In this session, we will study
the business modeling with lemonade stand
I want to give you some time
to practice business model
with lemonade stand example
And also, we are going to talk about
the very useful tool called business model canvas
You all know that lemonade stand
where kids as young as 9 years old or 10 years old
set it up in front of their house
and sell it to their neighbors who walk by
Then, are there any different business model?
What do you think?
Please think about it for a moment
What else could it be?
I actually practiced in a class at university
At first, the students are unfamiliar with this task
so they cannot think very well
But when they get used to do it a little bit
then they come up with endless ideas
I'm pretty sure that you do too
Lemonade, two kids, in front of house
and just target to the neighbors
who stop by or walk by
Is there any different business model?
What kind of business model we have learned?
What kind of business model?
Please remind of many different types of business model
Let's make a business model together
So what about this?
Why do we sell lemonade in front of my house?
Right, because not too many people walk by
So, we can just simply move to the crowded area
Busy places or event venue and so on
Then we can get more money
This is from a business model point of view
Actually, this is still sales model
not differentiated from original sales model of
lemonade in front of the house
We just simply change our locations
Is there anything else?
What do you think?
Why is it only targeting people who are passing by?
You can provide the delivery service
to the people who are far away from your lemonade stand
Then you can take order by the phone
It's going to be very famous
It's because of word of mouth
But then think about the business model point of view
Although you add up delivery service for the consumer
this business model is still sales business model
Let's think beyond the sales business model
What about it?
How about subscription?
A couple of lemonade every morning only $15 a month
Maybe we must target the neighbors
who came to work every morning
and then they are commuter and then they are going to drive to work
So, we hope you get
a place close to the street
Then you can meet the commuters every morning
This is kind of monthly charge subscription business model
Subscription business model is
way beyond just a simple sales business model
I think it's a great business model
Every morning, one cup of lemonade
What about the other business model
that can be applied to this lemonade stand?
What about bait and hook business model?
Let's think about the bait and hook business model
How can we apply these types of business model
into the lemonade stand?
Look at this picture
You are giving people free samples
and if people like it,
then you can sell a bottle of lemonade
that you already prepared
It is like kind of a testing corner at a grocery store
It is not just a simple sales business model
It is a little bit different
Your sample of the lemonade is kind of a bait
and the bottle of lemonade is kind of a hook
It is a good example of the bait and hook business model
What other business model?
Yes, how about this?
Lemonade is free or very cheap
Instead, consumers have to sit in your chair
And later they pay for the chair
How much?
It is $10 an hour
$10 for an hour
So, the lemonade is free,
but the consumer should pay the usage of the chair
So, in this case you are not selling lemonade
You are selling the hour of chair
So, the lemonade itself is kind of a bait,
and chair is a hook
Do you understand that?
Isn't it simple, right?
What about other bait and hook business model?
It can be applied to the variety of ways
So in this case, you are not selling lemonade
You are not selling the hour of chair
You are making and selling
entire lemonade stand
So you are a furniture company
If people like lemonade a lot,
then many of them want to sell lemonade at a lemonade stand
What do they need?
Yes, of course
They need entire lemonade stand furniture,
and they need some needed materials
Like a bucket
Like lemons
Like devices to make lemonade
Or like a cup
Even cup, right?
So, our business model is not
sales business model of the cup of the lemonade
Our business model is kind of
a manufacturing business model of entire lemonade stand
You look like I care for the lemonade
This is a bait and hook business model
Your lemonade is kind of bait,
and manufacturing and selling
entire lemonade stand as a furniture is a real hook
Let's move on to another type of business model,
which is a freemium business model
What about it?
Lemonade is sold free of charge,
but we have a premium lemonade,
which is iced lemonade
Think about it
It is very expensive to sell on a hot summer day, right?
And you are putting a couple of ices on the lemonade,
and you make an iced lemonade
Basically, you charge the money on the ice
It is a kind of a good application of
freemium business model to your lemonade stand
Think about hot summer day
Most people need iced lemonade
Who want to drink hot lemonade on a summer day?
So, probably, they are willing to pay
your premium iced lemonade for sure
And what about advertising business model?
In this case
you are not actually doing lemonade sales business
You are the one who organize and run event
Think about this
We planned the busking event, and we gather people around
We kind of give them free lemonade
and we can get a lot of people
Let's say, for example,
we guarantee 100 people because of your free lemonade
And then, you offer your 10 people guarantee to the busking
to the music band who need the busking event
And we invite the music band
to come and play in our busking event
Then, we can get the money from
music band, not from the consumers
These guys, consumers, have free lemonade from us
Why?
Because our business model is advertising business model
We advertise music band,
and we charge the money to the music band
So, it's kind of a Google for the lemonade
or Facebook for the lemonade,
or Pokemon Go for the lemonade
What about two-sided platform?
