Hello everyone and welcome back to our course on commercial open source software startups

and how to spin them off from university.

This is the fourth lecture and the first of three parts of the lectures of this course

about software businesses in general.

We previously discussed the software industry, what software products are and how software

vendors, one particular player in the industry, function.

Now we will look at the underlying business models of such software vendors from which

usually software startups are called.

I say business models here, but what it really will be about is a discussion of the business

model canvas and hence the different components of a business model.

So we will give them what's possible here, not really go into patterns or templates for

business models as a whole and we will leave that to the business model generation book.

Rather we will look at the levers and the different things and components of what you

do and can do and maybe at some later point of time add a lecture on patterns or templates

of business models.

So what is a business model?

Well it's a description of how an organization creates, delivers and captures the value.

That's a pretty general thing to say.

The key here really is in economic terms the creation of value, so something that is new

that did not exist without your work and that customers are willing to pay for.

And then the capture of that value, meaning someone actually makes money usually off it

or captures the value of that innovative or otherwise creation.

And so in between there's a delivery, but the core is creation and capture of value.

And since this is a model we will also talk about the relationships of the components

because we need to dig into the depth of that model or that description and understand its

components otherwise we can't create new ones which usually consist of refiguring things,

inventing new components, putting them together.

Since it's a model it has to be instantiated.

So a model is kind of static but it comes to life by people actually turning that model

into action.

So it's a blueprint for a company how to operate but without the actual operations of that

company meaning the execution of the business model there is no business.

So we will use the business model canvas to describe and discuss business models and you

know it by now.

It's got these nine different components that are laid out in primarily the business model

generation book but now many other textbooks as well.

To that basic canvas these nine components and their interactions I have added here how

to illustrate a value creation side and a value capture side.

The value creation happens on the left where there is the creation of what customers actually

are paying for the production or the operations and then on the right there's the capture,

the going to market with a product or value proposition and generating revenues of it.

In the middle, nicely in the middle is the actual value proposition which ties these

things together.

Value creation serves to create the value proposition or products and value capture

serves to turn those into revenues or income for the company.

And the original textbook does not really label these two sides as value creation and

value capture though given how neatly this canvas can be split in the middle I imagine

this was on the minds of Osterwalde and Pinier.

So we have these nine components with essential linchpin the value proposition.

Value capture, how you make money is the customer segments or market segments, channels, custom