00:02:31.439 --> 00:02:35.089
First of all, our business activities

50
00:02:35.339 --> 00:02:38.390
are heavily shaped by our business model

51
00:02:41.310 --> 00:02:43.860
I'd like to give you an example

52
00:02:44.210 --> 00:02:46.260
Let's take a look at

53
00:02:46.260 --> 00:02:49.639
on-demand food delivery industry

54
00:02:50.489 --> 00:02:51.989
As you already know,

55
00:02:51.989 --> 00:02:55.479
there are many startups
in action in this industry

56
00:02:57.070 --> 00:02:58.370
Are they all the same?

57
00:02:59.120 --> 00:03:02.170
Although they are in the same market,

58
00:03:02.170 --> 00:03:04.959
their activities will be different

59
00:03:05.259 --> 00:03:08.159
due to their different business models

60
00:03:09.309 --> 00:03:11.289
Let's look at this picture

61
00:03:11.539 --> 00:03:13.539
Do you know Grubhub and Seamless?

62
00:03:13.689 --> 00:03:18.870
They all connect restaurants and consumers

63
00:03:21.199 --> 00:03:23.149
How do they make money?

64
00:03:23.149 --> 00:03:24.449
Yes, of course,

65
00:03:24.449 --> 00:03:27.049
they make money from commission

66
00:03:27.899 --> 00:03:31.220
Then, who will pay the commission?

67
00:03:31.870 --> 00:03:33.220
Yes, of course

68
00:03:33.220 --> 00:03:35.720
Restaurants will pay the commission

69
00:03:36.620 --> 00:03:39.830
This is the business model
of Grubhub and Seamless

70
00:03:41.388 --> 00:03:43.138
For your information,

71
00:03:43.138 --> 00:03:49.238
Grubhub was founded from
two Chicago engineers in 2004

72
00:03:49.238 --> 00:03:50.238
On the other hand,

73
00:03:50.238 --> 00:03:55.437
Seamless was founded
from NY lawyers in 1999

74
00:03:55.719 --> 00:03:58.869
Seamless was doing the businesses with

75
00:03:58.869 --> 00:04:01.019
restaurants around the firm at that time

76
00:04:01.319 --> 00:04:02.519
Later what happened?

77
00:04:02.519 --> 00:04:05.719
Two companies merged together in 2013

78
00:04:05.719 --> 00:04:09.469
Then later, European company

79
00:04:09.469 --> 00:04:16.119
acquired GrubHub and Seamless
together for $7.3B in 2021

80
00:04:16.669 --> 00:04:19.069
Is it big company?

81
00:04:21.110 --> 00:04:22.760
Let's look at this picture

82
00:04:22.869 --> 00:04:25.469
This company is Caviar

83
00:04:25.919 --> 00:04:30.319
I think you already saw the Caviar story

84
00:04:30.319 --> 00:04:32.069
in the video before this lecture

85
00:04:33.343 --> 00:04:34.193
Caviar

86
00:04:34.193 --> 00:04:36.893
Caviar focused on popular restaurants

87
00:04:36.893 --> 00:04:38.393
Think about it

88
00:04:38.393 --> 00:04:40.443
Many popular restaurants don't deliver

89
00:04:40.443 --> 00:04:42.693
and even don't accept credit card

90
00:04:42.693 --> 00:04:45.493
The only way to use such restaurant

91
00:04:45.493 --> 00:04:48.942
is to wait in a long line

92
00:04:49.493 --> 00:04:53.543
For me, I once waited in line

93
00:04:53.543 --> 00:04:56.893
for about 2 hours
to purchase cookies

94
00:04:56.893 --> 00:04:59.493
at a popular bakery shop in NY

95
00:04:59.643 --> 00:05:01.043
So, the Caviar

96
00:05:01.043 --> 00:05:03.793
countered with those popular restaurants

97
00:05:03.793 --> 00:05:06.843
that don't offer delivery service

98
00:05:07.018 --> 00:05:12.318
And provided consumers
with exclusive delivery service

