Tài liệu Innovating business model by using business model canvas the case of phuc hung holdings

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- NGÔ QUỐC ANH INNOVATING BUSINESS MODEL BY USING BUSINESS MODEL CANVAS: THE CASE OF PHUC HUNG HOLDINGS J.S.C ĐỔI MỚI MÔ HÌNH KINH DOANH BẰNG CÔNG CỤ MÔ HÌNH KINH DOANH CANVAS: TRƯỜNG HỢP CỦA PHỤC HƯNG HOLDINGS LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH Hà Nội - 2017 ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- NGÔ QUỐC ANH INNOVATING BUSINESS MODEL BY USING BUSINESS MODEL CANVAS: THE CASE OF PHUC HUNG HOLDINGS J.S.C ĐỔI MỚI MÔ HÌNH KINH DOANH BẰNG CÔNG CỤ MÔ HÌNH KINH DOANH CANVAS: TRƯỜNG HỢP CỦA PHỤC HƯNG HOLDINGS Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: TS. NGÔ VI DŨNG Hà Nội - 2017 DECLARATION The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article. The other’s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given. The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration. th Date: 30 September, 2017. i ACKNOWLEDGEMENT I would like to acknowledge my advisor PhD. Ngo Vi Dung for his wealthy advices. He has guided and promptly given me a lot of instructions and comments in order to help me moving forward with the right direction to the completion of my final research. I would like to express my deeply thank to PhD. Ngo Vi Dung for his support since the beginning of my research that was selecting the very interesting research topic, then going through research outline, until the end of this research. From this research, I can have a deep understanding of business administration in general and innovative business model of a business firm in particular. I would like to thank everyone who are Phuc Hung’s staffs and Phuc Hung’s customers, who have assisted me to be fulfillment with this research’s aims and scopes. They also have spent a lot of their time with my team for the interview that my team was able to collect necessary answers serving for analyzing of current performance of Phuc Hung, as well as external environment factors affecting Phuc Hung’s business model. In addition, I would like to express my special thank to every member of the team who took part in and supported me in every study activities during implementation of the research. Without their support, I was not able to complete my assignment of the research study. Because limited time and ability so it cannot avoid some mistakes in my research. I look forward to receiving comments from lecturers and colleagues in order have more completed and better achieved of research result. th Date: 30 September, 2017. Ngo Quoc Anh ii CONTENT CHAPTER 1. INTRODUCTION............................................................................................................1 1.1. Rationale.............................................................................................................................................1 1.2. Literature review..............................................................................................................................5 1.3. Aims of research...............................................................................................................................6 1.4. Object of research............................................................................................................................6 1.5. Scope of research.............................................................................................................................6 1.6. Thesis structure.................................................................................................................................6 CHAPTER 2. THEORETICAL BACKGROUND............................................................................7 2.1. Definition of Business Model.......................................................................................................7 2.2. Business Model Canvas and Value Proposition Design......................................................8 2.2.1. Business Model Canvas.........................................................................................................8 2.2.2. Successful application of using Business Model Canvas..........................................10 2.2.3. Value Propositions Design..................................................................................................11 2.2.4. Innovating Business Model................................................................................................13 2.2.5. Summary of research theoretical background...............................................................14 CHAPTER 3. RESEARCH METHODS.............................................................................................15 3.1. Research strategy...........................................................................................................................15 3.2. Data collection methods..............................................................................................................15 3.2.1. Internal Interview Form.......................................................................................................15 3.2.2. Customer Interview Form...................................................................................................15 3.3. Research