Over the years, organizations experienced that making more money, growing and making profit require several success factors. For many organizations, investing in their portfolios by developing new products and services, has been the leading approach. Others understood the needs of their customers and focused on providing them with the right and best solutions. Yet some others experienced entering new markets or mergers and acquisitions. Especially with digitalization and the development of new economy companies, the number of organizations trying different business models, are on the increase. In the core of all such trials underlies enquiry for answers to the question ‘how can we create the highest possible value, in a faster and less costly manner?’
A Business Model can be defined as ‘a setup in all its dimensions as to how a business can deliver products, services and solutions to its target customers, in a profitable and sustainable manner. Innovation in business models may lead into growth-oriented possibilities, such as R&D, customer relations, business development, new market strategies. The most known Business Model approach is the ‘Business Canvas’. In order to design a Business Model that will lead the organization to a healthy and targeted result, it is essential to answer some critical questions in a clear, meaningful and consistent manner. Such as;
- Who is (are) our Target Customer(s)? Who else can it be? What are their profiles?
- What are the needs and expectations of the Target Customers?
- Which of these needs and expectations have been met and to what extent?
- Which ones are waiting to be met?
- What do we offer to meet these needs and expectations?
- What can we offer more?
- Briefly, what is our checklist? (JTBD)
- So how will we bring our Target Customers and our offers together?
- Through which channels? Briefly, how will we market and sell them?
- How will we keep long-term and healthy relationship with our Target Customers?
- Where will we stand while presenting the total solution as a business to the customer and what will be our role?
- How will we add value?
- Whom can we add this value with?
- What activities should we perform?
- What will our cost structure be?
- Where and how will we earn the money? How will we make profit?
In order to provide the best answers to all those questions, it is necessary to have a foundation on possible Business Model alternatives. All business models implemented in different industries and business lines should be examined closely regarding their pros and cons. This is the best possible way to create the chances to select and test the most convenient Business Models fitting our company objectives. When viewed from this angle, a few factors in selecting Business Models can be counted:
- Segment: It refers to the Target Customer groups. Sometimes, scanning for a different segment of customers solely, may even generate innovation in itself.
- Value Proposition: It defines the products, services, or solutions that exposes an opportunity or fulfills solutions for the customers’ demands, and the added value for them.
- Value Chain Structure: It indicates the position and activities of the business within the value chain, as well as the way of providing and maintaining value addition.
- Position within the Value Network: It means identification of competitors, partners, and any communication network impact that can add more value to the customer.
- Competitive Strategy: It is an understanding how a business can create a sustainable competitive advantage (cost, differentiation, niche strategy, etc.).
- Revenue Generation and Profit Margins: The ultimate objective of any Business Model is to provide a business outcome, such as targeted profit margins, low cost structure and how targeted income would be generated (sales, rentals, subscriptions, support services, etc.).
We have mentioned that a Business Model is a design, a setup.
A setup can only be enhanced by trying different alternatives and checking their consistencies, feasibilities and their capacity to meet the objectives. A Business Model that is designed with dozens of alternative questions and answers such as ‘Should we go through this channel? Should we produce this product? What kind of services should we offer?’, will be standing on its solid feet on the ground, confidently. Moreover, the more we refine our questions, the closer we get to what we are looking for. For example, instead of only asking the question ‘what will we offer to our customer?’, we may ask the below questions as well:
- Should we provide a product, a service, or a solution?
- Is a standard package the solution? Or should we customize it to customer needs?
- Will the benefits be measurable and tangible? Or will intangible benefits work as well?
- Should the products or services be ordinary? Or should we create a brand?
- Should it be durable consumer goods? Or should it be fast moving consumer goods or consumable material?
The answers may take us to a much more meaningful and newer space. After generating so many different alternatives, we will have to prioritize and pick the ones that are the most meaningful for us, the ones that will lead us towards our objectives.
The most important step for leaders or designers is to share their thoughts and ideas for improvement and development with others. Otherwise, they may burden and exhaust the organization. Business Models should be designed with structured and systematic thinking approach and must be put down in written. This is the best possible way to share, evaluate new alternatives and generate new ideas. And this is the best possible way to transform those ideas into reality and execution.