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Entrepreneurs with Denis Oakley

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Nimber Business Model Canvas

Nimber Business Model Canvas

This week we cover Nimber and produce a business model canvas for them. Nimber is one of the sharing economy startups. Their big idea is that there are people driving all over the country. There are also people who want to send packages all over the country. Using the app they hope to match them up. They launched in Norway and then moved to the UK in 2015

Introduction

The idea of Nimber is that they fit into a niche where national postal services and courier companies aren’t interested. The things to be transported are too bulky for their standard processes. At the same time, the packages are too small or being carried too far to be of interest to a freight haulier or local delivery company. Put simply for many items the cost of a man an van to transport them is prohibitive, but perhaps if someone is going that way…

Click here to go straight to the Nimber business model canvas and skip the analysis

Customer Segments

Nimber has 2 customer segments. Bringers and senders. Senders are people with an item to send whilst senders are the people who pick the package up and deliver it to its destination.

It’s difficult to delve down deeper than that as Nimber seems to be pre-traction in the UK with only 1 delivery/day in July/August 2015 and the current number of items available for delivery between 2 major metropolitan areas in the UK is less than 10.

I went through their social media channels and the strongest segmentation marker that I saw was a concern about saving CO2 emissions. But it wasn’t a strong appeal to Greens – more of let’s chuck it in.

I think that there is a big issue about who the bringers are going to be and how they are targeting them. There are obviously clear target audiences – students with cars would be one. Moonlighting tradesmen (with their blue vans is another)

With Senders – A table, a motorbike, a set of keys a plastic carrier bag. What is clear here is that the offer is focused on people for who the normal delivery services don’t work. Volumetric issues mean that tables and motorbikes are expensive to ship. Whilst keys don’t have the responsiveness required. I’m guessing that there would ideally be a 10:1 radio of senders to Bringers to make the site work

Value Propositions

I’ve touched on the value proposition above. It’s like Airbnb for sending things. The issue though is that people spend a lot on travelling and they do it a lot. If you account for holidays and business travel that could easily be $1000/head. For postage and sending things in the UK, I feel that the current market size is less than $100/head. So it’s smaller and more infrequent which makes making a powerful VP difficult.

The core of the Nimber VP is that it is cheap and easy.  You meet someone on the site and they pick up and deliver. So you have the convenience of a door to door courier service at the same price as going to the post office but without the hassle of dropping it off and filling in all the forms.

I think that this works if you have the network density – as Nimber has recognized by moving from Norway to the UK – but if you don’t then the value proposition fails because you simply don’t have enough bringers or senders in the network to liven the VP.

There’s also a recognition of this weakness in that Nimber is looking for a hub to hub carrier with bringers then being focused on the last mile delivery which is where most of the expense is incurred for courier companies. In many countries, FedEx and DHL outsource the last mile to franchises or local contractors.

Customer Relationships

The customer relationships are fairly straightforward. Nimber puts bringers and senders in contact with each other and creates an online marketplace. There is customer support and a number of policies to ensure that the marketplace functions well but mainly it is self-serving and self-operating with little requirement for direct customer interaction from the Nimber team

Channels

So Nimber has a website that is not hugely popular. It has a page authority of 29 which is really low for a B2C site and would indicate tens of thousands of visitors a month (boosted by the PR links from newspapers). It has iOS and Android apps. It is also setting up traffic partnerships with other sites where it looks to be listing items to be sent – probably via API

Social media seems to be a fairly generic mix but honestly doesn’t look like huge traffic sources. Stuff to be sent or brought doesn’t get great responses. Case studies look as if they could be a powerful marketing mechanism but these aren’t used. (and diving back into the segmentation there are some great stock images but very little personification and personalization with real user success stories that would be powerful in making their channels far more effective)

Revenue Streams

Nimber’s revenue streams: This was hard to find. It looks like there is some dynamic pricing mechanism in play that will charge up to 20% as a matching fee. Having had a quick play this is not obvious on the front end and I only found it buried in the T&C so I am guessing that they are looking for traction first and will then slowly increase the matching fee depending on how price elastic the market is.

Key Activities in the Nimber Business Model

The platform looks as if it works fine. It’s a sunk cost though will obviously need loads more development as the site matures (a key activity). There are a bunch of different ways that they can pivot and this will require further development as well

They look as if they have a fairly decent CRO team in place so the big activity is marketing and getting traction. So marketing, marketing and marketing. They need to figure out the chicken and egg problem.

