by | Jan 16, 2014

Building a better business model

Times are changing fast. Who would have thought that our children could be walking around with smart phone technology at their hip?

Technology is blowing through our lives faster than any of us can appreciate. It affects every part of our lives. I can’t think of a single area where technology, if you let it, doesn’t have an alternative option to the methods of years gone.

So what about our businesses? Recently Forbes magazine, a leading international business publication sighted New Zealand as the best place in the world to set up a business. The cheapest, the easiest – generally just the best place for entrepreneurs to get underway.

Cool start. So why then in this great nation do we see ourselves struggling under huge debt levels? Why don’t we turn this opportunity into wealth? There’s a variety of reasons of course and a number of them have been fodder for previous articles.

Here’s another. Our old tired business models could do with a shake up. A model is of course a small simplified imitation of the real thing. A business model is no different. It’s a cut down version of how your real business works.

There are numerous examples of companies that have beaten their competitors (actually annihilated them in some cases) simply by using their business model as a strategic advantage (just think of Apple with music – who still buys music in a store?). So how do you tweak your own business model? Or maybe completely smash it apart and rebuild it.

There are essentially 9 components of a business model that we prefer to use at RightWay. Perhaps have your own business in mind when you read down the list. Whatever you do don’t be limited by how things are done currently – after all that’s often where the problem is.

  • Value proposition – what are you actually selling the customer and why does it represent value to them?

  • Customer segments – these are the specific value propositions you need to create to deliver to different groups or types of customers.

  • Customer relationships – different customer segments often need to be looked after in different ways.

  • Channels – how do you reach and communicate to the different customer segments (e.g. different ways of advertising and selling)?

  • Revenue streams – there are often different pricing mechanisms for different groups of customers or value propositions (e.g. price per month, leasing/renting, full sale etc).

  • Key resources – what infrastructure is needed, what assets are used, what people are required to deliver all of the above?

  • Key activities – what areas do you need to perform well to run a successful business?

  • Key partners – who can help you to leverage your key business areas? You can’t and don’t necessarily want to do it all yourself.

  • Costs – once you have good answers to the eight points above you can gather the costs of the model. If the costs are less than the revenues then that’s always a good start.

If you want to make more money than your competitors then don’t just do the same old things. Give yourself a fright and shake things up a little. Consider new approaches to providing customer value.

Fight the good fight this week.

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