99
00:05:12.968 --> 00:05:15.568
Although their business
is very similar to

100
00:05:15.568 --> 00:05:17.668
GrubHub and Seamless

101
00:05:17.668 --> 00:05:18.768
In this case

102
00:05:18.768 --> 00:05:23.018
consumers pay for
this service and delivery fee

103
00:05:23.018 --> 00:05:27.417
This is the difference between
Caviar and GrubHub and Seamless

104
00:05:29.405 --> 00:05:33.305
Later, Square acquired Caviar

105
00:05:33.305 --> 00:05:37.105
for $100M in 2014

106
00:05:37.105 --> 00:05:40.155
When Caviar was acquired from Square,

107
00:05:40.155 --> 00:05:43.305
founders of Caviar
became the billionaire overnight

108
00:05:45.505 --> 00:05:48.705
DoorDash acquired Caviar from Square

109
00:05:48.705 --> 00:05:52.055
for $410M in 2019

110
00:05:52.055 --> 00:05:53.854
This is the story of the Caviar

111
00:05:55.778 --> 00:05:58.228
This company is Sprig

112
00:05:58.578 --> 00:06:01.828
Sprig is a delivery only restaurant

113
00:06:02.128 --> 00:06:05.128
We call it ghost kitchen

114
00:06:05.678 --> 00:06:10.728
Of course, consumers pay for
the delivery fee

115
00:06:10.728 --> 00:06:14.978
And Sprig raised about $60M

116
00:06:14.978 --> 00:06:16.878
in venture capital funding

117
00:06:16.878 --> 00:06:18.728
and it looks great

118
00:06:18.728 --> 00:06:23.228
However, this company shut down in 2017

119
00:06:23.228 --> 00:06:28.177
Because the model of
delivery only restaurant doesn't work

120
00:06:30.866 --> 00:06:34.066
This company is Blue Apron

121
00:06:34.216 --> 00:06:36.866
Blue Apron doesn't have any kitchen,

122
00:06:36.866 --> 00:06:40.666
doesn't have any
delivery service for the food

123
00:06:40.666 --> 00:06:45.866
But Blue Apron is
kind of a DIY meal-kit company

124
00:06:46.266 --> 00:06:50.166
It packed ingredients and recipe

125
00:06:50.166 --> 00:06:52.665
and deliver them to your door

126
00:06:52.921 --> 00:06:55.221
So, to use this service,

127
00:06:55.221 --> 00:06:59.721
you must be a member
and pay a subscription fee

128
00:06:59.721 --> 00:07:01.621
And the prices depends on

129
00:07:01.621 --> 00:07:05.521
how many servings per meal
and how many meals per week

130
00:07:10.021 --> 00:07:12.271
This company at once

131
00:07:12.271 --> 00:07:15.121
was worth more than $2B

132
00:07:15.121 --> 00:07:19.121
And it went IPO in 2017 at NY

133
00:07:19.271 --> 00:07:23.921
However, after that,
the situation worsened

134
00:07:23.921 --> 00:07:26.971
and stock prices continued to decline

135
00:07:27.221 --> 00:07:28.821
So what happened later?

136
00:07:29.271 --> 00:07:32.221
Wonder Group acquired Blue Apron

137
00:07:32.221 --> 00:07:37.170
for just $103M in 2023

138
00:07:38.250 --> 00:07:43.400
This company was valued up to $3B

139
00:07:43.450 --> 00:07:46.250
But they were acquired by other company

140
00:07:46.250 --> 00:07:49.299
for just $103M

141
00:07:50.314 --> 00:07:54.264
So far, we looked at startup operating

142
00:07:54.264 --> 00:07:57.964
in the on-demand food delivery industry

143
00:07:57.964 --> 00:07:59.264
As you can see,

144
00:07:59.264 --> 00:08:02.214
their activities are different

145
00:08:02.214 --> 00:08:04.663
depending on their business model

146
00:08:05.568 --> 00:08:07.968
For example, GrubHub or Caviar

147
00:08:07.968 --> 00:08:11.118
had to connect restaurants with consumers

148
00:08:11.118 --> 00:08:12.518
through their platform

149
00:08:12.518 --> 00:08:13.918
And Blue Apron

150
00:08:13.918 --> 00:08:17.068
had to recruit their subscribers

151
00:08:19.680 --> 00:08:24.580
Second reason why business model
is important is that

