What is a business model Archives - Entrepreneurs with Denis Oakley

Entrepreneurs with Denis Oakley

I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN

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What is a business model

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Beginners Guide to the Business Model Canvas: Part 1

How do you use the business model canvas? I am going to walk through how to do your business model canvas and use it to make better decisions in a number of small steps. It will take a few days but we will slowly, together, layer levels of understanding . All you need to do is stech as I sketch, note as I note, and your own business will emerge.

This is ideal if you run, own, manage, lead or study a business. A little bit of learning in less than 5 minutes a day.

Let’s start.

Sketch the Business Model Canvas

Grab a piece of A4 (or any other size that works for you)

Sketch out the business model canvas

Beginners Guide to the Business Model Canvas: Part 1
Sketching the business model canvas out quickly makes it easy to use where and when you need it – even on a napkin in a restaurant.

An L on its side. Then another one to close the square. Don’t worry about making it pretty

Draw a line across, about 1/4 of the way up. Then Cut it in half.

Beginners Guide to the Business Model Canvas: Part 1
I’ve highlighted in green where the pen needs to go when you are sketching the business model canvas. I know this sounds obvious, but that’s what the awesome team at Scriberia.com showed me when I started drawing

Then four strokes in the upper block, equally spaced. Then cut the two middle panels in half.

That gives you your basic business model canvas.

It’s that simple

Don’t bother using a template unless you have an easy way of keeping them handy. Being precise just slows you down and your mental focus is on the drawing, not your business.

Starting on Your Business Model

To make this a little bit more real and give you an example to follow I’m going to put my business in. This makes it easier for you because like me, you’ll have a bunch of thoughts about your business and the process will help you structure them.

Beginners Guide to the Business Model Canvas: Part 1
Start with the problem that you want to solve

The first thing that I usually do is to write down the problems that the business is solving. I use the space at the bottom of the value proposition section.

Hit the Problem

In this case, I’ve written

  • The old business models don’t work any longer
  • finding new business models that work is tough

That captures the heart of it. Is it the best formulation? Probably not. As you repeat and iterate you get it smoother. It is however good enough – and gives us the focus that we need to build the rest of the model.

Really, what I want you to appreciate here is that you can’t get this wrong. Putting together a great business model is an iterative process.

It’s always going to be solving a problem. A big problem. A painful problem.

The data shows me that over the next couple of decades tens of millions of SMEs will be destroyed by market forces. At the same time, a similar number of startups will form. Trillions of dollars and hundreds of millions of lives will be affected.

Is that a problem worth solving? I think so. What’s the problem you are solving?

Condense it down into 2-3 bullet points. A couple of words in each. If you need to write an essay you aren’t there yet. You’re not wrong, so much as focused at the wrong level. You need to come up to a higher level.

As we go through the process, if you change the problem, that’s ok. Come back to this point and start over. As many times as you need.

Tomorrow we’ll carry on 🙂

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What is business model innovation?

Business model innovation is the process of changing or designing a business to significantly increase its ability to create and capture value and disrupt the markets that it competes in.

Companies that have identical or very similar business models to their competitors are highly vulnerable to market shocks and disruption. This is because they are all vulnerable in the same way, and often respond in similar ways. BMI gives companies the ability to diversify business models and find better paths to growth and increased profitability

Let’s break down this definition of business model innovation into its parts.

What is business model innovation?

business model innovation is changing your business model
BMI is a change process that transforms your business and the market it plays in

Business model innovation is a change process. In it, you change how the business or organisation works, usually substantially. This requires significant cultural and organisational change for existing companies. For new ventures, it often means that your business model is substantially different from existing ones.

BMI is an intentional process
BMI is an intentional process that takes you to where you want/need to be, and avoids false paths

Business model innovation is an intentional process where you are trying to find the best business model for a particular environment or context. It can be emergent. As you solve business challenges in a novel way or use new technology, you can develop entirely new business models.

business model innovation increases value creation substantially
BMI is value creation, significant amounts of new values for consumers and users

Business model innovation significantly increases the amount of value created. All business creates value, or should. With business model innovation the intention is to create a significant amount of new value. In many industries, the value of the new products or services is 50 to 100 times greater than the previous best solutions. Google, Facebook, Wikipedia all do this.

business model innovation ensures you capture the value you create
BMI is value capture, making sure that your shareholders capture some of the value that you create

Business model innovation significantly increases the amount of value captured. The amount of value that you capture drives the profitability of the business model. Successful business model innovation enables companies to generate significant amounts of profit. Uber significantly increase passenger and driver value but failed to capture value itself. WeWork and Wikipedia also fail to capture value well (though that was never Wikipedia’s intention)

business model innovation disrupts the markets you play in
BMI disrupts markets. If you don’t then value creation is harder and you capture less value…

Business model innovation disrupts the markets the business competes in. The scale of value creation created by the new business model is often a shock to the market that you compete in. The best business models make it difficult for competitors to respond, to compete or survive. This can be through product innovation, but more often it is through disruption of manufacturing or distribution processes.

What is not business model innovation?

BMI is not a small change to the business. In the normal course of business, small changes are constantly being made to a business, or groups of businesses as they engage in evolutionary competition. Small changes to operations that do not disrupt the market aren’t business model innovation.

Business model innovation is not incremental growth. A business model innovation process that increases revenues by 5% is a failure. There is no point in putting so much work and emotional labour into the project for such small returns. Business model innovation is creating a step-change in growth.

BMI is not being the same business at the end as when you started. Business model innovation transforms your business making it look quite different.

Business model innovation is not looking at a business model from another industry, superficially adopting it and then claiming that your business model is the ‘Airbnb of X’ or the ‘Uber of Y’

What else is important about BMI?

Business model innovation requires you to see the world differently. If you look at the competitive landscape in the same way as everyone else you won’t be able to find the insights that drive successful business model innovation.

Business model innovation is a creative process that draws on technical domain knowledge, a deep understanding of business strategy and the ability to find insights that competitors cannot.

BMI in Human Speech

Putting aside all the corporate strategy gumph. What you need to know is this.

If your business model is the same as everyone else and your industry or market is starting to be affected by change then you are really vulnerable. You need to change how you do what you do so that you are able to take advantage of all this change.

You can just use your intuition to make changes to your business. The trouble is most of your competitors have the same knowledge and nights as you, so you all make the same mistakes together.

If you want to make better choices and unlock the opportunities that come with change – and not just get screwed – then applying a BMI process is a good idea. It helps you to get from A to B (screwed up to fat cat) quickly and safely without too much stress. Unless you are really conservative, in which case get some valium because a great deal of what you believe to be true is going to have to change.

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What is business model innovation?