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D'AMORE-MCKIM

SCHOOL OF BUSINESS

ENTR 6218 Business Model Design/Innovation

SYLLABUS V3.0

INSTRUCTOR Gregory Collier

OFFICE HOURS TBD

COURSE DESCRIPTION

Ever wonder how a Unicorn is conceived as a startup to grow to a billion dollar plus
valuation? In this course we will explore the nature of business models, which form the basis
of any enterprise in a market economy. A business model is a mechanism serving two purposes:
creating value for organizational stakeholders (most important, customers and partners), and
ensuring that sufficient part of this value is retained for the organization and its owners. The
course covers major topics in the modern understanding of business models; their essence and
role in securing competitive advantage, key components and design of business models,
business model change and innovation, technology commercialization through sustaining
business models, financial representation of business models and business model change, and
validation of developed business models.
The first section of the course considers dynamic entrepreneurial startup strategy from three
perspectives: positioning of the venture within a dynamic, evolving industrial ecosystem which
includes major companies, startups, and universities at various parts of the value-
chain; different sources of innovation, including open innovation and industry-wide technology
platforms; and basic business model structures for products, systems, and services.
The next section then explores the architecture of a business model and uses addition cases to
explore different types of interesting, dynamic business models. We will look at the meaning of
value creation for customers as well as the company, and within this, the interaction of revenue
models with resource models to produce operating profit. We will also examine the impact of a
business model on capital requirements for startup and growth. And then, the special role that
social ventures play in the business model conversation. Business model renewal for
companies in bad shape will also be examined.
Throughout the semester, students will be asked to prepare and partake in a series of case
study conversations. Students will then be asked to do an individual analysis of a company of

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their choosing with publically available financial statements or a private venture (with the
Professors approval) and make recommendations for improving its business model. And then,
in teams, students will be asked to focus on an industry and develop disruptive business model
for that industry.



COURSE OVERVIEW

The concept of a business model has gained a prominent position in both academic literature
and management practice for a good reason: one a company has defined is business strategy
(target market, target customers, product and service offerings, and market positioning), it
must define and implement a business model to derive economic value from that strategy for
the benefit of employees, investors, and some cases, for customers in terms of win-win pricing
models. Business model design can be innovative, but managing it must be disciplined so as to
insure sufficient profit derived from revenue to sustain the enterprise.

In the course, we will explore:
distinction and relationship between a business strategy and a business model
design of business models including revenue and operational components of a business
model
generic business models for products, systems, and services
the business model design process
the financial outcomes emerging from a business model, as pertaining to realized or
projected financial statements.
the capital requirements for startup and growth emerging from a business model.
business model change and innovation in mature companies
business model validation for a startup firm how to test a model with prospective
customers.

The methods that students should learn in the course include:
How to design a strong business model to commercialize a novel idea.
How to do a preliminary test of a business model with company stakeholders.
How to create projected financial statements from a business model
How to project financing needs needed to launch and then scale a business model.

The course is heavily participative and experiential in nature. The learning of listed above
concepts will happen not only through traditional lecturing, but also through student individual
work (on cases of real companies and startups in high-growth industries) and group projects.

No matter what your primary specialization and career aspirations are, the course is essential in
understanding the modern business. During the course, you will get an opportunity to acquire
the holistic perspective on the business (thorough the business model view), which will make

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sure that you have advantage over other candidates on the job market and later during your
professional career, either in high-growth startups, established family firms, or large public
companies.

PREREQUISITES
The course is open to all students and is a required course for the Entrepreneurship
Concentration and Minor.

It is best if students already have:
Basic financial literacy & understanding of accounting principles
Basic knowledge of financial modeling (e.g., building the models in MS Excel)

It is required that during the first two weeks of the course that you familiarize yourself with the
basic principles of accounting and three key statements we will be working with in the cases
(Income statement, Cash flow statement, and Balance sheet). A good free tutorial on this topic
can be found at the SmallBizU website (make sure to go through all topics and then pass the
test and 2 quizzes):

http://www.smallbizu.org/a101/


COURSE MATERIALS

No required textbook

Required materials:

Two book chapters, pdfs on Blackboard, supplied with permission from Marc Meyer,
Venturing, chapters 6 and 11.
Henry W. Chesbrough, Melissa M. Appleyard, (2007). Open Innovation and Strategy,
California Management Review, Vol. 50 No. 1.

