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Green Technologies
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Dr. Michael Prange
TUHH ‐ Institut TIM (W7)Schwarzenbergstraße 95 DD‐21073 Hamburg
Business Model Generation & Green Technologies
Winter Semester 2014/2015Dr.‐Ing. Michael Prange
Overview
Dr.‐Ing. Michael Prange 2
1. Targets of the course
2. Contents of the seminar
3. Teaching methods
4. Schedule
5. Literature
Targets of the course
Dr.‐Ing. Michael Prange 3
The course “Business Model Generation & Green Technologies" is offered regularly in winter semester as an elective course for all master's programs at TUHH.
Based on examples and case studies primarily in the field of green technologies, students learn the basics of Business Model Generation and will be able to develop business models and to evaluate start‐up projects.
As supplement, the course “Corporate Entrepreneurship & Green Innovation” takes place regularly in summer semester.
Contents of the seminar
Dr.‐Ing. Michael Prange 4
Green Technologies Global trends Resource efficiency Climate protection
Green Technologies Global trends Resource efficiency Climate protection
Business Planning Business plan Financing Foundation
Business Planning Business plan Financing Foundation
Business Models Business idea Forms of representation Business model patterns
Business Models Business idea Forms of representation Business model patterns
Business Strategy Design techniques Strategy development Value proposition architecture
Business Strategy Design techniques Strategy development Value proposition architecture
Current Topics Component‐based foundations Concept‐driven Startups Lean Startup method
Current Topics Component‐based foundations Concept‐driven Startups Lean Startup method
Green Business Renewable energy systems Energy efficient buildings Integrated mobility solutions
Green Business Renewable energy systems Energy efficient buildings Integrated mobility solutions
Teaching methods
Dr.‐Ing. Michael Prange 5
Lectures with PowerPoint slides
Discussion using examples
Group work using case studies
Grading by written exam
Schedule
Dr.‐Ing. Michael Prange 6
15.10.2014 15.11.2014 06.12.2014
09:00 – 10:30 Green Technologies Business Strategy Green Business
10:30 – 12:00 Group work Group work Group work
12:00 – 13:00 Lunch Break Lunch Break Lunch Break
13:00 – 14:30 Business Models Business Planning Current Topics
14:30 – 16:00 Group work Group work Exam
Literature
Dr.‐Ing. Michael Prange 7
Osterwalder, A.; Pigneur, Y.: Business Model Generation. Wiley, 2010.
Bessant, J.; Tidd, J.: Innovation and Entrepreneurship. Wiley, 2011.
Cooper, B.; Vlaskovits, P.: The Lean Entrepreneur. Wiley, 2013.
Ries, E.: The Lean Startup. Crown Business, 2012.
Faltin, G.: Brains versus Capital. Stiftung Entrepreneurship, 2013.
Green Technologies
Dr.‐Ing. Michael Prange 9
1. Introduction
2. Global trends
3. Resource efficiency
4. Climate protection
5. Group work
Introduction
Dr.‐Ing. Michael Prange 10
Green Technologies define technologies for environmental and climate protection as well as for sustainable and efficient use of natural resources.
Alternative: Clean Technologies, Environmental Technologies
Green Technologies define technologies for environmental and climate protection as well as for sustainable and efficient use of natural resources.
Alternative: Clean Technologies, Environmental Technologies
Green Business defines enterprises which offer products and services in the field of Green Technologies.
Alternative: Cleantech Business, Environmental Business
Green Business defines enterprises which offer products and services in the field of Green Technologies.
Alternative: Cleantech Business, Environmental Business
Green Entrepreneurship defines innovative entrepreneurship in the field of Green Business as well as Startups in the field of Green Technologies.
Alternative: Ecopreneurship, Sustainable Entrepreneurship
Green Entrepreneurship defines innovative entrepreneurship in the field of Green Business as well as Startups in the field of Green Technologies.
Alternative: Ecopreneurship, Sustainable Entrepreneurship
Trends
Dr.‐Ing. Michael Prange 11
Types of Trends: Meta trends Megatrends Socio‐cultural trends Consumption and Zeitgeist trends Product and Fashion trends Techno trends
Penetration depths of Trends: Pure surface phenomenon
(e.g. Product trends) Deep, sustainable tendency
(e.g. Megatrends)
Requirements for Megatrends: Half period of at least 25 to 30
years Persistence against short‐term ups
and downs Appearance and with impact in all
possible areas of life Basically global character
Source: Zukunftsinstitut (2013)
Megatrends
Dr.‐Ing. Michael Prange 12
Globalization
Urbanization
Neo‐Ecology
Connectivity
Mobility
Health
New Learning
New Work
Female Shift
Silver Society
Individualization
Source: Zukunftsinstitut (2013)
Megatrend Urbanization
Dr.‐Ing. Michael Prange 13
In the future, 20 to 30 mega‐cities dominate the world economy: 1970 about ⅓ of humanity lived in ci es. 2010 more than half of all people lived in cities. 2050 about ⅔ of humanity is expected to live in cities.
