World of Requirements – part II
2Lecture Introduction
STABILITY
EFFECTIVITY
USEFULNESS
DYNAMICS
theory of vitality
USEFULNESS Subjects Needs
Services
Products
Subjects Needs
Services
Products
Subjects Needs
Services
Products
Subjects Needs
Services
Products
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3Lecture Introduction
A business model describes the rationale of how
an organization creates, delivers and captures
value.
Subjects Needs
Services
Products
CSVPKP KA
KR
CR
CH
C$ R$
CSVP
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  Building up Usefulness (cont’d)
◦  BMC building blocks: Channels, Customer
Relationships, Revenue Streams
◦  Summary
  Building up Effectiveness
◦  Processes
◦  Resources
◦  Structures
◦  BMC building blocks: Key Activities, Key Resources,
Key Partners, Cost Structure
4Lecture Introduction PV215 - 3
5
Customer
Segments
(CS)
Value
Proposition
(VP)
Key Partners
(KP)
Key
Resources
(KR)
Key Activities
(KA)
Channels
(CH)
Customer
Relationships
(CR)
Revenue Streams (R$)Cost Structure (C$)
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• Describes how a company communicates with
and reaches its Customer Segments to deliver a
subject of Value Proposition.
• Comprises communication, distribution and sales
channels.
• Plays important role in customer experience.
Meaning
• Through which Channels do our Customer
Segments want to be reached? How are we
reaching them now?
• How are our Channels integrated? Which ones
work best?
• Which ones are most cost-efficient?
Questions
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Subjects Needs
Services
Products
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Raising awareness among customers about
a company’s products and services.
Helping customers evaluate a company’s
Value Proposition.
Allowing customers to purchase specific
products and services.
Delivering a subject of Value Proposition to
customers.
Providing post-purchase customer support.
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Subjects Needs
Services
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Awareness
• How do we
raise
awareness
about our
company’s
VP?
Evaluation
• How do we
help
customers
evaluate
our
organizatio
n’s VP?
Purchase
• How do we
allow
customers to
purchase
specific
products
and services?
Delivery
• How do we
deliver a
VP to
customer?
After sales
• How do we
provide
post-
purchase
customer
support?
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Subjects Needs
Services
Products
Channels
Types
Own
Direct
Sales force
Web sales
...
Indirect
Own stores
...
Partner
(indirect only)
Partner
Stores
Wholesaler
...
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CSVPKP KA
KR
CR
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C$ R$
Subjects Needs
Services
Products
• Describes the types of relationships a
company establishes with specific Customer
Segments
Meaning
• Customer Acquisition
• Customer Retention
• Boosting sales (upselling)
Motivations
• What type of relationship does each of our CS
expect us to establish and maintain with
them? Which ones have we established?
• How costly are they?
Questions
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Subjects Needs
Services
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• based on human interaction
• personal encounter, phone call, e-
mails
Personal
Assistance
• deepest and the most intimate kind
of relationship
• role of key account managers
Dedicated
Personal
Assistance
• no direct relationship
• customers is provided with all
necessary means to help themselves
Self-service
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C$ R$
Subjects Needs
Services
Products
• mixture of sophisticated self-service with
automated processes
Automated
Services
• to become more involved with customers/
prospects
• to facilitate connections between community
members
Communities
• customers are actively involved in value creation
• essential for service delivery
Co-creation
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CSVPKP KA
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C$ R$
Subjects Needs
Services
Products
• Represents the cash a company generates
from each CS
• Note: Cost must be subtracted from Revenues
to create Earnings
Meaning
• For what value are our customers really willing
to pay? For what do they currently pay?
• How are they currently paying? How would
they prefer to pay?
• How much does each R$ contribute to overall
revenues?
Questions
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Services
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• Revenues result from one-time
customer paymentsTransaction
• Revenues result from ongoing
payments to either
• deliver a VP to customers or
• provide post-purchase customer
support
Recurring
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C$ R$
Subjects Needs
Services
Products
• selling ownership rights to a physical productAsset sale
• using of a particular service
• the more a service is used the more customers
pay
Usage fee
• selling continuous access to a service, typically
limited in time (monthly, yearly subscriptions)Subscription fee
• granting the exclusive right to use a particular
asset for a fixed period in return for a fee
Lending/
Renting/Leasing
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CR
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C$ R$
Subjects Needs
Services
Products
• giving customers permission to
use protected intellectual property
in exchange for licensing fees
Licensing
• intermediating services performed
on behalf of two or more parties
Brokerage
fee
• resulting from fees for advertising
a particular product, service or
brand
Advertising
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Services
Products
• List price
• Product feature dependent
• Customer segment dependent
• Volume dependent
Fixed
menu
pricing
• Negotiation (bargaining)
• Yield management
• Real-time-market
• Auctions
Dynamic
Pricing
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C$ R$
Subjects Needs
Services
Products
Having clarified Usefulness is essential for every
business!
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Subjects Needs
Services
Products
The subject of VP has to be provided
• in appropriate amount,
• in appropriate quality, and
• with minimum costs!
Sum of output values has to be
greater than sum of input values!
• Value of output depends on its usefulness!
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Theory of Vitality
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Processes
• What procedures
will lead to
services and
products?
Resources
• What resources
will these
procedures
consume?
Structures
• How we organize
keeping up these
procedures and
resources?
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(C) J. Plamínek
Theory of Vitality
Processes Resources Structures
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CSVPKP KA
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C$ R$
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Theory of Vitality
• Describes the most important things a
company must do to make its business
model work.
