Is it time to rethink? The demise of well known companies such as Borders, Blockbuster, Kodak, Newsweek Magazine, as well as many mid-market companies is yet another stark indicator of the changing answers for business success today. It’s a jolting reminder that all the best intentions in the world are useless in the face of an outdated or dysfunctional business model.
The only way to grow your business without relying on a continual infusion of capital is to find a sustainable business model – one that that generates the cash necessary to fund continued growth of your business.
Are you constantly thinking about how to create value and build new businesses, or how to improve or transform your company? Are you looking to innovate around your business model to ensure you are not the next obituary in the business news? It may be time to rethink. You can do something about it. Here is how …
What is a business model?
A business model describes the rationale of how your company creates, delivers, and captures value. In other words, it is the logic of how your company intends to make money.
Business Model Generation, by Alexander Osterwalder, offers a concept that allows you to describe and think through the business model of your company, your competitors, or any other enterprise. This concept has been applied and tested around the world and is already used in organizations such as IBM, Ericsson, Deloitte, the Public Works and Government Services of Canada, and many more.
It is a shared language that allows you to easily describe and manipulate business models to create new strategic alternatives. Click here to download the Business Model Canvas tool.
The Nine Building Blocks
Your business model can best be described through nine basic building blocks that show the logic of how you intend to make money. The nine blocks cover the four main areas of your business: customers, offer, infrastructure, and financial viability. The business model is like a blueprint for a strategy to be implemented through your company structures, processes, and systems. Here are the nine blocks:
- Customer Segments – An organization serves one or several such as users and payers, or moms and teens.
- Value Propositions – Product or services solving customer problems and satisfying customer needs.
- Channels – Communication, distribution, and sales channels to reach customers and offer them the value proposition.
- Customer Relationships – Relationships are established and maintained with each customer segment to create demand.
- Revenue Streams – Generated from value propositions successfully offered to customers.
- Key Activities – Activities necessary to implement the business model.
- Key Resources – Assets required to make the key activities possible.
- Key Partnerships – Third parties needed to make the key activities possible.
- Cost Structure – Resulting from the business model.
Rethink – Tweak, Change, Innovate or Transform?
This shared language allows you to systematically challenge assumptions about your business model and to rethink and innovate successfully.
The Rethinking Process is pragmatic and simple (but not easy!). Define each of the nine building blocks, as they exist in your company today. Next, gather your leadership team and vigorously debate how to manipulate any one or a combination of the blocks to create a new logic of how you intend to make money. Your possibilities span the continuum from tweaking to major transformation.
Here are some examples from my clients:
- A land development company transformed itself into a hotel management group (transformation)
- An office equipment supplier reinvented itself into a software-as-a-service company (innovation)
- A surgical instrument distributor increased revenue streams by re-pricing product lines (change)
- A trucking sales/leasing firm grew sales by reorganizing its commercial market footprint (tweaking)
Systematically challenge assumptions about your business model, rethink and innovate successfully. Don’t be the next business obituary!
Contact me here for help developing new possibilities with your business model.
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