BUSinESS MoDEL EnviRonMEnT:
conTEXT, DESign DRivERS, anD conSTRainTS
Busi NESS Mo DELS a RE DESi GNED a ND Ex Ecu TED i N SPEci Fic ENV i Ro NMENTS.
Developing a good understanding of your organization’s environment helps
business models and categorize them using the four areas just mentioned.
you conceive stronger, more competitive business models.
The pharmaceutical industry, introduced in the previous chapter, is used to
Continuous environmental scanning is more important than ever
200
In the following pages, we describe the key external forces that influence
illustrate each external force. The pharma sector is likely to undergo substan-
because of the growing complexity of the economic landscape (e.g. net-
tial transformation in coming years, though it is unclear how the changes
worked business models), greater uncertainty (e.g. technology innovations)
will play out. Will biotechnology companies, which are currently copying the
and severe market disruptions (e.g. economic turmoil, disruptive new Value
pharmaceutical sector’s blockbuster drug model, come up with new, disrup-
Propositions). Understanding changes in the environment helps you adapt
tive business models? Will technological change lead to transformation?
your model more effectively to shifting external forces.
Will consumers and market demand force changes?
You may find it helpful to conceive of the external environment as a
We strongly advocate mapping your own business model environment
sort of “design space.” By this we mean thinking of it as a context in which
and reflecting on what trends mean for the future of your enterprise. A good
to conceive or adapt your business model, taking into account a number
understanding of the environment will allow you to better evaluate the differ-
of design drivers (e.g. new customer needs, new technologies, etc.) and
ent directions in which your business model might evolve. You may also want
design constraints (e.g. regulatory trends, dominant competitors, etc.). This
to consider creating scenarios of future business model environments (see p.
environment should in no way limit your creativity or predefine your business
186). This can be a valuable tool for jumpstarting business model innovation
model. It should, however, influence your design choices and help you make
work or simply preparing your organization for the future.
more informed decisions. With a breakthrough business model, you may
even become a shaper and transformer of this environment, and set new
standards for your industry.
To get a better grasp on your business model “design space,” we suggest
roughly mapping four main areas of your environment. These are (1) market
forces, (2) industry forces, (3) key trends, and (4) macroeconomic forces.
If you’d like to deepen your analysis of the landscape beyond the simple
mapping we propose, each of these four areas is backed by a large body of
literature and specific analytical tools.
— FORESIGHT —
REGULaToRy TRENDS
SociETaL
TECHNoLoGY TRENDS
aND cuLTURaL TRENDS
SocioECONo Mic TRENDS
KEY
TRENDs
MaRKET SEGMENTS
NEEDS
STaKEHo LDERS
KP
KA
CH
INDUSTRy
FORCES
coMPETiToRS
(INCUMBENTs)
NEW ENTRaNTS
(INSURGENTS)
CS
MARKET
FORCES
KR
C$
MaRKET
R$
SWiTcHiNG
suBSTiTUTE PRoDUCTS
aND SERVicES
REVENUE
MACRoEcONOMIC
FORCES
GLo BaL Ma RKET
coNDiTioNS
ECONo Mic iNFRaSTRUCTURE
CAPITal MARKETs
aND DEMaNDS
CR
VP
coMMoDiTiES aND oTHER RESouRcES
— MACROEcONOMICS —
issuES
coSTS
aTTRACTivENESS
— MARKET ANALysis —
— cOMPETITIVE ANALysis —
suPPLiERS aND oTHER VaLUE
cHaiN ACToRS
201
Main Qs
Identifies key issues driving and transforming your
market from Customer and Offer perspectives
What are the crucial issues affecting the customer
landscape? Which shifts are underway? Where is
the market heading?
Identifies the major market segments, describes their
attractiveness, and seeks to spot new segments
What are the most important Customer Segments?
Where is the biggest growth potentia l? Which segments
are declining? Which peripheral segments deserve
attention?
Outlines market needs and analyzes how well
they are serv
What do customers need? Where are the biggest
unsatisfied customer needs? What do customers really
want to get done? Where is demand increasing?
Declining?
swiTcHiNG coSTS
Describes elements related to customers switching
business to competitors
What binds customers to a company and its offer?
What switching costs prevent customers from defecting
to competitors? Is it easy for customers to find
and purchase similar offers? How important is brand?
REVENUE
aTTRACTivENESS
Identifies elements related to revenue attractiveness
and pricing power
What are customers really willing to pay for? Where can
the largest margins be achieved? Can customers easily
find and purchase cheaper products and services?
MaRKET
issuES
MaRKET SEGMENTS
202
MARKET
FORCES
NEEDS
aND DEMaNDS
— MARKEt ANALysis —
Pharmaceutical Industry Landscape
› Skyrocketing healthcare costs
› Emphasis shifting from treatment to prevention
› Treatments, diagnostics, devices, and support services
are converging
› Emerging markets becoming more important
›
›
›
›
›
›
Doctors and healthcare providers
Governments/regulators
Distributors
Patients
Strong potential in emerging markets
U.S. remains the predominant global market
› Strong, with dispersed need for niche treatments
› Need to manage exploding cost of health care
› Large, unsatisfied health care needs in emerging markets
and developing countries
› Consumers are better informed
› Monopoly on patent-protected drugs
› Low switching costs for patent-expired drugs replaceable
by generic versions
› Growing amount of quality information available online
› Deals with governments, large-scale healthcare providers
increase switching costs
› High margins on patent-protected drugs
› Low margins on generic drugs
› Healthcare providers, governments enjoy growing influence
over prices
› Patients continue to have little influence over prices
wHaT NEW KEy
RESouRcES Do wE NEED
To DEVELoP oR ACQUi RE
iN LiGHT oF THE oNGoiNG
sHiFT FRo M TRE aTMENT
TO PREVENTioN?
KP
KA
How caN ouR VaLUE
PRoPosiTioN aDDRESS
THE issuE oF ExPLoDi NG
HE aLTH coSTS?
CR
VP
wHaT WOuLD a GREaTER
Focus oN EMERGiNG
Ma RKETS ME aN FoR THE
oTHER BUiLDiNG BLocKS
IN OUR MODEL?
CS
CH
KR
203
R$
C$
wHaT DoES THE coNVERGENcE o F TRE aTMENT,
DiAGNoSTics, DEVicES,
aND SUPPoRT SERVicES
HOw CAN WE MAIN -
ME a N Fo R
TaiN E aRNiNGS WHi LE
WHaT KiND oF NEW
aDDRESSiNG THE PUBLic
STRUGGLE To coPE WiTH
SKYROCKETING HEALthcaRE coSTS?
