Thursday, 29 March 2012

Is it time to look at your business model?

If you have a successful business, but you feel it could be so much more...
If you are getting busier and busier, but don't see the rewards...
If you want to grow, but don't know the best approach to take...
...then it might be time to take a look at your business model.

What is a business model?

But what is a business model? You might have heard it before and been none the wiser. You might also have been asked what your business model is and not been able to answer. You're not alone.

Your business model is a complete description of how your business satisfies your customers' needs and makes profit. It's a holistic approach that maps all the important aspects of your business in one go, even on one page. It's a tool for looking at your business, exploring alternatives and planning change. It's a tool for designing your business.

On one side (the demand side) it covers customers, your offerings, your relationships with customers, the channels through which you deal with customers and the way that you generate revenue. On the other side (the supply side) it encompasses, the key activities supporting your business, key resources your business uses, key partnerships, and the cost structure of your business.

This is a framework for looking at business models that I use. I help clients identify the important parts of each of the 9 elements of business model and map them onto the canvas like this. It's accessible to almost all audiences, easy to use, easy to share and dare I say it, FUN!




An interesting example

The Metro newspaper is a really good example of how a new business model can radically change a market. Key aspects of the business model are: offering the paper for free; focusing distribution on high volume commuter traffic market; distributing it through low cost self-service stands, and; producing it with low cost editorial that is just about interesting enough to entertain its younger market on a quick commute. Its business model is all about attracting advertising revenue through high volumes, and minimising costs of production and distribution. And it's a business model that has spawned many an imitation.

Now we're not all going to radically reinvent and transform our markets, but I suggest we should all map our own business model, poke it with a stick, have play with it, and see if alternatives could make our business more successful and our lives that little bit better.

Map your business model

My own sector, the world of consultancies, advisers and agencies is undergoing change too in terms of competing business models. The traditional model of day-rate fees and project-based billing feels outmoded. This is my business and it's changing. I'm excited to be working with clients on their consulting business models and I'm redesigning my own business model too.

The benefits to your business

Taking a look at your business model will...
  1. Improve your understanding of your business and what is important 
  2. Focus how you communicate your business and how it works to clients, partners and investors 
  3. Provide a tool for exploring the future and comparing / contrasting with others 
  4. Allow you to build prototype business models with impunity 
  5. Identify changes you want to test within your business 
Looking at your business model takes you beyond looking at individual ideas for your business. It's about looking at your whole interconnected business and how it fits together. It can be a blueprint for your business success. It could be time to look at your business model.

If you've recently changed your business model, or you think you might need to, or you would just like to find out more then I'd love to hear from you...

James

The business model canvas and the example given in this article are courtesy of the fantastic ‘Business Model Generation’ book by Alexander Osterwalder.

4 comments:

  1. Nice article James. It's definitely something we business owners need more focus on. I particularly liked your advice that we should all "map our own business model, poke it with a stick, have play with it, and see if alternatives could make our business more successful and our lives that little bit better." Every business could benefit from doing just that, and when you put it in that way it doesn't sound too onerous. Thank you for making me think.

    ReplyDelete
    Replies
    1. Thanks Sonja. Business modelling for me is just like any other form of modelling (except perhaps catwalk). Models are simplified representations, abstractions, frameworks or conceptualisations. We can play with models, learn from them and then make changes in the real world. The framework I show in the article is a really good way of modelling a business, really getting to the heart of how it works, and then exploring how could work better in the future. James

      Delete
  2. Thanks for this good article James. I believe that this is a good addition to the blogosphere because we all talk about 'our business model' without actually really knowing what we mean by 'our business model'. It has become one of the business bits of jargon that we all throw around, without knowing what we really mean by it.

    ReplyDelete
    Replies
    1. Hi Heather, thanks for your comments. I'm originally from a corporate management consulting background and I am desperately trying to avoid jargon now I am working with small businesses. Even though it can sound jargony, 'business model' is a piece of terminology that I think is a really useful concept however. I am pleased if I have helped provide some clarity. I'm going to write some more articles on business models soon and would welcome your thoughts. James

      Delete