Business Model
A business model serves as a system that enables the various components of a business to come together and explains how enterprises operate. It helps us understand who the customer is, how we generate revenue, and what underlying economic principles allow a company to deliver value to customers at a reasonable cost. Our unique value proposition is the key to our business model. We carefully evaluate each element that adds value for the customer, ultimately leading to revenue for the company. Revenue streams arise from successful value propositions, while costs refer to the resources needed for each revenue stream. A business model is compelling, as competitors cannot easily replicate it. Even if they attempt to do so, the likelihood of their success is less than 1%.
Capability and Resource-based
Business Model Assessment
New and Recurring Revenue Stream
Business Model Elements
Business and Executive Coaching and Competence Focus
Objective
Our business models center on meeting customer needs. Innovating our business model provides a sustainable competitive advantage. Our assessment, supported by strategic planning, includes aligning with customer needs, creating network effects, aligning product and service offerings, ensuring customer satisfaction, and predicting revenue. Changing our business model based on capabilities transforms industries, reduces competition, and enhances growth and profitability.
What Challenge(s) do Our Clients Face?
- How can we redefine customer segmentation so we serve more than what we have?
- What type of customer needs should we stop serving?
- How could we change our relationship with our customers?
- How else could we reach our customers?
- How could we change the narrative around our products and services to make them more valuable?
- What are alternative revenue models? What are recurring or repeat revenue models?
- What would our business look like if we completely removed the most expensive activity in our value chain?
- How can we strengthen our competitive advantage? Can we discourage our competitors from investing in our sector?
- Do we have clarity about how we create value in the market? Are we investing in that value-creation capability?
- Can we articulate uniquely better capabilities than our competitors? Did we integrate them as a system?
- Does our performance management system reinforce these capabilities?
- Did we find our product and service “sweet spot” for the customer? Do we have complimentary capabilities to strengthen and reinforce this sweet spot?
- Do we have any product that requires support that we are lacking?
- Do our employees understand these differentiating capabilities? Is a system in place to reinforce these capabilities?
- Reinforce needs coherence; that activity is independent and simultaneously interdependent, pushing each other to deliver coherence.
- Who are our customers? What job do we solve for our customers?
- What benefit do we create for our customers?
- What is our offer? What are our value-creating steps?
- What is our value chain? How do we reach our customers? How do we communicate with our customers?
- What are the core capabilities we need?
- Which partner do we need? What benefit do we create for our partners?
- How do we make money? Does our cost structure support the revenue model sufficiently?
- What competencies do we have as an organization?
- Do we strengthen our unique capabilities? Do we invest enough to build new capabilities to support the value proposition?
- What capabilities are needed to achieve success? What business systems are required to achieve success?
- What cost model is needed to ensure attractive returns?
What are the benefits to our client?
Business Model Building Block
The solution to these questions lies in Business Model Building Blocks. Understanding these fundamental elements of a business model is crucial for strategic planning and decision-making. Several models are used, but the most popular is the Business Model Canvas, which has nine elements. Whichever one chooses, the fit of the entirety and organization is crucial. We propose our model here a little differently.
Those must be Visible and quantifiable in the company's strategic and business plan.
A business model is an economic framework that enables a company to create value and generate profit. Understanding how the business makes money is the easiest way to start your analysis. A well-performing company must also strive to satisfy its customers, generate economic profit and cash, and outperform its competitors.
- What are the critical building blocks of this company's business model?
- What is a good business meant to do?
Building Block 1. A company produces goods or delivers a service to satisfy a customer need in one or more customer segments.
Customer and Customer Value Proposition (CVP): An offering that adds value to customers more effectively, reliably, conveniently, or affordably solves a significant problem (or satisfies a job to be done) at a given price. You must understand your target customer’s job well to help you design a great CVP.
Building Block 2. How an organization creates and captures value and delivers support to the CVP.
A company’s asset base constitutes its essential Resources and key Capabilities/Processes capabilities, such as its
brand, reputation, license, patent, or intellectual property.
- Essential resources: Brands, funding, investments to outperform the competitor, people, technology, products,
facilities, and equipment required to deliver the value proposition to the customer. - Critical capabilities/processes: To deliver the CVP, a company needs sustainable, repeatable, scalable, and
manageable processes.
Building Block 3, Profit Formula. The Profit Formula outlines how a company creates value for itself and its shareholders and captures profit. It simplifies complex financial calculations into key variables critical for profit generation: revenue model and cost structure. The revenue model is a company’s strategy to attract customers and generate income. At the same time, the cost structure is the breakdown of all costs incurred in delivering the value proposition. Optimize these elements for a successful business model.
- Revenue:- It employs a pricing mechanism to create a value proposition to attract customers in its chosen market segment and generate revenue. At its most basic level, a company exists to deliver value in return for compensation. If a company does not make money now, an adept business model should eventually enable it to do so.
- Cost Structure:- Successful companies have well-defined cost structures, but it’s essential to determine overhead based on the value proposition rather than taking existing overhead costs as a given.
Building Block 4. A company must invest capital to
- Renew, replace, and support its existing asset base
- Innovate and establish new capabilities
- Expand into new markets or product segments.
Building Block 5. Competitive Advantage and Reinvestment
Once the company succeeds, it generates a sustainable and growing economic profit and an attractive cash return on capital invested. A high-quality business with a wide economic moat can reinvest its cash profits at high incremental rates of return, enabling the company’s value to accrue over time.
How Can We Help You?
1. Competitor Analysis
How is this company positioned at present compared to its competitors? Company’s competitive universe.