Related to Green Technologies: Smart City Car Sharing Bike Boom Mixed Mobility Urban Farming Urban Mining Mega‐Cities City Quarters
Megatrend Neo‐Ecology
Dr.‐Ing. Michael Prange 14
Focus on Sustainability and Efficiency in all areas of Life
LOHAS movement in USA (Lifestyle of Health and Sustainability)
Related to Green Technologies: Bio Boom Renewable Energy Green Jobs Environmental awareness Sustainability Society Green Investments E‐Mobility Energy Grids Reuse, Reduce, Recycle Smart Buildings
Megatrend Connectivity
Dr.‐Ing. Michael Prange 15
Internet with more than 4 billion users as basis for world‐wide Information and Cooperation
Strong growth of Social Media and Cloud Computing as well as increasing linkage of Cyberspace and Real World
Related to Green Technologies: E‐Commerce Internet of Things Big Data Open Innovation Energy Grids Smart Devices Small‐World‐Networks Crowd Sourcing
Megatrend Mobility
Dr.‐Ing. Michael Prange 16
Greater individual mobility by more leisure and prosperity
Increase in global mobility by road, rail and air transport
Increase in transport volume in logistics due to globalization
Related to Green Technologies: M‐Commerce E‐Mobility Markets on the way 24/7 Society Mixed Mobility Bike Boom Car Sharing Slow Traffic
Megatrends
Megatrends as basis for Innovations
Dr.‐Ing. Michael Prange 17
Green Technologies
Action fields
Smart City Car Sharing Bio Boom E‐Mobility Energy Grids Smart Buildings Big Data E‐Commerce Mixed Mobility Bike Boom …
Kondratieff Cycles
Dr.‐Ing. Michael Prange 18
1790 1840 1890 1940 1990 Steam engine Cotton
Steel Railway
Electricalengineering Chemistry
Petro chemistry Automobile
Informationtechnology
1. Kondratieff 2. Kondratieff 3. Kondratieff 4. Kondratieff 5. Kondratieff
Clothing Mass transport Mass consumptionIndividualmobility
Information,Communication
Long economic waves due to new Basic Technologies
What influences the next Kondratieff Cycle?
Dr.‐Ing. Michael Prange 19
No incremental, but only radical innovations form the trigger for long economic waves.
Green Technologies and Life Science Technologies based on Information Technologies could be the new Basic Technologies for the 6th Kondratieff cycle.
After the dot‐com boom begins in Silicon Valley already the green tech boom.
The development speed of internet‐based economy is urgently needed in Green Business for resource efficiency, climate change and sustainable growth!
Discussion
Dr.‐Ing. Michael Prange 20
What impact does the megatrend Urbanization have on our cities?
What influence does the megatrend Neo‐Ecology have on our daily life?
How will the megatrend Connectivity change our working environment?
Which role does the megatrend Mobility play in the world economy?
What can Green Technologies effect in the future?
Resource efficiency
Dr.‐Ing. Michael Prange 21
Resource efficiency is defined as the ratio of a particular benefit to the required use of natural resources.
The benefit can be provided in the form of a product or service. The lower the required input of natural resources or the higher the benefit of the product or service, the higher is the resource efficiency.
Resource efficiency is defined as the ratio of a particular benefit to the required use of natural resources.
The benefit can be provided in the form of a product or service. The lower the required input of natural resources or the higher the benefit of the product or service, the higher is the resource efficiency.
Natural Resources are components or functions of nature that have an economic benefit. These include raw materials, space as well as the function and quality of components of the environment such as soil, air and water.
Natural Resources are components or functions of nature that have an economic benefit. These include raw materials, space as well as the function and quality of components of the environment such as soil, air and water.
Resource efficiency as a political goal
Dr.‐Ing. Michael Prange 22
Avoidance of supply bottlenecks (technical and economic availability of certain raw materials)
Raising of market potential and competitive advantages for resource efficiency technologies in the sense of ecological modernization of the economy
Reduction of negative environmental effects resulting from the extraction and processing of raw materials, the manufacturing of semi‐finished and finished goods as well as the use of the generated products and their disposal
Compliance with planetary sustainability boundaries
Preservation of natural resources for future generations
Resource efficiency in the product life cycle
Dr.‐Ing. Michael Prange 23
Lightweight and miniaturization already in product design
Savings of raw materials during the production
Reduction of material consumption in the use phase
Possibility of clean separation and recycling of the materials in the technical or natural cycles
Climate protection
Dr.‐Ing. Michael Prange 24
Climate protection is the collective term for all measures that counteract human‐induced global warming and mitigate possible consequences or even prevent them.
Climate protection is the collective term for all measures that counteract human‐induced global warming and mitigate possible consequences or even prevent them.
Global warming refers to the rise in the average temperature of the lower atmosphere and the oceans, which has been observed since the middle of the 19th century.
By Climate Research expected and partly already observable consequences of global warming include depending on the Earth region: sea ice and glaciers melt, sea level rise, thawing of permafrost, growing arid zones and increasing weather extremes with corresponding repercussions on the life and survival situation of people and animals.
Global warming refers to the rise in the average temperature of the lower atmosphere and the oceans, which has been observed since the middle of the 19th century.
By Climate Research expected and partly already observable consequences of global warming include depending on the Earth region: sea ice and glaciers melt, sea level rise, thawing of permafrost, growing arid zones and increasing weather extremes with corresponding repercussions on the life and survival situation of people and animals.