Coursepack:

http://cb.hbsp.harvard.edu/cbmp/access/6780987

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METHOD OF ASSESSMENT

ASSIGNMENT VALUE
1. Classroom participation and Case Assignments 25%
2. Case Analysis 25%
3. Individual Company Business Model Design and 20%
Improvement Analysis
4. Team Project on Designing a Disruptive Business Model 30%
Total 100%

Grading (add this for undergraduate versus graduate level course delivery. For example ..)

We seek a class grade average of B/B+. As are very hard to achieve, A-s for consistent
excellence, B+ for a strong effort, and Bs for solid but unexceptional work. C level grades
reflect poor performance, both on individual assignment and the team project. Any grade less
than this reflects a disregard for class attendance and failing to complete class assignments.

GRADING SCHEME

Percent Mark Letter Grade
95 - 100 A
92 - 94.99 A-
88 - 91.99 B+
84 - 87.99 B
80 - 83.99 B-
Below - 79.99 C

***Grading scheme may be revised. If so the instructor will notify the class of the changes. ***

PERFORMANCE ASSESSMENTS

1. Accounting literacy test, taken in class at the end of Week 2, is necessary to continue
the class. All students must work towards getting a passing grade.

2. Class participation, case & article discussions. The rationale behind this assessment
mechanism is the fact that passive listening is ineffective in developing business analysis
skills. Thus, class participation (preparation, quality of contributions in class discussion,
questions, case analyses) is most valuable. Ideas and contributions should be
communicated effectively and professionally. Coming to class prepared (or not
prepared) will increase (or decrease) your participation points. Therefore, attending
and preparing for class are essential. Class participation will be recorded. The
distribution of the resulting points is at the discretion of the instructor. Attendance

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does not equal participation, meaning coming to all classes will not, in itself, warrant
points associated with participation.


3. Case Analysis will test the knowledge of key concepts we discussed in class. You will
submit answers to case questions. Thoughtful preparation of the analysis, and
demonstration of the concepts of the case will be crucial. Top marks will be awarded for
papers showing critical insights to the issue identified in the cases.

4. Individual Company Business Model Design and Improvement Analysis. This is an
analysis of a current companys existing business model and financial performance,
using frameworks and methods from the course, with a set of clear recommendations
on the company can improve its business model and financial performance. You can
select a publically traded company, and dig into its public financial statements (such as
the Annual Report, 10K, or equivalent statements), or work on your company of you
have access to financial data. Please submit to your professor the company you wish to
study for this part of the course. Data from private companies will be held in strict
confidence.

5. Team Project on Designing a Disruptive Business Model. This usually involves
identifying a market disruption and/or technological innovation and designing a
business model to capitalize on it. This can either be for a new fictitious company to be
started or a company that you wish to start. The focus here is on a disruptive, high
impact business model. Target industries can be media and entertainment, IT,
healthcare, energy, social networking, green technologies, or enterprise software and
services. Analyzing an innovation from another industry must be approved by the
instructor (and can be allowed as an exception).

Some sources of ideas on technological innovations (or social changes) include:
1) Your own company / Internship / Co-op experience
2) Fast Company (http://www.fastcompany.com/) / Wired (http://www.wired.com/)
3) Your university venture accelerator (you might help a real startup to design its
business model)

Please contact the instructor if you need help with choosing the subject of your team
project.

Over the first two weeks of the course, please form your own teams of four to six
people. By the third week of the semester, EMAIL me your list of team members. If you
have tried hard but have not succeeded in joining a team by the deadline, email me, and
I will assign you to a project team.

Do your best to get a mix of skills on your team. Not everyone should be a finance
major, a marketing major, or an electrical engineering major!
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This makes team learning richer. Please ensure that you manage the process well. At the
first group meeting, it is advisable for each team to identify days and times when all
members of the team can meet. If your team has significant issues with one of its
members, the whole team should discuss the problem and find possible solutions in a
reasonable and professional manner. Continuing problems should be brought to my
attention as soon as possible (do NOT wait until the last few days before any project is
due).

