When a superhero picks up a car and throws it they intuitively figure out where the car’s centre of mass is. This is important as it means the car doesn’t spin or tumble, and makes better TV. When we are creating business models it is useful to have something similar. Alexander Osterwalder calls it the epicentre.
The epicentre, in an earthquake, is the point on the earth’s surface that is vertically above the focus of the earthquake. It’s where it is all happening. In business model innovation it’s useful to think about business models having epicentres.
By this what we mean is what is the core of your business model? What is the type of business model that you are trying to create?
What are business model epicentres?
The first step is to ask where do you think you will find the biggest source of competitive advantage.
We can divide the business model canvas up into 4 areas.
- Customers – on the right side of the business model. This includes marketing, and customer relationships
- Creation – on the left side of the business model canvas. This includes key resources, key activities and key partners.
- Finance – at the bottom – where you make money and how you spend it.
- Value – in the centre – your key resources, activities, relationships and marketing as well as the value proposition.
How do you use epicentres to compete?
The first question you have to answer is where shall we compete?
- Do we focus on satisfying customers?
- Do we focus on creating out product or service better, faster or cheaper?
- Do we focus on innovative ways to generate revenue or save costs?
- Do We focus on new ways of creating value?
You can answer this, as quickly as you have read the previous paragraph.
Alternatively, you can go back to your competitor analysis, and ask where existing competitors, substitutes, new entrants and out there competitors are finding the source of their strength.
In many mature businesses, most players will have adopted very similar epicentres. Most oil firms focus on the creation epicentre. Most clothing retailers focus on the customer epicentre.
Should you use the same business model picentres as everybody else?
Those may be the right choices. At this point when you still have a blank canvas in front of you, it’s great to ask?
Shall I follow the same path as everyone else?
When we are doing business model innovation we’re not trying to copy other people. We’re trying to develop business models that are disruptive and different.
What you should do is consider where most existing players have their current epicentre. Then choose a different one. This is a contrarian play. It’s choosing a different path, and by thinking about how you can take high-quality clothes and stack them high like a discount supermarket, unlike Gap or Zara, you end up with a profitable business model like Primark.
How do you find advantage by seeing things differently?
We keep coming back to this. How do you see things differently than the rest of the market? Where can you find your disruptive insight? So every time we have a choice of doing what they do or going our own way, we go our own way.
All we have done at this point is to choose a place on the business model canvas to start thinking about our future business model.
As you go forward through the design process it’s easy to move from one to the other. It’s easy to combine different epicentres.
What happens if we compete on the basis of finance and customers? How does that play out compared to creation and value? or against creation and customers vs value?
Working this way you can develop a much strong set of business models as a first draft for where you are going to take your business
Business Model Epicentre FAQ
Nope. it’s voluntary, but my experience is that 1. it adds more value to the discussion, 2. generates more valuable insights, 3. helps you create more robust business models
That’s totally context-dependent. Different industries have very different preferences. In most industries, there is clearly a ‘right’ epicentre which often means that there are nuggets of gold hidden in other approaches.
No. The business model design process is iterative. If it doesn’t work or add value that’s ok. choose another one. Remember what we are doing is as much a search and discovery process as a building one.
Not really. It’s easy to fork your approach and see what new ideas are developed.
Alexander Osterwalder’s book Business Model Generation has a page full of examples.
It’s an area of fundamental focus in your business model that helps to derive your strategy approach
