ISOM 351 UNIT 1 QUESTIONS &
ANSWERS(RATED A+)
What does alignment mean? - ANSWER- Strategy, business model, and execution
must be connected and consistent
- Decisions about one must be made with consideration of each of the others (aka
interconnectedness, consistency)
What does the BMC do? - ANSWERHelps align strategy & execution; helps align
internal capabilities to market expectations
4 elements of strategy - ANSWERDecisions, tradeoffs, activities, resources
What are the goals of strategy? - ANSWER- Competitive advantage
- Create, capture, and deliver value
4 questions that a business model answers - ANSWERWho is the customer? What
does the customer value? How do we make money in this business? What is the
underlying economic logic that explains how we can deliver value to customers at an
appropriate cost?
Business model vs strategy - ANSWERBusiness model describes how your business
runs, while strategy explains how you will do better than your rivals
Right side of the BMC - ANSWERWho are our customers (segments), what problem do
they want solved (value proposition), how do they want to interact with us
(relationships), and how do they want to get access to our service or product
(channels)?
Left side of the BMC - ANSWERkey partners, key activities, key resources, value
propositions
- "the operating model," how the firm executes strategy
Bottom of the BMC - ANSWEREconomic logic = cost structure, revenue streams
Willingness to pay - ANSWERBelongs to the customer; the maximum amount of money
a customer would spend in order to solve their problem; aka benefits
Price - ANSWERthe amount of a money a customer actually spends to buy the
product/service
Total cost - ANSWERthe total cost incurred by the company in order to make the
service or product available to the customer
, Input cost - ANSWERthe cost incurred by the company in order to acquire all basic
materials and equipment needed to deliver the service or product
WTP - TC = ? - ANSWERvalue created
Price - TC = ? - ANSWERvalue captured by the firm
WTP - Price = ? - ANSWERconsumer surplus: the amount of value, created by the
business and the customer, that the customer gets to keep
TC - IC = ? - ANSWERvalue delivered (transformation costs): the cost incurred to
deliver a product or service; value is delivered through the operating model
What is the role of price? - ANSWERto divide value created into the portion captured by
the firm and the portion captured by the customer
If price > WTP... - ANSWERmaybe TC > WTP --> bankrupt, monopoly, or subsidized
prices, "ought to" price
If price = WTP... - ANSWERconsumer surplus is 0; there is no basis of choice for a
customer aside from price; very low consumer loyalty; pure commodity; transaction
market
If WTP > price... - ANSWERconsumer surplus is greater than 0; creates consumer
loyalty, relationship
What is the operating model? - ANSWER- Reflects how an organization delivers value
to its customers
- The basis for day-to-day execution
- The blueprint that results from the decisions an organization makes to navigate
tradeoffs concerning key activities, key resources, and key partnerships
What are key activities? - ANSWERthe critical processes, or work steps, needed to
deliver value to the customer
What are key resources? - ANSWERthe critical tangible and intangible assets that are
internal to the organization needed to deliver value to the customer
4 types of key resources - ANSWERphysical, information, people, organizational
What are key partnerships? - ANSWERthe critical external entities needed to deliver
value to the customer
- suppliers, suppliers of suppliers, NGOs, government entities, unions, and other
stakeholders
- key partnerships in the operating model focuses on those needed to deliver value to
the customer
ANSWERS(RATED A+)
What does alignment mean? - ANSWER- Strategy, business model, and execution
must be connected and consistent
- Decisions about one must be made with consideration of each of the others (aka
interconnectedness, consistency)
What does the BMC do? - ANSWERHelps align strategy & execution; helps align
internal capabilities to market expectations
4 elements of strategy - ANSWERDecisions, tradeoffs, activities, resources
What are the goals of strategy? - ANSWER- Competitive advantage
- Create, capture, and deliver value
4 questions that a business model answers - ANSWERWho is the customer? What
does the customer value? How do we make money in this business? What is the
underlying economic logic that explains how we can deliver value to customers at an
appropriate cost?
Business model vs strategy - ANSWERBusiness model describes how your business
runs, while strategy explains how you will do better than your rivals
Right side of the BMC - ANSWERWho are our customers (segments), what problem do
they want solved (value proposition), how do they want to interact with us
(relationships), and how do they want to get access to our service or product
(channels)?
Left side of the BMC - ANSWERkey partners, key activities, key resources, value
propositions
- "the operating model," how the firm executes strategy
Bottom of the BMC - ANSWEREconomic logic = cost structure, revenue streams
Willingness to pay - ANSWERBelongs to the customer; the maximum amount of money
a customer would spend in order to solve their problem; aka benefits
Price - ANSWERthe amount of a money a customer actually spends to buy the
product/service
Total cost - ANSWERthe total cost incurred by the company in order to make the
service or product available to the customer
, Input cost - ANSWERthe cost incurred by the company in order to acquire all basic
materials and equipment needed to deliver the service or product
WTP - TC = ? - ANSWERvalue created
Price - TC = ? - ANSWERvalue captured by the firm
WTP - Price = ? - ANSWERconsumer surplus: the amount of value, created by the
business and the customer, that the customer gets to keep
TC - IC = ? - ANSWERvalue delivered (transformation costs): the cost incurred to
deliver a product or service; value is delivered through the operating model
What is the role of price? - ANSWERto divide value created into the portion captured by
the firm and the portion captured by the customer
If price > WTP... - ANSWERmaybe TC > WTP --> bankrupt, monopoly, or subsidized
prices, "ought to" price
If price = WTP... - ANSWERconsumer surplus is 0; there is no basis of choice for a
customer aside from price; very low consumer loyalty; pure commodity; transaction
market
If WTP > price... - ANSWERconsumer surplus is greater than 0; creates consumer
loyalty, relationship
What is the operating model? - ANSWER- Reflects how an organization delivers value
to its customers
- The basis for day-to-day execution
- The blueprint that results from the decisions an organization makes to navigate
tradeoffs concerning key activities, key resources, and key partnerships
What are key activities? - ANSWERthe critical processes, or work steps, needed to
deliver value to the customer
What are key resources? - ANSWERthe critical tangible and intangible assets that are
internal to the organization needed to deliver value to the customer
4 types of key resources - ANSWERphysical, information, people, organizational
What are key partnerships? - ANSWERthe critical external entities needed to deliver
value to the customer
- suppliers, suppliers of suppliers, NGOs, government entities, unions, and other
stakeholders
- key partnerships in the operating model focuses on those needed to deliver value to
the customer
