BUSINESS MODEL IS KEY

Create Competitive Business Models

Organizations rise and fall depending on the business models they develop and implement. If you have a good model you are likely to prosper but if you have a bad one you are most likely  losing money. First things first. In simple terms what a business model ? A business model is  a structure or framework of how an organization engages with its clients or customers so that they willing pay for its products and services in a sustainable manner.  Payment by customers generates revenues and the means to pay costs and  possibly  earn profit. The key things to consider in creating a powerful business model are:

1.       Creating value for customers

No matter how much marketing and advertising you do if you cannot create something the customers want or appreciate then you are going nowhere. To succeed as a firm you must be able to meet a customer need or solve a problem at a cost that the customer is willing and  able to pay. If you create something well sought after at a very low cost you have high chance of success. You have opportunity  to increase price and make more profits. You can keep low prices and other competitors can't match you.

2.       Appropriating the created  value

You can create customer value but benefiting from the value is not obvious. Sometimes imitators gain from genuine innovators. Appropriability  is possible with a  lot of innovation and creativity. Another pertinent question is whether  customers can afford  goods and services? How do they pay? Is it in physical shops, online or via some other platform? To appropriate value you must give customers hassle free platforms to facilitate  exchange . Customers are always hungry for generously priced goods of high quality. To easily  part with money  every transaction should be  be a joy to execute instead of frustration or pain.

 

3.       Select and Engage with the right customer

Successful organizations are happy to lose some non profitable customer segments. They focus on developing unique profitable segments. Through appropriate customization successful firms select, engage and develop the right segments in a sustainable manner. Most companies fail  when they try to treat  all customers the same ignoring the fact that today’s customers demand differentiation, personalization and individuality. 

4.       Decide on Competences and Infrastructure to develop and others to sub-contract

In a world of speed and agility, success is hinged on excellence and  in what you do. If you are weak in certain activities pass them to those with capability or look at ways of upgrading your competences. To be fast and flexible means you don’t have to build all the infrastructure yourself but share, subcontract or outsource.

5.       Build an effective production system

To deliver sought after customer value consistently and reliably you need efficient systems and processes. Therefore an effective production system is key to sustainable competitive advantage. To stand above the pack there is need to design, operate and manage efficient systems, processes and policies. This ensures customers get the best quality always. It is also important to periodically review the production processes and to adjust them in line with the feedback received  from customers. Progressive companies are quick to own and correct mistakes. They pride in continuous improvement based on lifelong learning.

6.       Innovate the business Model

No matter how successful you have been, the business model requires periodic assessment to determine its relevance and effectiveness. Good leaders are not afraid to adjust or even abandon a successful model for the sake of implementing one that is future proof. Innovation of the business model should be part of continuous improvement. Customer needs and tastes are changing so there is need to be in perpetual state of flux, monitoring and improving the way business is conducted. Some organizations have failed to embrace change and they have joined others in the grave yard.If the customer wants to rent a product don’t force him to own it. If the customer wants to pay as they go don’t force them to  pay for the whole month. Also, it is important to realize that customers demand many goods and services for free. Sometimes its better to give them free delivery or repair . Therefore its better to  spend time changing business models instead of trying to change  customer mind frame.

 

Re-modelling the business model should be effected  even in times of great success. The greater the success of a business model brings the greater the risk that executives are tempted to keep and use it for life. Customer needs are changing and the business environment is also becoming more complex and challenging. The only sure way to succeed in the highly competitive, volatile and uncertain market is to be comfortable with change. As a result even the most successful and promising business model needs adjustments.

Dr Andrew Nyambayo (PhD. MBA, Bsc Eng) is a business leader, strategist, coach and motivational speaker with over 20 years experience in the telecommunications and service industry. He is the author of famous books, "Integral Marketing: Enhancing Livelihoods"  and  "Succeeding in Turbulent Times"