• i.e. to create and offer VP, reach
markets, maintain CR, and establish R$.
Meaning
• What Key Activities do our VP require?
• Our Distribution Channels?
• Customer Relationships?
• And Revenue Streams?
Questions
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Processes Resources Structures
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C$ R$
Process is sequence of activities to be
performed
• Activity is an basic element of process
• In general, processes are contemplated to be
repeatable
Process transforms inputs to outputs
To develop effectivity, it is crucial to have
processes well defined and described!
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Processes Resources Structures
Process measurement
Process effectivity evaluation
Accurate definition of process resources
Accurate responsibility assignments
Process support and integration
Process management and adjustment
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Processes Resources Structures
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Processes Resources Structures
A1 A3 A4 A5A2
R1 R2 R3 R4 R5
Service
Product
Resource Management
Process Management
Process
Owner
Activity
Performers
(C) J. Plamínek
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Monitoring
Resource
Bearers
Possibilities
Requirements
• Describes the most important assets
required to make a business model
work.
Meaning
• What Key Resources do our VP
require?
• Our Distribution Channels?
• Customer Relationships?
• And Revenue Streams?
Questions
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Processes Resources Structures
CSVPKP KA
KR
CR
CH
C$ R$
• Physical
• Intellectual
• Financial
Hard
resources
• Human resources: abilities,
qualities, attitudes
• People are bearers of
human resources
Soft/
Human
resources
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Processes Resources Structures
Easy to
specify
and
measure!
Hard to
specify
and
measure!
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Processes Resources Structures
Activity
• What will
exactly
happen
within
activity?
Demands
• What exactly
will one have
to do?
Requirements
• What abilities
and its level
will one have
to posses?
Person
• Who fits the
demands and
requirements
the best?
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Processes Resources Structures
Performance
Management
Leadership
strategic
frame
monitoring
external
resources
external
suppliers
goals
ways
tasks
evaluation
internal
resources
internal
products
payments
external
products
clients/
customers
market
environment
global
environment
company border
border of company influence
• performed by Leaders
• long-term focus on
• definition of system of corporate ideas
Leadership
• performed by Managers
• short- and medium-term focus on
• organization of realization of corporate thoughts by
planning, controlling
Management
• performed by Workers
• realization of corporate ideas by service provision or products
delivery
• do what is to be done now
Performance
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Processes Resources Structures
• deliver services/products for external customers
• bound to business cases
• “start by order and end by payment”
Ortoprocesses
• deliver internal products critical for all three key
functions (performance, management,
leadership)
• parallel processes supporting ortoprocesses
Paraprocesses
• deliver changes to the company system
Metaprocesses
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Processes Resources Structures
PV215 - 2 32
Performance
Management
Leadership
strategic
frame
monitoring
external
resources
external
suppliers
goals
ways
tasks
evaluation
internal
resources
internal
products
payments
external
products
clients/
customers
market
environment
global
environment
company border
border of company influence
D
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Processes Resources Structures
• Describes the network of suppliers and
partners that make the business model
work
Meaning
• Who are our Key Partners?
• Who are our key suppliers?
• Which Key Resources are we acquiring from
partners?
• Which Key Activities do partners perform?
Questions
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Processes Resources Structures
CSVPKP KA
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CR
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C$ R$
Strategic alliances between non-competitors
• optimization and economies of scale
• acquisitions of particular resources and activities
• outsourcing and sharing infrastructure
Coopetition - strategic partnerships between competitors
Joint ventures to develop new business
Buyer-supplier relationships to assure reliable supplies
Sales relationships
• for brokerage fees
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Processes Resources Structures
CSVPKP KA
KR
CR
CH
C$ R$
• Describes all cost incurred to operate a
business model
• creating and delivering Value, maintaining
CR, and generating R$ all incur costs
• can be calculated relatively easily after
defining KA, KR and KP
Meaning
• What are the most important costs inherent in
our business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?
Questions
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Processes Resources Structures
CSVPKP KA
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CR
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C$ R$
• minimizing costs wherever possible
• using low price VP, maximum
automation, and extensive outsourcing
• the main value for customer is end low
price
Cost-
driven
BMs
• focus on value creation
• typically premium VPs and high degree
of personalized service is characteristic
Value-
driven
BMs
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Processes Resources Structures
CSVPKP KA
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C$ R$
Fixed costs
• costs that
remain the
same despite
the volume of
goods or
services
produced
• examples:
salaries,
physical
manufacturing
facilities
Variable costs
• costs that vary
proportionally
with the
volume of
goods and
service
produced
Economies of
Scale
• cost
advantages
that a business
enjoys as its
outputs
expands
Economies of
Scope
• cost
advantages
that a business
enjoys due to
larger scope of
operations
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Processes Resources Structures
CSVPKP KA
KR
CR
CH
C$ R$
Revenues (usefulness) are not everything!
You need to consider costs of your KAs, KRs, and KPs!
The most important are earnings which illustrates effectivity
at best!
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Theory
of Vitality
revenues cost
> 0 ( )
earnings/profit
39Lecture Summary PV215 - 3
  Usefulness
◦  Foundation of the business
◦  Subjects (CS) -> Needs -> Service/Product (VP)
◦  Importance of CH and CR
◦  Quantification through R$
  Effectivity
◦  Optimization of the business
  amount, quality, minimum costs
◦  Processes (KA) -> Resources (KR) -> Structures
◦  Profit/Loss = Revenues – Cost
  Examples from Mycroft Mind, a.s.
  Stability and Dynamics
40PV215 - 3Lecture Summary