Tuesday, June 15, 2021

Utilizing Business Models Upon Building Blocks

A business model is "why this business works. "If you can't answer that in a few words, you probably don't have a viable business!

A business model = Construct of {value proposition, products/services, resources/activities/capabilities, customer relationship/partnerships, cost/revenue structure}. 

A business model should not only be used for describing, analyzing, and predicting the evolution of a business system, but also provide a framework for managing the performance of the business throughout its life cycle.


Value proposition
: Business models describe, as a system, how the pieces of a business fit together, as well as the rationale of how an organization creates, delivers, and captures the multidimensional value (economic, social, cultural, or other forms of value). To create a practical business model, both sales and products in the business are absolutely critical. It usually contains numeric values representing one's assumptions about the market and about costs, etc. Business model designers should methodologically review a list of levers for business model components, and systematically generate the list of potential business model options.

The business model is a living breathing thing that can be articulated as a compelling story and validated as a logical scenario. It’s also important to validate the business model through the number test. To perceive the value of the business model and make an objective assessment of an investment, you need to have a very clear idea of the new product/service - its life cycle, the overall "value proposition," where it fits into the overall "product portfolio," the wider competitive landscape and your price/business model.

Key activities/resource/capability/capacit
y: Businesses can access the maximum number of potentially good ideas for building new innovative products, services, business models or solutions. But organizations have limited resources, time, and there are capability/capacity gaps existing to do a given amount of work. If you have a strong business model you need to have a set of value-generating skills that match customer needs and are difficult to copy, at least in the short term.

A business model should not only be used for describing, analyzing, and predicting the evolution of a business system, but also provide a framework for managing the performance of the business throughout its life cycle. To rejuvenate the business models, it’s important for innovation management to adopt the facilitation style, apply dynamic practices to build high performing and creative teams, develop a common understanding of business model innovation effort, create the necessity and motivation for it, as well as getting the management buy-in, and close the accountability gap through open door listening, cross-functional communication & collaboration, transparency, and empathy.

Partnership/relationship Management: Building a strategic alliance and business partnership is a “soft,” but an important step in business model innovation. Instead of being rigidly grouped around a specific function or team, the hyperconnected digital organizations draw together mutually supportive partnership teams collectively seek to create differentiated ideas, implement new business models, and achieve innovation that they could not reach alone. create a flexible environment in which people can grow, treating customers, channel partners, suppliers as industry ecosystem participants to create and co-solve tough problems and many common challenges.

When you have the vision and business model proposal, then it's a lot easier to "see and connect the dots" to make a delivery plan/strategy, and perhaps even adjust/modify or change the vision and mission. The type of the business where the relationship might be a make or break situation is generally where you build a partner-relationship for mutual benefit. Digital collaboration focuses on harnessing cross-functional collaboration and iterative communication via robust process and collaboration tools. As a business grows, your teams, customers, and business partners will evolve and their demands will change.

Revenue/Cost structure: A business model is a way or ways that a company generates revenues and profits. Without a product, you have nothing to sell, and without sales, you have no revenue. It’s important to have a cost optimized system that optimizes cost structure, fine tunes processes, reuse and reduction of waste reduces cost and creates new revenue streams , and makes wise investments to reinvent the business. It includes making a deep revenue/cost analysis of the components and functions of the business which generate revenues and expenses of the business.

To create and implement new business models, doing cost/benefits analysis and optimization of cost structure are important to improve business management effectiveness and efficiency. Scrutinize cost, complexity, or footprint, improve the visibility of costs measured against the visibility of quantifiable benefit. Whatever the cost is estimated to be, they will then need to determine the net increase in revenue at current margins needed to offset the cost of business.

Most successful business models are usually based on low cost, high differentiation or a combination of these factors. Maintaining these features is often the basis of sustaining the model. A strong business model is difficult to copy; it is differentiated in the marketplace. However, market forces render any given business model unsustainable. Thus, continually rejuvenating business model is a journey to keep the business fresh and build a highly innovative organizaiton.


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