Over the past 3 decades, strategy has been the primary block of competitiveness. In the future, a sustainable advantage may be associated with the business model. The convergence of information and communication technologies in the 1990s triggered short-lived fascination with business models. Today’s interest in business models has been caused by the combination of several factors: deregulation, technological change, globalization and sustainability. Since 2006, the Institute for Business Value’s Global CEO Study has reported that senior executives across industries consider developing innovative business models as a top priority. A 2009 follow-up study showed that 7 out of 10 companies focused on business model innovation, and 98% were modifying their business models. The conclusion is clear: focus on business model innovation will undoubtedly remain. To develop a successful business model, here are some tips:
1. Maintain a relationship with your consumer base. Regardless of its size or purpose, any business depends on satisfying the needs of its customers, stakeholders and members. This means that it is important to conduct market research to be able to understand business growth opportunities such as maintaining customer retention rates, positive experiences and new acquisition strategies. Relationships could be improved by approaching members with transparency and empathy. It is also crucial to implement post-sale tactics such as membership rewards, discounts and perks or exclusive benefits.
2. Assess the risk of your business model. Creating a business model comes with certain risks. If you anticipate these pitfalls, you can increase your chances of success:
- Are you answering a question nobody asked? You might be involved in an idea that customers have not really asked for. Any business idea must be driven by real demand, a problem or a gap in the market.
- Does your business model have built-in flaws? A business model can be easily undermined with silly mistakes such as having costs that exceed revenue, the lack of good channels to your market or the lack of the right long-term partners.
- Are you ignoring threats? Never underestimate a competitor, regardless of their size. You should remember that the needs and whims of customers can change a lot over time. To ensure a perfect-fit relationship with your customers, you need to adapt.
- Are you executing it poorly? There is no use of the best business model in the world if your business is not well-structured for it. To avoid this, ensure that all your resources (people, technology and capital) are deployed according to the demands of the model. If there is a tempting opportunity, make sure it fits the model.
3. Examine your business model. To build a successful business model, you need to focus on extensive research, creative brainstorming, planning, action, detail and follow-through. Make sure to review the effectiveness of your strategic position annually. Consumers will not differentiate your brand or start talking about it if they do not consider your brand to be remarkable in relation to your competition. To succeed in a competitive business environment, you need to build a business model that will ensure ‘the highest percentage of success at capturing market share’. This task, however, is challenging. It has been observed that many business people simply do not know what they should be planning, what questions to ask, what decisions to make and what information to research. Business owners who are unable to make educated decisions about their business model will fail at satisfying their customers enough to earn their loyalty and develop word of mouth advertising.
4. Develop a strategy to generate demand. If you are not planning to do something radical for the launch of your business, you will need to think how to build interest in your company and think of ways to find leads and close deals. You should also think of how customers will come across your business and what you want them to do once they have. If you draw up a demand generating strategy, you will create an outline of your customers’ journey while establishing what motivates them to take action. To generate demand, it is also crucial to figure out how your business will stand out from competitors. You need to determine what value your business can deliver, and what makes your products or services better than competitors’ offer.
5. Forecast the finances of your business model. When you have checked that your prospective customers are interested in your business idea, it is time to create a more detailed business model. This time you need to figure out what your revenue and expenses will be. These data will help you estimate the profitability of your business. Another benefit is that these forecasts will help you find out how much money you need to start your business and get through at the beginning.
You should create the following documents:
- a sales forecast,
- expense budget,
- profit and loss,
- cash flow,
- balance sheet.
When you create your forecasts, make educated guesses. For example, try to guess how many customers you can acquire, how much they will spend, and how much it will cost you to run your business.
References: Ramon Casadesus-Masanell and Joan E. Ricart, hbr.org | Mark Frissora, asaecenter.org | Nick Green, unbiased.co.uk | businessknowledgestrategies.com | connects.world | Noah Parsons, liveplan.com