Climate protection as a political goal
Dr.‐Ing. Michael Prange 25
Reduction of the consumption of fossil fuels
Reduction of the emission of greenhouse gases that are released by industrial and agricultural production, by energy consumption in transport, in private homes and in public spaces
Preservation and promotion of such natural components that can accommodate the quantitatively most significant greenhouse gas carbon dioxide (oceans, tropical rain forests, boreal forests, wetlands)
Measures to adapt to the unavoidable climate change (dike construction, disaster preparedness)
Education and behavioral changes of people, especially in industrialized countries with high energy consumption and greenhouse gas emissions
Sustainable growth in Europe
Dr.‐Ing. Michael Prange 26
Building a more competitive low‐carbon economy that makes efficient, sustainable use of resources
Protecting the environment, reducing emissions and preventing biodiversity loss
Capitalizing on Europe's leadership in developing new green technologies and production methods
Introducing efficient smart electricity grids
Harnessing EU‐scale networks to give European businesses (especially small manufacturing firms) an additional competitive advantage
Improving the business environment (in particular for SMEs)
High‐Tech Strategy of the German Government
Dr.‐Ing. Michael Prange 27
Prioritize future tasks for prosperity and quality of life Digital Economy and Society Sustainable Economics and Energy Innovative Working Environment Healthy Living Intelligent Mobility Civil Security
Join forces and promote transfer
Strengthen innovation dynamics of the economy
Create a favorable environment for innovation
Strengthen dialogue and participation
Economic Sectors of Green Business
Dr.‐Ing. Michael Prange 28
Automobile and Transport
Bio Fuels and Agriculture
Energy Management and Efficiency
Renewable Energy Technologies
Energy Storage
Nanotechnology and Nanomaterials
Waste Management
Water
Discussion
Dr.‐Ing. Michael Prange 29
Why has the European Union committed to sustainable growth?
What does the German government want to achieve with their high‐tech strategy?
In addition to the political goals, does it also make sense from a business perspective to deal with resource efficiency?
What can businesses contribute to climate protection?
Group work 1: Green Technologies
Dr.‐Ing. Michael Prange 30
60 Minutes Working Time
20 Minutes Presentation
10 Minutes Discussion
Business Models
Dr.‐Ing. Michael Prange 32
1. Introduction
2. Business idea
3. Forms of representation
4. Business model patterns
5. Group work
Introduction
Dr.‐Ing. Michael Prange 33
A business idea is a concept with which an economic existence can be established.A business idea is a concept with which an economic existence can be established.
A business model pattern describes business models with similar characteristics, similar arrangements of building blocks or similar behaviors.A business model pattern describes business models with similar characteristics, similar arrangements of building blocks or similar behaviors.
A business model describes the rationale of how an organization creates, delivers and captures value.A business model describes the rationale of how an organization creates, delivers and captures value.
A business model innovation is a deliberate alteration of an existing business model or the generation of a new business model for an existing organization.A business model innovation is a deliberate alteration of an existing business model or the generation of a new business model for an existing organization.
Business idea
Dr.‐Ing. Michael Prange 34
The following types of business ideas can be distinguished: Imitative business ideas Improved business ideas Innovative business ideas
Business idea imitative improved innovative
Product known partly known unknown
Functionality known partly known unknown
Manufacturing & distribution costs
known partly known estimated
Price known partly estimated estimated
Product awareness given partly given not given
Customer needs known partly known estimated
Innovative business ideas
Dr.‐Ing. Michael Prange 35
An innovative business idea is based on a new product or a new service, which is not yet known in the market and their needs are difficult to estimate.
Various design techniques can be used to design suitable business models for innovative business ideas: Customer Insights Ideation Visual Thinking Prototyping Storytelling Scenarios
Forms of representation
Dr.‐Ing. Michael Prange 36
A representation of a business model must cover the main areas of a business: Customers Offer Infrastructure Finance
Business Model Canvas allow a structured representation and visualization of business ideas and business models.
Business Model Canvas
Dr.‐Ing. Michael Prange 37
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Building blocks of business models
Dr.‐Ing. Michael Prange 38
1. Customer Segments
2. Value Propositions
3. Channels
4. Customer Relationships
5. Revenue Streams
6. Key Resources
7. Key Activities
8. Key Partnerships
9. Cost Structure
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 39
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Customer Segments
Dr.‐Ing. Michael Prange 40
The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve: For whom are we creating value? Who are our most important customers?
Examples: Mass Market Niche Market Segmented Diversified Multi‐sided Platform
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 41
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Mass marketMass market
Value Propositions
Dr.‐Ing. Michael Prange 42
The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment: What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying?
Characteristics: Newness Performance Customization “Getting the Job Done” Design, Brand/Status Price, Cost Reduction, Risk Reduction Accessibility, Convenience/Usability
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 43
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Seamlessmusic
experience
Seamlessmusic
experience
Mass marketMass market
Channels
Dr.‐Ing. Michael Prange 44
The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition: 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? How are we integrating them with customer routines?
Channel phases:1. Awareness: How do we raise awareness about our company’s products and
services?2. Evaluation: How do we help customers evaluate our organization’s Value
Proposition?3. Purchase: How do we allow customers to purchase specific products and services?4. Delivery: How do we deliver a Value Proposition to customers?5. After sales: How do we provide post‐purchase customer support?
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 45
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Seamlessmusic
experience
Seamlessmusic
experience
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Customer Relationships
Dr.‐Ing. Michael Prange 46
The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments: What type of relationship does each of our Customer Segments expect us to
establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they?
Examples: Personal assistance Dedicated Personal Assistance Self‐Service Automated Services Communities Co‐creation
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 47
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Seamlessmusic
experience
Seamlessmusic
experience
Love markLove mark
High switching costs
High switching costs
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Revenue Streams
Dr.‐Ing. Michael Prange 48
The Revenue Streams Building Block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings): 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 Revenue Stream contribute to overall revenues?
Types: Asset sale Usage fee/subscription Lending/renting/leasing Fixed Pricing Dynamic Pricing
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 49
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Seamlessmusic
experience
Seamlessmusic
experience
Love markLove mark
High switching costs
High switching costs
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Large hardware revenues
Large hardware revenues
Low music revenuesLow music revenues
Key Resources
Dr.‐Ing. Michael Prange 50
The Key Resources Building Block describes the most important assets required to make a business model work: What Key Resources do our Value Propositions require? Our Distribution Channels? Our Customer Relationships? Our Revenue Streams?