REVENUE oPPoRTUNiTiES
Mi GHT BE cREaTED By
THE SHiFT iN EMPHasis
FRo M TRE aTMENT To
PREVENTioN?
ouR
KEy RESouRcES aND
ACTiviTiES?
Main Qs
Identifies incumbent competitors and their
relative strengths
Who are our competitors? Who are the dominant
players in our particular sector? What are their
competitive advantages or disadvantages? Describe
their main offers. Which Customer Segments are they
focusing on? What is their Cost Structure? How much
influence do they exert on our Customer Segments,
Revenue Streams, and margins?
NEW ENTRaNTS
INSURGENTS)
(INSURGENTS
Identifies new, insurgent players and determines whether
they co ete with a business model different from yours
Who are the new entrants in your market? How
are they different? What competitive advantages or
disadvantages do they have? Which barriers must they
overcome? What are their Value Propositions? Which
Customer Segments are they focused on? What is their
Cost Structure? To what extent do they influence your
Customer Segments, Revenue Streams, and margins?
suBSTiTUTE PRoDUCTS
aND SERVicES
Describes potential substitutes for your offers—including
those from
er markets and industries
Which products or services could replace ours? How
much do they cost compared to ours? How easy it is for
customers to switch to these substitutes? What business
model traditions do these substitute products stem from
(e.g. high-speed trains versus airplanes, mobile phones
versus cameras, Skype versus long-distance telephone
companies)?
suPPLiERS aND oTHER
vaLUE cHaiN ACToRS
Describes the key value chain incumbents in your market
and spots new, emerging players
Who are the key players in your industry value chain?
To what extent does your business model depend
on other players? Are peripheral players emerging?
Which are most profitable?
STaKEHo LDERS
Specifies which actors may influence your organization
and business model
Which stakeholders might influence your business
model? How influential are shareholders? Workers?
The government? Lobbyists?
coMPETiToRS
(i UMBENTs)
204
INDUSTRy
FORCES
— cOMPETITIVe ANALysis —
Pharmaceutical Industry Landscape
› Several large and medium size players compete in pharma
› Most players are struggling with empty product
pipelines and low R&D productivity
› Growing trend toward consolidation through mergers
and acquisitions
› Major players acquire biotech, specialty drug developers
to fill product pipeline
› Several players starting to build on open innovation processes
› Little disruption of the pharmaceutical industry over the
last decade
› Main new entrants are generic drug companies, particularly
from India
FoR WHicH PaRTS oF
THE iNDUSTRy vaLUE
cHaiN SHouLD KEy
PaRTNERSHiPS BE BUiLT
as OPPOSED To DEVELOPiNG KEy RESouRcES aND
ACTiviTiES iN-HousE?
KP
› To a certain extent, prevention represents a substitution
for treatment
› Patent-expired drugs replaced by low-cost generics
KA
VP
CR
KR
C$
› Increasing use of research contractors
› Biotech firms and specialty drug developers as important
new product generators
› Doctors and healthcare providers
› Insurance companies
› Bioinformatics providers growing in importance
couLD SUPPLiERS
sucH as RESEaRcH
coNTRACToRS TURN
› Laboratories
iNTo coMPETiToRS?
› Shareholder pressure forces drug companies to focus
on short term (quarterly) financial results
› Governments/regulators have a strong stake in the actions
of pharmaceutical companies because of their pivotal role
in healthcare services
› Lobbyists, social enterprise groups and/or foundations,
particularly those pursuing agendas such as low-cost
treatments for developing countries
› Scientists, who represent the core talent of the drug
manufacturing industry
MUST THE VaLUE
PRoPosiTioN cHa NGE To
acco MMo DaTE SHiFTS iN
THE iNDUSTRy (E.G. THE
GRowiNG i MPoRTa NcE oF
BioTECH fiRMS)?
wHicH PaRT oF THE
PHaRMa iNDUSTRy
oFFERS THE GRE aTEST
EARNINGS POTENTIAL?
CS
CH
205
R$
is iT NECESSaRy To
ACQUiRE SMaLLER
fiRMS To fiLL PRoDUCT
PiPELiNES?
WHicH oF THE KEy
RESouRcES EMERGiNG
aMo NG NEW acToRS iN
THE VaLUE cHaiN NEED To
BE DEVELoPED iN-HousE
(E.G. BioiNFoRMaTics)?
Main Qs
206
TECHNoLoGY TRENDS
Identifies technology trends that could threaten your
business model—or enable it to evolve or improve
What are the major technology trends both inside and
outside your market? Which technologies represent
important opportunities or disruptive threats? Which
emerging technologies are peripheral customers adopting?
REGULaToRy TRENDS
Describes regulations and regulatory trends that influence
your business model
Which regulatory trends influence your market? What
rules may affect your business model? Which regulations
and taxes affect customer demand?
sociETaL aND
cuLTURaL TRENDS
Identifies major societal trends that may influence your
business m d
Describe key societal trends. Which shifts in cultural or
societal values affect your business model? Which trends
might influence buyer behavior?
socioECONo Mic
Outlines major socioeconomic trends relevant to your
b s n s model
What are the key demographic trends? How would
you characterize income and wealth distribution in your
market? How high are disposable incomes? Describe
spending patterns in your market (e.g. housing, healthcare, entertainment, etc.). What portion of the population lives in urban areas as opposed to rural settings?
KEY
TRENDs
— FORESIGHt —
TRENDS
Pharmaceutical Industry Landscape
› Emergence of pharmacogenomics, declining cost of gene
sequencing, and the immenent rise of personalized medicine
› Major advances in diagnostics
› Use of pervasive computing and nanotechnology for the
injection/delivery of drugs
› Heterogeneous global regulatory landscape in the pharmaceutical industry
› Many countries prohibit drug companies from marketing
directly to consumers
› Regulatory agency pressure to publish data on unsuccessful
clinical trials
› Generally unfavorable image of big drug makers
› Growing social consciousness among consumers
› Customers increasingly conscious of global warming,
sustainability issues, prefer “green” purchases
› Customers are better informed about drug maker activity
in developing countries (e.g. HIV/AIDS drugs)
›
›
›
›
Aging society in many mature markets
Good but costly healthcare infrastructure in mature markets
Growing middle class in emerging markets
Large, unsatisfied healthcare needs in developing countries
wHicH TECHNoLoGiES
aRE LiKELy To iMPRovE
vaLUE PRoPosiTioN
coMPETiTivENESS iN
THE EVoLVi NG PHaRMa
La NDScaPE?
wHicH NEW KEy
RESouRcES aND
ACTiviTiES WiLL PRovE
aDVaNTAGEOus wHEN
PERSoNa LizED DRUGS
aND DiAGNoSTics aRE
wiDELy usED?
