MGMT20143: Business Model Canvas Report on Udacity Analysis

This report provides a detailed analysis of Udacity's business model, employing the Business Model Canvas framework to dissect its core components. The report begins with an executive summary that highlights the purpose of the assignment, which is to understand and apply the Business Model Canvas developed by Alexander Osterwalder and Yves Pigneur. It then delves into Udacity's business model, examining each of the nine elements: key partners, key activities, value propositions, customer relationships, customer segments, key resources, channels, cost structure, and revenue streams. The report explores the interrelationships between these elements and identifies critical success factors and potential downside risks. Furthermore, it discusses potential business model changes and concludes with a summary of the company's strengths and weaknesses, particularly focusing on its online education platform and hiring partners. The analysis is supported by references to relevant sources, providing a comprehensive overview of Udacity's business strategy and operations.

Running head: BUSINESS MODEL CANVAS
MGMT20143
Business Model Canvas: UDACITY
Name of the Student
Name of the University
Author’s note

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Executive Summary
The purpose of the assignment is to understand the application and the importance of building a
business model. The assignment introduces the concept and framework developed by
Alexander Osterwalder and Yves Pigneur “Business Model Canvas”. The tool is used by
deconstructing an organisation and understanding the business model that drives the company
towards its objectives. The limitations, improvement scope and the interrelations in between the
nine elements of the business model is discussed with reference to the chosen organisation
Udacity.

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Table of Contents
1. Introduction..................................................................................................................................4
1.1 Overview of the Business......................................................................................................4
2. Business model of UDACITY.....................................................................................................4
The nine elements of Business model.........................................................................................5
1. Key partners.........................................................................................................................5
2.Key activities........................................................................................................................5
3. Value propositions...............................................................................................................6
4. Customer relationships........................................................................................................6
5. Customer segment...............................................................................................................7
6. Key resources......................................................................................................................7
7. Channels..............................................................................................................................7
8. Cost Structure......................................................................................................................7
9. Revenue Streams.................................................................................................................8
3. Interrelationships.........................................................................................................................8
4. Critical success factors................................................................................................................9
5. Downside risks.............................................................................................................................9
6. Business model changes............................................................................................................10
7. Conclusion.................................................................................................................................10
8. Reference List............................................................................................................................11

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Appendix 1.......................................................................................................................................0
Appendix 2.......................................................................................................................................1
Appendix 3.......................................................................................................................................2

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1. Introduction
For a business organisation to function successfully, it is important to organisation and
plans the actions in order to achieve the objectives. The business model Canvas is a tool that can
be used by a number of organisations of any scale or size to improve or develop (Greenwald,
2012). The elements in the model help in developing a plan for the business. This model is
developed by Alexander Osterwalder in the book that he has co-authored with Yves
Pigneur, Business Model Generation (Osterwalder & Pigneur, 2010). The business model is
planned while initiating the business; this model can be further organized with the help of the
model.
1.1 Overview of the Business
Established in 2011, the organisation quickly gained the attention of the present
stakeholders and the company achieved a number of objectives in a very less time of operation.
An experiment of two individuals in offering online free courses gained momentum more than
160,000 students from more than 190 countries enrolled themselves for the course (Udacity.com,
2018). Sebastian Thrun found an opportunity in the business idea and UDACITY was founded.
The company aspires to provide eager learners with opportunity to get as well as provide
knowledge (Udacity.com, 2018).
The mission of the organisation was to “democratize education” (Udacity.com, 2018).
2. Business model of UDACITY
Udacity runs on the internet platform and the business model is based on the principle
that everyone has right to get education. One of the major aspects of the Business model is

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incorporation of Innovation in the process of achieving the business objectives (Udacity.com,
2018). The leaders of the company follow transformational leadership style that drives change
and encourages innovation (Udacity.com, 2018).
The nine elements of Business model
Following are the business model canvas elements explained refer to Appendix 1 for the
framework.
1. Key partners
These are the suppliers of the business, as the company is a technology based
organisation; the company has a number of aspects of technology that are supplied by third
parties (Osterwalder & Pigneur, 2013). The hiring partners are some of the significant
organisation that hires people with Udacity degree in significant posts. Georgia Institute of
Technology and AT&T partners with Udacity in order to offer online masters course on counter
science. As the company operates on the innovation model the company has partnered with
Baidu to manufacture an innovative self-driving car. Elektrobit is another partner which helps
in developing a program for developing self-driving car engineering (Blog.udacity.com, 2018).
The company also has developed cources with Google, Facebook, mongoDB, GitHub,
Amazon etc. The flying car nanodegree with MIT faculty is oen of the new proposition of the
company.
2.Key activities
The company offers a number of degrees and also guides a student to understand a
subject. The services are segmented and can be customized according to the student’s
requirement thus providing an innovation to the field of online education. The company also

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offers courses for business organisations in order to improve the skills of the employees (Bocken
et al., 2014). The company based their marketing on the digital platform from where the idea of
the venture was picked up. The industry that the company operates in is massive open online
courses (MOOC).
Apart from the services the company has Research and development as well as Marketing
aspects as a part of the operations of the business. Manage the content and the courses on a daily
basis are part of the operation (Blog.udacity.com, 2018).
3. Value propositions
The value that drives the organisation is providing high quality education to the people
who aspire to learn. The values of the company are built on the aspect of encouraging an
individual to create something innovative for the future (Osterwalder et al. 2014). Refer to the
other values that the company stands up to in Appendix 1.
4. Customer relationships
The people of Udacity consider the clients to be one of the most significant stakeholders
and therefore focus on the customer services. The aim of the business is to develop valuable
customer relations so that the clients can refer the services to others who are looking for similar
services. The company maintains a close association with the clients and the customers with the
help of e-mails and feedbacks (Udacity.com, 2018). The company is also in constant
communication with the clients and potential clients with the help of the social media platforms.
Clients can contact the customer service operations with the help of mail as well as
telecommunication services (Udacity.com, 2018).