Types of resources: Physical Intellectual (brands, patents, copyrights, data) Human Financial
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 51
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
People
iPod hardware
iTunes software
Content + agreements
People
iPod hardware
iTunes software
Content + agreements
Seamlessmusic
experience
Seamlessmusic
experience
Love markLove mark
High switching costs
High switching costs
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Large hardware revenues
Large hardware revenues
Low music revenuesLow music revenues
Key Activities
Dr.‐Ing. Michael Prange 52
The Key Activities Building Block describes the most important things a company must do to make its business model work: What Key Activities do our Value Propositions require? Our Distribution Channels? Our Customer Relationships? Our Revenue streams?
Categories: Production Problem Solving Platform/Network
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 53
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Hardware designHardware design
MarketingMarketing
People
iPod hardware
iTunes software
Content + agreements
People
iPod hardware
iTunes software
Content + agreements
Seamlessmusic
experience
Seamlessmusic
experience
Love markLove mark
High switching costs
High switching costs
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Large hardware revenues
Large hardware revenues
Low music revenuesLow music revenues
Key Partnerships
Dr.‐Ing. Michael Prange 54
The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work: Who are our Key Partners? Who are our Key Suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform?
Motivations for partnerships: Optimization and economy Reduction of risk and uncertainty Acquisition of particular resources and activities
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 55
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Record companiesRecord companies
OEMOEM
Hardware designHardware design
MarketingMarketing
People
iPod hardware
iTunes software
Content + agreements
People
iPod hardware
iTunes software
Content + agreements
Seamlessmusic
experience
Seamlessmusic
experience
Love markLove mark
High switching costs
High switching costs
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Large hardware revenues
Large hardware revenues
Low music revenuesLow music revenues
Cost Structure
Dr.‐Ing. Michael Prange 56
The Cost Structure describes all costs incurred to operate a business model: What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?
Is your business more: Cost Driven (leanest cost structure, low price value proposition, maximum
automation, extensive outsourcing) Value Driven ( focused on value creation, premium value proposition)
Sample Characteristics: Fixed Costs (salaries, rents, utilities) Variable costs Economies of scale Economies of scope
Example: Apple iPod/iTunes Business Model
Dr.‐Ing. Michael Prange 57
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Record companiesRecord companies
OEMOEM
Hardware designHardware design
MarketingMarketing
People
iPod hardware
iTunes software
Content + agreements
People
iPod hardware
iTunes software
Content + agreements
Seamlessmusic
experience
Seamlessmusic
experience
Love markLove mark
High switching costs
High switching costs
Mass marketMass market
Retail stores
Apple stores
Website
iTunes store
Retail stores
Apple stores
Website
iTunes store
Marketing+
Sales
Marketing+
Sales
PeoplePeople
ManufacturingManufacturing
Large hardware revenues
Large hardware revenues
Low music revenuesLow music revenues
Discussion
Dr.‐Ing. Michael Prange 58
What are the advantages of a uniform representation of business models with Business Model Canvas?
Which importance do key partnerships have in a business model?
What can be derived from the financial structure shown in the Business Model Canvas, and what not?
Business model patterns
Dr.‐Ing. Michael Prange 59
Business models with similar characteristics, similar arrangements of building blocks or similar behaviors can be described by business model patterns.
Some important concepts of business model patterns are:1. Unbundling business models2. Long Tail3. Multi‐Sided Platforms4. FREE as a business model5. Open business models
Unbundling business models
Dr.‐Ing. Michael Prange 60
The concept of the “unbundled” corporation holds that there are three fundamentally different types of businesses: Customer Relationship businesses, Product innovation businesses, Infrastructure businesses.
Each type has different economic, competitive and cultural imperatives.
The three types may co‐exist within a single corporation, but ideally they are “unbundled” into separate entities in order to avoid conflicts or undesirable trade‐offs.
Examples: Mobile telecom industry, private banking industry, Energy Industry
Example: Unbundling business model
Dr.‐Ing. Michael Prange 61
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
B2BB2B
B2C / B2BB2C / B2B
Customer focusedCustomer focused
Infrastructure services
Infrastructure services
Product & service innovation
Product & service innovation
Highly service oriented
Highly service oriented
Strong relationships, acquisition & retention
Strong relationships, acquisition & retention
Strong channelsStrong channels
InfrastructureInfrastructure
Manage R&DManage R&D
Customer acquisitionCustomer acquisition
Large volumeLarge volume
Talent poolTalent pool
Customer baseCustomer base
Product & service innovation
Product & service innovation
Infrastructure managementInfrastructure management
Commodities pricing
Commodities pricing
Premium pricingPremium pricing
Large share of wallet
Large share of wallet
High fixed costsHigh fixed costs
High employee costs
High employee costs
High costs of customer acquisition
High costs of customer acquisition
Long Tail
Dr.‐Ing. Michael Prange 62
Long tail business models are about selling less of more: They focus on offering a large number of niche products, each of which sells relatively infrequently.
Aggregate sales of niche items can be as lucrative as the traditional model whereby a small number of bestsellers account for most revenues.
Long Tail business models require low inventory costs and strong platforms to make niche content readily available to interested buyers.
