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Book Reference:Neck, H. M., Neck, C. P., & Murray, E. L. (2021). Entrepreneurship: The practice and mindset (2nd ed). SAGE. https://online.vitalsource.com/#/books/9781544354644

Describe the business model for a product you recently purchased. Do you believe this is the best business model for the organization? Why, or why not? Is there a different business model that you could recommend that is more innovative?

BUS 8303, Entrepreneurship and Innovative Business Development 1

Course Learning Outcomes for Unit V

Upon completion of this unit, students should be able to:

3. Appraise the use of design thinking toward innovative ideation.
3.1 Apply design thinking to select a business model.

4. Examine business models.

4.1 Apply design thinking to revenue models.
4.2 Integrate business models and revenue models.

5. Differentiate innovative business strategies.

5.1 Discuss the value in developing networks.

Course/Unit
Learning Outcomes

Learning Activity

3.1

Unit Lesson
Chapter 5
Student Resource: What Is a Business Model?
Unit V Case Study

4.1

Unit Lesson
Chapter 9
Student Resource: Types of Revenue Models
Unit V Case Study

4.2

Unit Lesson
Chapter 5
Chapter 9
Unit V Case Study

5.1

Unit Lesson
Chapter 8
Student Resource: The Power of Networks
Student Resource: Developing a Network
Unit V Case Study

Required Unit Resources

Chapter 5: Building Business Models

Chapter 8: Developing Networks and Building Teams

Chapter 9: Creating Revenue Models

In order to access the following resources, click the links below.

Navigate to the Video and Multimedia area in Student Resources for Chapter 5 of the eTextbook to view the
item below.

• What Is a Business Model?

UNIT V STUDY GUIDE

Business Models and Innovation

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Navigate to the Video and Multimedia area in Student Resources for Chapter 8 of the eTextbook to view the
items below.

• The Power of Networks

• Developing a Network

Navigate to the Video and Multimedia area in Student Resources for Chapter 9 of the eTextbook to view the
item below.

• Types of Revenue Models

Unit Lesson

Business Models and Innovation

People frequently misunderstand what a business model is. It is an important step in creating the
entrepreneurial venture. A business model describes how a business creates and delivers value for long-term
success. The business model is described as having four main interlocking parts that create the business
(Neck et al., 2021). These four interlocking parts include the offering (the value proposition from the
customer’s perspective), the customers or target market, the infrastructure (the resources within the business
that support creation and delivery of the product or service), and the financial viability (the revenue and
related costs). They are all combined to support the creation of the entrepreneurial venture. Within each of
these four areas, the entrepreneurial mindset is employed to seek out innovative approaches to support the
new venture’s success.

Some examples of how innovation is used in these four areas include redefining the delivery of the product or
service, bundling products, or targeting a narrow or niche market. By considering these four parts as unique
individual opportunities for innovation and using your entrepreneurial mindset, innovative ideas occur. One
such innovative idea is the growth in subscription services.

Subscriptions

In the past, subscriptions were limited to magazines and newspapers; however, applying that same concept
to other products and services created an innovative business model for companies like StitchFix, BarkBox,

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and many other startup companies that offer regular product delivery based on a set payment plan. The
benefit or value proposition for the customer is the freedom from having to remember to make the purchase
as well as the personalized approach to aligning with your size and style for StitchFix, or your dog’s size and
interests for BarkBox. The benefit from the entrepreneur’s perspective is a dependable target market. This
established customer base allows for more predictable planning as inventory is more predictable, as is
employee scheduling and other parts of the infrastructure planning and control processes.

Circular Business Model

Another innovative business model is a circular business model, or the idea of working within a network
system of partners to apply innovation in order to create, capture, and deliver value to improve resource
efficiency ending in environmental, social, and economic benefits (Frishammar & Praida, 2019). The circular
business model considers all aspects of the venture’s activities from creation through the discarding of
merchandise, with attention to sustainability and preserving the environment. A circular business model
requires adjustments to the revenue model to consider what sources of revenue could be realized through a
circular business model and what new customers or partners would benefit from these new revenue streams.
These considerations require research and innovative thinking to discover the potential for new revenue
streams from a circular business model.

Value Proposition

Exploring each of the four parts of the business model, in conjunction with tools from our previous units such
as design thinking and mind maps, opens possibilities for unique approaches to creating and delivering the
value proposition to the customer. In considering the value proposition, think about how your venture provides
enhanced value than offered elsewhere or a unique value that is not currently offered elsewhere. Keep in
mind that this value must be recognized by the customer through a willingness to pay for this value, and this
value must be sustainable. If a competitor can easily copy your value proposition, or if the infrastructure is not
perfected to support the business model, including the value proposition, then the business is not sustainable.