152
00:08:25.630 --> 00:08:30.630
We can revise, modify, and refine

153
00:08:30.630 --> 00:08:32.479
your initial business ideas

154
00:08:32.586 --> 00:08:34.636
This is because

155
00:08:34.636 --> 00:08:38.286
the business model itself
is the answer sheet

156
00:08:38.286 --> 00:08:42.235
for many critical questions
about your businesses

157
00:08:43.467 --> 00:08:45.567
More specifically,

158
00:08:45.567 --> 00:08:47.717
to make a doable business model

159
00:08:47.717 --> 00:08:51.067
we need to answer questions like this

160
00:08:51.067 --> 00:08:51.767
For example

161
00:08:51.767 --> 00:08:53.467
Who is your consumers?

162
00:08:53.467 --> 00:08:55.717
That is a really important question

163
00:08:55.717 --> 00:08:58.017
What does the consumers value?

164
00:08:59.367 --> 00:09:02.917
How do we make money in this business?

165
00:09:03.467 --> 00:09:06.217
What is the underlying economic logic

166
00:09:06.228 --> 00:09:09.987
that explains how we can deliver value

167
00:09:10.010 --> 00:09:13.160
to consumers at an appropriate cost?

168
00:09:13.160 --> 00:09:18.024
We need to think about
cost and price mechanism

169
00:09:20.621 --> 00:09:24.721
Again, creating business model
can be a big help

170
00:09:25.021 --> 00:09:29.971
Because we need to be able to answer
all of these critical questions

171
00:09:29.971 --> 00:09:33.321
to construct your businesses

172
00:09:36.171 --> 00:09:37.571
Third reason

173
00:09:37.571 --> 00:09:39.921
why business model is important is that

174
00:09:39.921 --> 00:09:42.821
having a innovative business model itself

175
00:09:42.821 --> 00:09:44.971
is one of competitive advantages

176
00:09:46.863 --> 00:09:51.863
Harvard business review editor
once argued that

177
00:09:51.863 --> 00:09:57.413
introducing a better business model
into an existing market

178
00:09:57.413 --> 00:10:00.213
is the definition of
a disruptive innovation

179
00:10:00.213 --> 00:10:01.863
He argued that

180
00:10:02.113 --> 00:10:04.763
The innovative business model

181
00:10:04.763 --> 00:10:07.912
many times have killed old business models

182
00:10:10.204 --> 00:10:13.404
So, I will give you an example about

183
00:10:13.404 --> 00:10:14.804
innovative business model

184
00:10:14.804 --> 00:10:17.254
and how the innovative business model

185
00:10:17.254 --> 00:10:18.954
killed old business model

186
00:10:20.304 --> 00:10:24.654
Have you ever rented out a video at home?

187
00:10:25.004 --> 00:10:26.554
Let's take a look at

188
00:10:26.554 --> 00:10:29.054
how the video rental market has changed

189
00:10:29.054 --> 00:10:31.454
depending on the business model

190
00:10:34.058 --> 00:10:37.658
Since the release of
the video tapes called VHS

191
00:10:37.658 --> 00:10:38.858
Do you know the VHS?

