A lot of businesses operates without a Business Model. At least, businesses who are not positioned in the market to win. In my Information Systems Strategy and Management course, one of the words you cannot miss but hear every class is “Business Model”( Dr. Nawaz, why???? ) Business model this…Business model that. Fast forward to the course coming to an end, I now understand it and it’s importance in modern business strategy creation.
Please do not get me wrong, even though I began the post by saying “A lot of businesses operates without a business model” I want to believe that majority do have some plan of what value their business provide and who their target audience is. But it really does go beyond that, it is important for your business to have a model it follows. Okay, what is a Business Model?
A business model states “What value a business creates, who it serves, what sets it apart (competitive advantage), what resources it depends upon, it’s crucial relationship, the channels through which it delivers value, how it generates money, and what it spends money on”
If you take time to accentuate those key components that makes up a business model for your business, it would be instrumental in positioning or re-positioning your business to win.
Let’s take a look at the important elements of a Business Model:
- Customer value proposition (CVP) : Successful businesses are businesses that has found a way to provide a valuable product or service to their customer, a product or service that helps their customer get an important job done. And “job” in the previous sentence means a problem or challenge that needs a solution. Once you as a business owner understands the job that needs to be done and the processes to get it done, you can then design and develop the perfect offering. The key here is to design or create an offering with the job in mind, so as to create a product or service that offers value to the target customer.
- Target Audience: After understanding what problems lies in the marketplace and what value needs to be created, having a distinct set of people who the value is to be created for, is key.
Quick Example: When Ratan Tata of Tata Group looked out over the streets of Mumbai, he saw motorcycles in traffic carrying entire families – father, mother, and children. What if he could provide these scooter families with a safe, enclosed car at a price they could afford? That there is a powerful customer value proposition targeted to a specific set of people “scooter families”
- Competitive Advantage: One of my favorites. Most times, in a marketplace, there are numerous businesses providing a product or service that provides value/solution to a challenge, in your business model, it is important to state and know what makes you standout from other businesses providing the same value.
- Key Resources: The key resources in the business model are invaluable assets such as the people, technology, products, facilities, equipment, channels, and brands required to deliver the value proposition to your targeted customer. In the book “Re-inventing Your Business Model”, Mark et al says – The focus here is on the key elements that create value for the customer and your business, and the way those elements interact with each other.
If you are business owner or an aspiring one and you are finding it hard to come up with a business model, check the below examples of business models used by successful businesses and see which you can adapt for your business. ( gotten from Harvard business Review )