You are not selling lemonade, but you are a platform
What kind of platform?
Let's say you organized a blind date platform
You arrange a blind date,
and you get paid from both sides Man and woman
You got the waiting list,
and then you invite each of them,
and then you prepare for table and chair
And the blind date venue is
our the lemonade stand
Then, you will give free lemonade
to the participant in this blind date
And, of course, both two people
pay for the service for you
This is a simple example of
the two-sided platform business model
that applies to the lemonade stand example
Did it help you understand the business model?
Let's move on to the most common tool
that you actually use in your business modeling
It is called as the business model canvas
I prepared the short video,
and let's take a look at the video for yourself
And, it could be a two-minute video,
and you will understand right away
Let's watch it together
How is it?
Easy to understand, isn't it?
There are a total of nine building blocks
And on the right side of this picture on your screen,
it is about the consumer section
On the other hand, on the left side of this picture,
it's about a resource section or your company section
So, you can understand it this way
Half of them are consumer side,
half of them are your resources or your companies
What about in the middle?
In the middle, there is a value proposition
The value proposition is not about
your content of your service or product
It's about what consumers feel
and the value they feel through your businesses
Isn't it the same?
No, it is a little bit different
I will show you
For example
Do you remember the subscription model
that gave people a cup of lemon
for every day in the morning, about $15 a month?
What is the value proposition of these businesses?
What is that?
Is it just lemonade?
Yes, everyday lemonade
Everyday early morning lemonade
Lemonade itself is a product
Early morning lemonade
is a combination of the product and service
On the business model canvas,
we don't write about your product and service
We should write down the value
that the consumer perceived from your product and service
Value proposition in this subscription,
the business model of the lemonade stand
What about it?
Maybe the commuter every morning,
feel that they can get the energy
from the early morning lemonade
It's kind of energy in the morning
Energy in the morning from the lemonade
That could be a value proposition
I need energy early in the morning,
so that's why I stop by your lemonade,
especially for the kids who want the lemonade
Wow, how is it cute?
So I have a kid, and I want to cheer them up
This is kind of a desire to cheer the children in my neighborhood
That could be commuter in your neighborhood
The value proposition
And also, another value proposition would be
the pride of seeing young kids work every morning
I'm really proud of you guys
This is kind of value proposition
And also, what about feeling happy?
Every morning when I stop by your lemonade stand,
I feel happy about it
Because I'm watching you work very well and very diligent,
so this phenomena gave me some kind of happiness
So, the value proposition from
every morning lemonade has many values
Energy, happiness, cheer up, pride
Something like that
So we need to think this way
But, I already knew that
it is not easy to figure out your value proposition
You should get out of your product and service
So, look at the channel
Channel, there is a truck
So many people are confused about what channel is
The right meaning of the channel is
thinking about how consumer
get to know your company or your service
For example
If your company is a mobile application,
then the channel will be like an Apple Store
Because you will upload your mobile application on Apple Store
Or if your business is a restaurant business,
then, a local sign would be your channel
And what about delivery applications?
Food delivery application will be
good channel for consumer, for your businesses
Because they get to know you from
on-demand food delivery applications
This is channel
And how did you learn about the Hanyang University online class?
Yes, of course
That place you reach out Hanyang University online lecture
is Hanyang University channel
So, now you understand what is channel
What about the consumer relationship?
So, the consumer relationship refers to
how your company interacts with the consumers
For example
You can visit them in person
or respond by phone
If your company is a mobile application,
then it's likely to operate the consumer relationship
through the 24-hour, 7-day self-service
In this case, you don't talk to your consumer directly
Instead, you have automated system
to deal with the consumer feedback
and to increase the consumer satisfaction
If you are a B2B company,
then probably you should send out your salesperson directly
to your consumer site
So, in this case,
your consumer relationship occur in person
So, it depends on what business you are in
What about key activities on the left side?
Key activities means your daily work for your businesses
For example
If your business is a cafeteria,
then you need to serve coffee and tea,
and also you clean up the floor every day
So, serving tea or coffee
and cleaning your floor
would be your key activities
And also, you manage your part-timers
Those are all your key activities if your business is a cafeteria
If your business is a mobile application,
then what is your key activities?
Yes, of course
It's management of your mobile application
or scheduling of your mobile application,
maintaining your mobile application in terms of technology
Those are all key activities for your businesses
Let's take a real-world example
Have you heard about the name of Zipcar?
Zipcar is not the rent car services
In order to use a Zipcar, you should be a member
Zipcar charges annual membership to you
And also, you download the application,
then you make a reservation from the application,
and then you find out the available time slot,
and you make a reservation
Then, you have a key
because you are a member of the Zipcar
Then, you approach to the car,
parked in the parking side, parking lot,
then you touch your key onto the car,
then you unlock the car
Then, the Zipcar allows you to drive this car
for three hours or four hours whatever you want
And then later, if the time's up,
then you park at the same places,
and you simply return your car
into the same parking spot
This is the business model of the Zipcar
And in Korea, we have Socar
Socar exactly copies the same concept of the Zipcar
How does Zipcar idea come from?
