This PowerPoint was presented at the 2012 Summer School on Fashion Management at the University of Antwerp. The lecture explains the concept of business models from a theoretical point of view, and illustrates this with an example from the fashion industry.

1. Business models in fashion
Theory & practice
August 28th 2012 – Walter van Andel
walter.vanandel@ams.ac.be

2. Agenda
1. Innovation
2. Business models - theory
What are business models?
Business model creation
3. Business models - practice
Application of a business model
4. Q&A

3. Innovation

4. Innovation
Innovation is the process and outcome of creating something
new, which is also of value
Schumpeter (1934) argued that innovation comes about
through new combinations made by an entrepreneur

5. Innovation
A new product
A new process
Opening of new market
New sources of supply
A new business model

6. good ideas are widely
distributed, nobody has a
monopoly on innovation
Prof. Henry Chesbrough, Berkeley

7. Business
Models
What are they?

8. Business models
Examples
EasyJet / SouthWest Airlines no frills: low cost, direct flights without
(free) extras
Gillette razor and blades: low (no) margin on razor; high margin on
blades
Dell built-to-order: choose the components of your pc before
production starts
Farmville / Spotify “freemium”: Basic service is free, added services
are offered for premium pricing
There is more to it than just a catchy name…

9. Business models
Every organization has a business model
Many definitions / many approaches
Interpretation:
The core logic by which a firm
creates, delivers and captures value
Role: to unlock the value potential embedded in (new)
technologies/products/innovations and converting it into market
outcomes

10. A business model is a logical story explaining
who your customers are, what they value, and
how you will make economic returns in
providing them that value
Prof. Joan Magretta, Harvard Business School

11. Value?
What values do we pursue as a company?
What value/benefit do we create, and for whom?
How do we create this value?
How do we transform value into money?

12. Business models create value
The business model creates value not technology or a product itself
product/technology X value/utility
creates
enables
business model
defines
business strategy

13. Business model components
Value creation
Why does your business exist?
Company’s unique value proposition
Value delivery
How can you deliver the value to the customer
Value capture
Whether & how can you make money now and in future
internal processes + profit formula
+ value chain
and organization
organization network consumer

14. Business model innovation
Value creation innovation
we offer a better value proposition for an existing or new problem
Value delivery innovation
we reconfigure the value chain so that a better value proposition and
value delivery emerges
Value capture innovation
we change the revenue mix and thereby create a better value
proposition

15. Side note…
Business plans, business strategy & business models
Often used interchangeable
However: different concepts
Business plan: statement of a set of business goals + how to attain
them
Business strategy: combined choices of how to compete
Business model: operationalization of the business strategy choice

16. Value proposition
Value Proposition
Identify the customer ‘pain’ or problem
Indicate how the product addresses that problem
Quantify the ‘value’ of the product from the customer’s perspective
Understanding ‘value’ is KEY!
Generally wholly unrelated to your cost base
What is the value of an MacBook?
What is the value of a (luxury) clothing item?

17. Well, I know we are in a commodity
market where the price is key, but I
believe we can sell the good for 10x as
much as before

19. Value proposition
Fashion and quality at the best price
Instant fashion
Other fashion brands?

20. Business model creation
Two important concepts:
Business models consist of a set of Choices and Consequences
Business models are a variation of the Value Chain

21. Business model creation
Choices & consequences - Casadesus-Masanell & Ricart (2010)
What ‘parts’ are business models made of?
The concrete choices made by management about how the
organization must operate, and
The consequences of these choices

22. Business model creation
Choices & consequences
Choices Consequences
Policies Flexible
Assets Rigid
Governance
Business model
A business model is a reflection of the firm’s realized choices

23. Business model creation
Value chain
Every business model is a
variation on a company’s
value chain (Magretta, 2002)
The business model
encompasses the pattern of
the firm’s economic
exchanges with external
parties (Zott & Amit, 2008)

24. Business model creation
Value chain
Value creation is a networked process
Business models span across firm boundaries
It involves a complex, interconnected set of exchange relationships and
activities among multiple players

25. Business model creation
Value chain
Where does your business sit in the value chain?
Do you need support/partnership/technology?
Can you go direct-to-customer?
If you are reliant on others, how will you capture your part of the value
created?
And build lasting relations?

26. Business model creation
Value delivery and capture: customers
Identify the specific group of customers (aka ‘market segment’) you
will target
Understand that different market segments have different needs,
preferences and purchasing criteria
Understand the value that they desire
Create an optimal delivery system of that value
Quantify, quantify, quantify

27. Business model creation
Value capture
How is revenue generated?
One-off purchase?
Subscriptions?
‘Freemium’ model?
Advertising?
How does that tie back to the value chain?
What is your cost structure?
How does that tie back to the value chain?

28. Business model creation
Discovery, learning, and adaptation
Start with a provisional business model
Validate; then revalidate and revise
The “right” business model is rarely apparent early on…
entrepreneurs/managers who are well positioned and can learn and
adjust are more likely to succeed

29. Business models
Some conclusions
To be a source of competitive advantage, a business model must be
more than just a ‘logical’ way of doing business
A model must be honed to meet particular customer needs and
requires deep understanding of the customer/consumer and their
values
It must be constantly revalidated and adjusted
Designing a business (model) is a creative act!

30. Case
Example
Fragile
Nathalie Vleeschouwer

31. Case example
Nathalie Vleeschouwer
Fashion designer from Antwerp
Female entrepreneur of the year 2011
Main brand: Fragile
Maternity fashion

32. Fragile delivers contemporary fashion
that enables pregnant women to feel
comfortable, free, and attractive

33. Fragile
Value creation
Product:
High fashion for pregnant women
High quality fabrics specifically
Chosen for sensitive skins
Durable products
Cut and shape adjusted for pregnant shape
But also wearable afterwards

34. Fragile
Value creation
Personal contact:
High emphasis on personal contact
With boutiques and suppliers/producers
Establishes goodwill
Establishes calm / steady relations

35. Fragile
Value delivery
Maternity Boutiques
Flagship stores
Provide a unique experience
Provide a complete offering of maternity products

36. Fragile
Value capture
Standard sales format
But in addition:
Durability leads to cast-offs
Word of mouth
Many request for non-maternity clothing
Second line: Nathalie Vleeschouwer

37. Nathalie Vleeschouwer line
Builds on good name designer
Builds on style Fragile
Builds on previous customer base
Attracts regular and maternity boutiques

38. Nathalie Vleeschouwer
Some choices (and consequences)
Clear initial choice for maternity high fashion
Untapped market, possibility for personal contact with retail
Choice for a complete offering maternity wear
Supports and enables delivery of value proposition
Choice for as much local production as possible
Fast, convenient, goodwill

39. Nathalie Vleeschouwer – business model

40. Q&A

41. OPENING MINDS
TO IMPACT
THE WORLD
Slides and references available on:
www.waltervanandel.com/fashionmanagement