192
00:10:38.858 --> 00:10:42.558
It is thick, heavy, and kind of square

193
00:10:42.808 --> 00:10:47.058
Movie studio has made a home video

194
00:10:47.058 --> 00:10:50.108
and individual consumers like us

195
00:10:50.108 --> 00:10:52.858
rented them from video rental shop

196
00:10:52.858 --> 00:10:54.558
as you can see in the picture

197
00:10:54.858 --> 00:10:57.908
Most of these video rental shops were

198
00:10:57.908 --> 00:10:59.807
Mom-and-Pop based stores

199
00:11:00.908 --> 00:11:03.158
So, they were not organized

200
00:11:03.158 --> 00:11:05.357
and they were not fancy

201
00:11:08.915 --> 00:11:11.665
The business model is simple

202
00:11:11.665 --> 00:11:15.715
You go into the store
and rent a video over there

203
00:11:15.715 --> 00:11:18.515
and return it a few days later

204
00:11:19.165 --> 00:11:21.415
Then the store charges you

205
00:11:21.415 --> 00:11:25.065
for the number of videos it rents

206
00:11:25.065 --> 00:11:28.715
and a late fee for later returns

207
00:11:28.965 --> 00:11:30.764
This is pretty simple

208
00:11:31.830 --> 00:11:33.180
Then later, what happened?

209
00:11:33.180 --> 00:11:34.680
In the 1980s

210
00:11:34.680 --> 00:11:37.080
a new business model started with

211
00:11:37.080 --> 00:11:41.630
emergence of
personal computers and spreadsheet

212
00:11:41.730 --> 00:11:46.780
It was a Blockbuster Video
rental franchise that started in Texas

213
00:11:47.180 --> 00:11:51.780
The stores had the same exterior
as you can see

214
00:11:51.780 --> 00:11:54.030
and very similar interior

215
00:11:54.030 --> 00:11:56.930
They had a personal computer in the stores

216
00:11:56.930 --> 00:12:00.030
and use the same consumer care programs

217
00:12:00.992 --> 00:12:04.342
So, the business model is pretty same as

218
00:12:04.342 --> 00:12:06.042
a Mom-and-Pop based store

219
00:12:06.042 --> 00:12:09.442
But old Mom-and-Pop stores
quickly disappeared

220
00:12:09.442 --> 00:12:13.042
and were replaced by Blockbuster chains

221
00:12:13.542 --> 00:12:18.442
Blockbuster had 9,000 stores

222
00:12:18.442 --> 00:12:19.942
across North America

223
00:12:19.942 --> 00:12:25.391
and had the power to
buy into movie studios

224
00:12:25.826 --> 00:12:27.026
How does it do?

225
00:12:28.274 --> 00:12:32.424
Instead of opening their
physical rental shop

226
00:12:32.424 --> 00:12:35.474
Netflix opened an website online

227
00:12:35.474 --> 00:12:38.674
And they took orders
from consumers like us

228
00:12:38.674 --> 00:12:39.974
through the online

229
00:12:40.224 --> 00:12:43.424
When they receive the order online,

230
00:12:43.424 --> 00:12:46.824
they ship the DVD to consumer's home

231
00:12:46.824 --> 00:12:50.623
And consumers receive them at home
and watch the movie

232
00:12:51.000 --> 00:12:52.000
Isn't it pretty simple?

233
00:12:52.829 --> 00:12:55.029
After the consumer finished a movie

234
00:12:55.029 --> 00:12:58.379
they put them in a return envelope

235
00:12:58.729 --> 00:13:02.379
and put them in their mailbox

236
00:13:02.379 --> 00:13:05.129
Then, the post office
will take care of everything

237
00:13:05.779 --> 00:13:08.429
And then, consumers are eligible

238
00:13:08.429 --> 00:13:11.379
to order a new video again and again

239
00:13:11.529 --> 00:13:15.728
So, Netflix applied a subscription model

240
00:13:18.284 --> 00:13:20.184
The consumers had to pay

241
00:13:20.184 --> 00:13:24.034
a certain amount of money a month
to use this service

