It is not uncommon to hear entrepreneurs mention the fact of them having to beat the market competition or resistance as their major source of fear. However, it is noteworthy that this fear is more appropriately dealt with internally than externally. Consider your business competitive advantage as the K-factor of how internally mature your business is.
Therefore, among the general factors impacting a business performance in the new competitive landscape, the essence or soul of the business or, put simply, the business model is a sine qua non. Accordingly, a study by the small business administration reveals many small enterprises that fold up within their first year or their first five years do so due to a faulty business model among other factors.
Often people confuse business model and business plan. They are not the same neither could they be used interchangeably. Whereas a business plan is the comprehensive documentation of all the vital aspects of your business, business model is the systemic design of your business execution. Business model is invariably included in the business plan alongside other essentials of the business success.
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It is one thing to have a fantastic idea or product, it is another to have the right framework or environment to turn that idea or product into a value that customers are willing and able to pay for in a timely manner.
Some entrepreneurs develop a sense of urgency of launching into the market at the wile of inspiration. In other words, the moment they discover a product they feel or think is needed in the market, they are quickly propelled to take their product to the market. However, this often leads to serial disappointment since solutions and market successes are built on systems that are both iterative and interactive.
Robert Kiyosaki put this in proper perspective in a challenge he often pose to his ambitious clients:
Could you make a better sandwich than McDonald’s? Granted you could make a better sandwich than McDonald’s, could you develop a better system than McDonald’s to enable you win the market?
According to the Rich Dad Poor Dad author, most of the people who hurriedly respond in the affirmative to the query of whether they have a better product to offer often suddenly become cold when asked if they have a better system to drive the success of their product.
What are the components of an efficient business model?
Business model has 4 important elements which include the following:
Value Proposition. The value proposition entails a business offering to users based on a problem that needs to be solved for the users. Value Proposition is problem-focused or solution-centric. Therefore, it is often advised that the value proposition design should be based on the user’s perspective rather than the organization’s.
Some sample questions that could guide the design of value proposition from user perspective are delineated as follows:
• Is my need properly addressed in the offering?
• What will the good or the service or a combination of them look like?
• Who is giving me this offer?
• How is the offering to be delivered?
• What is the alternative forgone of the offering?
• What does the landscape of payment options look like?
Profit Formular encompasses key financial metrics and projections that ensure profit for the organization and its shareholders or stakeholders. The key metrics include the revenue model, the cost structure, the margins model, and the resource velocity.
Key resources are assets including human talent, technology, facilities, equipment, channels, reputation, freedom to operate, and brand that facilitate effective delivery of value proposition to end users.
Key processes may include training, budgeting, manufacturing, planning, sales, and services that enable companies to deliver value propositions to users on a recurrent basis which is then able to be scaled up.
Resource:
Hugo Campus (Editors). 2021. The Innovation Revolution in Agriculture: A Roadmap to a Value Creation. Springer