Ahh Business Models - Poetry to those who love Strategy!

Hello Everyone,



Having worked in a number of different companies and several fields - legal, education and the favorite sales/marketing/management/operations where I spent my longest time, it is so refreshing to take a step back and review how someone else views a business model. When you are living it in a business, sometimes, you are too close to really understand what is going on. That is, you are behaving much like the proverbial mouse in a habitrail. Stepping back and seeing with fresh eyes, the divine aha becomes readily apparent.



As most recently presented to me, there are 8 essential ingredients to a business model. (source: Dr. Craig Piercy, University of Georgia - Terry College of Business)



1 - Value Proposition - This term refers to how a company's product or service can fulfill the needs of consumers. What can you offer to the customer - why should they buy from you instead of the company down the street or on another website.



2 -Revenue Model - How will the firm generate revenue, profits, and produce a positive ROI for investors and owners. In simple terms - it is the question 'how are you going to show me the money!'



3 - Market Opportunity - This is where you determine the company's intended marketspace and the overall financial opportunities available to the firm in the marketplace. In the Business Plan itself, this is where you define where your best case, worst case and most likely case scenarios come from based on the market total potential. What marketplace will you represent and serve with your company and what is the most likely revenue potential for the venture?



4- Competitive Environment - This is the area which discusses who is in direct or indirect competition to you. Who is selling the same or similar products? How are you able to compete? What is your point of difference that separates you from the competition?



5 - Competitive Advantage - This is achieved when a firm can produce a superior product or they can offer a product to the market at a lower price than others. WalMart has long been the quintessential definition of competitive advantage with a focus on low prices. They are known as the low cost leader and are actively studied in business schools.



6 - Market Strategy - What is the formalized plan that is put together to detail exactly how to attract customers to your business, product or offerings? How do you attract your target market - and even further who is in your target demographic? Remember the example of watering a garden with a sprinkler - a little water goes everywhere versus hand watering with a hose - the water is concentrated on the plants which need it the most. Plant your marketing strategies with the proper audience addressed and you can be successful.



7 - Organizational Development - How will you set up the business? Are you a micromanager who must make every decision or will you hire great people and empower them to act within a set of guidelines that lead toward growing the busness? Structure is critical to showing people a path to grow and functionally to set up the business. What is the best structure to fit the business that you are creating?



8 - Management Team - Who is part of the team who will make this business a reality taking the idea to fruition? What skills are necessary to ensure success? What are the weaknesses of the team members? For example: hiring a family member may make you feel safe in that they should have your best interests in mind but in reality, you could be exercising the Peter Principle and hiring the worst person for the job. The strength of the team helps to add credibility and relevance to your venture.



Each of these are actively explored in a professional business plan and developed so that all questions are answered without hesitation. When developing the business at it's infancy - before the opening - truly in the incubation period, it is important to flesh out these to ensure that all possible outcomes and scenarios are analyzed.



More later!



CH