KP
KA
CR
VP
KR
C$
wHicH PaRTNERSHiPS
wiLL BECOME ESSENTiaL
wHEN PHaRMacoGENo Mics is aN iNTEGR aL
PaRT oF THE iNDUSTRy
La NDScaPE?
How aRE cuSTo MERS
REACTiNG To NEW TECHNOLOGICAL DEVELOPMENTS IN THE PHARMAcEUTicaL iNDUSTRy?
CS
207
CH
R$
How wiLL TECHNoLoGY
sucH as PHaRMacoGE No Mics, PERVasivE
coMPUTiNG, aND NaNoTECHNoLoGY a FFECT THE
coST STRUCTURE oF a
DRUG MaKER’s BUSiNESS
MODEL?
Do aDVa NcES iN
PHaRMacoGENo Mics,
DiAGNoSTics, PERVasivE
coMPUTiNG, oR NaNoTECHNoLoGY o FFER NEW
REVENUE oPPoRTUNiTiES?
Main Qs
208
MACRoEcONOMIC
FORCES
GLo BaL MaRKET
coNDiTioNS
Outlines current overall conditions from a
macroeconomic perspective
Is the economy in a boom or bust phase? Describe
general market sentiment. What is the GDP growth rate?
How high is the unemployment rate?
CAPITal MARKETs
Describes current capital market conditions as they
relate to your capital needs
What is the state of the capital markets? How easy is
it to obtain funding in your particular market? Is seed
capital, venture capital, public funding, market capital, or
credit readily available? How costly is it to procure funds?
coMMoDiTiES aND
oTHER RESouRcES
Highlights current prices and price trends for resources
required for your business model
Describe the current status of markets for commodities and other resources essential to your business
(e.g. oil prices and labor costs). How easy is it to obtain
the resources needed to execute your business model
(e.g. attract prime talent)? How costly are they?
Where are prices headed?
ECONo Mic
iNFRaSTRUCTURE
Describes the economic infrastructure of the market
in which your business operates
How good is the (public) infrastructure in your market?
How would you characterize transportation, trade, school
quality, and access to suppliers and customers? How
high are individual and corporate taxes? How good are
public services for organizations? How would you rate
the quality of life?
— MACROEcONOMICs —
DoES THE iNFR aSTRUcTURE AND TRADE ENVIRoNMENT a DEQUaTELy
suPPoRT cHaNNELS?
Pharmaceutical Industry Landscape
›
›
›
›
Global recession
Negative GDP growth in Europe, Japan, and the United States
Slower growth rates in China and India
Uncertainty as to when recovery will occur
›
›
›
›
Tight capital markets
Credit availability restricted due to banking crisis
Little venture capital available
Risk capital availability extremely limited
› Fierce “battles” for prime talent
› Employees seek to join pharmaceutical companies
with positive public image
› Commodity prices rising from recent lows
› Demand for natural resources likely to pick up with
economic recovery
› Oil prices continue to fluctuate
DoES THE ECONo Mic
iNFRaSTRUCTURE
aDEQUaTELy suPPoRT
KEy ACTiviTiES?
KP
KA
VP
CR
KR
C$
CS
CH
R$
› Specific to the region in which a company operates
Do uNivERSiTiES aND
oTHER EDUcaTioNaL
iNSTiTUTioNS FURNisH
a su FficiENT aMou NT
oF QUaLifiED TaLENT?
How wiLL LocaL aND
NaTioNaL TaxES a FFECT
THE BUSiNESS MoDEL?
209
A competitive business model that makes sense in today’s environment
How sHouLD youR
BUSiNESS MoDEL EVoLVE
iN LiGHT oF a cHaNGiNG
ENVIRonment?
210
might be outdated or even obsolete tomorrow. We all have to improve
our understanding of a model’s environment and how it might evolve.
Of course we can’t be certain about the future, because of the complexities,
uncertainties, and potential disruptions inherent in the evolving business
environment. We can, however, develop a number of hypotheses about the
future to serve as guidelines for designing tomorrow’s business models.
Assumptions about how market forces, industry forces, key trends, and
macroeconomic forces unfold give us the “design space” to develop potential
business model options or prototypes (see p. 160) for the future. The role
of business model scenarios (see p. 186) in forecasting should also be evident by now. Painting pictures of the future makes it much easier to generate
potential business models. Depending on your own criteria (e.g. acceptable
level of risk, growth potential sought, etc.) you may then select one option
over another.
Options
Time
— PRESENt ENVIRONMENt —
— PRoJEcTED ENVIRONMENT —
211
EVaLUaTing BUSinESS MoDELS
L IKe SEEIN g TH e DOCTO r FO r A n ANNUA l EXAM, REGULARLy ASSESSING
a business model is an important management activity that allows an
organization to evaluate the health of its market position and adapt accordingly. This checkup may become the basis for incremental business model
improvements, or it might trigger a serious intervention in the form of a
business model innovation initiative. As the automobile, newspaper, and
music industries have shown, failing to conduct regular checkups may
212
prevent early detection of business model problems, and may even lead
to a company’s demise.
In the previous chapter on the business models environment (see p. 200),
we evaluated the influence of external forces. In this chapter, we adopt the
point of view of an existing business model and analyze external forces from
the inside out.
The following pages outline two types of assessment. First, we provide a
big picture assessment of Amazon.com’s online retailing model circa 2005
and describe how the company has built strategically on that model since.
Second, we provide a set of checklists for assessing your business model’s
strengths, weaknesses, opportunities, and threats (SWOT) and to help
you evaluate each Building Block. Keep in mind that assessing a business
model from a big picture perspective and assessing it from a Building Block
perspective are complementary activities. A weakness in one Building
Block, for example, may have consequences for one or several other
Building Blocks—or for the entire model. Business model assessment,
therefore, alternates between individual elements and overall integrity.