It looks, and remember I am an outsider speculating, that they need to do some seriously hard work doing manual scaling and signups with a city by city focus (as Uber, AirBnb, LinkedIn all did in the day). They need to sign up a community of bringers – a single university per city and then do a geo-focused marketing campaign to use all those newly signed up bringers.

Key Resources

The key resources for a site like this are the networks of people that they connect. The platform is actually secondary – it could all be done on pen and paper – which would probably be cheaper pre-scale ;). What matters is the network. Getting sufficiently dense networks with strong route corridors to most major destinations.

The other is staffing. Here again, I think that they are weak. The problem that they are essentially trying to solve is based on finding the best channels/routes for non-standard packages. That’s a big data problem with serious analysis of traffic flows to work out which are the best cities and segments to target

Basically it can be treated as an inventory and stock turnover problem. How much do I have to invest to acquire and retain a stock of bringers and does the demand for that SKU justify the investment that I am making in that stock?

So the key thing is to identify the best products to be moved, acquire users to shift those products and then identify products senders. There needs to be someone focusing on generating those insights – and they are not fundamentally digital insights – but economical and behavioural ones that come from multiple data sources

Key Partners

Key partners – these are the bringers and sellers in the Nimber business model. They need to be acquired and kept satisfied. Nimber has a number of other key partners though it’s unclear how significant these are. First, they are looking at having partnerships with hub-to-hub carriers.

These will enable the company to pivot to a focus on the last mile if the VP is not attractive to bringers. Secondly, they are starting to use partner sites for traffic generation and there could be some great opportunities by tying up with more sites that are involved in the sharing economy but for whom transportation is not part of their core offering.

Cost Structure

The cost structure is the platform development costs and marketing. The platform development is now essentially a sunk cost so the focus is on generating leads, conversion and retention.

The cost structure to move to a new country as far as IT infrastructure is concerned is small – principally localization – whereas the marketing is a significant investment with each new country – a restart from scratch almost

Nimber Business Model Canvas

This is the Nimber business model canvas.

Nimber Business Model Canvas
Nimber Business Model Canvas

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The Uber Business Model Canvas

Uber Business Model Canvas

Today we’re talking about Uber, the ridesharing company and putting its business model on to the business model canvas. So, there is the Uber business model canvas, a short video presentation, and an analysis of the Uber business model based on the 9 segments of Alexander Osterwalder’s business model canvas.

Introduction

Uber’s a ride-sharing company. It has disrupted the taxi industry by using technology to allow people with cars and spare times to drive people who don’t want to drive but who have money.

Basically every city had two or three taxi companies, but because of the way they operated they could not scale beyond a limited geographical area. Uber changed all that and that’s what we are going to look at now.

Click here to go straight to the Uber Business model canvas and skip the analysis

Customer Segments

The Uber business model has 2 groups of customers. It has passengers and it has drivers. In a traditional taxi business model canvas, the customer segment is purely passengers and drivers are part of the company.

What distinguishes Uber’s passengers from traditional taxi passengers most is they need a smartphone and a credit or debit card. Without these, they can’t use the platform.

Uber’s other customer segment are drivers. Instead of employing drivers and having an asset-heavy company, Uber uses freelance drivers – which brings many legal battles worldwide.

Here Uber has reached well beyond the traditional source of recruits for taxi drivers. They made driving accessible to anyone with a smartphone, a smart car and a smart appearance. As well as anyone who’d like to earn some cash whenever they want to.

Value Proposition

Next on the Uber business model, we have the value proposition. At the heart of the business is the value proposition that says

We will always give you a ride when you need it

and for drivers

We will always give you passengers when you want them

In a traditional taxi business, the number of taxis is determined by the rides that are available over time to support that number of taxis and drivers. If demand surges there is no excess capacity. And if there’s low demand for a period? Drivers are slow to leave the market and payments for all drivers suffer due to excess supply.

The Uber Value Proposition
The Uber value proposition. Note that the website is very focused on getting drivers to signup – the person shown is a good proxy for the customer segment that Uber is looking to recruit as drivers

Uber’s value proposition is thus like a market but if it were that simple it would not have the same disruptive effect. What enables it to deliver on the promise above is that it is able to match supply to demand.

How do they match Supply to Demand?

By using real-time metrics it is able to see what demand is like and then as demand starts to exceed available capacity to reduce demand by introducing surge pricing (but taxi fares are partially price inelastic so this is a lesser effect) which increases prices where demand is highest. At the same time, increased fares encourage more drivers to work and thus increases supply.

Uber is able to do this because the drivers are owner-operators. It doesn’t own the assets and thus it can flex capacity within minutes, whereas a traditional taxi company takes months or years to achieve the same results (in the case of New York taxi medallions almost never).