Examples: Amazon, Ebay, YouTube, Facebook
Example: Long Tail business model
Dr.‐Ing. Michael Prange 63
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Many niche segmentsMany niche segments
Large scope of niche contentLarge scope of niche content
Niche content providers
Niche content providers
InternetInternetPlatformPlatform
Selling less of more
Selling less of more
Platform management & development
Platform management & development
Platform managementPlatform
management
Service provisioning
Service provisioning
Niche content providers
Niche content providers
Content production tools
Content production tools
User generated content
User generated content
Multi‐Sided Platforms
Dr.‐Ing. Michael Prange 64
Multi‐sided platforms bring together two or more distinct but interdependent groups of customers.
Such platforms are of value to one group of customers only if the other groups of customers are also present.
The platform creates value by facilitating interactions between the different groups. A multi‐sided platform grows in value to the extent that it attracts more users, a phenomenon known as the network effect.
Examples: Visa, Google, Ebay, Microsoft Windows
Example: Multi‐Sided Platform
Dr.‐Ing. Michael Prange 65
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Customer segment 1Customer segment 1
Customer segment 2Customer segment 2
Platform managementPlatform
management
Service provisioning
Service provisioning
PlatformPlatform
Platform management & development
Platform management & development
Revenue flow 1Revenue flow 1
Value proposition 1
Value proposition 1
Value proposition 2
Value proposition 2
Revenue flow 2Revenue flow 2
Possible revenue flow subsidy
Possible revenue flow subsidy
Customer segment 3Customer segment 3
Value proposition 3
Value proposition 3
Revenue flow 3Revenue flow 3
FREE as a business model
Dr.‐Ing. Michael Prange 66
In the free business model at least one substantial Customer Segment is able to continuously benefit from a free‐of‐charge offer.
Different patterns make the free offer possible.
Non‐paying customers are financed by another part of the business model or by another Customer Segment.
Examples: Skype, Google, Open Source, free mobile phones
Example: FREE as a business model
Dr.‐Ing. Michael Prange 67
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Small base of paying usersSmall base of paying users
Large base of free users
Large base of free users
Automated & mass customizedAutomated &
mass customizedPremium servicePremium service
Paid premium services
Paid premium services
Infrastructure development & maintenance
Infrastructure development & maintenance
PlatformPlatform
Fixed costsFixed costs
Cost of service for premium users
Cost of service for premium users
Free basic serviceFree basic service
Free basic servicesFree basic services
Cost of service for free users
Cost of service for free users
Open business models
Dr.‐Ing. Michael Prange 68
Open business models can be used by companies to create and capture value by systematically collaborating with outside partners.
This may happen from the “outside‐in” by exploiting external ideas within the firm, or from the “inside‐out” by providing external parties with ideas or assets lying idle within the firm.
Examples: Procter & Gamble, GlaxoSmithKline, InnoCentive
Example: Open business model
Dr.‐Ing. Michael Prange 69
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Secondary marketSecondary market
LicenseesLicensees
Innovation customersInnovation customers
Internet platformsInternet platforms
Sales divestitureSales divestiture
License feesLicense fees
Spin‐offSpin‐off
Sell innovationSell innovation
R&D resultsR&D results
Unused intellectual property
Unused intellectual property
Buy innovationBuy innovation
Externalizing development
costs
Externalizing development
costs
ScreeningScreening
Managing networksManaging networks
Exploring marketExploring market
Screening capabilitiesScreening capabilities
Access to innovation network
Access to innovation network
Innovation partnersInnovation partners
Research communityResearch community
Discussion
Dr.‐Ing. Michael Prange 70
What sense does it make to deal with already known concepts of business model patterns when designing a new business model for an innovative business idea?
Which business model patterns are also still widespread?
Wherein do business models differ that are built on the same business model pattern?
Group work 2: Business Models
Dr.‐Ing. Michael Prange 71
60 Minutes Working Time
20 Minutes Presentation
10 Minutes Discussion
Business Strategy
Dr.‐Ing. Michael Prange 73
1. Introduction
2. Design techniques
3. Strategy development
4. Value proposition architecture
5. Group work
Introduction
Dr.‐Ing. Michael Prange 74
A business strategy describes the medium‐ and long‐term planned behavior of a company to achieve its business objectives.A business strategy describes the medium‐ and long‐term planned behavior of a company to achieve its business objectives.
Design techniques are methods to promote creativity and generating new ideas targeted to develop visions or solve problems.Design techniques are methods to promote creativity and generating new ideas targeted to develop visions or solve problems.
The value proposition architecture of a company defines how the division of labor looks like and how to coordinate the specialized, but logically related value‐added labor activities.
The value proposition architecture of a company defines how the division of labor looks like and how to coordinate the specialized, but logically related value‐added labor activities.
Design techniques
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Design techniques can help to design better and more innovative business models.
Design techniques are primarily used in workshops where a group of people often explores unfamiliar terrain while designing business models.
Well‐known business model design techniques are: Customer Insights Ideation Visual Thinking Prototyping Storytelling Scenarios
Customer Insights
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Adopting the customer perspective is a guiding principle for the entire business model design process. Customer perspectives should inform our choices regarding Value Propositions, Distribution Channels, Customer Relationships, and Revenue Streams.
Customer‐centric business model design: What jobs do our customers need to get done and how can we help? What are our customer’s aspirations and how can we help him live up to them? How do our customers prefer to be addressed? How do we, as an enterprise, best fit into their routines? What relationship do our customers expect us to establish with them? For what values are customers truly willing to pay?