Your team will select a technological innovation (or a social change), research the
selected subject matter in detail, go through the business model design process to
develop an optimal business model, perform financial estimations of the designed
business model, and conduct the business model validation. The business model is
developed for deployment through a new venture (startup or a corporate spin-off, not
through a change in the business model of an established company). The output of this
process consists of two parts: a team report and a team presentation.

Team Report. Your team report should be a formal written document (mini business
plan focusing on business models), following the course Business Planning Guide
1) An Executive Summary
2) The Business Model Design
3) Industry analysis and market opportunity
4) Product / service design
5) Go to market channel design
6) Financial projections
7) Capital requirements for startup and growth to implement the business model
8) Appendix
a. Business model validation plan
b. Results of validating the Revenue Model of your proposed business model

Financial analysis should be used to support your arguments and recommendations.
Although the financial analysis should be discussed in the text, the actual tables or
figures can be placed in an Appendix (please be sure to reference to the Appendix
where appropriate so I know where the Appendix fits with the text).

All sources must be referenced correctly (use APA citation style). This also applies to
financial data. The reports should contain a reference list at the end while also citing the
specific sources directly in the text.

Paper format: The final report should not exceed 15 double-spaced pages including any
appendices & references (Calibri or Times New Roman 12 point font, 2.5 cm margins).
Please number the pages. Use exhibits judiciously and only to support your analysis in
the main paper. Use proper referencing, good grammar and correct spelling. These and
the clarity of your writing will be incorporated in your grade.

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The report must be written in a professional manner. Other grading criteria include the
quality of research, conciseness, cogency of argument, consistency of the style, and
thoughtfulness of discussion.

Team presentations are among the most fun aspects of the class! Your group will give a
15-minute formal presentation of the project (key issues, analyses, and
recommendations) during the last two classes. The presentation will be followed by a
brief question and discussion session with the class. The content of your presentation
will closely reflect the written team project: the presentation should summarize your
written report, highlight key issues, main findings your analysis, and your final
recommendations.

The team presentations will be professional presentations. Tips: (a) dress professionally,
(b) use visual aids such as overheads, (c) speak clearly and professionally, (d) be
prepared for questions, and (e) do not exceed the time allotted to your team. Note:
every member of the team is expected to participate in the presentation.

By default, each team member gets the same grade for the team project. Yet, at the end
of the term, students will fill in anonymous report forms evaluating the contribution of
their peers into the team project. On the basis of these reports, the instructor has the
right to correct the grade of individual team members (up or down).


Peer feedback on BlackBoard
Around the middle of semester (see the details in the schedule), each team will make a
post in the Initial business model concept forum on Blackboard. Your initial business
model concept should be described in a formal written document (between 5 and 10
double-spaced pages, MS Word or PDF format, attached to the Blackboard post in the
Initial business model concept forum), discussing:
1) The essence of your subject: technological innovation or social change
2) Industry analysis and market opportunity
3) Existing business models to commercialize the innovation (if any), with their
strengths and weaknesses
4) Design of your proposed business model
5) Preliminary financials

Then, each student will have to provide a feedback on one business model concept
posted in the Initial business model concept forum (not from your team!). I am
looking for:
reasonable critics of the weaknesses of the business model
constructive suggestions
No good job-type of the posts count!
The minimal size of the post is 150 words.

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COMMUNICATION WITH INSTRUCTOR

In addition to the established office hours, there will be Ask the instructor forum on
the discussion board. If you have any question concerning course materials or
assignments, please create a separate thread to post it for the instructor. If you have
something to ask, there is a chance that someone else in your group has the same
question. All questions in this forum will not affect your grade in any way.


COURSE POLICIES
Academic Honesty
Northeastern University is committed to the principles of intellectual integrity. Members of the
Northeastern community are expected to maintain complete honesty in all academic matters,
presenting only their own work in tests and graded assignments. It is imperative to cite the
source of any outside material that you use, including any content or views found on the
Internet. Of particular note is the recent increase in cut and paste plagiarism which entails
downloading phrases from websites or other Internet sources. Plagiarism is defined broadly as
taking anothers thoughts or words and presenting them as your own. Please familiarize
yourself with the academic integrity policies of the University (available at
http://www.northeastern.edu/osccr/academichonesty.html). If you have any questions
regarding proper citation of reference material, contact me prior to submitting the assignment.