Networking and Innovative Business Models

In an article by Richter et al. (2017), the value in applying a sharing economy concept in creating innovative
business models was researched. The qualitative research included 14 companies from three different
countries. Through their research, the authors found that entrepreneurs identify new business models through
sharing resources. These resources include sharing physical goods, sharing digital content, sharing customer
needs and insights, increasing the entrepreneur’s openness to new ideas and discovering new potentials for
adding value to the business model. In this research, sharing economy is applied from the perspective of
networking with people who have similar interests within a virtual setting. These networking discussions
provide openings for entrepreneurs to support each other in a non-competitive environment, sharing ideas as
well as other resources. This sharing economy approach can lead to innovative business models that an
individual entrepreneur might not consider without utilizing a sharing economy approach to gaining new
insights.

Customer Value Proposition

Conducting research can focus on problems your customers experience. You can even begin by thinking
about what problems you face in your daily life. For example, most people believe they do not have enough
time in their days. Four generic problems that most people face include lack of time, complicated lives,
insufficient funds, and lack of access to products or services.

After adding up work hours, commute time, sleeping, and other needs, people are not left with much available
open time, and that time is highly valued by people. If every minute counts in a person’s life, how can you use
this information in enhancing your value proposition? Amazon successfully uses this knowledge to gain
customer loyalty as Amazon makes finding and ordering the product as easy as possible by using
recommendations, subscriptions for repeat purchases, one-click check out, quick delivery, and even easy-to-
open packaging. Amazon has analyzed the entire value chain of activities to identify how to make the process
as quick and easy as possible. Within 5 minutes, a customer can search, find, and purchase the desired item.
Compare this sequence of actions to getting into a vehicle or mass transit system, searching through aisles in
a store, standing in line to pay for the item, and carrying the item home. It is certainly a vastly different

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experience. Admittedly, there might be times when a person prefers to go to a physical location, but if the
emphasis is on a lack of time, then Amazon is the logical choice.

Another aspect of time poverty relates to ease of use and switching costs. The idea of making the product
easy to assemble, easy to learn, and easy to use all fits with creating the value proposition, again, from the
user or customer’s perspective. Building switching costs into products is often an intentional action to keep
the customer from discontinuing your product and switching to a competitor’s product. Once the customer
learns your system or has established a history of information or knowledge with your business, there can be
an awareness of what is lost by switching to a different company. Again, we see Amazon excelling in this area
as it retains a history of the customer purchases, addresses, and even timing of purchases. All these actions
focus on adding value from the customer’s perspective.

A third generic problem for many customers is lack of money. Amazon solves this problem by offering a credit
card. Other companies solve this problem by offering smaller assortments of products at a lower price point.
For example, food trucks and tapa restaurants have become popular across the United States. There are now
startups that focus on helping customers save money by creating a service that offers coupons and discounts
such as Groupon and CouponCabin. Recently, Amazon has offered an easy payment plan for customers to
split their payments over several months.

The fourth generic problem is lack of access to the offered product or service. The internet is the most
significant solution to this problem by removing challenges related to geographical locations. Again, Amazon
has excelled in this area. Using an entrepreneurial mindset, we would approach the lack of access from a
more creative viewpoint. To provide a different example from Amazon, consider the problem of living in a rural
area without medical services. Zipline, a drone medical delivery company located in California, operates
across the globe by delivering medical products to hard-to-reach locations, stating that they fly around the
planet Earth every 5 days (FlyZipline, n.d.).

Revenue Models

You might wonder how a revenue model fits into this information about the business model. A revenue model
is a subsection of the business model and specifically addresses how the business will earn income to
generate profits. The business model defines the value proposition. The revenue model describes how the
organization will create revenue. The image below includes a variety of topics that should be considered in
creating the revenue model. Answering these questions defines the revenue model for each unique venture.

As the business model and revenue model are developed, these decisions impact the financial viability of the
business resulting in the identification of how the revenue will be derived and how the costs of the business
will impact pricing decisions. Some companies purchase inventory for resale in a unit sales revenue model,
while more recently there is an increase in innovative approaches such as an advertising revenue model as
used in a cost-per-click where revenue is realized every time a consumer clicks on the ad. Important
questions in these models is who is the customer, how much money is the customer willing to pay for the
value provided by your business, and is this amount of revenue enough to sustain your business?

