With the pace of business spiraling up dramatically, the necessity to innovate and respond to the ever-changing commercial space is what makes a company stay in the game, thereby making building a powerful business model one of the biggest challenges there is to face from a business outlook. This article looks at ways to innovate and transform your business model.
Why is it important?
Behind every successful enterprise is a staunch business model. Customer needs have always been dynamic demanding business models to reform and upgrade.
Without realizing it, a company that does not focus on innovating and enhancing its business model to fit customer requirements ends up compromising its status.
9 building blocks
A business canvas aids companies in aligning their activities by illustrating potential trade-offs by comparing them to one another and being able to see the bigger picture of their overall business framework. Nine building blocks describe and assess a business model.
- Customer Segments – The target audience that you aim at selling your products or services to. A business that is appealing to its customers is a feasible one. Customer obsession has been a popular catchphrase in enterprise circles lately and getting this building block right is key to your success.
- Value Propositions – Arguably the most important element that validates an enterprise’s worth to its customers! Your value proposition chart will speak about how distinctive your business is when compared to your competitors and why a customer must choose you instead of someone else.
- Channels – We’ve spoken about customer segments and value proposition, the bridge between them is a channel. It’s how you are going to convey your value proposition to your target customers. A few commonly used channels are:
-Raising awareness among customers about a company’s products and services.
-Helping customers understand your business’ value proposition.
-After-sales service has been a promising means to connect and stay connected with your customers. - Customer Relationships – What would be a perfect customer relationship be like? – should it be personal, automated, or somewhere in between? Putting yourself in the customer’s shoes will help you answer that question better. Your relationship with the customer is directly proportional to customer experience. Providing an excellent customer experience is the gateway to building strong and lasting customer relationships.
- Revenue Streams – Customers are the heart of the business model and revenue streams are its arteries. Each Revenue Stream may have different pricing mechanisms, such as fixed list prices, bargaining, auctioning, market dependent, volume dependent, or yield management.
Questions to keep in mind.
-What’s the most important element or value that the customer would be willing to invest in?
-How would they prefer to pay?
-How much does each Revenue Stream contribute to overall revenues? - Key Resources – It’s paramount to start your business with the appropriate resources to drive you towards success. Of course, not all resources are the same. Key Resources can be categorized as follows:
-Physical Resources: Manufacturing facilities, buildings, vehicles, machines, systems, point-of-sales systems, and distribution networks.
-Intellectual Property: Brands, proprietary knowledge, patents and copyrights, partnerships, and customer databases.
-Human Resources: Human resources are crucial in knowledge-intensive and creative industries
-Financial Resources: Cash, lines of credit, or a stock option pool for hiring key employees. - Key Activities – While Key Resources are about what you have, Key Activities are about what you do with what you have. An effective key activity is an answer to the question “What activities does our value proposition need?” You’ll also want to ask yourself what activities your channels, customers, revenue streams, and Key Partners call for.
- Key Partnerships – Companies forging partnerships is the mainspring of numerous successful business models. The whole idea of a partnership is to either reduce risk or acquire resources and, in some cases, both.
The four main types of partnerships are:
-Buyer-Supplier
-Co-opetition
-Joint Ventures
-Strategic Alliances - Cost Structure – Saving the most momentous element for the last! Every element in your business model depends on your cost structure. It describes the costs that business occurs through its operations.
The cost structure of a business can be placed into one of two categories:
-Cost-driven: As the name suggests, it focuses on reducing cost
-Value-driven: Some companies are not entirely based on cost. They are persistent in the value they are providing to their customers.
Identify and fill the gaps in a business model
Building a successful business is easier said than done and studying business ideas and thinking of ways to cut down costs will only take you so far! You need to have the answer to “Gaps in the market”. Here are 3 ways to identify gaps in the market.
- Surveil trends in your area of expertise – If you have your finger on the pulse of current trends, consider what is missing. Are there products you would you that are not on the market? Are they any desired services that you could render? Networking is the root of keeping yourself up to date.
- Elicit feedback from your customer – How often do you take customer feedback? And often do you listen to it? Your customers can be your best critics and will tell you what you are lacking and where it can fit in.
- Understand your competitors and differentiate yourself – Making sure that you not only know your competition but also how you differ from them will help you gain better control of your corner of the market and identify any potential gaps.
With the market changing constantly it’s important to stay alert to everything that going on in your space. Finding opportunities and learning from other business models is a healthy way to stay on top of your game.
As a Digital Business transformation agency, we facilitate Innovation coaching to develop your business model or if you need a fresh look at your current one. We can help align your customer segments, value propositions, and then eventually your business model using the canvas through strategic workshops. Get in touch before you get too deep into a new product or service development for your business as this could save you much time and stress in the future.