Hi
We watched the video clip
before we start this main topic today
How about the interview of
the founder of Kevya from the video?
Is it insightful? Isn't it?
Did you notice any
unique business model from the Caviar?
In my opinion,
Caviar applied previous TaskRabbit business model
into the high-end restaurant area
Today, we are going to talk about
the business model
You probably heard about the term of the business model
In fact, the term of the business model
is something that even people
who are not interested in startup are quite familiar with
But you know what?
Surprisingly, there are few people
who truly understand this exact meaning
Actually, when I meet a student preparing to start their businesses,
many of them do not clearly know
what a business model actually means
Even as they plan their startup right away
But for those of you attending this class,
there's no need to worry
Why?
Because I'm going to explain it very clearly and simply
I'd appreciate it if you just focus
for a moment from now on
Let's begin right now
So, what is the business model?
The business model is a company's logic for creating value
Pretty simple, isn't it?
Second definition of the business model would be
the way it operates
and how it creates value for its stakeholders
Another one is
business model is essence for the process of the businesses
To sum up, the business model is
the blueprint of the businesses
Just as you need a blueprint when you build a house,
we need a big frame plan before we do the businesses
This is the business model
It is very simple, right?
But my second question is
Why is the business model important?
I think there are three main reasons
First of all, our business activities
are heavily shaped by our business model
I'd like to give you an example
Let's take a look at
on-demand food delivery industry
As you already know,
there are many startups in action in this industry
Are they all the same?
Although they are in the same market,
their activities will be different
due to their different business models
Let's look at this picture
Do you know Grubhub and Seamless?
They all connect restaurants and consumers
How do they make money?
Yes, of course,
they make money from commission
Then, who will pay the commission?
Yes, of course
Restaurants will pay the commission
This is the business model of Grubhub and Seamless
For your information,
Grubhub was founded from two Chicago engineers in 2004
On the other hand,
Seamless was founded from NY lawyers in 1999
Seamless was doing the businesses with
restaurants around the firm at that time
Later what happened?
Two companies merged together in 2013
Then later, European company
acquired GrubHub and Seamless together for $7.3B in 2021
Is it big company?
Let's look at this picture
This company is Caviar
I think you already saw the Caviar story
in the video before this lecture
Caviar
Caviar focused on popular restaurants
Think about it
Many popular restaurants don't deliver
and even don't accept credit card
The only way to use such restaurant
is to wait in a long line
For me, I once waited in line
for about 2 hours to purchase cookies
at a popular bakery shop in NY
So, the Caviar
countered with those popular restaurants
that don't offer delivery service
And provided consumers with exclusive delivery service
Although their business is very similar to
GrubHub and Seamless
In this case
consumers pay for this service and delivery fee
This is the difference between Caviar and GrubHub and Seamless
Later, Square acquired Caviar
for $100M in 2014
When Caviar was acquired from Square,
founders of Caviar became the billionaire overnight
DoorDash acquired Caviar from Square
for $410M in 2019
This is the story of the Caviar
This company is Sprig
Sprig is a delivery only restaurant
We call it ghost kitchen
Of course, consumers pay for the delivery fee
And Sprig raised about $60M
in venture capital funding
and it looks great
However, this company shut down in 2017
Because the model of delivery only restaurant doesn't work
This company is Blue Apron
Blue Apron doesn't have any kitchen,
doesn't have any delivery service for the food
But Blue Apron is kind of a DIY meal-kit company
It packed ingredients and recipe
and deliver them to your door
So, to use this service,
you must be a member and pay a subscription fee
And the prices depends on
how many servings per meal and how many meals per week
This company at once
was worth more than $2B
And it went IPO in 2017 at NY
However, after that, the situation worsened
and stock prices continued to decline
So what happened later?