Ideation
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Basic attitude for idea generation: Ignore the status quo Forget the past Stop focusing on competitors Challenge orthodoxies
Epicenters of business model innovation: Resource‐driven Offer‐driven Customer‐driven Finance‐driven Multi‐Epicenter‐driven
Challenge conventional assumptions with “what if” questions
Visual Thinking
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Arguments for Visual Thinking: Understand the essence Enhance dialogue Explore ideas Improve communication
Tools for Visualizing: Post‐it Notes Drawings Mind maps
Telling a Visual Story: Map your business model Draw each business model element on a note Define the storyline Tell the story using the notes on the canvas
Prototyping
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Mindset of Prototyping: Multiple business models in and across industries Inside‐out: business models transform industries Opportunistic thinking Exploratory search for business model Design‐focused Value‐ and efficiency‐focused
Prototypes at different scales: Napkin sketch: outline and pitch a rough idea Elaborated canvas: explore what it would take to make the idea work Business case: examine the viability of the idea Field‐test: investigate customer acceptance and feasibility
Storytelling
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Reasons for Storytelling: Introduce the New and make it tangible Clarification of complex relationships Engaging people (investors, employees, customers, …)
Perspectives for Storytelling: Company perspective Customer perspective
Techniques for Storytelling: Talk & Image Video Clip Role Play Text & Image Comic Strip
Scenarios
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Scenarios can be useful in guiding the design of new business models to render the abstract tangible.
Use of different types of scenarios: Customer scenarios Future scenarios
Development of new business models with future scenarios: Develop a set of future scenarios based on two or more main criteria Describe each scenario with a story that outlines the main elements of the scenario Develop one or more appropriate business models for each scenario
Discussion
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Why is it useful to take the customer's perspective for the development of business models?
Why should a neutral, non‐judgmental attitude be taken for Ideation?
How do Visual Thinking and Storytelling support the development and presentation of business models?
Why does it make sense to create several prototypes of different possible business models first instead of one detailed business planning?
What role do Scenarios play for business model innovation?
Strategy development
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There is not only a single business model, there are really a lot of opportunities and options that will be discovered.
The business model environment must be considered for the strategy development: Key trends Industry forces Market forces Macro‐economic forces
Strengths, weaknesses, opportunities und threats of business models can be evaluated with a SWOT analysis. Hereby all buildings blocks of a business model canvas will be analyzed in detail.
Value proposition architecture
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The strategy development process leads to the value proposition architecture of the company.
The organizational structure and the process organization of the company can be derived from the value proposition architecture.
Established companies must often be able to manage multiple business models. Therefore they have different options: Integration Autonomy Separation
The evaluation of the value proposition architecture by creating new and innovative business models is a permanent process.
Example: Strategies of Daimler and CAR2GO
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Daimler (www.daimler.com) is an international automobile manufacturer with an annual revenue exceeding 136 billion Euro through sales of more than 2 million vehicles.
Car2go (www.car2go.com) is a startup business offering city dwellers mobility on demand using a citywide fleet of Smart cars.
Both companies have different business strategies to offer their customers individual mobility. Therefore they use different business models.
Example: Daimler Business Model
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Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
Car Parts Manufacturers
Car Parts Manufacturers
ManufacturingManufacturing
DesignDesign
Vehicle PlantsVehicle Plants
Cars, Trucks,Vans, Busses,
Financial Services
Cars, Trucks,Vans, Busses,
Financial Services
Mainly High‐End Brands
Mainly High‐End Brands
Mass marketMass market
DealersDealers
Marketing+
Sales
Marketing+
Sales
R & DR & D
ManufacturingManufacturing
Vehicle SalesVehicle Sales Vehicle FinancingVehicle Financing
Sales ForceSales ForceIntellectual PropertyIntellectual Property
BrandsBrands
Example: CAR2GO Business Model
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Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Key Resources Channels
Cost Structure Revenue Streams
City ManagementCity Management Fleet Management
Fleet Management
TelematicsTelematics
Service teamService team
Individual urban mobility without car ownership
Individual urban mobility without car ownership
One‐off Sign‐upOne‐off Sign‐up City DwellersCity Dwellers
CAR2GO.COM
Mobile phone
CAR2GO shops
Parking lots
CAR2GO.COM
Mobile phone
CAR2GO shops
Parking lots
Systems Management
Systems Management
Fleet Management
Fleet Management
Pay per minutePay per minute
CleaningCleaning
Telematics SystemsTelematics Systems
Car fleetCar fleet
Discussion
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Wherein do the business strategies of Daimler and Car2go differ?
What are the fundamental differences in the value proposition of the two business models?
What business strategy is more appropriate for the global megatrends of Urbanization and Mobility?
Group work 3: Business Strategy
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60 Minutes Working Time
20 Minutes Presentation
10 Minutes Discussion
Business Planning
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1. Introduction
2. Business plan
3. Financing
4. Foundation
5. Group work
Introduction
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A business plan is a written document which describes all necessary measures for the implementation of a business idea in a structured form.A business plan is a written document which describes all necessary measures for the implementation of a business idea in a structured form.
Financing includes all operational processes for providing and repayment of funds.Financing includes all operational processes for providing and repayment of funds.
The foundation includes all processes to implement a business idea until the start of the business operation in a new company.The foundation includes all processes to implement a business idea until the start of the business operation in a new company.
Business plan
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A business plan is an instructional description from the idea to the foundation. It is the basis for action and decision‐making for investors.
The business plan consists of 4 parts, in which the results and decisions of a feasibility study are composed: Foundation plan Marketing plan Management plan Financial plan
Foundation plan
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The foundation plan should include the following points: Formal data Name of the founder, company name, legal form, business activity
Founding idea What is the product? What is it? What we do? Is it something special? Why do we want to do that?
Market Condition, size, revenues, prices, special features
Competition Number, market shares, changes Insights from the successes and mistakes of other market participants
Forecast Assumptions and expectations, potential of the company Why is the company profitable?