— ExTERNAL —
— INTERNAL —
213
— POSITIVE —
— NEgaTIVE —
BiG PicTURE
ASSESSMENT:
AMAZON.COM
Amazon.com’s main strengths and weaknesses in 2005:
IT infra
FUL
INFRAS
P
OMMEND
ARE
DEVEL
MAINTENANCE
items
U
VERSEAS
U
214
cost
capital
Amazon.com provides a powerful illustration of implementing business model innova-
com recorded sales of $8.5 billion in 2005 with a net margin of only 4.2 percent. At the
tion based on an analysis of strengths and weaknesses. We’ve already described why it
time, Google enjoyed a net margin of 23.9 percent on sales of $6.1 billion while eBay
made sense for Amazon.com to launch a series of new service offers under the moniker
achieved a net margin of 23.7 percent on sales of $4.6 billion.
Amazon Web Services (see p. 176). Now let’s examine how those new offers launched
Looking to the future, founder Jeff Bezos and his management team took a two-
in 2006 related to Amazon.com’s strengths and weaknesses the previous year.
pronged approach to building on Amazon.com’s business model. First, they aimed to
Assessing the strengths and weaknesses of Amazon.com’s business model circa
grow the online retail business through a continuing focus on customer satisfaction
2005 reveals an enormous strength and a dangerous weakness. Amazon.com’s
and efficient fulfillment. Second, they began growth initiatives in new areas. Manage-
strength was its extraordinary customer reach and huge selection of products for sale.
ment was clear on the requirements for these new initiatives. They had to (1) target
The company’s main costs lay in the activities in which it excelled, namely fulfillment
underserved markets, (2) be scalable with potential for significant growth, and (3)
($745 million, or 46.3 percent of operating expenses) and technology and content
leverage existing Amazon.com capabilities to bring strong customer-facing differentia-
($451 million, or 28.1 percent of operating expenses). The key weakness of Amazon.
tion to that marketplace.
com’s business model was weak margins, the result of selling primarily low-value, lowmargin products such as books, music CDs, and DVDs. As an online retailer, Amazon.
Opportunities Amazon.com explored in 2006:
KP
KA
FULFILLMEN
T
IT
INFRASTRUCTUR
E & SOFTWARE
DEVELOPMENT
& MAINTENANCE
Lo GisTics
PARTNERS
AFFILIATES
KR
IT
INFRASTRUCTURE
& SOFTWARE
GLoB aL
FULfiLLMENT
INFRASTRUCTURE
C$
MARKETING TECHNOLogy
& cONTENT FULFILLMENT
TWO ToTaLLy NEW
cuSTo MER SEGMENTS WHicH
aRE UNDERSERVED as To THE
PRoPosED o FFER
syNERGiES iN THE USE
oF ACTiviTiES aND
RESouRcES
FOR NEW oFFERS
VP
CS
CR
o NLiNE RETaiL
SHOP
cusToMizED
oNLiNE PRofiLES &
REcOMMENDaTIONS
GLoB aL
co NSUMER
MaRKET
(No RTH aMERica,
EUROPE, asia)
FULfiLLMENT By
AMAZON
s
aMazo N WEB
ERVicES: s3, Ec2,
SQS,SERVICE
oTHER sWEB
DEVELoPERS
CH
&
coMPaNiES
iNDiviDUaLS &
aMazoN.co M
(& cOUNTRIEs)
coMPaNiES THaT
N EED FULFILLMENT
NEW REVENUE STRE a MS WiTH
HIGHER MARGINS THAN RETAIL
AFFILIATES
APIs
R$
SALES MARGIN
215
UTILITY cOMPUTING FEES
FULFILLMENT HANDLING FEES
In 2006 Amazon.com focused on two new initiatives that satisfied the above require-
Amazon Simple Storage Systems (Amazon S3) allows developers to use Amazon.com’s
ments and which promised to powerfully extend the existing business model. The first
massive data center infrastructure for their own data storage needs. Similarly, Amazon
was a service called Fulfillment by Amazon, and the second was a series of new Amazon
Elastic Compute Cloud (EC2), allows developers to “rent” servers on which to run
Web Services. Both initiatives built on the company’s core strengths—order fulfillment
their own applications. Thanks to its deep expertise and unprecedented experience
and Web IT expertise—and both addressed underserved markets. What’s more, both
scaling an online shopping site, the company can offer both at cutthroat prices, yet still
initiatives promised higher margins than the company’s core online retailing business.
earn higher margins compared to its online retail operations.
Fulfillment by Amazon allows individuals and companies to use Amazon.com’s
Investors and investment analysts were initially skeptical about these new long-term
fulfillment infrastructure for their own businesses in exchange for a fee. Amazon.com
growth strategies. Unconvinced that the diversification made sense, they contested
stores a seller’s inventory in its warehouses, then picks, packs, and ships on the seller’s
Amazon.com’s investments in even more IT infrastructure. Eventually, Amazon.com
behalf when an order is received. Sellers can sell through Amazon.com, their own Chan-
overcame their skepticism. Nonetheless, the true returns from this long-term strategy
nels, or a combination of both.
may not be known for several more years—and after even more investment
Amazon Web Services targets software developers and any party requiring highperformance server capability by offering on-demand storage and computing capacity.
in the new business model.
DETaiLED SWoT
assESSMENT oF EacH
BUILDING BLOCK
Assessing your business model’s overall integrity is crucial, but looking at
The following pages contain non-exhaustive sets of questions to help
its components in detail can also reveal interesting paths to innovation and
you assess the strengths and weaknesses of each of your business model
renewal. An effective way to do this is to combine classic strengths, weak-
Building Blocks. Each set can help jumpstart your own assessments. Results
nesses, opportunities, and threats (SWOT) analysis with the Business Model
from this exercise can become the foundation for business model change
Canvas. SWOT analysis provides four perspectives from which to assess the
and innovation in your organization.
elements of a business model, while the Business Model Canvas provides
the focus necessary for a structured discussion.
What are your business model’s . . .
SWOT analysis is familiar to many businesspeople. It is used to analyze
ties and threats. It is an attractive tool because of its simplicity, yet its use
can lead to vague discussions because its very openness offers little direction concerning which aspects of an organization to analyze. A lack of useful
outcomes may result, which has lead to a certain SWOT-fatigue among
— INTERNAL —
an organization’s strengths and weaknesses and identify potential opportuni-
sTRE NGths
WEAKN Esses
— ExTERNAL —
216
OPPORTUNITIEs
THREAts
— HELPFUL —
— HARMFUL —
managers. When combined with the Business Model Canvas, though, SWOT
enables a focused assessment and evaluation of an organization’s business
model and its Building Blocks.
