Your business model is how your Expertise creates Value for your Customers.
The term Business model is used frequently, but it is not well defined. Much like Innovation, it means different things to different people. Hence, one of the challenges when discussing a company's business model is that those participating in the discussion lack a common language, which may lead to misunderstandings.
With this in mind, inspired by Alex Osterwalder of Arvetica in Switzerland, Create has developed a framework for analyzing and discussing business models. This framework divides the business model into three major blocks:
- Expertise
- Value
- Customers
The Expertise is what makes your company unique. What is it you can do better than any of your competitors. For analysis purposes, we break it down into:
- Assets - This includes physical assets (equipment, factories, vehicles), intellectual property (brands, patents, code) and most importantly your people and their competence and knowledge.
- Processes - Depending on your industry and offering, your key processes can be assembly, manufacturing, supply chain management, project management, design or others.
- Network - No company or product is entirely self reliant. You rely on a network of suppliers, partners, distributors and service providers.
When analyzing the business model, we map and question every aspect of your business model. This can be done in a workshop environment or as a more thorough break down and analysis.
The Value is what the customer is paying for when making his purchasing decision. The value you can create depends on your expertise. Porsche doesn't sell cars, it sells a driving experience and an image. The value you create is not the product and the service itself, but the need it addresses. The mousetrap is a method of getting rid of troublesome mice. We break the value down as follows:
- Selling point - The value created for the customer by the products or services the company is offering.
- Pricing - When, how much and for what the customers are asked to pay.
- Cost - Main cost drivers and cost elements, divided into fixed and variable costs.
The Customers are the people, companies or organizations who are willing to pay for the value you create. This segment breaks down both who the customers are, how you reach them and convince them to buy from you and who else is trying to reach those same customers.
- Individuals - Within your target market, who are the key decision makers. This can be a specific position within a company or a typical customer for a mass market product/service. Often you may have several important individuals to address, some divide them into decision makers and evangelists.
- Channels - How you reach your customers before, during and after a sale. This includes marketing, sales process, distribution channels and customer care.
- Competition - All main competitors for the value you are trying to get paid for and their relative strengths and weaknesses. This can be other companies or products, but for many newer business models you may also be competing against existing internal solutions that address the same need.
Lastly, in addition to the three main building blocks of the business model, the red line through a business model is the products and/or services you are offering. The products and services are a result of the expertise, they carry the value and are the deliverable to the customers. In our framework, the products and services are therefore drawn on top of the three building blocks, linking them together.
Contact Create for a discussion on how we can apply the business model framework to help in your strategy discussions.