Process............................................................................................................................16 3.3.1. Assemble team........................................................................................................................17 3.3.2. Preliminary ideas...................................................................................................................17 3.3.3. Internal interview...................................................................................................................18 3.3.4. Customer interview...............................................................................................................18 3.3.5. Group discussion....................................................................................................................19 3.3.6. Design Innovating Business Model..................................................................................20 3.3.7. Prototype..................................................................................................................................20 CHAPTER 4. RESEARCH RESULTS...............................................................................................21 4.1. Overview of Vietnam’s Construction Industry.....................................................................21 4.1.1. History.......................................................................................................................................21 4.1.2. Character..................................................................................................................................21 4.1.3. Local Key Players..................................................................................................................22 iii 4.2. Introduction of Phuc Hung..........................................................................................................23 4.3. Key players’ current business models: Classification, Strength and Weakness.........25 4.3.1. Classification...........................................................................................................................25 4.3.2. Current business models of key players..........................................................................26 4.3.3. Strength.....................................................................................................................................27 4.3.4. Weakness..................................................................................................................................28 4.4. Phuc Hung’s current business model: Characteristics and Performance......................28 4.4.1. Characteristics of Phuc Hung’s existing business model..........................................28 4.4.2. Performance of Phuc Hung’s current business model................................................30 4.4.3. Phuc Hung’s existing business model: Strength and weakness...............................31 4.5. Innovating Phuc Hung’s business model................................................................................32 4.5.1. Study external environment................................................................................................32 4.5.2. Collection of ideas and opinions.......................................................................................39 4.5.3. Design Business Models......................................................................................................40 4.5.4. Select the most satisfactory Business model.................................................................52 4.5.5. Innovating Business Model Discussion..........................................................................55 4.5.6. Recommendation...................................................................................................................56 CHAPTER 5. CONCLUSION, LIMITATION AND IMPLICATION....................................58 5.1. Conclusion.......................................................................................................................................58 5.2. Limitation.........................................................................................................................................59 5.3. Implication.......................................................................................................................................60 REFERENCES............................................................................................................................................61 APPENDIX A: INTERNAL INTERVIEW FORM........................................................................63 APPENDIX B: CUSTOMER INTERVIEW FORM......................................................................68 APPENDIX C: INNOVATIVE BUSINESS MODEL CANVAS..............................................71 APPENDIX D: “FIT MAP” CALCULATION SHEET................................................................74 iv ABBREVIATION GDP: Gross Domestic Product WTO: World Trade Organization TPP: Trans-Pacific Strategic Economic Partnership Agreement FTA: Free Trade Agreement PPP:Private Public Partners FDI: Foreign Direct Investment GSO: General Statistics Office of Vietnam MOC: Ministry of Construction HNX: Hanoi Exchange Market CEO: Chief Executive Officer VND: Vietnamese Dong FPTS: FPT Security ROE: Return On Equity ROA: Return On