CLASSROOM EXPECTATIONS
ATTENDANCE: You are expected to attend each scheduled class. If you must miss a class, it is
your responsibility to get the instructors approval in advance, and to get notes, assignments
and other information from another student. Missing more than 2 (two) classes without a
valid reason will be fined by a letter grade decrease for the overall course (e.g., A- decreases
to B-). The judgment of the appropriateness of the reasons for missing the class remains at the
discretion of the instructor.

LATE ASSIGNMENTS: Late submissions of individual and team works will be fined by half letter
grade lower per day (e.g., B to B-).

APPEALING A GRADE
As any grading is open to human error, please feel free to question your results. When
appealing, please, send me a written letter (e.g., via e-mail) outlining your argument for
changing the grade. It will take me up to 4 days to make the decision in each case. I will inform
you about the decision in written form (e.g., via e-mail). If necessary, I will request a meeting
with you. Please be advised that appealing might result in increase OR decrease of the grade;
hence, use this option only if you have a very strong case for grade change.

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Course Schedule


Session Date Topic Assignments
1a Review of Course Syllabus and Expectations
1b 7-Sep Venture Strategy - Unicorn Strategies - Class Activity Form Project Teams
2a Strategy vs Business Models
2b 14-Sep Dogfight over Europe: Ryanair Case: Ryanair
3a Understanding Perspectives and Definitions of Business Models Mini Case Assigned
3b 21-Sep Silver Rail Technologies Case: Silver Rail
4a Business Model Analysis - Tools and Techniques
4b 28-Sep Disect Business Models - Class Activity
5a Translating a Business Model into Financial Projections Accounting Literacy
5b 5-Oct Zipcar: Redefining the Business Model Case: Zipcar
6a Business Model Design - The Revenue Model
6b 12-Oct Scalix Corp: The Evolution of a Sales Model Case: Scalix
7a Business Model Design - The Operating Models
7b 19-Oct Fitbit: The Business About the Wrist Case: Fitbit
8a Business Model Design - Go-To-Market Mini Case Due
8b 26-Oct Zero, Brammo, and the Electric Motorcycle Industry Case: Zero, Brammo
9a 2-Nov Work on Team Project
10a Business Model Innovation
10b 9-Nov Netflix Case: Netflix
11a Venture Financing
11b 16-Nov Generate Inc. Case: Generate
12a Born Global Business Model Case: Takadu
12b 30-Nov Social Enterprise Business Models

13a 7-Dec Final Project Presentations Final Project Due




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Session 1a: Introduction and Venture Strategy

Date: September 7, 2017

Major topic: Review of Course Syllabus and Expectations

Readings: None

Framework: None

Activity: Review of iPhone

Objective:




Session 1b: Introduction and Venture Strategy

Date: September 7, 2017

Major topic: Venture Strategy

Readings: Why Business Models Matter Joan Magretta

Framework: Venture Strategy Venture Business Model

Activity: Major Unicorn Strategies

Objective:

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Session 2a: Strategy versus Business Models

Date: September 14, 2017

Major topic: Strategy versus Business Models

Readings: Competing through Business Models (B): Competitive Strategy vs.
Business Models Casadesus-Masanell, Ricart

Framework: Venture Strategy Template

Activity: Lecture/Discussion

Objective: Students will learn the difference between Business Models in isolation
versus those in Interaction, and how Strategy, Business Models, and
Tactics work together.

Session 2b: Strategy versus Business Models

Date: September 14, 2017

Major topic: Strategy versus Business Models

Readings: Dogfight over Europe: Ryanair (A) Jan Rivkin

Framework: Industry Structure Models

Activity: Case Review: Ryan Air

Objective: To analyze the dynamics of business models in dynamic competition.
Provides cost and revenue figures to allow students to examine the
economics of retaliatory pricing in a business with high fixed costs and
low marginal costs.