SWOT asks four big, simple questions. The first two—what are your
organization’s strength and weaknesses?—assess your organization internally. The second two—what opportunities does your organization have
and what potential threats does it face?—assess your organization’s position within its environment. Of these four questions, two look at helpful areas
(strengths and opportunities) and two address harmful areas. It is useful to
ask these four questions with respect to both the overall business model and
each of its nine Building Blocks. This type of SWOT analysis provides a good
basis for further discussions, decision-making, and ultimately innovation
around business models.
IMPORtance T o M y B . M .
54321
12345
Our Value Propositions and
customer needs are misaligned
Our Value Propositions have strong
network effects
54321
12345
Our Value Propositions have
no network effects
There are strong synergies between
our products and services
54321
12345
There are no synergies between
our products and services
Our customers are very satisfied
54321
12345
We have frequent complaints
We benefit from strong margins
54321
12345
Our margins are poor
Our revenues are predictable
54321
12345
Our revenues are unpredictable
We have recurring Revenue
Streams and frequent repeat
purchases
54321
12345
Our revenues are transactional
with few repeat purchases
Our Revenue Streams are
diversified
54321
12345
We depend on a single Revenue
Stream
Our Revenue Streams are
sustainable
54321
12345
Our revenue sustainability is
questionable
We collect revenues before
we incur expenses
54321
12345
We incur high costs before we
collect revenues
We charge for what customers
are really willing to pay for
54321
12345
We fail to charge for things
customers are willing to pay for
Our pricing mechanisms capture
full willingness to pay
54321
12345
Our pricing mechanisms leave
money on the table
Our costs are predictable
54321
12345
Our costs are unpredictable
Our Cost Structure is correctly
matched to our business model
54321
12345
Our Cost Structure and business
model are poorly matched
Our operations are cost-efficient
54321
12345
Our operations are cost-inefficient
54321
12345
We enjoy no economies of scale
1-10
Our Value Propositions are well
aligned with customer needs
CERTAINTY OF EVALUaTION
1–10
Value Proposition Assessment
IMPORtance T o M y B . M .
1-10
We benefit from economies of scale
CERTAINTY OF EVALUaTION
1–10
Cost/Revenu
e Assessment
217
IMPORtance T o M y B . M .
54321 12345
Resource needs are predictable
54321 12345
Resource needs are unpredictable
We deploy Key Resources in the
right amount at the right time
54321 12345
We have trouble deploying the
right resources at the right time
We efficiently execute Key Activities
54321 12345
Our Key Activities are difficult
to copy
54321 12345
Our Key Activities are easily
copied
Execution quality is high
54321 12345
Execution quality is low
Balance of in-house versus
outsourced execution is ideal
54321 12345
We execute too many or too few
activities ourselves
We are focused and work with
partners when necessary
54321 12345
We are unfocused and fail to work
sufficiently with partners
We enjoy good working
relationships with Key Partners
54321 12345
Our Key Resources are easily
replicated
Key Activity execution is inefficient
Working relationships with Key
Partners are conflict-ridden
1-10
218
Our Key Resources are difficult for
competitors to replicate
CERTAINTY OF EVALUaTION
1–10
Infrastructure Assessment
IMPORtance T o M y B . M .
12345
Customer churn rates are high
54321
12345
Customer base is unsegmented
We are continuously acquiring
new customers
54321
12345
We are failing to acquire new
customers
Our Channels are very efficient
54321
12345
Our Channels are inefficient
Our Channels are very effective
54321
12345
Our Channels are ineffective
Channel reach is strong among
customers
54321
12345
Channel reach among prospects
is weak
Customers can easily see our
Channels
54321
12345
Prospects fail to notice our
Channels
Channels are strongly integrated
54321
12345
Channels are poorly integrated
Channels provide economies
of scope
54321
12345
Channels provide no economies
of scope
Channels are well matched to
Customer Segments
54321
12345
Channels are poorly matched to
Customer Segments
Strong Customer Relationships
54321
12345
Weak Customer Relationships
Relationship quality correctly
matches Customer Segments
54321
12345
Relationship quality is poorly
matched to Customer Segments
Relationships
customers
through
high bind
switching
costs
54321
12345
Customers switching costs are low
Our brand is strong
54321
12345
Our brand is weak
Customer base is well segmented
1-10
54321
Customer churn rates are low
CERTAINTY OF EVALUaTION
1–10
Customer Interface Assessment
219
ASSESSING THREATS
We’ve described how business models are situated within specific environments, and shown how external forces such as competition, the legal
environment, or technology innovation can influence or threaten a business
model (see p. 200). In this section we look at threats specific to each business model Building Block, and provide a non-exhaustive set of questions
to help you think about ways to address each threat.
Value Proposition Threats
Are substitute products and
services available?
12345
Are competitors threatening to
offer better price or value?
12345
Cost/Revenue Threats
220
Are our margins threatened by
competitors? By technology?
12345
Do we depend excessively on one
or more Revenue Streams?
12345
Which Revenue Streams are likely
to disappear in the future?
12345
Which costs threaten to become
unpredictable?
12345
Which costs threaten to grow
more quickly than the revenues
they support?
12345
Infrastructure Threats
Customer Interface Threats
Could we face a disruption in the
supply of certain resources?
12345
Could our market be saturated
soon?
12345
Is the quality of our resources
threatened in any way?
12345
Are competitors threatening
our market share?
12345
What Key Activities might
be disrupted?
12345
How likely are customers
to defect?
12345
Is the quality of our activities
threatened in any way?
12345
How quickly will competition
in our market intensify?
12345
Are we in danger of losing any
partners?
12345
Do competitors threaten our
Channels?
12345
Might our partners collaborate
with competitors?
12345
Are our Channels in danger of
becoming irrelevant to customers?
12345
Are we too dependent on certain
partners?
12345
Are any of our Customer Relationships in danger of deteriorating?
12345
221
ASSESSING OPPORTUNITIEs
As with threats, we can assess the opportunities that may lie within each
business model Building Block. Here’s a non-exhaustive set of questions
to help you think about opportunities that could emerge from each of the
Building Blocks in your business model.
Value Proposition Opportunities
Could we generate recurring
revenues by converting products
into services?
12345
Could we better integrate our
products or services?