Assets DBB: Design – Bid – Build DB: Design and Build EPC: Engineering – Procurement – Construction BIM: Building Information Modeling ERP: Enterprise Resource Planning v LIST OF FIGURES Figure 2.1: A business model – a link between strategy and operations Figure 2.2: Business Model Canvas Figure 2.3: Value Proposition Canvas Figure 3.1: Flowchart of the Research’s process LIST OF TABLES Table 4.1: Phuc Hung’s finance performance of 2013, 2014 and 2015 Table 4.2: Customer Profile ranking result Table 4.3: Value Map ranking result of “Resource Driven” business model Table 4.4: Value Map ranking result of “Offer Driven” business model Table 4.5: Value Map ranking result of “Customer Driven” business model vi CHAPTER 1. INTRODUCTION 1.1. Rationale Vietnam is one of the fastest growing countries in the last decade. As reported by World Bank: “Vietnam is a development success story. Political and economic reforms (Doi Moi) launched in 1986 have transformed the country from one of the poorest in the world, with per capita income around $100, to lower middle income status within a quarter of a century with per capita income of over $2,000 by the end of 2014. Vietnam’s growth rate averaged 6.4% per year in the 2000s, but begun to slow in the wake of the global financial and economic crisis. However, driven by strengthening domestic demand, GDP has accelerated to 6.3% during the first half of 2015, the fastest first-half-of-the-year growth rate in the past five years” (World Bank, 2015). “GDP at market prices (current US$) of Vietnam 2014 is $186.2 billion” (World Bank, 2015). Since the reform launched, Vietnam has been joined with serials of economic organizations in the World. Vietnam has joined WTO since 2006 and Vietnam’s economy had stepped toward a deeper integration to global and regional market. The newest singed trade agreement TPP will be a strong motivation and will be an opportunity for domestic economic development in general and for construction industry in particular. Number of FDI (Foreign Direct Investment) firms and investment capital has been increased rapidly in recent years. In 2014, “total FDI capital was VND 265.407 billion, equal to 22% total economic investment and increase 9.8% in comparison with 2013” (GSO, 2015). FDI become important part of Vietnam’s economic and opportunities are increased from this investment activity. In the pathway of economic development, industrialization and modernization, the construction industry has paid an important role in the aspect of economic contribution, urban and rural development, and housing increase. “The production value of the construction industry in 2014 at current prices is estimated at VND 201.203 billion and contributed 5.11% of GDP” (GSO, 2015). The development of urban and rural areas in the recent year is growing fast. At the end of 2014, “there are 774 urban (increase 4 urban in comparison with 2013), in which 02 special urban, 15 urban Grade I, 21 urban Grade II, 42 urban Grade III, 67 urban Grade IV and 627 urban Grade V. Housing area for living also increase at high rate recently. In 2014, there are 92 million sqm of housing increased, average housing area per person nationwide is 20.6 sqm, increase 1 sqm per person in 1 comparison with 2013” (Baoxaydung, 2015). These figures clearly show how the importance of construction industry to Vietnam economic. During the development of socio-economic, there are many opportunities created for Vietnamese contractors. In parallel challenges for local contractors are also increased from investors’ side and international contractors’ side. From investors’ side, requirements of both local and international investors are higher and higher together with economic development. This means that local contractors has to improve their capabilities in term of corporate governance ability, technology-innovation capability, financial and accounting status, management skill, branding development, human resources management, corporate social responsibilities, environment protection, etc., to meet high requirements from investors (FPTS Report, 2015). From international contractors’ side, which are origin from America, Europe, Japan, Korea, China, etc., they have come into Vietnam market together with several advantages of high construction technology, high management skills, good finance ability, several years of experience, etc. These advantages of international contractors create a big challenge for local contractors (FTPS Report, 2015). In order to compete internally among local contractors and internationally with foreign contractors, the urgent requirement for Vietnamese contractors is to find the way to improve their capabilities, corporate strategy, as well as business model, etc., to enhance competitive advantage to survive, and sustainable develop in long-term. There are some successful contractors in re-structuring their company. When finding the trend of development, Coteccon, Hoa Binh Construction, Cofico, Delta Construction have had early privatization process from State – Owned enterprise. Most of them today have a good position of branding, market share, and profit. Moreover, they also are able to compete equally with international contractors in the civil projects of construction industry. Within these contractors, innovating business model is an important solution to enhance competitive advantage