Wonder Group acquired Blue Apron
for just $103M in 2023
This company was valued up to $3B
But they were acquired by other company
for just $103M
So far, we looked at startup operating
in the on-demand food delivery industry
As you can see,
their activities are different
depending on their business model
For example, GrubHub or Caviar
had to connect restaurants with consumers
through their platform
And Blue Apron
had to recruit their subscribers
Second reason why business model is important is that
We can revise, modify, and refine
your initial business ideas
This is because
the business model itself is the answer sheet
for many critical questions about your businesses
More specifically,
to make a doable business model
we need to answer questions like this
For example
Who is your consumers?
That is a really important question
What does the consumers value?
How do we make money in this business?
What is the underlying economic logic
that explains how we can deliver value
to consumers at an appropriate cost?
We need to think about cost and price mechanism
Again, creating business model can be a big help
Because we need to be able to answer all of these critical questions
to construct your businesses
Third reason
why business model is important is that
having a innovative business model itself
is one of competitive advantages
Harvard business review editor once argued that
introducing a better business model into an existing market
is the definition of a disruptive innovation
He argued that
The innovative business model
many times have killed old business models
So, I will give you an example about
innovative business model
and how the innovative business model
killed old business model
Have you ever rented out a video at home?
Let's take a look at
how the video rental market has changed
depending on the business model
Since the release of the video tapes called VHS
Do you know the VHS?
It is thick, heavy, and kind of square
Movie studio has made a home video
and individual consumers like us
rented them from video rental shop
as you can see in the picture
Most of these video rental shops were
Mom-and-Pop based stores
So, they were not organized
and they were not fancy
The business model is simple
You go into the store and rent a video over there
and return it a few days later
Then the store charges you
for the number of videos it rents
and a late fee for later returns
This is pretty simple
Then later, what happened?
In the 1980s
a new business model started with
emergence of personal computers and spreadsheet
It was a Blockbuster Video rental franchise that started in Texas
The stores had the same exterior as you can see
and very similar interior
They had a personal computer in the stores
and use the same consumer care programs
So, the business model is pretty same as
a Mom-and-Pop based store
But old Mom-and-Pop stores quickly disappeared
and were replaced by Blockbuster chains
Blockbuster had 9,000 stores
across North America
and had the power to buy into movie studios
How does it do?
Instead of opening their physical rental shop
Netflix opened an website online
And they took orders from consumers like us
through the online
When they receive the order online,
they ship the DVD to consumer's home
And consumers receive them at home and watch the movie
Isn't it pretty simple?
After the consumer finished a movie
they put them in a return envelope
and put them in their mailbox
Then, the post office will take care of everything
And then, consumers are eligible
to order a new video again and again
So, Netflix applied a subscription model
The consumers had to pay
a certain amount of money a month to use this service
Look at this red envelope
This red envelope you see on the screen
is patented by Netflix
And this business model, looks a little bit complicated
has also been patented
This website is early website of Netflix in 1998
Until 2004
Netflix was doing DVD by mail businesses
But later, it changed its business model to
on-demand streaming service
Now, Netflix doesn't have DVD rental businesses
I'm also a subscriber to Netflix personally
And I never ordered a DVD,
received it at home,
and sent it back to return mail
I just open Netflix at home
on my smart TV connected to internet
and watch the video
So, as I mentioned earlier,
this type of business is called
On-demand streaming business
It is kind of common to subscribe to a service to use it
But sometimes,
you can purchase online videos through this website
Netflix has changed its business model in this way
so has Hulu,
and recently Disney joined this business
Let me summarize
So, what is the business model?
Business model is a blue print of your businesses
Why business model matter?
Because the business model
heavily shapes your business activities
So, your business activities can be influenced by
your chosen business model
Second reason
Business model makes our initial business idea more reliable
Why?
Because, to make your business model,
you should answer some critical questions such as
Who is your consumer?
What is consumer value?
Something like that
The last reason why the business model matters is that
business model itself gives you a competitive advantage
You already looked at change in the business model
and how those business killed old business model
in video rental market
Thank you for watching this session