Hello, we are going to discuss the value proposition and the associated business model. The academic literature and innovators' testimonials are numerous. So, my aim is to provide the keys to interpretation and comprehension as to prepare the action. I wish to pass on to you the desire to study further this subject which is very active in management sciences. But please be aware that there is no silver bullet. The challenge is to use a range of tools, all with strong resources constraints. I hope to help you better understand the role of the business model for an innovative entrepreneur. Let us focus first on the economic foundations which highlight the importance of innovative entrepreneurship. I will condense it to the extreme as to give you some markers. One the one hand, the theories of growth introduce economic models that are based on factors of growth. Solow, 1987 Nobel Prize in Economics, quantifies these factors. Please be reminded that he presents the technological development as the key factor, although it will be a long time before it gets modeled, not deduced. Also, be aware that some economists like Schumpeter have focused their works on the analysis of a focal agent: the entrepreneur. Schumpeter has proved the unique role of the entrepreneur who activates a process of creative destruction. I quote him: "Possibilities of gains to be reaped by producing new things or by producing old things more cheaply are constantly materializing and calling for new investments. These new products and new methods compete with the old products and old methods not on equal terms but at a decisive advantage that may mean death to the latter. This is how "progress" comes about in capitalist society." This is why you must attach importance to your value proposition which will be constructed all through your innovation path. But let us get back to the growth models. They measure the production, labour and capital factors which generate products, services and patents. Solow's works show that the technological progress factor is dominant This is the first good news for you. Shortly after Solow's works, the OECD's works have played an essential role and namely the Frascati's manual in 1963. The latter sets forth a methodology for Research and Development in three categories: basic research, applied research and experimental development Thereby, it allows the economists to measure the importance of R&D and compare the countries, make a connection between R&D investments, knowledge stock in Economics and, in the end, the economic growth rate. This justifies the creation of a series of arrangements to incite companies to carry out more R&D. You will learn to know them, in France for instance: the research tax credit, because they completely change your business plan in enabling you to get incentives to carry out R&D. A second manual from the OECD, of which concrete results are also important for you, is the Oslo manual centered on the innovation notion. This will impact your business plan as well because it ensures you will get support for the preparation costs of your innovations. Hence, if we are to cross-reference the trends of the States, of Research and Schumpeter's contributions, it appears that you, entrepreneurs of a start-up designed for innovative offers, are the focus of some mechanisms the States and public institutions wish to support. Therefore, you have a social role and as a result you benefit from a support which will influence the conception of your value proposition and, to a greater extent, your business model. But then, if your mission is to contribute to the economic growth of your country, will you also question the current organisation of the markets? It is indeed possible and desirable, because the existing market is not only a constraint that must be integrated but also a conception factor to challenge if need be. Your value proposition may have a creative destruction potential as defined by Schumpeter, and in that case your business model must be constructed in line with this ambition. In this respect, I wish to mention the works of Jean Tirole. You might have noticed that in 2014, he has been the third French man to be awarded a Nobel Prize in Economic Sciences. He has focused on the question of regulation and has brought, and that's our matter at hand, substantial lights on the question of business models, especially the question of the so-called two-sided business models. This means very interestng contexts for an entrepreneur. A two or multi sided market, is where a platform will allow several stakeholders to meet, to each add a value in and be of interest as regards the interaction of a platform. Think about the very simple mechanism of financing certain activities owing to to the audience generated through the free provision of a service, for instance on an Internet platform. These approaches may inspire you and help resolve the contradictions to capture the value generated by your innovation. The economists have hence modeled the role of innovation for the economic growth. However, it is important to keep in mind there are different kinds of ambitions in innovation, there is more than one kind of innovation. Obviously, these different kinds don't give rise to the same effects nor the same prospects for you. My argument is based on the works of Professor Christensen, who we had the honour to receive for a conference in the Ecole Polytechnique. The existence of different kinds of innovation is a core subject to him. To describe them he uses three terms: empowering, sustaining and efficiency innovations. Efficiency, seeks to enhance the operating conditions, for instance an innovation which squeezes costs while allowing the same offers. Sustaining aims at improving a well known performance criterion. Lastly, the empowering innovations aim at creating new market spaces and the circulation of a functionnality reserved up until then to a minority. As far as you are concerned, please be aware that the relative assets of a technological start-up, compared to those of great multinationals, are very different depending on the type of innovation you are aiming at. Admittedly, the empowering reflects the most ambitious strategy, yet tomorrow's industrial giants are also being constructed on this type of innovation. Please think about the innovations which, owing to their empowering aspect, have changed our daily life. From discouts stores versus supermarkets, to mobile telephony versus fixed telephony, and PC versus the old computer rooms. You and your start-up will not necessarily be the