242
00:13:24.334 --> 00:13:26.484
Look at this red envelope

243
00:13:26.484 --> 00:13:28.884
This red envelope you see on the screen

244
00:13:28.884 --> 00:13:31.134
is patented by Netflix

245
00:13:31.134 --> 00:13:34.434
And this business model,
looks a little bit complicated

246
00:13:34.434 --> 00:13:36.633
has also been patented

247
00:13:39.196 --> 00:13:45.196
This website is early website
of Netflix in 1998

248
00:13:45.846 --> 00:13:48.296
Until 2004

249
00:13:48.296 --> 00:13:52.546
Netflix was doing DVD by mail businesses

250
00:13:53.830 --> 00:13:57.580
But later, it changed
its business model to

251
00:13:57.580 --> 00:14:00.230
on-demand streaming service

252
00:14:00.430 --> 00:14:04.480
Now, Netflix doesn't have
DVD rental businesses

253
00:14:04.930 --> 00:14:09.229
I'm also a subscriber
to Netflix personally

254
00:14:09.656 --> 00:14:11.806
And I never ordered a DVD,

255
00:14:11.806 --> 00:14:13.356
received it at home,

256
00:14:13.356 --> 00:14:15.506
and sent it back to return mail

257
00:14:15.506 --> 00:14:18.406
I just open Netflix at home

258
00:14:18.406 --> 00:14:21.256
on my smart TV connected to internet

259
00:14:21.256 --> 00:14:23.806
and watch the video

260
00:14:25.611 --> 00:14:28.411
So, as I mentioned earlier,

261
00:14:28.411 --> 00:14:30.611
this type of business is called

262
00:14:30.611 --> 00:14:33.661
On-demand streaming business

263
00:14:33.968 --> 00:14:38.468
It is kind of common to
subscribe to a service to use it

264
00:14:38.468 --> 00:14:40.268
But sometimes,

265
00:14:40.268 --> 00:14:44.118
you can purchase online videos
through this website

266
00:14:44.118 --> 00:14:47.218
Netflix has changed
its business model in this way

267
00:14:47.218 --> 00:14:49.318
so has Hulu,

268
00:14:49.318 --> 00:14:52.817
and recently Disney joined this business

269
00:14:55.100 --> 00:14:57.000
Let me summarize

270
00:14:58.119 --> 00:14:59.969
So, what is the business model?

271
00:14:59.969 --> 00:15:05.119
Business model is
a blue print of your businesses

272
00:15:06.069 --> 00:15:08.669
Why business model matter?

273
00:15:08.919 --> 00:15:11.569
Because the business model

274
00:15:11.569 --> 00:15:13.919
heavily shapes your business activities

275
00:15:14.619 --> 00:15:18.469
So, your business activities
can be influenced by

276
00:15:18.469 --> 00:15:19.969
your chosen business model

277
00:15:20.539 --> 00:15:21.839
Second reason

278
00:15:21.839 --> 00:15:26.689
Business model makes
our initial business idea more reliable

279
00:15:26.689 --> 00:15:27.289
Why?

280
00:15:27.289 --> 00:15:30.639
Because, to make your business model,

281
00:15:30.639 --> 00:15:33.739
you should answer
some critical questions such as

282
00:15:33.739 --> 00:15:35.139
Who is your consumer?

283
00:15:35.139 --> 00:15:36.889
What is consumer value?

284
00:15:36.889 --> 00:15:37.688
Something like that

285
00:15:38.127 --> 00:15:42.077
The last reason why
the business model matters is that

286
00:15:42.077 --> 00:15:46.777
business model itself gives you
a competitive advantage

287
00:15:47.377 --> 00:15:50.827
You already looked at
change in the business model

288
00:15:50.827 --> 00:15:54.577
and how those business
killed old business model

289
00:15:54.577 --> 00:15:56.827
in video rental market

290
00:15:57.553 --> 00:16:00.253
Thank you for watching this session