Marketing plan
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The marketing plan describes how we enter the market, claiming it and want to grow: Target market Who and where are our customers? Is there something special to them?
State of the market and competitors Results of the market and competitive analysis How is our product different from the competition? What can we learn from the competition?
Market expansion and market differentiation Do we can and want to expand our market? Do we want to gradually penetrate new markets or market segments?
Customer approach How do we want to attract customers, keep them and increase their number? Which marketing tools do we want to use?
Price How do we want to make the prices of our products?
Management plan
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The management plan makes clear knowledge, skills and the organization: People Who runs the company? What obligations and what personal and professional background do they have?
Tasks Who is responsible for which task? What are the strengths and weaknesses of the people and how can we solve deficits?
Employees Are employees to be taken? When and for what purposes? How many employees with what skills are needed?
Salaries What are the salaries of the founders and its employees and how should salaries develop?
Accounting and Controlling How is accounting organized? What processes are covered and how? How often are the controlling results evaluated?
Financial plan
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The budget for capital, costs and revenues must match by time.
The financial plan consists of the foundation budget and the operating budget and is the set of figures of the business plan. Both budgets overlap, because the transition is smooth.
Liquidity is the "Achilles heel" of the company.
The foundation budget is a monthly statement when which funds must be available for the start‐up process.
The operating budget relates to the ongoing operation and includes the fixed and variable costs as forecasted figures for the first 3 to 5 years of doing business. For the first fiscal year a monthly list is common.
Discussion
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What is the purpose of the business plan?
What would you suggest a founder to check its company‐specific skills and knowledge?
What effect do the expectations of the founders have on the business plan and how can the danger of overestimating be reduced?
Financing
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The financial viability of the project is determined by the formation of trust and perspectives.
The funds can be divided into: Equity Venture capital Borrowing Public funding
Equity
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The main feature of equity is that it is liable, and therefore it is subject to the risk of loss.
The decision to allocate capital is the result of the following rational consideration: How big is the risk of losing my money? What is my potential profit?
Venture capital
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Venture capital is a special form of equity, which is made available by third parties.
Venture capital can be distinguished as follows: Informal risk capital Formal risk capital
Informal risk capital
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Informal risk capital is provided by family and friends.
Relationship, trust and goodwill are crucial for informal risk capital.
The potential profit is not always the focus.
Informal risk capital plays a major role especially in the early stages of a start‐up project.
Formal risk capital
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Formal risk capital is provided by venture capital companies. The funds come from wealthy individuals, businesses and the companies themselves.
Since they are often working with foreign money for a limited time (usually up to 10 years), the profit is the focus and must be above average.
The allocation of formal risk capital is preceded by: Selection of possible projects Assessment of the projects Examination of the business plan Assessment of the founders and the project team Decision on the start (when, by how much, for how long) Controlling and optionally advice of the current business operation Exit (disinvestment or sale of equity shares)
Borrowing
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Borrowings are mostly loans that can be very different.
Basis for the decision is the founder and his business plan and a willingness to accept a letter of guarantee.
Loan type Loaner Loan period Securities Paying out Costs Repayment
Bank loans Bank negotiable banking practice
negotiable interest monthly, negotiable
Personal loans Friends & family
negotiable negotiable negotiable negotiable negotiable
Shareholder loans
Shareholder negotiable usually none negotiable negotiable negotiable
Overdraft credit
Bank until 60 days none 100% until limit
high interest open until limit
Supplier credit Supplier until 90 days purchased goods
in form of purchased goods
higher price or high interest
within 90 days
Public funding
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Public funding can be divided into the following categories:1. Transfers in kind2. Transfers in cash3. Combinations of 1 and 2
Transfers in kind are help and advice (e.g. counseling centers, hotlines, training), which are worth money, but are not given in the form of a direct payment.
Transfers in cash are financial benefits. This takes place in the form of savings for the founders. These primarily include interest rate subsidies, tax breaks and loan guarantees.
Discussion
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Is the term "informal risk capital" for equity contributions from family and friends really true?
Why is informal risk capital especially in the early stage of formation of particular importance?
Is formal risk capital an option only for innovative and fast growing companies or also for only fast growing companies?
Can founders limit their liability to their investment through the choice of the legal form "GmbH"?
Why would it be interesting for a bank to include public fundingin the start‐up financing – and why not?
Foundation
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If the financing of the business plan is secured, the final decision on setting up a business is pending.
In case of a positive decision, the founding process can begin. There the requirements defined in the business plan are translated into action.
During the start‐up phase and the subsequent operational activities, a continuous adjustment of the current business data with the data from the business plan has to be done.
Founding process
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The classic founding process begins with a feasibility study, a business plan and securing financing.
The implementation of the start‐up process for a corporation is done in several steps:1. Opening a company bank account and payment of the equity share capital2. Notarial certificate of the incorporation3. Entry in the commercial register at the Registration Court4. Registration of the trade5. Registration at the tax office6. Registration with the Social Security7. Registration with the Professional Association
After completing the formalities: the new company is authorized to operate and can put the business plan into action.
Group work 4: Business Planning
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60 Minutes Working Time
20 Minutes Presentation
10 Minutes Discussion
Green Business
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1. Introduction
2. Renewable energy systems
3. Energy efficient buildings
4. Integrated mobility solutions
5. Group work
Introduction
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Green Business defines enterprises which offer products and services in the field of Green Technologies.
Economic sectors of Green Business are, inter alia, Automobile and Transport, Bio Fuels and Agriculture, Energy Management and Efficiency, Renewable Energy Technologies, Energy Storage, Nanotechnology and Nanomaterials, Waste Management and Water.