Zipcar's idea came from the discussion
between these two women
These two women met together in Boston at the elementary school
Because they have 10 years old
elementary school students as their kids
So, they met together,
and they discussed about traffic jam in Boston
because Boston is well-known for the horrible traffic jam
And then, Robin Chase at that time,
she was around 44 years old,
and Danielson came from Germany
She was a very similar age
and they recognized the problem of the traffic jam in Boston,
and they were frustrated about nobody can solve this problem
And then, Danielson said that
Wait a minute, in Europe, because she came from Germany,
In Europe, we have such a good solution
which is the core of the car sharing business concept
Car sharing business concept is called as car club or car co-ops
This is alternative car ownership
How can we use?
We can use the kind of car
based on our driving time or our mileage
It began in the European countries in 1978,
which is Switzerland
And by 2010, there were 500,000 members in Europe
Germany, UK, and Switzerland
had 75% of the members for the car sharing service
Also, in Europe,
there are about 200 car sharing organizations,
and also we have 12,000 cars available to the members
So, this car sharing business is
so popular in European countries already
So, why car sharing business is so popular in Europe?
Because the consumers have their own problem,
which is it is very expensive for us to have a car
And then another problem was
there is a big hole in the market
for kind of short-term basis car rental businesses
Think about if you go to the traditional rental car service,
then you rent out the car daily-based
But I need just three-hour driving
because of the grocery shopping
But there is such a solution
So, this is kind of a big hole in the market
And also,
I want to drive the car nearby my house
There is no on-demand private car access available
These are two big problems
So, that's why the people in Europe
use the car sharing business a lot
What about America?
Although it is growing in Europe
U.S. market is not touched by 1999
In 1999, so many American people lived in top 20 metropolitan area
Although so many people live in big cities,
there are such a similar concept, similar services
unless only two or three businesses located in the West Coast
In America, there are only two companies
Car-sharing Inc in Portland,
and Flexcar in Seattle
Those companies are located in the West Coast
But what about Robin Chase and Danielson?
They lived in Boston, which is the East Coast
They are far away
So, that's why
Robin Chase and Danielson decided to
work together to develop the very similar
car sharing business in Boston area
Then they developed value proposition
Again, the value proposition is not the product or not the service itself
Value proposition is something unique value
that consumer perceive from your service and your product
So what could be value proposition for their consumers?
What about easy to use?
Yes, great, easy to use is a great value
And what about freedom to travel?
Freedom to travel
And has free ownership
For whom?
For the people who live in metropolitan area
And then, the founding team of the Zipcar
emphasized on convenience and cost saving
Why convenience?
Because we will provide you with very great access to our car
Because we will put our car
nearby your house or your workplaces
And what about cost saving?
You don't have to pay daily base rent car
You pay just three-hour driving for us,
or what, four-hour driving
So that's why we can
save the cost if you use our Zipcar service
But the key concern was the technology
Because they don't have technology
They don't know how to unlock the car,
how to lock the car,
and how to make a reservation through the website,
through the application
They don't have technology
And also, they didn't have price structure
They don't know how much they charge to the consumer
They don't know how much they charge to the subscription fee
So they tried to develop those technologies and prices
This is initial price structure
What about $25 nonrefundable application fee?
$300 fully refundable security deposit?
And $300 annual subscription fee?
This is subscription fee
Then they charge the service for use
For example
What about $1.5 per hour
and $0.4 per mile?
Then later, they evaluated their initial prices
Then they figured out it is not realistic
So they revised their price structure
They decreased annual subscription fee
from $300 to $75
At the same time
they increased service charge for the usage
from $1.5 to $4.5
When I used the Zipcar service many years ago in America,
I paid just $10 because I lived in NY
I think, these days, probably the price has also increased again
Then later, they planned their financial projection
This looks like a great financial projection
When you write down your business plan,
you need to follow this exact step
So, you prepare for the financial plan at least 5 years
They prepare a 5-year financial plan,
which is revenue, cost, and also there is asset, equity, and debt
We are going to talk about it in a little more detail
So, they are ready to set up
So they created a website
This is kind of an early version of the website of the Zipcar
Right now, Zipcar developed a mobile application
So many people, Zipcar users,
just open up their mobile application
and they use a mobile application
They never use the website these days
And also, they try to meet the parking space,
so they contract a local parking lot
The left picture is a parking lot
in the area of the commercial area of Washington, D.C
and the right picture is a parking lot
at Notre Dame University, Indiana
So, how many cars park over there?