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Session 3a: Defining Business Models

Date: September 21, 2017

Major topic: Understanding Perspectives and Definitions of Business Models

Readings: The Four-Box Business Model Framework Mark w. Johnson
Why the Lean Start-Up Changes Everything Steve Blank

Framework: Four-Box Business Model Framework / Lean Canvas

Activity: Lecture/Discussion

Objective: Understand Mark W. Johnsons, four-box business model framework-
comprising the customer value proposition (CVP), profit formula, key
resources, and key processes-a road map to new possibilities for
innovation. Review Steve Blanks Lean start-ups model, which begins by
searching for a business model. Then entrepreneurs test, revise, and
discard hypotheses, continually gathering customer feedback and rapidly
iterating on and reengineering their products.

Session 3b: Defining Business Models

Date: September 21, 2017

Major topic: Understanding Perspectives and Definitions of Business Models

Readings: Silver Rail Technologies Meyer

Framework: Industry Structure Models

Activity: Case Review: Silver Rail Technologies

Objective:

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Session 4a: Business Model Analysis Tools and Techniques

Date: September 28, 2017

Major topic: Techniques to Analyze Business Models

Readings: Business Model Analysis for Entrepreneurs Thomas Eisenmann

Framework: Generic Models, Dynamic Business Model System

Activity: Lecture/Discussion

Objective: To build students' understanding of elements of a business model and
business model issues that are most salient in an entrepreneurial context.


Session 4b: Business Model Analysis Tools and Techniques

Date: September 28, 2017

Major topic: Techniques to Analyze Business Models

Readings: The Innovation Workbook: Concept, Methods, and Applications
Chapter 7 pgs. 1-9, Meyer, Crane

Framework: Generic Models, Dynamic Business Model System

Activity: Class Review of Selected Well Know Business Models

Objective: Students will apply the concepts of the Business Model system and
Analysis.

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Session 5a: Translating a Business Model into Financial Projections and Capital Requirements

Date: October 5, 2017

Major topic: Understanding the financial implications of the Business Model Design

Readings: Cash is King: Your Working Capital Model Mullins, Komisar

Framework: Income Statement, Profit & Loss Statement, Cash Flow, Balance Sheet

Activity: Lecture/Discussion

Objective: Think working capital isn't important to your business? If you haven't got
working capital on hand, you'll be out of business in the blink of an eye.
Some savvy entrepreneurs have sharply reduced the gross margins they
need by developing working capital models that have disrupted their
industries. Working capital models form the foundation for some of
today's most interesting and revolutionary business models.

Session 5b: Translating a Business Model into Financial Projections and Capital Requirements

Date: October 5, 2017

Major topic: Understanding the financial implications of the Business Model Design

Readings: Zipcar: Redefining the Business Model HBS 9-803-096

Framework: Income Statement, Profit & Loss Statement, Cash Flow, Balance Sheet

Activity: Case Review: Zipcar

Objective: To understand the notion of a business model and unit economics and
flow through the impact of actual operating results.

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Session 6a: Business Model Design I

Date: October 12, 2017

Major topic: Business Model Design: The Revenue Model

Readings: The Innovation Workbook: Concept, Methods, and Applications
Chapter 7 pgs. 9-17, Meyer, Crane
Air, Food, and Water: Your Revenue Model-Developing a Revenue
Model that Paying Customers Will Support Mullins, Komisar

Framework: Venture Business Model Template, Revenue Model Template

Activity: Lecture/Discussion

Objective: Students will examine six questions that underlie every revenue model
and how various businesses identified a customer problem they could
resolve and developed healthy revenue models that paying customers
were willing to support.

Session 6b: Business Model Design I

Date: October 12, 2017

Major topic: Business Model Design: The Revenue Model

Readings: Scalix Corp.: The Evolutions of a Sales Model Stanford SM-147

Framework: Venture Business Model Template, Revenue Model Template

Activity: Case Review: Scalix

Objective: To examine the issues a start-up should be aware of in building its go-to-
market strategy and how these challenges should impact its revenue
model.