for them when they are facing high requirements from market. However, the above successful contractors are few in comparison with the scale of Vietnam Construction Industry. There is still a big gap among local contractors with international contractors, such as: Turner Construction from America; Vinci, Colas from Europe; Shimizu, Sumitomo Mitsui, Obayashi, Taisei, from Japan; Posco, Hyundai, Dealim, Keangnam from Korea in the field of infrastructure projects, industrial projects and airport projects. Contractors of these construction fields are still very slowly in changing their business models due to the embedment deeply with state-owned enterprise’s 2 corporate governance model. Vinaconex, Hanoi Construction Corporation, Cienco, Contrexim, among others, are examples. Indeed, they are newly privatized, but state is still owned over 90% of total shares. They are getting several difficulties in innovating business model, enhancing capabilities as well as competitive advantage to compete with local and international competitors. Vinaconex 9 – a company of Vinaconex is an example. Although the company's Board of Managers has made great efforts to improve the business situation, its production and business results in 2015 was be less effective than in 2014.As reported by the Board of Managers, the company's revenue in 2015 increased compared to 2014, but profit of the company in 2015 reduced more than half compared to 2014; the profitability ratio of profit after tax / net sales also decreased.The company’s Board of Directors assessed the business performance reduced its effectiveness due to several reasons that the main reason leading to this difficulty is due to the overall difficulty of the socio-economic situation. Another reason come from the high competition of domestic and international competitors.Regarding the level of construction, the company has not had a bigchange in construction technique and technology compared with other contractors; in construction management, the company also has no advantage management model compared to foreign contractors.Although the Board of Directors has strategic direction, however, the Board of Managers has not had a strong restructuring solution to innovate the business model, to meet the economic fluctuations as well as challenges from both local and international competitors. (Vinaconex Report, 2015). ICON4 – a company of Hanoi Construction Corporation is another example.Recent years have been seen as a step backward of ICON4 in the company's boom over the past decade. In 2015, the company's revenue and profit is both decreased at the same time in compared to 2014. The profitability ratios of its business activities are lower than the industry average.Facing with the difficulties in business in recent years, the Board of Directors has strongly directed the Board of Directors to propose solutions to improve the situation of business development, as well as its business model to develop the company. However, the medium and long-term solutions of the Board of Managers is still focused on the construction - the traditional business of the company. As a result, the company focuses all resources internal and external of the company to find jobs, improve the quality of bidding; healthy financial situation, increased debt recovery; improve the organizational model and its the quality of management…. (ICON4 Report, 2015). Thus, despite facing many difficulties and challenges both from macro economic, as well as from internal of the 3 company, ICON4 has not had a breakthrough solution to innovate the business model to meet requirements of the Board of Directors, overcome the difficult period, thus creating a basis to increase company’s competitiveness and sustainable development. Phuc Hung Holdings JSC – a previous Contrexim’s member company of Ministry of Construction (MOC), has established in 2001 under the originated name: Phuc Hung – Constrexim Construction Investment and Export-Import Co. Ltd. In 2002, Phuc Hung Co. Ltd was reformed to Joint Stock Company and by 2009; Phuc Hung JSC was successfully listed in Hanoi Exchange Market – HNX with stock code PHC. Similar to most of other local contractors, Phuc Hung Holdings has been being got difficulties in innovating business model when facing with high demand of market, as well as high competition from both international and local contractors. Phuc Hung is also in the same difficult situation of their business as Vinaconex 9 and ICON4. In 2014, Phuc Hung’s business revenue and profitability ratios are decreased compared with 2013. In 2015, although the situation has been improved in which revenue is increased almost double compared to 2014, but the revenue mostly came from the construction of the project The Light Complex which is invested by the company in associated with Viettel Real Estate Company. The competition with industry players in 2015, Phuc Hung still faced with many difficulties as they still focused on maintaining their activities in construction projects based on traditional “Design - Bid –Build”bidding process.Despite the entire staff’s effort, the company often fails to compete with major local and foreign competitors in large scale projects; in small and medium scale projects, Phuc Hung has difficulty in competing with other small and medium sized competitors who are dynamic and compact in their management model.The Board of Directors of Phuc Hung assessed the business situation that despite its improvement in 2015, but generally not meet the expectations and not in compliance with the long-term growing strategy of the Company (Phuc Hung Report, 2015). Thus, the Board of Managers has to find out solutions to innovate the business model and create competitive advantage to develop its business sustainably. The current research will come up with the following questions: -What is current business model of Phuc Hung Holdings? -Does Phuc Hung Holdings need to change its current business model? -If yes, how Phuc Hung Holdings to innovate business model? 