The technology enables this value proposition and at the same time, it also enables traditional pain points to be addressed at minimal additional cost. If you have no cash it’s not a problem. Uber charges your card. In fact, the whole system is cashless making it safer for both drivers and passengers.

It also brings transparency by identifying both driver and passenger and their positions to each other – and by showing exactly where the taxi is at all times. Uncertainty – and thus anxiety – is reduced for both

These are issues that were difficult to resolve in a traditional taxi business model.

Customer Relationships

The only time I’ve spoken to anyone at Uber was when I bumped into the local Uber country manager at a startup event. For everyone else, it’s a totally automated process as far as the passenger is concerned. The old dispatchers are removed and the passenger’s phone automatically identifies the pickup point.

Uber’s customer relationships are almost entirely automated

For the driver’s there is a more hands-on role, principally around quality assurance and making sure that the drivers meet the minimum quality standards that Uber expects. And ideally, they don’t pull guns on their passengers

Channels

Let’s take a look into the Uber marketing strategy and channels it used in its early days. Uber started to use many different channels as it grew, but early on the focus was in moving from city to city to get enough drivers and users signed up. They also wanted to get them using the app so there was a strong enough market to make it work.

Increasingly with a market in each city, the channels are through the mobile app. As for the Uber marketing strategy, it was purely through email and word of mouth! This was incredibly important in overcoming adoption fear and crossing the chasm from early adopters – and PR.

One of Uber’s huge strengths has been the amount of money that it has raised which has given it a huge amount of earned media which in turn has driven passenger and driver growth.

Revenue

Revenue in Uber’s business model is pretty simple. Uber moves the traditional taxi meter from the car to its servers – tracking via GPS technology on the phone – and then charges the passenger based on the miles travelled and whatever surge multiplier is in effect. If the passenger uses a different Uber brand the same process applies but with different pricing.

Key Resources

Uber has three key resources without which the whole thing falls apart. First, it has a platform. This connects Uber to drivers and passengers and both to each other.

That’s a necessary but not a sufficient requirement. Then it has the algorithms that do the heavy lyfting (sorry couldn’t resist that). These are the pricing and routing algorithms.

Pricing algorithms are used to balance supply and demand in the market. It also helps ensure that there is always enough capacity available to meet demand – fulfilling its core value proposition.

The Routing algorithm focuses on ensuring that the customer wait time is as short as possible. By implication, it reduces the deadhead time for drivers as they’re either waiting for or driving to a new job.

Key Activities

A key part of the Uber business model is then developing the platform. Its key activities are as follows:

It is continually adding value to ensure user adoption and retention as well as optimizing its algorithms.

It also has to do significant marketing on a global and a local level to driver/passenger adoption and ensure an adequate supply of drivers. Churn apparently is a problem.

Uber still has the same problem as traditional taxi companies. It serves lots on unconnected geographical markets. Singapore, London, Frankfurt. Each has specific attributes and requirements. So marketing to users in each city, and ensuring that there’s the right level of driver support for user growth is critical for meeting its value proposition.

Key Partners

The main key partner is the drivers who own all their cars. That saves Uber from having a contract with a leasing company for hundreds of thousands of cars. It has the payment processors and the map data providers.

Often missed are the local authorities. In many cities, there are legal actions against Uber. Taxi companies are fighting to protect their businesses and persuade the ‘authorities’ to erect barriers to entry against Uber. This is often characterized as adversarial. But in the long run, regulation is seen as important and Uber will need to resolve these issues. So they are long term partners, even if they are not right now

Cost Structure in the Uber Business Model

There are huge costs for platform development, hosting etc.

There are salaries for the software engineers, the sales, and marketing teams and the country and city managers.

And then there are the driver payments. Uber gets paid upfront, keeping the money before paying drivers each week to ensure that the payments are valid.

The Uber Business Model Canvas

Uber Business Model Canvas

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LinkedIn Business Model Canvas

LinkedIn is one of the most successful social networks. In this case study, we dissect its business model and produce the LinkedIn business model canvas.

Some figures:

  • 400 million Users (Jan 2016)
  • 100 million MAU (Jan 2016)
  • $3.2 billion revenue (annualised based on Q3 2015 figures)

LinkedIn is pretty good company now that it has been around for over a decade, and has now been bought by Microsoft . Now we ask how is the LinkedIn business model composed and how do we capture it on a business model canvas?

