Monday, October 13, 2014

The Starting Point to Design Business Model

The mindset, vision, competency, capability, culture and marketing opportunity are all great starting point for business model innovation.

Business model design is one of the critical types of innovation that enable business growth and compete for the future. However, most of such effort fails to achieve the expected result. The good start is half way to succeed, what’s the starting point to design business model?

The starting point reflects one’s state of mind: so when you begin to design the model, you have to, as a business leader, be very clear what you are and how you want to approach the market. That would determine your starting points. When you define the direction in which you want your business to travel, you need to ask a series of definitive questions. The strategizing process should start with understanding the style of the leadership, what the leadership preaches, and what it actually promotes. The style of the leadership is imbued with mind-maps, with past situations, and with future hopes that - in an unstable form - condition the state-of-mind.  Your state of mind (mood/outlook) can vary massively throughout this process! Your state of mind can vary from day to day! Anyone's starting point reflects one’s state of mind! 

Competencies / Dream / Vision: You need to identify core competencies and critical capabilities as well as where the future will be for the business entity model design (expansion / consolidation / emerging field trend and predications). Starting the business-model based on the technologic vision and on the mega-trends is to be able to build the core competencies and the critical capabilities early enough to catch the wave before its crest breaks. The core competencies and the critical capabilities are probably what the senior management should focus on. Look at who and what you have to work with before you define the expected outcomes! Please note the former fixate the intangible resources, while the latter focus on the tangible resources. In a business environment that is driven by change, it enables senior management to keep evolving their core competencies and the critical capabilities so as to keep their enterprise ahead of the crest of the wave.

Culture eats innovation for lunch. No matter where you start your business model from (customer needs, technological leaps, market gaps, etc.) will mean very little unless you also simultaneously build a culture that can execute, which takes two major things, hiring and promoting people with an agile mindset, and designing internal processes that promote the right behaviors and culture. After eating strategy for breakfast, now culture is hunting innovation for lunch. Hence, Strategy, structure and culture must be developed in tandem for real sustainability.

Then you examine the market to describe the opportunity. Is it growing? How large is it today and what are projections for the future? How many suppliers and are they dominant in market share? Are current suppliers able to supply the anticipated future growth? What is the cost of entry? Is this a market that competes on price, quality, innovation, service, other factors? What is the cost point to be competitive? What is your strategic advantage? What percentage of that market you expect to capture over what period of time? Why would someone prefer to buy from you? What is your vision and mission? The starting point for a business model differs based on the objectives and nature of an organization as well. But just following trends in your own sector is a sure way to lose! Trends are just a means to an end- successful (and profitable) innovation. It’s all about foreseeing and applying trends: that’s where you win the competitive edge. Understanding customer insights and buy trends is the key to any future business/marketing strategies. However, creating trends is about anticipating direction.

The mindset, vision, competency, capability, culture and marketing opportunity are all great starting point for business model innovation. The senior management frame is important in complicated systems subject to biases and the forces of change. Business models can be holistically evolved through feedback loops and probes, subjectively and objective evolved, refined and changed and the process measured and then repeated.


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