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5. Customer segment
The consumer segment of the services offered by the company can be divided in three
aspects: recruiters, students and professionals. As discussed the company has a number of
organisations that has partnered with Udacity to hire students who have taken degrees from
Udacity (Udacity.com, 2018). The students form the major part of the customers, they can avail
the custmised services of Udacity ot choose to opt for the free services. Apart from that
professional can also enroll in order to develop their skills (Udacity.com, 2018).
6. Key resources
The most important resource of the company is the technology that runs the website and
the idea of innovation (Osterwalder & Pigneur, 2011). The professional who are associated with
the company who offer the course as well as the people who are responsible for running the day
to day operations of the business are important resource (Bloomberg.com, 2018). The
management and the owners are also important as they are responsible for the ideation and the
management of the company (Udacity.com, 2018).
7. Channels
Social media is a large platform for the company to channelize the process of
communication. Telecommunication and other digital platform like e-mails are also major
channels used by the company. PR is another strategy that the companies have in order to gather
attention of potential customers.
8. Cost Structure
The cost of the company is mostly associated with the salaries of the employees
associated with the company around 40 percent of the cost is dedicated to the HR. In order to

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maintain the infrastructure of the business and to further develop the business 50 percent of the
cost invested furthermore 10 percent is administrative cost that is required to run the day to day
business (Bloomberg.com, 2018).
9. Revenue Streams
The revenue by the company are sourced from that the company offers are priced from
$399 to $2400. The partnership of the firm with third parties to offer services generates around
20 percent of the revenue for example; the company has 321,153 subscribers in YouTube which
contributes to the revenue (YouTube.com, 2018). The turnover of the company in 2017 is $70
million which is expected to rise in the current financial year (Cnbc.com, 2018).
3. Interrelationships
The company is built on the internet platform and revolves around the concept of
innovation and change. The company uses the channel of promotion in order to reach out to the
mentioned customers; the students can easily contact the company regarding their services with
the help of the various social media platforms that they use. The revenue of the company is
directly related to the ways the resource and capabilities of the company are associated. The
company has generated $70 million in the last financial year and the people associated with the
business are responsible for the effort (Cnbc.com, 2018). The value proposition of the company
drives the mission and help the customers to achieve what they seek form the services. The
partners are essential as they provide an accreditation for an online platform which is one of the
common issues faced by the MOOC industry. The partners are responsible for generating value
as well as create loyal customers (Dudin et al., 2015).

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4. Critical success factors
Disruptive innovation is a concept that has been used to describe an idea which is one of
a kind in the market which offers an exceptional feature to the idea. Udacity started with an idea
of being able to provide people with knowledge. The owners of the company viewed the
opportunity the internet had in terms of offering education and setting up an educational
institution which is completely based on the digital frame (Cnbc.com, 2018). The company has
enrolled around 53,000 students in the nanodegrees which accounts for almost 30 percent or
more of the revenue collected annually. Along with that the company has also increase the
number of courses to 22, all the courses that the company offer are based on the market research
that the company (Cnbc.com, 2018). The rising revenue of the company and the growing
popularity is a indication of success of the business model that has been followed by the
organisation. The company was listed in LinkedIn’s Top 50 Startups and MIT Technology
Review’s Top 50 Smartest Companies of 2017 (Cnbc.com, 2018).
5. Downside risks
The company had faced a number of successes in the last financial year, however the year
ended on a bad note when there was an accident where a number of employees were physical
hurt.
The company runs on an online platform which allows the business to face a number of
issues such as trust among the consumers, there are always a threat of hacking the system or
infecting the infrastructure with malware.

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6. Business model changes
The services of the company are priced on the higher end, though the quality of the
service is not compromised but Udacity can come up with courses which are mainstream and
should launch them with low price.
Another change that is required is a more personal approach from the customer service;
this will help in generation of loyal and advocating customers (Dudin et al. 2016)
7. Conclusion
From the above discussion it can be concluded that the company has a number of
strengths and opportunities in terms of resource and capabilities that the company has as well as
the growth opportunity that the industry have, the company can come up with more and more
subjects in order to gather more customers. The hiring partners of the company are also a major
strength ensuring accreditation for the organisation and its services. The price point of the
degrees is the major weakness.

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8. Reference List
Blog.udacity.com. (2018). Partnerships Archives | Udacity. Retrieved from
https://blog.udacity.com/category/partnerships
Bocken, N. M., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to
develop sustainable business model archetypes. Journal of cleaner production, 65, 42-56.
Cnbc.com. (2018). 2017 Disruptor 50: No. 10 Udacity. Retrieved from
https://www.cnbc.com/2017/05/15/udacity-2017-disruptor-50.html
Dudin, M., Kucuri, G., Fedorova, I., Dzusova, S., & Namitulina, A. (2015). The innovative
business model canvas in the system of effective budgeting.
Greenwald, T. (2012). Business Model Canvas: A Simple Tool For Designing Innovative
Business Models. Retrieved from
https://www.forbes.com/sites/tedgreenwald/2012/01/31/business-model-canvas-a-simple-
tool-for-designing-innovative-business-models/#1a38927416a7
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries,
game changers, and challengers. John Wiley & Sons.
Osterwalder, A., & Pigneur, Y. (2011). Aligning profit and purpose through business model
innovation. Responsible management practices for the 21st century, 61-75.
Osterwalder, A., & Pigneur, Y. (2013). Designing business models and similar strategic objects:
the contribution of IS. Journal of the Association for information systems, 14(5), 237.