The LinkedIn Business Model Canvas

LinkedIn Business Model Canvas
The LinkedIn Business Model Canvas

LinkedIn Customer Segments

The LinkedIn business model has 3 customer segments. The most obvious one is all the internet users who go to the site and create a profile on it. These are business people who use it to connect and interact with other business professionals.

Then there are the recruiters who are looking for talent, and finally, advertisers who are looking to reach either a wealthy B2C audience or senior B2B decision-makers.

LinkedIn Value Proposition

LinkedIn Business Model Canvas

Next on the LinkedIn business model is the value proposition. Like most companies, it has distinct value propositions for each customer segment.

Business Users

For the normal internet user, it offers them a showcase for their professional skills and talent. It allows them to network and to build relationships.

LinkedIn does all this for free. Users don’t pay anything for this. There is a whole range of additional smaller value points but these can be boiled down to – what does LinkedIn have to do to keep user engagement high and for users to increase the value of their profile and content. It’s a classic Freemium model.

Recruiters

For recruiters LinkedIn providers a superb tool for finding and evaluating candidates. Essentially it has 400 million CV’s in its database together with references and a wealth of information that is not normally available in a standard CV. Even better all the CV’s are structured and easily sortable and searchable.

The value of this to recruiters is immense. No longer do they have to go out and build their own candidate lists from word of mouth and networking. Now they are able to identify and sell a much wider pool of talent.

This provision of free CVs to recruiters is at the heart of the monetisation of the LinkedIn business model

Advertisers

Finally, advertisers can use the same structured data to reach a highly targeted audience. If you want to target adverts that will only go to the CIO’s of pharmaceutical companies with more than 5,000 employees you can set up the advert and get it running in minutes without even having to buy a list of their contact details

LinkedIn Business Model Customer Relationships

How do customer relationships work on the LinkedIn business model? Like most social networks, LinkedIn relies on network effects. The more people who are in the network the more valuable the network is to ALL participants. For normal users, it is a same-side network effect. That means that the more normal users are on the site the more valuable the site is. The presence or lack of advertisers and recruiters doesn’t affect this value. This is all done on an automated self-service basis. LinkedIn provides the platform, sets the rules and lets users get on with it.

On the other side, the recruiters and advertisers are there for the cross-side network effects. They don’t benefit from there being additional recruiters or advertisers. They benefit from normal users. The more users there is the more value LinkedIn provides to them. Again this is pretty much automated.

LinkedIn Marketing & Distribution Channels

The main channels are the Website and LinkedIn’s mobile apps. This is how people reach and engage with LinkedIn. In the early days, there were sales teams going from city to city to encourage users to sign up but now the volume of users on the site and the number of links that users put back to their profiles means that it has a commanding SEO position. Where it does still have active sales is in going out and selling its talent solutions to large corporations and recruitment companies.

LinkedIn Monetisation

So how does LinkedIn make money? For normal users, it makes some money by selling them additional services on a subscription basis. These are mainly targeted at salesmen and job hunters looking to get access to people they don’t know.

Recruitment companies and corporations pay for the ability to post jobs, to search the database for talent and to establish a strong branded presence on the site for recruitment purposes. Advertisers pay on a pay per click or pay per view basis.

LinkedIn Key Activities

The key activity for LinkedIn is all about platform development. Its essential value is in the number of monthly active users. So it needs a platform that increases the number of users over time, and which keeps them engaged and active on the site.

Everything else is subservient to this as it needs to keep those numbers up and to keep raising the value bar to stop other companies from disrupting the market or displacing it.

LinkedIn Key Resource

So the key resource for the LinkedIn business model is the platform. If you take the platform away LinkedIn has nothing. The networks and the connections that everything else is built on are nothing without the platform.

In this case, the staff, the branding, indeed many of the monetisation channels and value adds aren’t critical.

LinkedIn Business Model Key Partners

The main groups of key partners for LinkedIn are the data centres (which it now has three) and all the ancillary infrastructure that keeps the platform online.

Increasingly with LinkedIn Pulse and influencers it also acts as a content distribution network (not a CDN) using the content of thousands of experts to engage users and keep them on the platform.

LinkedIn Costs

The costs are mainly those associated with keeping the platform online and then R&D for platform development to find ways to increase its product value to its customer segments. Marketing and sales is a small but significant cost as it works to increase revenue streams.

LinkedIn Business Model Canvas

This is the LinkedIn business model canvas. In this case, we’ve used Alexander Osterwalder’s original template and the descriptive text is a bit small. Feel free to download and reuse the image.

LinkedIn Business Model Canvas
LinkedIn Business Model Canvas