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Session 7a: Business Model Design II

Date: October 19, 2017

Major topic: Business Model Design: Operating Models (Production, R&D, Service)

Readings: The Innovation Workbook: Concept, Methods, and Applications
Chapter 7 pgs. 18-24 and 30-38, Meyer, Crane
Deep Change: How Operational Innovation Can Transform your
Company Michael Hammer
Why Companies Should Have Open Business Models Henry W.
Chesbrough
Winning in the Aftermarket Cohen, N. Agrawal, V. Agrawal


Framework: Venture Business Model Template, Operating Model Template

Activity: Lecture/Discussion

Objective:




Session 7b: Business Model Design II

Date: October 19, 2017

Major topic: Business Model Design: Operating Models (Production, R&D, Service)

Readings: Fitbit: The Business About the Wrist Ivey W16265

Framework: Venture Business Model Template, Revenue Model Template

Activity: Case Review: Fitbit

Objective: Students will understand Fitbit's business model focus and
product/service offerings. They will explore the strategic advantages and
disadvantages of Fitbit and its competitors, and generate a preliminary
prediction of the market.

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Session 8a: Business Model Design III

Date: October 26, 2017

Major topic: Business Model Design: Go-To-Market

Readings: The Innovation Workbook: Concept, Methods, and Applications
Chapter 7 pgs. 24-30, Meyer, Crane
The Customer Has Escaped Nunes, Cespedes


Framework: Venture Business Model Template, Channel Design Template

Activity: Lecture/Discussion

Objective: Students will understand how a company should design pathways across
channels to help its customers get what they need at each stage of the
buying process.


Session 8b: Business Model Design III

Date: October 26, 2017

Major topic: Business Model Design: Go-To-Market

Readings: Zero, Brammo, and the Electric Motorcycle Industry Ivey W11551

Framework: Venture Business Model Template, Channel Design Template

Activity: Case Review: Zero, Brammo

Objective: Students will get to think about the important role played by product
positioning in entrepreneurs' decisions, such as the distribution channel
decision. Finally, the case will familiarize students with the electric
motorcycle industry, and the Go-To-Market business model that could
succeed in that industry.

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Session 9a: Work on Team Project

Date: November 2, 2017

Major topic: Work on Team Project

Readings: None

Framework: None

Activity: Exam

Objective:




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Session 10a: Business Model Innovation

Date: November 9, 2017

Major topic: Business Model Innovation

Readings: The Hard Truth About Business Model Innovation Christensen,
Bartman, van Bever
Dont Reinvent the Wheel, Make It Better Mullins, Komisar

Framework: None

Activity: None

Objective: Students will understand how to turn the act of creating a new business
and a new business model into a repeatable process at the corporate
level. Understand the distinction between sustaining and disruptive
business models.

Session 10b: Business Model Innovation

Date: November 9, 2017

Major topic: Business Model Innovation

Readings: None

Framework: None

Activity: Case: Netflix

Objective: To support a discussion on disruptive vs. sustaining business models,
examine jobs-bases segmentation, and look at emergent strategy
development.

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Session 11a: Venture Financing

Date: November 16

Major topic: How Your Business Model Helps to Raise Financing

Readings: The Innovation Workbook: Concept, Methods, and Applications
Chapter 9, Meyer, Crane

Framework: TBD

Activity: Lecture

Objective:




Session 11a: Venture Financing

Date: November 16

Major topic: How Your Business Model Helps to Raise Financing

Readings: Generate Inc.

Framework: TBD

Activity: Case: Generate Inc.

Objective:

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Session 12a: Born Global Business Model

Date: November 30

Major topic: Global Business Models

Readings: None

Framework: None

Activity: Case: Takadu

Objective: Understand the challenges of a company trying to globally scale and
move beyond early adopters for its innovation. Examining how to
segment potential business customers and determine who to target.
Build an economic case for customers that care about ROI. Assess
customer profitability.


Session 12b: Social Enterprise Business Models

Date: November 30

Major topic: Social Business Models

Readings: PayPals CEO on Creating Products for Underserved Markets Dan
Schulman
EBays Founder On Innovating the Business Model of Social Change
Pierre Omidyar

Framework: Socially Focused vs. Social Enterprise

Activity: Lecture

Objective:


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Session 13a: Final Presentations

Date: December 7, 2017

Major topic: Final Presentations

Readings: None

Framework: None

Activity: Presentations

Objective:



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