4 1.2. Literature review Assessing the current researches on business model innovation in Vietnam shows that there are numbers of different tools for studying the business model of a business, thus findingpotential solutions/ways for innovating a business model. In research of“successful e-commerce business models in the world and lessons for Vietnam”, author Nguyen Phuong Chi analyzes the successful business models of Amazon, eBay, and Alibaba and then finds outlessons learned for e-commerce in Vietnam (Nguyen Phuong Chi, 2010). The author uses B2B, B2C, C2C e-commerce business models to analyze business models of Amazon, eBay or Alibaba. Author Nguyen Dinh Van has conducted a study of “the franchise model of mineral franchising in Ho Chi Minh City”, whereby the author relies on franchise business concepts to analyze the franchise business model. The study is case study with the case of Trung Nguyen Coffee and Pho 24, then design a suitable franchise business model for mineral drinks in Ho Chi Minh City (Nguyen Dinh Van, 2007). Recently, author The Cuong has posted in the Young Knowledge Newspaper on the topic of “What is Business Model Canvas of Google, Facebook” (Trithuctre, 2015). The author uses the business model canvas tool to analyze in detail every aspect of Google and Facebook’s business model. The aboveliterature review found that there are few researches regarding business models. And literature review of current researches in Vietnam also found that Business Model Canvas is a new research tool that has not yet been widely applied in Vietnam despite the fact that the tool is now becoming popular all over the world. Especially in the Vietnam construction industry, there is no research which has used the Business Model Canvas tool to study and foundpotential solutions/ways to innovate the business model, then creating competitive advantage as the basis for building businesses for sustainable development. In the case of Phuc Hung Holdings, the company did not have any research related to its business model analysis to find out how to innovate and restructure the company. Therefore,a research of using Business Model Canvas tool to study the business model of Phuc Hung Holdings or of domestic construction contractors is necessary, then find out potential solutions/ways to innovate its business model, and so that the research questions can be solved. 5 1.3. Aims of research Aims of this research are to: -Describing major type business models of local contractors in construction industry of Vietnam and analyze the strength and weakness of those business models. -Identify the business model of Phuc Hung Company and evaluate its performance. -Applying the Business Model Canvas to identify potential ways/solutions for innovating business model of Phuc Hung Company. 1.4. Object of research The object of research is the business model of a typical contractor of Vietnamese Construction Industry – Phuc Hung Holdings JSC. 1.5. Scope of research Scope of this research is to analyze Phuc Hung capabilities based on its internal data of fiscal year 2013, 2014 and 2015. Data and information will be collected and then will be analyzed to find out current business model of Phuc Hung, why they should innovating and how to innovate their business model. 1.6. Thesis structure Thesis structure of this research includes 5chapters, and major content will be described in 03 chapters from Chapter 2 to Chapter 4 as below: Chapter 1: Introduction Chapter 2: Theoretical background Chapter 3: Research method Chapter 4: Research result Chapter 5: Conclusion, limitation, implication. 6 CHAPTER 2. THEORETICAL BACKGROUND 2.1. Definition of Business Model There are many ways to define what Business Model is. “In essence, a business model is a conceptual, rather than financial, model of a business” (Teece, 2010). Pekuri et al. summaries: “Business models are seen as an essential part of successful businesses as they define the way companies create value for their customers and subsequently make profit from their operations. A good business model has a potential to separate a company from its competitors by creating a competitive advantage” (Pekuri et al., 2013). “Business models are sometimes confused with strategy. However, literature review found that business models provide a critical link between strategy and operation by explaining how the activities of the firm work together to execute strategy” (Pekuri et al., 2014). The link between strategy and operation by a business model is modeled as a 3 Level Pyramid: Bottom of the Pyramid is Operation Level, Middle of the Pyramid is Business Model Level and Top of the Pyramid is Strategy Level. The Pyramid Model is shown as Figure 1 below: Strategy Business Model Operation Figure 2.1: “A business model – a link between strategy and operations” (source: Pekuri et al., 2014) “Business model has the main functions that it is able to enable managers of an organization to understand, study and develop the whole their businesses. Beside, business model also relates to a subject of innovation as it is more important to success than innovating of product or service” (Pekuri et al., 2014). Within this research, the definition of Business model is “A business model describes the rationale of how an organization creates, delivers, and captures value” (Osterwalder & Pigneur, 2010). 