How To Design A Winning Business Model

How to Design A Winning
Business Model
HBR Case Study by
Ramon Casadesus-Masanell and Joan E. Ricart
Presented By
Ashok Kalra 10/MBA/20
Ashruti Khera 10/MBA/21
Ishha Nagrath 10/MBA/24
Ishita Gupta 10/MBA/25
About the authors:
Ramon Casadesus Masanell:
An associate professor at Harvard business school in

Boston.
Joan E. Ricart:
carl Schroder professor of Strategic Management

and Economics at IESE Business School in
Barcelona.
Competing through Business
Models:
In the January-February 2010 issue of the Harvard Business
Review, authors Ramon Casadesus-Masanell and Joan E. Ricart
explore business model innovation in an article entitled “How to
Design a Winning Business Model”.
The article focuses on how companies might compete more

effectively through business models.
In a nutshell:
• Executives believe competing through business models is critical
for success, few understand how best to do so.
• One common mistake: Focus on creating innovative models and

evaluating their efficacy in standalone fashion – Akin to engineers
testing new technologies or products.
• The success or failure depends on how it interacts with other

players in the industry.
• Companies build them without considering competition - They

routinely deploy doomed business models.
• Many companies ignore Dynamic Elements of Business Models.

E.g. Microsoft, eBay, and Facebook.
Business Models
What they are:
1. The story that explains how an enterprise works.

2. Answering the question
– Who is your customer,
– what does the customer value, and
– how do you deliver value at an appropriate
cost.
Business Models
Why we need them NOW:
1. Deregulation, technological change, globalization,

and sustainability have rekindled interest.
2. Pressure to crack open markets in developing
nations.
3. Economic slowdown is forcing companies to modify
or create new business models.
4. Rise of new technology based, low-cost rivals.
Business Models
Limitation and Challenges:
1. Companies’ focus on creating innovative models,

evaluating efficacy in a vacuum.
2. Propensity to ignore potential of dynamic business

models. Undervaluing virtuous cycles.
Business Model
Characteristics of a “Good” Business Model:
1. Aligned with company goals.
2. Self-reinforcing.
3. Robustness.
Business Model
Choices VS Consequences:
Generating a Virtuous Cycle
• Competitive advantage of companies stems largely
from their accumulated assets – They are
consequences of BM choices.
• Favorable consequences enable further choices.
Process generates Virtuous Cycles.
• As cycles spin, company stocks grow, enhancing
competitive advantage.
• Virtuous cycles, over time, expand both value creation
and capture.
E.g. Ryan Air, Irizar.

Beware the vicious cycle:
1. Virtuous Cycles reach a limit, triggering

counterbalancing cycles.
2. VC slow down due to interaction with other BM’s –
When interrupted, synergies work in opposite
direction, eroding competitive advantage.
E.g. Had Ryan Air’s employees unionized/

demanded higher wages.
Ryan Air VS Irizar:
1. Virtuous Cycles are not the

birthright of low-cost, no-
frills players. Differentiators
may also create VC.
2. Focus on customer driven

value and exploit
innovation and empowered
workforce.
Competing with Business Models
S Group VS Kesko:
1. To compete with rivals having similar BM, companies

must quickly build rigid consequences; create and
capture more value.
2. S Group, being a consumer cooperative may gain
market share by offering customers bonuses on
lowering prices BUT Kesko may increase profitability
though its superior shopping experience.
Strengthening your own:
Boeing VS Airbus
1. Boeing’s 747 enjoyed
monopoly until Airbus, afraid
that the European subsidies
currently keeping it afloat
would soon dry up, took the
bold step by introducing
Airbus 380.
2. Helped decelerate Boeing’s
VC.
Weaken Competitor’s cycles:
Microsoft VS Linux
1. Get ahead by using rigid
consequences of choices to
weaken new entrant’s VC.
2. Microsoft used relationship
with OEMs to preinstall
Windows, keeping Linux
customer base limited.
3. Spread fear and uncertainty
about Linux
Turn competitors into
complements:
Betfair VS Ladbrokes and William

Hill.
1. When a BM creates an
environment conducive for the
practices of its rivals without
hampering its own market
share.
2. Converts substitute goods into
complementary ones.
3. Incumbents less likely to
respond aggressively.
Then what is Strategy?
Business model refers to the logic of a company-
1. How it operates
2. How it creates value
3. How it captures value of stake holders in competitive
market place
Whereas
Strategy is the plan to create a unique and

valuable position involving a distinctive set of
activities
And Tactics?
Strategy focuses essentially on deciding on what
the organization is trying to do, what it is trying to
become within its business environment.
Changing strategy is difficult and often causes
problems.
Tactic is the implementation of the strategy. It is

the set of management decisions focused on
how to achieve the strategic objectives.
BM VS Strategy VS Tactics
Examples:
1. Once the organization decides that it wants to be a

widget manufacturer, there are many decisions that
must be made about how to profitably manufacture
widgets.
2. Metro, the world’s largest newspaper-

Business Model: Ad sponsored free newspaper.
Tactic: You cannot manipulate the price of the
PRODUCT itself, only the ads.
Essentially…
Business Model Strategy Tactic

How To Design A Winning Business Model

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What are the main points about business models discussed in the document?

What are the main points about business models discussed in the document?

What are some of the challenges in designing business models according to the document?

What are some of the challenges in designing business models according to the document?

How to Design A Winning

An associate professor at Harvard business school in

carl Schroder professor of Strategic Management

The article focuses on how companies might compete more

• One common mistake: Focus on creating innovative models and

• The success or failure depends on how it interacts with other

• Companies build them without considering competition - They

• Many companies ignore Dynamic Elements of Business Models.

1. The story that explains how an enterprise works.

1. Deregulation, technological change, globalization,

1. Companies’ focus on creating innovative models,

2. Propensity to ignore potential of dynamic business

1. Aligned with company goals.

E.g. Ryan Air, Irizar.

1. Virtuous Cycles reach a limit, triggering

E.g. Had Ryan Air’s employees unionized/

1. Virtuous Cycles are not the

2. Focus on customer driven

1. To compete with rivals having similar BM, companies

Betfair VS Ladbrokes and William

Strategy is the plan to create a unique and

Tactic is the implementation of the strategy. It is

1. Once the organization decides that it wants to be a

2. Metro, the world’s largest newspaper-

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