Models

SPASA Australia

By Lindsay McGrath
Monday, 08 April, 2019


Models

When you think of your business as a model, is it beautiful with curves and muscles in all the right places? Or does it look and handle more like a model train?

In 2003, Apple introduced the iPod along with the iTunes store, forever changing the world of portable entertainment. Within three years, that combination accounted for 50% of the firm’s $18 billion in revenue, which exploded to $150 billion market capitalisation by 2007 and $1 trillion by August 2018.

Apple wasn’t the first; Diamond Multimedia launched its Rio mp3 player in 1998 and Best Data followed shortly after with the CABO 64 in 2000. In Apple’s case, good technology combined with great design and backed by a sound business model changed the way the world purchases and listens to music.

You may be thinking “well, my business isn’t Apple and that example isn’t relevant to me”. Henning Kagermann is the author of Seizing the White Space and a believer in business model innovation to deliver growth. He says there are four core business model elements: customer value, resourcing, processes and profit. He believes business model innovation — designing and developing a new model by tweaking these levers — is what has given some companies the ability to completely redefine market sectors.

A common business tool is the SWOT analysis — a self-diagnostic way to establish business strengths, weaknesses, opportunities and threats. From there you develop strategies and tactics to capitalise on strengths and opportunities while minimising weaknesses and threats. A business model is the logical (left brain) component which operates after strategy (right brain) has created the big picture plan. The model below can assist you to visualise your current market offering and see opportunity for incremental positive change.

  • Marketing: is often considered purely as promotion. Challenge this thought and think of your marketing model as total customer value propositions. What problem does it solve for the customer? How do you answer what’s in it for them? What benefit does it give them that they didn’t know they wanted? An unknown problem solved is unique value creation.
  • Net: is what drives the bottom line. Higher pricing, greater volume is often the expectation on sales teams, but how clear is the true impact of discounting on the bottom line? Start with a simple calculation — if your sales team is offering a 10% discount, how many more sales will be required to return the same level of profit?
  • Resources: including human capital and the investment in your team is crucial for attraction and retention of great staff. How does a new product actually add to your value? Are you targeting the right customer type for your brand?
  • Operational efficiency: procedures and processes can dictate business success through safety, efficiency and productivity. Beyond the operations manual, culture is “this is how we do it here” and should express efficiency and positivity. Is it okay to make a mistake? What is acceptable performance? Expanding geographically, increasing your product offering or improving buying power are operational tactics to branch out into new markets.

While you don’t always need a new business model to capitalise on a new opportunity, having a solid understanding of where you are now will provide the benchmark... and you never know, your current business model may just be that classic that stands the test of time.

Image credit: ©iStockphoto.com/pressureUA

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