Green Business defines enterprises which offer products and services in the field of Green Technologies.
Economic sectors of Green Business are, inter alia, Automobile and Transport, Bio Fuels and Agriculture, Energy Management and Efficiency, Renewable Energy Technologies, Energy Storage, Nanotechnology and Nanomaterials, Waste Management and Water.
Green Investments are investment activities that focus on companies or projects that are committed to the conservation of natural resources, the production and discovery of alternative energy sources, the implementation of clean air and water projects, and/or other environmentally conscious business practices.
Green Investments are investment activities that focus on companies or projects that are committed to the conservation of natural resources, the production and discovery of alternative energy sources, the implementation of clean air and water projects, and/or other environmentally conscious business practices.
Renewable energy
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Renewable energy are energy sources which are virtually inexhaustible available in the context of human time horizon or renew itself relatively quickly. Thus, they differ from fossil energy sources that regenerate only over a period of millions of years.
Renewable energy sources are, in addition to higher energy efficiency, the most important building block of a sustainable energy policy and energy transition.
Renewable energy includes hydropower, wind energy, solar radiation, geothermal and renewable raw materials.
Decentralized energy systems
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In decentralized energy systems, electric power is generated close to the consumer, e.g. within or near residential areas and industrial plants using small power plants.
The capacity of the electricity generation plants is usually designed only to meet the energy needs of the immediately or in the nearby area connected electricity consumers.
Also isolated networks, i.e. the interconnection of a few small power producers and consumers in remote locations that are not connected to the public power grid, are seen as decentralized energy systems. Likewise, wind farms and solar parks are commonly counted to decentralized energy systems, but the shift to centralized power generation, especially for larger systems, is flowing.
Example: Smart Hydro Power GmbH
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German company located in Feldafing (near to Munich)
Mini hydroelectric power plant with 5 kW turbine
Energy management system with battery storage
Micro grid with auxiliary devices, e.g. pumps, water purification or cooling
Connector for the national grid
Energy efficient buildings
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In private households in Germany about 85 percent of total energy demand is used for space heating and hot water.
The greatest energy savings potential lies in existing buildings. Here about three times as much energy is required for heating as in new buildings.
The energy demand can be reduced up to 20 percent by professionally modernization and use of advanced building technologies. From the energy saving potential, however, on average, only about one third is exhausted during renovations in practice.
All parties would benefit from energy‐efficient construction and renovation: the tenant and landlord, crafts and industry, environment and economy.
Example: Nest Labs, Inc.
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American company located in Palo Alto (California) since 2010
Building automation system for energy efficiency and security
Thermostats, smoke detectors and webcams
Device control over Internet and smartphones
Usability and design unique selling proposition
Acquisition by Google in 2014
Integrated mobility solutions
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Integrated mobility solutions are the foundation for a modern, regional and municipal mobility system: Well‐coordinated mobility services, a transport offering tailored to the mobility needs of the citizens and a customer‐friendly access to the different mobility services in the region.
It creates the prerequisites for a sustainable mobility behavior of citizens, commuters and companies in the region.
Examples are car‐sharing systems, bike rental systems, combined bus and rail services, lift‐arranging agencies and cross‐modal Internet platforms.
Example: ubitricity GmbH
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German company located in Berlin
Cost‐efficient charging infrastructure for electric cars
Mobile electric meters with charging cable
Communications platform for transaction based billing
Discussion
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How could an energy system of the future look like? What changes will the energy industry be faced then?
Why are energy efficient buildings an important topic for the future?
Where is a great need for integrated mobility solutions?
Group work 5: Green Business
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60 Minutes Working Time
20 Minutes Presentation
10 Minutes Discussion
Current Topics
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1. Component‐based foundations
2. Concept‐driven Startups
3. Lean Startup method
Component‐based foundations
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The term “component‐based foundations" means that even a complex entity may be created by using available components in the market: Accounting Office services Online Shop Web design and programming Logistics services
By a suitable composition of components available on the market, the investment and risk of a business start‐up can be reduced significantly.
Concept‐driven Startups
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The term “concept‐driven Startups” describes a procedure for finding an innovative business model by focusing on the following properties: Function versus Convention Scalability Simplicity Minimizing risks
Examples: Teekampagne, Migros, Aldi, IKEA, Skype
Lean Startup method
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The Lean Startup method is a method for the iterative search for a viable business model in several steps:1. Founders translate ideas into business model hypotheses, test assumptions about
the needs of the customers and create a minimal functional product to try out the solution to customers.
2. The company continues to test all other hypotheses and attempts to validate the interest of the customer through early orders or the use of the product. If there is no interest, the company can re‐align by changing one or more hypotheses.
3. The product will be revised to the extent that it can be sold. Based on its proven hypotheses, the company generates demand by boosting up marketing and sales quickly and expanding the company.
4. The company slowly leaves the startup mode, in which a team for customer development seeks answers, and forms functional departments for the implementation of the business model .
Discussion
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Why are component‐based foundations less risky and more scalable? What are the disadvantages?
Why can concept‐creative Startups possibly change entire industries?
Which industries is the Lean Startup method useful for? What are the advantages?
Please note the following hints:
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Only students with prior registration are allowed to participate!
You have 90 minutes for answering the questions.
You can achieve maximum 60 points in total. To pass the exam, you need 30 points or more.
You can answer the questions either in English or in German.
Please write clearly and in a precise and brief manner.
No additional tools (calculator, books, etc.) and no additional paper are allowed.
Please turn your mobile phone completely off.