You know, around 1, 2, 3, 4, 5
Five cars parked on the campus of Notre Dame University
So, the Notre Dame University,
the students at Notre Dame University
probably live at the dormitory together
Then not many people have a car
So, sometimes they need a car
because they want to go outside as a date
or they want to go to the grocery shopping,
but they don't want to rent out the car daily basis
And also, where are the rental car services located?
Yes, airport
If you go to the airport
from Notre Dame University to the Indianapolis
then it could be two hours driving
They don't have a car
How do they get to the airport?
So, it is nonsense
So, that's why they need
a Zipcar types of service
Easy to use, hassle-free ownership
and great access to the campus
And then, they created a marketing plan
For example, they made the logo
and they distributed a postcard as a flyer
And then, they tried to speak to local communities
And they used this green beetle car at first
to attract attention from the public
So, the local newspaper,
they covered this story about the Zipcar
After that, so many people get to know the Zipcar service
Then, later, they successfully attracted
so many subscribers, so many users
So now, I think you are ready to draw
the business model canvas
Look at this picture
This is a business model canvas
that has nine building blocks, as you already know
In order to draw the business model,
then you'd better have the 3M Post-it
It can be very useful
Let's apply the Zipcar service
to your business model campus
In the middle, what it is?
That is the value proposition
And we say it is offer
Value proposition, offer, same thing
But it is not your service and your product itself
This is kind of a real value
that consumer can perceive from your service and product
What could be a great value for the consumer
if they use your Zipcar service?
What is that?
As you already mentioned that,
it's a cheap and hassle-free car ownership
or easy-to-use car or cost-saving
Or convenient car ownership,
Who is your target consumers?
Who will use your Zipcar service?
Probably the people who drive a car
three hours at best
Because they drive a car for grocery shopping
Or what about the university student
who don't need a car on weekday,
but they need a car a little bit on weekend
So our target consumer would be
the city resident who need a car sometimes
or university student who live in campus
who need a car sometimes
And how does Zipcar make money?
This is a revenue stream
How does Zipcar make money?
Zipcar make money from the annual subscription fee
And also Zipcar charge the service fee for usage
Look at this, channels
How do consumers reach out your service?
They can find out your service
through the online and through the phone
And they can see your Zipcar sign on the parking spot
And they were curious
What is that?
This is a Zipcar
And they probably ask somebody,
What is a Zipcar?
And then somebody ask if they are members
and they can explain what it is
Zipcar is kind of
cheap and hassle-free car ownership service
What about the consumer relationship?
So, you have website and mobile application
and you don't have to meet your regular consumers in person
So, you prepare 24 hours, 7 days consumer service
and also this consumer service can be done by automatic self-service
So we've done on the right side,
which is a consumer-related side
Let's look at the left side,
which is a resources side or your company side
And what about your key activities
to manage your businesses as a Zipcar?
Of course, you do the marketing
And what about scheduling?
Because you have a lot of consumers
And you need to make optimal scheduling each other
And also, you need to analyze who like what,
something like that
And also, you should negotiate with
parking spot owners
So, for example, Notre Dame University,
you may negotiate with the president
of Notre Dame University to set up your Zipcar sign
on your parking lot at Notre Dame University, Indiana
What about key resources?
Of course, in order to run your businesses, you should have car
Without car, you cannot do the businesses
And parking spot
Your car should be parked in a certain place
And what about platform?
Without the platform, no one can make a reservation
And website application
In order to manage those resources and key activities,
you should have employees
Then you should pay salary for them
And if we have car, you need to maintain the cars
And, of course, you put the gas
and you pay the insurance fee
You pay the parking fee
for the university or the other landlord
Who would be your partners?
The last one is partner network
You are investors of your partners
And your local community could be your partners
And payment company could be your partners
And parking point owners could be your partners
What do you think?
It's not difficult
It's not that difficult than you expected, right?
And then you can draw your business model canvas
if you have business ideas
So I recommend you guys to
conduct the business model canvas many times
before you start your real businesses
Because it will be very helpful for you to
revise and refine your businesses
And later,
it will make your business ideas more reliable
What happened to the Zipcar?
In January 2013,
Avis, which is a global rental car service,
purchased a Zipcar for how much?
$491 million
And then two founders became the billionaire
And Danielson became the administrative director
at one of the universities
Robin Chase went to France
and she started another kind of similar business in France
Let me summarize
As we practiced through the lemonade stand,
same business can have a different business model
So we can apply
the bait-and-hook business model
into our simple lemonade stand businesses
or we can apply some subscription business model
into our lemonade stand
or we can apply the platform businesses
into our lemonade stand businesses
Secondly,
we talked about the Business Model Canvas
So the Business Model Canvas is a really good
and simple and structural tool
that has nine blocks
It will be very helpful for you to prepare for the businesses
Thank you for watching this session