12345
Which additional customer needs
could we satisfy?
12345
What complements to or
extensions of our Value Proposition
are possible?
12345
What other jobs could we do on
behalf of customers?
12345
Cost/Revenue Opportunities
222
Can we replace one-time
transaction revenues with recurring
revenues?
12345
What other elements would
customers be willing to pay for?
12345
Do we have cross-selling
opportunities either internally
or with partners?
12345
What other Revenue Streams could
we add or create?
12345
Can we increase prices?
12345
Where can we reduce costs?
12345
Infrastructure Opportunities
Customer Interface Opportunities
Could we use less costly resources
to achieve the same result?
12345
How can we benefit from a growing
market?
12345
Which Key Resources could be
better sourced from partners?
12345
Could we serve new Customer
Segments?
12345
Which Key Resources are
under-exploited?
12345
Could we better serve our customers through finer segmentation?
12345
Do we have unused intellectual
property of value to others?
12345
How could we improve channel
efficiency or effectiveness?
12345
Could we standardize some Key
Activities?
12345
Could we integrate our Channels
better?
12345
How could we improve efficiency
in general?
12345
Could we find new complementary
partner Channels?
12345
Could we increase margins by
directly serving customers?
12345
Could we better align Channels
with Customer Segments?
12345
Is there potential to improve
12345
Are there outsourcing
opportunities?
12345
Could greater collaboration with
partners help us focus on our core
business?
12345
Are there cross-selling
opportunities with partners?
12345
How could we tighten our
relationships with customers?
Could partner Channels help us
better reach customers?
12345
Could we improve personalization?
Could partners complement our
Value Proposition?
customer follow-up?
12345
12345
12345
How could we increase switching
costs?
12345
Have we identified and “fired”
unprofitable customers? If not,
why not?
12345
Do we need to automate some
relationships?
12345
223
usiNG SWoT assESSMENT aNaLysis RESULTS To
DESIGN NEW BUSINEss MODEL OPTIONS
A structured SWOT assessment of your business model yields two results.
It provides a snapshot of where you are now (strengths and weaknesses)
and it suggests some future trajectories (opportunities and threats). This is
valuable input that can help you design new business model options toward
which your enterprise can evolve. SWOT analysis is thus a significant part
of the process of designing both business model prototypes (see p. 160) and,
with luck, a new business model that you will eventually implement.
224
Future Model(s)
225
Current Model
— swoT PROCESS —
BUSinESS MoDEL PERSPEcTivE
on BLUE OCEAN sTRATEgy
I N THIS SE c TION WE BLEND OUR BUSINE ss MODEL TOOLS WITH THE
To achieve value innovation, Kim and Mauborgne propose an analytical
Blue Ocean Strategy concept coined by Kim and Mauborgne in their
tool they call the Four Actions Framework. These four key questions
million-selling book of the same name. The Business Model Canvas is a
challenge an industry’s strategic logic and established business model:
perfect extension of the analytical tools presented by Kim and Mauborgne.
Together they provide a powerful framework for questioning incumbent
business models and creating new, more competitive models.
Blue Ocean Strategy is a potent method for questioning Value Proposi-
226
1. Which of the factors that the industry takes for granted should
be eliminated?
2. Which factors should be reduced well below the industry standard?
tions and business models and exploring new Customer Segments. The
3. Which factors should be raised well above the industry standard?
Business Model Canvas complements Blue Ocean by providing a visual
4. Which factors should be created that the industry has never offered?
“big picture” that helps us understand how changing one part of a business
model impacts other components.
In a nutshell, Blue Ocean Strategy is about creating completely new
In addition to value innovation, Kim and Mauborgne propose exploring
non-customer groups to create Blue Oceans and tap untouched markets.
industries through fundamental differentiation as opposed to competing in
Blending Kim and Mauborgne’s value innovation concept and Four
existing industries by tweaking established models. Rather than outdoing
Actions Framework with the Business Model Canvas creates a powerful new
competitors in terms of traditional performance metrics, Kim and Mauborgne
tool. In the Business Model Canvas the right-hand side represents value
advocate creating new, uncontested market space through what the authors
creation and the left-hand side represents costs. This fits well with Kim and
call value innovation. This means increasing value for customers by creating
Mauborgne’s value innovation logic of increasing value and reducing costs.
new benefits and services, while simultaneously reducing costs by eliminating less valuable features or services. Notice how this approach rejects the
traditionally accepted trade-off between differentiation and lower cost.
a
ALUE
HAS
a
a
a
OMPETED
a
227
REDUCE
a
— vALUE innovaTION —
a
a
a
HAS NEVER
— FOUR acTIONS FRAMEwork —
Source: Adapted from Blue Ocean Strategy.
BLENDiNG THE BLUE ocEaN STRaTEGy FRaMEWoRK
WITH THE BUSINEss MODEL CANVas
Business Model Canvas
Value innovation
+
228
cosT-SIDE
Blending approaches
ALUE
=
ALUE
vALUE-SIDE
The Business Model Canvas consists of a right-hand
Blue Ocean Strategy is about simultaneously increasing
Blending Blue Ocean Strategy and the Business Model
value and customer-focused side, and a left-hand cost
value while reducing costs. This is achieved by identify-
Canvas lets you systematically analyze a business model
and infrastructure side, as descibed earlier (see p. 49).
ing which elements of the Value Proposition can be elimi-
innovation in its entirety. You can ask the Four Actions
Changing elements on the right-hand side has implica-
nated, reduced, raised, or newly created. The first goal
Framework questions (eliminate, create, reduce, raise)
tions for the left-hand side. For example, if we add to
is to lower costs by reducing or eliminating less valuable
about each business model Building Block and imme-
or eliminate parts of the Value Proposition, Channels,
features or services. The second goal is to enhance or
diately recognize implications for the other parts of the
or Customer Relationship Building Blocks, this will
create high-value features or services that do not signifi-
business model, (e.g. what are the implications for the
have immediate implications for Resources, Activities,
cantly increase the cost base.
cost side when we make changes on the value side?
Partnerships, and Costs.
and vice versa).