7 2.2. Business Model Canvas and Value Proposition Design 2.2.1. Business Model Canvas Osterwalder & Pigneur (2010) recently developed a tool for analyzing, developing, improving and innovating business model that is called Business Model Canvas. This tool is strongly visualized and can help us to better understand and communicate/share different business logics for effective management and execute strategy. “Business model canvas is a shared language for describing, visualizing, assessing, and changing business models. Business model canvas – which consists of nine basic building blocks that show the logic of how a company intends to make money – is the best way to describe a business model. The nine blocks including: (1) Customer Segments (CS), (2) Value Propositions (VP), (3) Channels (CH), (4) Customer Relationships (CR), (5) Revenue Streams (RS), (6) Key Resources (KR), (7) Key Activities (KA), (8) Key Partnerships (KP), (9) Cost Structure (CS); they cover the four major areas of a business: customers, offer, infrastructure, and financial viability” (Osterwalder & Pigneur, 2010). Business Model Canvas is modeled as Figure 2 as below: Figure 2.2: “Business Model Canvas” (Source: Osterwalder& Pigneur, 2010) 2.2.1.1. Customer Segments (CS) The Customer Segments is the first block to be studied of the business model canvas. Itis different groups customers which a company aims to reach and that company 8 has to find out for them (profitable) customers in order to survive in long-term. A company can group their targeting customers into distinct segments with common needs, common behaviors, or other attributes, so they will able to serve their customers better. There are one or several large or small Customer Segments of a business model. However, a companyshould make a right decision to select which segments to serve and which segments to ignore. After making this decision, a business model can be carefully designed around a strong understanding of specific customer needs. (Osterwalder& Pigneur, 2010) 2.2.1.2. Value Propositions (VP) The second block of the business model canvas to be studied is Value Propositions block.It is the bundle of products and services that create value for a specific Customer Segment.The Value Proposition is the reason why customers select a company’s products or services instead of another. It solves a customer problem or satisfies a customer need. Each Value Proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment. There are some Value Propositions to be innovative and represent a new or a disruptive offer, while others may be similar to existing market offers, but with added features and attributes. (Osterwalder& Pigneur, 2010) 2.2.1.3. Channels (CH) The Channels block describes how a company communicates with and reaches its Customer Segments to deliver their Value Proposition.Channels are customer touch points that play an important role in the customer experience. (Osterwalder& Pigneur, 2010) 2.2.1.4. Customer Relationships (CR) The Customer Relationships block describes the types of relationships a company establishes with specific Customer Segments.A company should establish with each Customer Segment with an appropriatedtype of relationship which is personal or automated relation. (Osterwalder& Pigneur, 2010) 2.2.1.5. Revenue Streams (RS) The Revenue Streams block represents the cash a company generates from each Customer Segment.A company must find out what value is each Customer Segment willing to pay. A successful answerwill allow the firm to generate one or more Revenue Streams from each Customer Segment. (Osterwalder& Pigneur, 2010) 9 2.2.1.6. Key Resources (KR) The Key Resources block describes the most important assets required to make a business model work.It is required by every business model. Different type of business model will need different Key Resources which can be physical, financial, intellectual, or human. (Osterwalder& Pigneur, 2010) 2.2.1.7. Key Activities (KA) Like Key Resources, every business model will have its Key Activities.The Key Activities block describes the most important things a company must do to make its business model work and there are the most important actions a company must take to operate its business model successfully. (Osterwalder& Pigneur, 2010) 2.2.1.8. Key Partnerships (KP) The Key Partnerships block describes the network of suppliers and partners that make the business model work.Now a day, suppliers and partners provide a very important input for a company, therefore partnerships are becoming a cornerstone of many business models. Companies, whohave a strong partnership with their partners, will able to reduce risk, or acquire resources. (Osterwalder& Pigneur, 2010) 2.2.1.9. Cost