leader or designer of these new economic spaces and new platforms, but you have the capacity of spotting the future potential leaders, do not hesitate to create your own space within the budding ecosystem. Think about Ford's partners at the beginning of the last century, or Toyota's, about the very early stages of the hybrid vehicule, or most recently, those of Tesla Motors or Renault Nissan and the electric car. We have stressed out the ecosystem which supports the innovation. Still I will, more formally, define this notion of business model. Indeed, numerous academic publications allow to refine this concept, which is so much more complex than it looks in the first place. A systemic work had been carried out by Alexander Osterwalder who details the nine dimensions of a business model and their interactions. Think the business model as an explanation of the way your business operates, identify who the client is, what they do value, and more globally, how the business operates. The business model explains the mechanisms through which you may expect profits, but also the economic logic for value creation with the clients and how to keep your costs at an acceptable level as to expect profitability. You must be able to specify the elements that are essential to your activity. The business model must, thus, describe the market onto which you consider operating but also the value proposition you will offer to your clients, the whole value streams, a costs structure which allows to expect profitability, your value network and strategy regarding competition. Being able to create value from an innovation hence depends on your capacity to coordinate the following four items: value proposition for the client, the option which allows to gain profit from an innovation, the key resources you use and the processes on which you will rely. I hope that from now on you will better understand why the business model is a focal academic and economic concern. It is a concept that is intensely studied so decisive is the role it plays in dazzling business successes, technological businesses, such as Amazon or Google, or many others. These companies are not technological leaders only, they have mastered, with their partners, the construction of an ecosystem and have built relationships from an innovative business model. And so, we may find some consistencies in the analysis of the companies' business models, like it has been carried out in the academic world as part of a study on the business model of the top thousand american companies. What useful info can we gather from these works? Well, it shows you the relevance of the right approach and understanding of the business models of the companies which are a part of your ecosystem. As such, you can characterise a business model based on two dimensions. On the one hand what the business model aims at achieving; does it aim at creating, distributing, operating, facilitating transactions? And, the main assets it uses; are they financial, physical, immaterial or human assets? This will give you a canevas, a matrix for a first comprehension of the environment you operate in. Let us take an example. You have designed an invention and registered a patent which allows product innovation. You are left with multiple choices Here are four of them. If you decide to sell the patent you will soon get some money from it, but you won't be associated to the potential success of the product use. You can then decide to sell the licenses to use your patent. This will generate income and you will have no further financial investments to make. However, your income will be deferred over time. You may also sell products and will then increase the captured value. But you will need substantial equity and an industrial expertise for these patent based products. Lastly, you may also sell services based on the use of the product. You will then increase the value creation but through further raised capital intensity and needs in expertise. In this way, how can you design your business model? Firt, think that the business model is not obvious, your responsability is to understand the choices you are capable of making at a given moment, to analyse their predictable consequences and to constantly iterate. You will develop your business model as you gain knowledge over the course of your innovation path. Hence, it is essential that you know to differentiate the decisions you make and of which you decide they will fix one aspect of your business model or the other; and those which, on the contrary, rely on yet very uncertain knowledge and thus deserve further explorations to progress. One example which has been subjected to studies and publications, is that of the incursion of radically new business models in the field of air freight. It is obvious that the so-called low cost airlines have operated a successful disruption of the economic balance of an industry, in constantly challenging their business model while maintaining a number of aspects like that of the low costs, the "no more free stuff" principle, which ensure that a number of theses choices consequences strengthen over time: like a perfect command of the costs or a reputational asset. Well, whatever economic industry you will operate in, you will need to take a closer look to your business model, but also to that of the businesses or of the new comers in your ecosystem. For instance, think about the remarkable opportunity that was the appearance of these new air freight agents for all the technological start-ups then capable to offer new material to lighten the aircraft thus reducing the operational costs, or new seat structures to increase, for instance, the number of transportable passengers. As a conclusion, I would like to stress out one of the main assets as an entrepreneur you will need to make use of and that you will endeavour to protect all through your innovation path. It is the flexibility, which means the capacity to combine in your action the fulfilment of a pre-determined plan and the ability to take action further to the acquisition of new knowledge or the emergence of new ideas. Those who wish to delve further into the theoretical sources will namely have a chance to study the so-called innovative design theories and CK theory. Moreso, in the business model assessment you will have to carry out of your innovation, please keep in mind that you are initiating a long innovation path, that your action's value will altogether be measured by your ability to honour your commitments and make suitable decisions along your innovation path.