- Who are the competitors, and what are they doing? Compare the business with your peers with several dimensions.
- Can you read into the strategic plans of the key competitors of your target company?
- Who is preparing to dominate the market, and who, by contrast, plans to remain in its niche?
- Are companies particularly successful in producing network effects or imposing significant switching costs on their customer base?
2. Competitor Analysis -Deeper Dive
Since strategic change costs money, companies must be able to find some of this information by reviewing each key competitor’s CAPEX plan.
- Who aims to be the fastest, cheapest, and nimblest operator? Who is investing in brand-building?
- Who is pursuing activities that might impose switching costs on their customer base?
- Is anyone planning a severe sector disruption? What competitive strategies can harm your target business?
- Given what you learned about the competition, what competitive fights can your target company plausibly win?
3. Target Market
- How is the market currently segmented? Who is operating in each segment?
- Who captured the most important customer group? Are the company’s customers the best ones for its products?
4. Value Proposition
Think again about how customers want to buy and what drives their purchasing decision: price, specific product features, customer experience, brand, or proprietary technology.
- Who in your competitive universe is offering the cheapest product or service? Who is charging the premium?
- Map out how your company’s value proposition vis-à-vis competitor offerings.
5. Revenue Models
- What differences in revenue-generating approach can you see among the company’s competitors?
- Are companies particularly successful in producing network effects or imposing significant switching costs on their customer base?
6. Cost Structure and Profits
- How do margins compare among the companies in the same competitive universe?
- What activities are integrated, and what is typically outsourced?
- What is considered best-in-class performance at the operating margin level?
- What can you say about the current profits generated by your target company compared to its competitors?
- How about the profit potential?
- Who generates an attractive return and tolerates losses, and how deep are their financial pockets?
7. Business Systems and Supply Chain
Step through each key competitor’s value chain to understand their approach to development and innovation, procurement, manufacturing, marketing, distribution, and customer support.
- Do you notice any unusual power nodes, such as proprietary processes, unique distribution gateways, patented technology, significant cost advantages due to scale, a secret recipe, unique ingredients, or raw materials?
The above competitive advantages can be deployed as harmful and potentially lethal competitive weapons against your target company.
Strategic objectives
The information you have gathered so far should equip you with a good understanding of the industry’s state and our target company’s positioning against its peers. However, it would be best to research and consider what may happen.
Business model innovation is essential for business transformation. Many organizations have common concerns: What kind of business model innovation will help us achieve outstanding performance? How can we avoid putting the core business at risk? How do we develop the ability to quickly create, test, and expand new models? Encouraging an organization to change is difficult but crucial in the current strategic environment.
Why Choose Us?
Cross-Functional Catalyst Approach
The organization comprises various functions, capabilities, and people. The catalyst approach ensures daily task completion by incorporating necessary processes and tools to achieve strategic objectives through bottom-up performance.
Tailor Made Solutions
Business Partner Role
Collaborates with other business areas to guide and support their strategic and operational decision-making, offers insights based on industry trends and competitor dynamics, and evaluates and improves operational performance using different tools.
Execution Guidance
“Without strategy, execution is aimless. Without execution, strategy is useless.” Most organizations fail in execution. The entire organization needs to apply a similar scientific approach to what operational excellence has brought to the operations.
Coaching and Competence Focus
Our unwavering focus on coaching and developing competence underscores our commitment to helping our clients achieve sustainable business results. We believe that meticulous execution and an unyielding dedication to improvement are paramount. We offer comprehensive supportive services to ensure our clients thrive, including personalized business coaching, tailored competency development, hands-on process support, adequate tool support, and customized mentoring. We aim to empower our clients to attain and maintain their desired outcomes, ensuring their long-term success and prosperity.
We have developed a module that considers business needs and executive working styles.
- We offer tools to use, improve, and use for regular analysis and insights. Many times, different companies have specific requirements. We can guide your team in developing those tools. Tools built in Excel are an excellent beginning. Once the understanding and processes reach proficiency levels, automation, and software systems can enhance their value.
- During the assignment, we encourage your team to take some initiatives and projects under our supervision. That will be an excellent chance to showcase and apply their recently enhanced competence to the company's requirements. We review their performance and guide them toward continuous improvement.
- We wish to take key personnel mentoring. We hope what we deliver to clients will be sustainable in the medium to long term. Many times, mentoring key personnel helps keep that momentum. We identify them as super users. Super users are responsible for mastering specific skill sets and internally training others. This is the benchmark method where the company can internalize the competence building without frequently hiring an external advisor.
How Do We Serve Our Clients?
Frequently Asked Questions
When a company seeks to innovate its business model, it may encounter various challenges. The business model comprises four components: customer, value proposition, value chain activities, and capabilities required to deliver offerings to the customer. These components have different value drivers. Success requires having the necessary resources such as people, technologies, tangible and intangible assets, and brands and conducting appropriate activities like training, development, production, budgeting, planning, and selling.
Business models serve as a system to align the different parts of a business and explain how enterprises operate. They answer questions such as: who is the customer, how do we generate revenue, and what economic principles allow a company to provide value to customers at a reasonable cost?
The business model efficiently creates value for the customer, which, in turn, generates revenue for the company. Successful value propositions lead to new revenue streams, while costs represent the resources needed for each revenue stream. Innovative business models deliver new types of value that involve venturing into unexplored areas or “white space” beyond their core business.
Business model innovation is exciting and wonderful. At its simplest, it does not require new technologies or the creation of brand-new markets and new revenue streams.
