Business Model Design – Reinventing business and implementing new models are undertaken by organizations as these are seen as necessary catalysts to sustain growth and development. The need to improve the company’s way of working without completely changing its prototype arises from the existence of game-changing opportunities waiting to be exploited in the market.
Sticking with the current business model is like throwing away the opportunity to better meet consumer needs in a more affordable and efficient way. Remember that process innovation can only get you to a certain ceiling of efficiency and that there will always come a time when it is a must to redo your business.
Business Model Design
But before re-entering a business model, managers must first evaluate their organizations’ current business models, as well as those of their competitors. They need to step back and take a hard look at the current structure and identify all the strengths and weaknesses of the systems in place to create value for customers and generate profits.
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Having a basic understanding of the existing business model is a prerequisite for business modeling or the design and implementation of a new one. The assessment had to be done to create a baseline for improvements on which the new model would build.
An effective way to look at the current business model is to define the 9 Business Model Canvas blocks or to look at it in four segments:
Having a full understanding of these four segments enables companies to create a new business model or reinvent existing ones to assess whether they have already reached the limits of their current business models. However, we recommend that you analyze your model later and try to define other blocks. The Wise Cluster Canvas is a great tool to have this holistic approach.
This evaluation stage also includes studying the possibility of taking on new customers and establishing new markets. By assessing your current model using this canvas, the question of whether it is possible to adjust the price, your unique selling proposition, your resources and the composition of the company’s current offering is addressed.
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Reinventing the company and implementing new business models without jeopardizing the existing models is a very tricky job. But it’s not impossible either. Getting the full implementation process right while nurturing the new innovations can actually strengthen the core business as a whole. The business model template is designed to visualize the essential ingredients of a business model as a future business scenario on one page. Learn more about key elements, use cases, Q&A and download the template for your team.
The left part focuses on external components, to understand how you reach and serve your customers and users. The right part consists of internal components to describe how your organization works to create and deliver high value. The lower part of the canvas is titled “Profit Formula” and asks questions about how you generate revenue and what costs are involved in setting up and running your organization.
“Business DNA” is the very core of your business model, which helps you tell a compelling story. If you only had 60 seconds to pitch your new business, you should simply focus on the DNA with respect to the questions outlined in the table below.
Consider different scenarios when designing new business models. There are always many ways to create your offers, to serve your customers and users, and to charge them. Be as clear as possible and avoid unreasonable jargon. While it’s so easy to just scratch the surface, try to imagine how your new business model will actually work.
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Primary Audience: What is our primary customer and user segment that unlocks the most value in our business and is easily accessible?
Keep in mind that each pot-it in the section usually costs a lot of money. Identify no more than 1-2 key marketing and sales channels
This section differs from the original Business Model Canvas. It’s not about fancy words, but a very concrete picture of what the team has to offer.
We do not need a complete list of all required resources. The purpose is to understand which are the most strategically important resources that should be kept internally. It’s about making or buying decisions.
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Same here. Not a complete list. The purpose is to understand which are the most strategically important processes and competencies that should be kept in-house.
Not always necessary. Only for platform deals where a company has to deal with many partners and therefore needs effective channels to reach them (e.g. partner conference).
We distinguish between R&D partners (needed only once to build a new product) and delivery partners (needed every time a customer buys something).
WARNING: The business model template is an excellent tool for creating a high-level overview of business models. At the same time, though, it’s the perfect invitation to compile a collection of “bullsh*t bingo” statements that make almost no sense. There is more to literally design and understand a new business.
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We sometimes use a “reduced” version of the business model template to create and visualize business ideas – already with a clear customer focus. To build a sustainable product, you need a business model created by Alexander Osterwalder. We will break this down further using the business model canvas. The business model canvas is a useful tool for mapping out a business model. You can create a business model that captures several components that will affect your ability to develop and bring a product to market, including things you need to build the product and their associated costs, value props for your product, and getting your product to your customers and associated revenue streams.
Now we will go through each component of the business model canvas. As we go through each element, we’ll also map it out with an example for Zoom, which is a company that creates video conferencing software.
Key Partners: These can be resellers and other partners like suppliers etc. If you look at Zoom their product is mostly software based. Still, they work with partners to help build out cameras, TVs, and tablets in their conference rooms, and they also work with system integrators and integrate their technology into exciting spaces. They also work with payment processors to collect money from their customers.
Key Activities: Things that must happen to build your product. For Zoom, there are two important activities: technology development and sales and support.
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Essential Resources: Things you need to deliver value to the user. It can be people, financial support or any other type of resources. Going back to Zoom, data centers are essential for delivering streaming video to participants. Zoom also likely has a compression algo that allows them to provide high quality video while reducing the amount of bandwidth required.
Cost Structure: Let’s talk about the costs of building the product. It can include a fixed price such as the salary of the engineering team and variable cost that increases as the product runs like a data center. It is also important to think about which activities and resources are the most expensive. For the Zoom example, two highest costs will be people and data centers.
Value Proposition: It explains why someone would want your product. In Zoom’s case, their value add is that they build a video conferencing product that works well, their product also works on phones, laptops and conference room TVs and it can scale and support over 1000 participants in a call which is pretty crazy.
Customer relations: Think of this as how to build a relationship with your customers, including through interactions in the product? You want to make sure to think about building a relationship with both the person using the product and the person buying the product. With Zoom, at the end of each, they ask participants to rate the call. It allows the team to understand how the product is performing from the customer’s perspective.
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Channels: How do you get the product to the customer? It is also important to think about which channels work best and which are most cost-effective. For Zoom, there are three channels that I notice: they have their website where people can sign up and buy the product directly. They also have referrals; zoom customers can invite others to join Zoom. Finally, they have resellers who sell the product on their behalf.
Customer Segment: This is about understanding who is your customer and which customer is most important. For Zoom, their customer is distributed people or teams that need to collaborate and communicate. It is broad and you can divide yourself into further segments like Enterprise, Education, Govt and healthcare etc.
Revenue Streams: What is a customer’s willingness to pay for, how much and how do they pay. For Zoom, the primary revenue stream is through subscriptions.
Business Model Examples — Case Studies for Cars and Amazon The Business Model Canvas is a tool used by business owners and managers to plan their strategy Strategic planning and… corporatefinanceinstitute.com
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