CIRQUE DU SOLEIL
KP
KA
aRTisTic
VP
STa R PERFo RMERS
DEVELOPMENT
ANIMAL SHOws
ANIMAL CARE
aisLE co NSESSio N
CR
aDDiNG THE aRTiSTic
ELEMENT To THE VaLUE
PRoPosiTioN c Ha NGES
ACTiviTiES & coSTS
CS
SALES
MULTiPLE SHow
ARENAS
KR
ELi MiNaTi NG aNi Ma LS FRoM
THE SHow suBSTa NTia LLy
REDUcES coSTS
FUN & HUMOR
T HRILL & DANGER
THE VaLUE PRoPosiTioN
CH
FOcus
o N FaMiLiES
Focus o N THEaTER
& OPERA VISITORS
THEME
ANIMALS
STa R PERFo RMERS
RE fiNED
ENVIRonment
RE fiNED
ENVIRonment
MUTLiPLE
PRODUCTIONS
coMB iNES ELEMENTS FRoM
ciRcus, THE aTER & oPERa,
WHicH aLLows caTERiNG To
HiGHER END cuSTo MERS WHo
Pay HiGHER Tic KET PRicES
aRTisTic MUSic &
DANcE
229
UNIQUE VENUE
C$
coSTLy a NiMa L MaiNTENa NcE
coSTLy STa R PERFoRMER FEES
R$
TICKET PRICE INCREASE
AISLE cONCESSION SALEs
ARTISTIC PRODUCTION
ELIMINAte
STa R PERFo RMERS
ANIMAL SHOws
AISLE cONCESSION SALEs
MULTIPLE SHOw ARENAS
REDUCE
Cirque du Soleil features prominently among Blue Ocean
refined music. This revamped Value Proposition allowed
Strategy examples. Next we apply the blended Blue
Cirque du Soleil to broaden its appeal to theatergoers and
Ocean and Business Model Canvas approach to this
other adults seeking sophisticated entertainment, rather
intriguing and highly successful Canadian business.
than the traditional circus audience of families.
First, the Four Actions Framework shows how Cirque
As a consequence, it was able to substantially raise
du Soleil “played” with the traditional elements of the cir-
ticket prices. The Four Actions Framework, outlined in
cus business Value Proposition. It eliminated costly ele-
blue and gray in the business model canvas above, illus-
ments, such as animals and star performers, while adding
trates the effects of changes in the Value Proposition.
FUN & HUMOR
THRILL & DANGER
RAISE
UNIQUE VENUE
CREATE
THEME REFINED
ENVIRonment
MULTIPLE PRODUCTIONS
ARTISTIC MUSIC & DANCE
other elements, such as theme, artistic atmosphere, and
Source: Adapted from Blue Ocean Strategy.
NINTENDO ’s
wii
w
P
P
MANUF
GAME
ELIMINAte
P
U
P
GAME
P
REDUCE
CREATE
UNCHANGED
230
P
U
P
U
V
U
P
We’ve discussed Nintendo’s successful Wii game console
performance, graphic quality, and game realism: factors
as an example of a multi-sided platform business model
valued primarily by diehard gaming fans. Nintendo
characteristics: A shift in focus from “hardcore” to casual
pattern (see p. 76). Now we look at how Nintendo dif-
shifted its focus to providing a new form of player interac-
gamers, which allowed the company to reduce console
ferentiated itself from competitors Sony and Microsoft
tion targeted at a wider demographic than the traditional
performance and add a new element of motion control
from the standpoint of Blue Ocean Strategy. Compared
avid gamer audience. With the Wii, Nintendo brought
that created more fun; elimination of state-of-the-art
to Sony’s PlayStation 3 and Microsoft’s Xbox 360, Nin-
to market a console that technologically underperformed
chip development and increased use of off-the-shelf
tendo pursued a fundamentally different strategy and
rival machines, but boosted the fun factor with new
components, reducing costs and allowing lower console
business model with Wii.
motion control technology. Players could control games
prices; elimination of console subsidies resulting in prof-
through a sort of “magic wand,” the Wii Remote, simply
its on each console sold.
The heart of Nintendo’s strategy was the assumption
that consoles do not necessarily require leading-edge
through physical movement. The console was an instant
power and performance. This was a radical stance in an
success with casual gamers, and outsold rival consoles
industry that traditionally competed on technological
focused on the traditional market of “hardcore” gamers.
Nintendo’s new business model has the following
QUESTioNiNG youR caNVas
FouR acTioNS FRaMEWoRK
wiTH THE
The combination of Blue Ocean Strategy tools and the Business Model Canvas provide
cost perspective—provide ideal starting points from which to start questioning your
a solid foundation upon which to question your business model from value creation,
business model using the Four Actions Framework. Changes to each starting point then
customer, and Cost Structure perspectives. We propose that three different perspec-
allow you to analyze impacts on other areas of the Business Model Canvas (see also
tives—the Customer Segment perspective, the Value Proposition perspective, and the
innovation epicenters on p. 138).
Cost Impact Exploration
Exploring Value Proposition Impact
Exploring Customer Impact
RE
RAI
RE
231
Identify the highest cost infrastructure elements and
Begin the process of transforming your Value Proposition
Ask yourself the Four Actions Framework questions
evaluate what happens if you eliminate or reduce them.
by asking the Four Actions Framework questions.
about each business model Building Block on the
What value elements disappear, and what would you
Simultaneously, consider the impact on the cost side
customer side of the Canvas: Channels, Relationships,
have to create to compensate for their absence? Then,
and evaluate what elements you need to (or could)
and Revenue Streams. Analyze what happens to the
identify infrastructure investments you may want to
change on the value side, such as Channels, Relation-
cost side if you eliminate, reduce, raise, or create value
make and analyze how much value they create.
ships, Revenue Streams, and Customer Segments.
side elements.
› Which activities, resources, and partnerships have
› What less-valued features or services could be
› Which new Customer Segments could you focus
the highest costs?
› What happens if you reduce or eliminate some of
these cost factors?
› How could you replace, using less costly elements,
the value lost by reducing or eliminating expensive
resources, activities, or partnerships?
› What value would be created by planned new
investments?
eliminated or reduced?
› What features or services could be enhanced or newly
created to produce a valuable new customer experience?
› What are the cost implications of your changes to
the Value Proposition?
› How will changes to the Value Proposition affect the
customer side of the model?
on, and which segments could you possibly reduce or
eliminate?
› What jobs do new Customer Segments really want
to have done?
› How do these customers prefer to be reached and
what kind of relationship do they expect?
› What are the cost implications of serving new
Customer Segments?
