BUSINESS MODEL CANVAS

BUSINESS MODEL CANVAS

In an article in Inc. magazine in June 2015, Jim Schleckser advised:?“I believe that the best leaders never waste a good crisis because it affords you the chance to make the kind of large wholesale changes your organization needs that you've also been putting off for too long. ?To put that another way, sometimes the best move is to let the fire do its work so that you can rebuild something stronger from the ashes.”

We are certainly in a crisis!?In fact we are facing many crises—climate change, political upheavals and unrest and the economic fallout and dislocation caused by theses. While we may disagree with the characterization of any crisis as ‘good’, we should always take the opportunity to choose our response—to learn from the crisis and emerge better and stronger.?Many of you, micro, small and medium sized enterprises, mom and pop shops and sole traders, have been severely impacted by the Covid-19 pandemic and rising costs of basic commodities caused by Russia’s invasion of Ukraine—you may have had to downsize and think about new and creative ways to serve your customers.?Some of you are still worried!?Understandably so, but I have heard worrying described as praying for something bad to happen.

Therefore, instead of worrying you need to clear your head and take time to consider what the future may look like.?Start by turning off your WhatsApp and other notifications.?I am amazed at the amount of time people are wasting by reading and forwarding junk on social media.?Use the time you save to FOCUS and think about your response; to develop action plans you can implement as life returns to a new normal. ?I would suggest that you start by looking at your business model.

Business Model

In their book “Business Model Generation”, Alexander Osterwalder & Yves Pigneur note: “a business model describes the rationale of how an organization creates, delivers, and captures value.?(https://books.apple.com/us/book/business-model-generation/id599573920)

What is your business model??How do you create value for your customers??How do you deliver that value??And how do you make sure that you are capturing enough of that value, after paying your suppliers and employees, to pay yourself?

Value Creation

Every business model should start with a look at customers. ?Who do you serve??Can you identify your customers’ pains??What do you do to help them reduce or eliminate their pain??While I was at JMMB we were focused on making every client interaction easy and enjoyable and on ensuring that we always acted in their best interests.

Why should I buy your product or service as opposed to the product or service of another supplier?

I believe that you must provide answers to the following question: Why should I buy your product or service as opposed to the product or service of another supplier??The answer to that question is your value proposition.?And your answer to the question may be quantitative—lower price, shorter distance—or qualitative—quality of materials used, the special way you make your clients feel, speed of service.?What makes you special??What separates you from the rest??Why do people drive from San Fernando to Maracas to buy your product??Why do they want you to do their hair?

You also have to be clear as to how much your customers are willing to pay.?What do they pay now??How do they pay??How would they prefer to pay? ?How would you like them to pay??What percentage of your revenues do you earn from each product, service, or customer segment??Are you selling a product or the rights to use the product for a certain length of time??If you’re selling a service, e.g., counseling, is it better to bill on delivery, or can you offer ongoing access, a subscription if you will, at a discount?

Value Delivery

This aspect of your business model was most probably seriously impacted by the virus.?You were most probably forced to close your offices or production facilities –your restaurants, salons, factories.?You may have also had to rethink your delivery options.?The questions you will need to consider here are:

• How do you communicate with your customers??How should you communicate with customers in a post-pandemic world??Is Zoom here to stay??What about Microsoft Teams or Slack?
• What kind of relationship do you have with your customers??Do you know them??How will you re-engage with them??Do you have their email addresses and mobile numbers??Do you think it would be useful to divide your customers into segments based on the type of relationship you have with them?
• How do you deliver your product or service today and tomorrow??Is pick-up and delivery a permanent option??What about online teaching, training and coaching?
• How do you sell your product??How will you sell your product??Is it time to really look at social media as an option??Are virtual tours of homes an option for real estate agents?

You also need to take stock of the key resources necessary for creating and delivering value for your customers.?I believe that the most critical resource is the human resource—do you have the right people in the right roles??What are you doing now to ensure that they remain healthy and committed??Also very important are your financial resources.?Have you been communicating with your bank or credit union??Do you have the necessary lines of credit in place to weather the storm??What about your office??Given the impact of Zoom, Teams other team based communication software, do you really need all that office space?

The most critical resource is the human resource—do you have the right people in the right roles?

I want you to take some time to think carefully about the key activities that you do every day to deliver value to your customers.?What exactly do you do to solve their problems and alleviate their pain??And you should also spend some time analysing your relationships with your suppliers—those who partner with you to deliver your critical activities.

Value Capture

The difference between the revenue earned from customers and the cost of delivering that value is the value captured.

Therefore, the last piece of the puzzle is taking a hard look at the cost of delivering the value proposition.?Costs can be broadly divided between variable costs (move up and down as sales move up and down) and fixed costs (are not dependent on volumes produced).?For most of you, these fixed costs, like rent and office staff salaries, are the most problematic at this time.?However, don’t lose the opportunity to take a hard look at these fixed expenses.?Working from home can eliminate those mind-numbing commutes, increase productivity directly and, through the reduced need for physical space, reduce rent expense.

I hope that you take the time to think about your business and plan for the post-pandemic world.?If you would like a PDF copy of the business canvas you can check out this link:?https://www.strategyzer.com/canvas/business-model-canvas.

As usual, I look forward to your questions and comments.?Be safe.?Take good care.?

Cheers, Nigel

Nigel Romano, Partner, Moore Trinidad & Tobago, Chartered Accountants