Structure (CS) The Cost Structure block describes all costs incurred to operate a business model.This building block describes the most important costs incurred while operating under a particular business model. It can be calculated after defining the business model’s Key Resources, Key Activities, and Key Partnerships. Some business models can base on Low-Cost strategy to build up Value Proposition to offer their Customer Segments. In this case, the business model is more cost-driven than others. (Osterwalder& Pigneur, 2010) 2.2.2. Successful application of using Business Model Canvas There are several examples of successful cases by using Business Model Canvas as an important tool to innovate their business model. These cases become patterns as Osterwalder and Pigneur summarized in Business Model Generation. Bhati Airtel – an India’s leading telcos, is one of the first mobile telcos using Business Model Canvas to be considered as a pattern of Unbundling Business Model. After unbundling its infrastructure business which was outsourced network operation to Ericsson and Nokia Siemen Networks and IT infrastructure to IBM, the company focuses on its core competency: building Customer Relationships (Osterwalder & Pigneur, 2010). 10 The other typical pattern of using canvas to innovate business model is The LongTail Business Model which applying in the transformation of book publishing industry is an example. The old book publishing model is built on a process of screening many authors and manuscripts by publishers to find out potential ones which seem to archive minimum sales targets. In the contrast, the new book publishing model of Lulu.com is innovated by using model canvas which known as the pattern of The Long-Tail Business Model. Lulu.com is a multi-sides platform in which authors and readers is connected with a Long-Tail of user-generated niche contents. Authors by using Lulu.com self-service tools are able to publish and sell their books to actual orders. (Osterwalder & Pigneur, 2010) Multi-Sided Platforms Business Model is an innovating model that brings together two or more distinct but interdependent groups of customers and iPhone & App Store is known as the Evolution of a Platform Operator. App Store allows users to browse, buy and download application directly from iTunes Store and install them on their iPhones. Application developers must sales of all applications through App Store and Apple get 30% royalty on each application sold. (Osterwalder & Pigneur, 2010) There are some other patterns of business model using the canvas as an innovating tool such as Freemium or Open Business Models. Freemium model can be applied as getting basic functions for free, but has to pay for advance functions; or customers are able to use products for free, but their revenue from advertisements which combine together. Open Business Models can be used by companies to create and capture value by systematically collaborating with outsides partners. It can be “outside-in” by using external ideas within the firms, or “inside-out” by providing external partners with ideas or assets lying idle from the firm. (Osterwalder & Pigneur, 2010) The above examples show that Business Model Canvas can be an important tool for innovating a firm’s business model. In order to innovating a business model, the firm should have a team who has business model design ability, strategic thinking and understand how to process the model design with adapting the firm’s specific needs. 2.2.3. Value Propositions Design Value Propositions is the center part of Business Model Canvas and it will be linked to the most important part of the canvas which is Customer Segments. To ensure the innovating business model is workable, we have to use the Value Proposition Canvas as a design tool. Osterwalder & Pigneur (2014) proposed Value Proposition Canvas which will help the firm create value for customers. 11 The Value Proposition canvas has two sides, Customer Profile and Value Map. With the Customer Profile, you will clarify your customer understanding. With the Value Map, you will describe how you intend to create value for your customer. And you will archive Fit between Customer Profile and Value Map when one meets the other. Value (Propositions) Map breaks down value proposition detailed into Products/Services, Pain Relievers and Gain Creators. And Customer (Segments) Profile breaks down customer detailed into its Jobs, Paints, and Gains. (Osterwalder & Pigneur, 2010) Figure 2.3: “The Value Proposition Canvas” (Source: Osterwalder& Pigneur, 2014) Value (Propositions) Map describes the features of a specific value proposition in business model in a more structured and detailed way. It breaks down value proposition into products/services, pain relievers and gain creators. Customer (Segments) Profile describes a specific customer in business model in a more structured and detailed way. It breaks down customer into its jobs, paints, and gains. According to author Osterwalder, Value Proposition Canvas is a tool for objectively assessing as well as monitoring needs of the selected customer segments, and analyzing in detail the company's designedvalue that is able to create to meet the needs of the segments. In this research, Value Proposition Canvas is used as the basis for designing customer interview questions to find out what their specific needs are. 12