MANAging MULTIPLE BUSINEss MODELS
232
Visio N a R i ES , Ga ME c H a NGERS , a ND c H a LLENGERS a RE GENERAT i NG
Synergies, Markides claims, should be carefully exploited even when the new
innovative business models around the world—as entrepreneurs and as
model is implemented in a standalone unit.
workers within established organizations. An entrepreneur’s challenge is
Risk is a third variable to consider when deciding whether to integrate
to design and successfully implement a new business model. Established
or separate an emerging model. How big is the risk that the new model will
organizations, though, face an equally daunting task: how to implement
negatively affect the established one in terms of brand image, earnings,
and manage new models while maintaining existing ones.
legal liability, and so forth?
Business thinkers such as Constantinos Markides, Charles O'Reilly III,
During the financial crisis of 2008, ING, the Dutch financial group, was
and Michael Tushman have a word for groups that successfully meet this
nearly toppled by its ING Direct unit, which provides online and telephone
challenge: ambidextrous organizations. Implementing a new business model
retail banking services in overseas markets. In effect, ING treated ING Direct
in a longstanding enterprise can be extraordinarily difficult because the
more as a marketing initiative than as a new, separate business model that
new model may challenge or even compete with established models.
would have been better housed in a separate entity.
The new model might require a different organizational culture, or it might
Finally, choices evolve over time. Markides emphasizes that compa-
target prospective customers formerly ignored by the enterprise. This begs
nies may want to consider a phased integration or a phased separation of
a question: How do we implement innovative business models within
business models. e.Schwab, the Internet arm of Charles Schwab, the U.S.
long-established organizations?
retail securities broker, was initially set up as a separate unit, but later was
Scholars are divided on the issue. Many suggest spinning off new busi-
integrated back into the main business with great success. Tesco.com, the
ness model initiatives into separate entities. Others propose a less drastic
Internet branch of Tesco, the giant U.K. retailer, made a successful transition
approach and argue that innovative new business models can thrive within
from integrated business line into standalone unit.
established organizations, either as-is or in separate business units.
In the following pages we examine the issue of integration versus separa-
Constantinos Markides, for example, proposes a two-variable framework
tion with three examples described using the Business Model Canvas. The
for deciding on how to manage new and traditional business models simul-
first, Swiss watch manufacturer SMH, chose the integration route for its new
taneously. The first variable expresses the severity of conflict between the
Swatch business model in the 1980s. The second, Swiss foodmaker Nestlé,
models, while the second expresses strategic similarity. Yet, he also shows
chose the separation route for bringing Nespresso to the marketplace. As
that success depends not only on the correct choice—integrated versus
of this writing, the third, German vehicle manufacturer Daimler, has yet to
standalone implementation—but also on how the choice is implemented.
choose an approach for its car2go vehicle rental concept.
— SIMILARITY OF
NINE BUILDING
BLOCKS —
— PoTEnTiaL
FOR SynERGiES —
— PoTEn Tia L
conflicTS —
FOR
cREaTE SynERgiES aMong THE SEPaRaTED
BUSinESS MoDELS anD cooRDinaTE
BETWEEN THEM as NECESSARy
iNTEGRaTioN
233
auToNoMy
SEPARATION
avoiD conflicTS BETWEEn THE
inTEgRaTED BUSinESS MoDELS anD
aLLow FoR nEcESSaRy auTOnoMy
SMH ’s aUTONOMOUS MODEL FOR SWaTCH
In the mid-seventies the Swiss watch industry, which had historically dominated the
the potential to anchor a larger product line. This forced engineers to entirely rethink
timepiece sector, found itself in deep crisis. Japanese and Hong Kong watch manu-
the very idea of a timepiece and its manufacture; they were essentially deprived of the
facturers had dislodged the Swiss from their leadership position with cheap quartz
watches designed for the low-end market. The Swiss continued to focus on tradi-
The result was a watch made with far fewer components. Manufacturing was highly
tional mechanical watches for the mid- and high-end markets, but all the while
automated: molding replaced screws, direct labor costs were driven down to less than
Asian competitors threatened to intrude on these segments as well.
10 percent, and the watches were produced in large quantities. Innovative guerrilla
In the early 1980s competitive pressure intensified to the point that most Swiss
234
ability to apply their traditional watchmaking knowledge.
marketing concepts were used to bring the watch to market under several different
manufacturers, with the exception of a handful of luxury brands, were teetering on
designs. Hayek saw the new product communicating a lifestyle message, rather than just
collapse. Then Nicolas G. Hayek took over the reigns of SMH (later renamed Swatch
telling time on the cheap.
Group). He completely restructured a newly formed group cobbled together from companies with roots in the two biggest ailing Swiss watchmakers.
Hayek envisioned a strategy whereby SMH would offer healthy, growing brands in
all three market segments: low, mid, and luxury. At the time, Swiss firms dominated the
Thus the Swatch was born: high quality at a low price, for a functional, fashionable
product. The rest is history. Fifty-five million Swatches were sold in five years, and in
2006 the company celebrated aggregate sales of over 333 million Swatches.
SMH’s choice to implement the low end Swatch business model is particularly inter-
luxury watch market with a 97 percent share. But the Swiss owned only 3 percent of
esting in light of its potential impact on SMH’s higher end brands. Despite a completely
the middle market and were non-players in the low end, leaving the entire segment of
different organizational and brand culture, Swatch was launched under SMH and not as
inexpensive timepieces to Asian rivals.
a standalone entity.
Launching a new brand at the bottom end was provocative and risky, and triggered
SMH, though, was careful to give Swatch and all its other brands near-complete
fears among investors that the move would cannibalize Tissot, SMH’s middle-market
autonomy regarding product and marketing decisions, while centralizing everything else.
brand. From a strategic point of view, Hayek’s vision meant nothing less than combin-
Manufacturing, purchasing, and R&D were each regrouped under a single entity serving
ing a high-end luxury business model with a low-cost business model under the same
all of SMH’s brands. Today, SMH maintains a strong vertical integration policy in order
roof, with all the attending conflicts and trade-offs. Nevertheless, Hayek insisted on this
to achieve scale and defend itself against Asian competitors.
three-tiered strategy, which triggered development of the Swatch, a new type of affordable Swiss watch priced starting at around U.S. $40.
The specifications for the new watch were demanding: inexpensive enough to
compete with Japanese offers yet providing Swiss quality, plus sufficient margins and
CENTRALIZED
SMH
KP
DECENTRALIZED
KA
PRo DU cTio N &
QUALITY cONTROL
VP
CR
CS
R& D
HR,
fiNANCE, ETc.
B
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