Remember that design thinking is a human-centered process that focuses on customers and their needs.
Using a design-thinking perspective can be used in both defining the business model as well as defining the
revenue model. Previous units addressed design thinking from a business model perspective, but design
thinking is a tool that can be applied to a variety of topics and actions. For example, applying design thinking
to the revenue model can result in new payment method. Amazon added another customer-focused tool by
developing Amazon Pay. Since Amazon already has a payment process established on their webpage, how
much easier is it for a customer shopping on a different webpage to click Amazon Pay? Is it possible that this
other company gains more sales due to the customer focus on making the purchase easier through Amazon
Pay? Now consider using design thinking in addressing each of the variables included in the above image.
What innovative ideas result from applying design thinking in creating the revenue model? We would expect
that in using design thinking, customer satisfaction and loyalty would increase, as would sales.

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(Adapted from Meyer, 2019)

Business Model Canvas

Completing a plan using the business model canvas is an excellent starting point in developing your business
model and planning your new venture. In building your new venture, creating your team is an essential piece
of success as is building your network. Within the entrepreneurial world, the phrase invest in the team over
the idea is popular. The idea is that well-selected team members can pull a mediocre idea into success, and a
low-performing team will compromise the success of even a good idea. Building both your team and your
network contributes to a wealth of resources from legal advice through knowledge of key success factors
such as selecting the best business and revenue models.

Interactive Activity

In order to check your understanding of
concepts from this unit, complete the Unit V
Knowledge Check activity.

Unit V Knowledge Check

PDF version of the Unit V Knowledge Check

Note: Be sure to maximize your internet
browser so that you can view each individual
lesson on a full screen, ensuring that all
content is made visible.

Remember, this is a nongraded activity.

Next Up

The next unit addresses the topic of innovative business strategies, which includes planning, failure, and
marketing. We will view failure from the viewpoint that failure can open new doors when we have an

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entrepreneurial mindset that constantly seeks out new possibilities. A failure of one idea might provide
insights into another idea that becomes a spin-off from the original idea. Applying the course material
presents key tools that will support your business, as well as a vigilant willingness to stay alert to necessary
changes as new information and insights arise.

References

FlyZipline (n.d.). Zipline about. https://flyzipline.com/about/

Frishammar, J., & Parida, V. (2019). Circular business model transformation: A roadmap for incumbent firms.

California Management Review, 61(2), 5–29. https://doi-
org.libraryresources.columbiasouthern.edu/10.1177/0008125618811926

Meyer, R. (2019, October 2). Revenue model typology: Revenue model framework. TIAS.

https://www.tias.edu/en/item/revenue-model-typology-revenue-model-framework/

Neck, H. M., Neck, C. P., & Murray, E. L. (2021). Entrepreneurship: The practice and mindset. SAGE.

Richter, C., Kraus, S., Brem, A., Durst, S., & Giselbrecht, C. (2017). Digital entrepreneurship: Innovative

business models for the sharing economy. Creativity and Innovation Management, 26(3), 300–310.

Suggested Unit Resources

In order to access the following resources, click the links below.

The article below was mentioned in the lesson and is highly recommended to read.

Richter, C., Kraus, S., Brem, A., Durst, S., & Giselbrecht, C. (2017). Digital entrepreneurship: Innovative

business models for the sharing economy. Creativity & Innovation Management, 26(3), 300–310.
https://doi-org.libraryresources.columbiasouthern.edu/10.1111/caim.12227

This article below expands upon biases in business models.

Roessler, M., Velamuri, V. K., & Schneckenberg, D. (2019). Corporate entrepreneurship initiatives:

Antagonizing cognitive biases in business model design. R&D Management, 49(4), 509–533. https://doi-
org.libraryresources.columbiasouthern.edu/10.1111/radm.12340

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This article showcases an innovative business model and how innovative models present a challenge in
communicating in uncharted waters.

Schneckenberg, D., Velamuri, V. K., Comberg, C., & Spieth, P. (2017). Business model innovation and

decision making: uncovering mechanisms for coping with uncertainty. R&D Management, 47(3), 404–
419. https://doi-org.libraryresources.columbiasouthern.edu/10.1111/radm.12205

Learning Activities (Nongraded)

Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.

In order to access the following resources, click the links below.

Utilize the following Chapter 5 Flashcards, Chapter 8 Flashcards, and Chapter 9 Flashcards to review
terminology from the eTextbook

  • Course Learning Outcomes for Unit V
  • Required Unit Resources
  • Unit Lesson
    • Business Models and Innovation
      • Circular Business Model
    • Value Proposition
    • Networking and Innovative Business Models
    • Customer Value Proposition
    • Revenue Models
    • Business Model Canvas
    • Interactive Activity
    • Next Up
    • References
  • Suggested Unit Resources
  • Learning Activities (Nongraded)
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