HOW TO BUILD A SUCCESSFUL COMPANY – Differentiation through the Business Model

In a constantly evolving business world, the ability to innovate is more than just a competitive edge; it's a necessity for survival and growth. Value creation in business is a complex process that involves multiple interconnected elements. Let's delve into the logic and importance of working with four key elements:

1) Knowledge about Stakeholders:

Logic: Understanding the needs and contributions of stakeholders is fundamental for any business, as they are the ones who either affect or are affected by the company's actions. This includes customers, employees, investors, suppliers, and the community. Being responsive to these needs creates a capacity for mobilization and engagement.

?Importance: Knowledge about stakeholders helps the company to shape its strategy, purpose, value proposition, and vision for the future. This understanding and mapping allow the organization to identify expectations, points of opportunity for improvement and growth, which are crucial for decision-making and sustainable value creation.

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2) Business Model of the Organization:?

Logic: The business model is the mechanism through which the company creates, delivers, and captures value. It defines what the company offers, to whom, and how it monetizes that value.??

Importance: A well-crafted business model is essential for commercial viability and long-term success. It should be flexible enough to adapt to market changes and robust enough to provide a competitive advantage.

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3) Management Model (or operational model, I particularly prefer this term):

Logic: The management model comprises the structures and processes that allow the company to effectively execute its strategy and business model. This includes governance, processes, systems, structure, and people.

?Importance: Effectiveness ensures all of the company's resources are used efficiently and effectively. It acts as the organization's "nervous system," coordinating all its parts to achieve the desired objectives.

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4) Organizational Culture:?

Logic: Organizational culture encompasses the norms, values, and shared beliefs that govern how people within the organization interact with each other and the external world. It shapes and integrates the “atmosphere” in which the organization operates and behaves.

Importance: Culture is often described as "the way we do things around here" and significantly impacts employee motivation, talent retention, and ultimately, company success. A strong culture can be a competitive differentiator and facilitate the implementation of strategies and changes.

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Each of these elements does not operate in isolation; they are intrinsically linked. For instance, organizational culture can influence or be influenced by the management model. Similarly, the business model must align with the strategy, which is informed by knowledge about stakeholders. Therefore, it's crucial for companies to view these four elements as parts of an integrated system for effectively and sustainably creating value.

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To establish a triumphant enterprise, a truly unbeatable company, it's vital to focus on three fundamental axes: efficient operations, relative market share, and a superior customer value proposition. Winning companies usually dominate at least two of these elements. Starting with operations, efficiency is key. This doesn't just mean cutting costs, but rather optimizing processes so that you can consistently and scalably offer high-quality products or services. This sets the foundation for the other two axes.

The second axis, relative market share, refers to your company's position compared to competitors in the market. Having a high relative market share not only validates market acceptance but also offers economies of scale and bargaining power. When a company combines efficient operations with a high relative market share, it becomes a force to be reckoned with—a large and lean enterprise that can dominate the market.

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The third axis, superior customer value proposition, is perhaps the most critical. This entails deeply understanding your customers' needs and desires and offering something that not only meets but exceeds their expectations. When a company combines efficient operations with a superior value proposition, it truly differentiates itself in the market, offering something unique that customers are willing to pay a premium for.

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Now, when a company manages to combine a high relative market share with a superior value proposition, it gains tremendous market power. This allows the company to set trends and dictate the rules of the game, becoming the gold standard in its sector.

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However, true success, the formula for becoming an unbeatable company, comes from combining the three axes: efficient operations, relative market share, and superior value proposition. This creates a company that's not only efficient and loved by its customers but also dominates the market. It's a powerful triad that few companies achieve, but those that do become legendary in their respective sectors.

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We'll now delve into Axis 3, crafting a superior value proposition. It is indeed one of the most critical pillars for a company's success. The central idea here isn't merely to surpass competition in a race for the lowest price or the best features, but to render them irrelevant by offering something so unique and valuable that customers don't view alternatives as comparable. This is what we term "value innovation," where you're not vying for a slice of the existing pie but rather creating a new market space you can dominate.

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To achieve this, it's essential to deeply understand your customers' needs, desires, and pain points. This goes beyond market research and data analysis; it's about empathy and understanding. When you grasp what your customers truly value, you can create solutions that exceed expectations and solve problems they might not even know they had.

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But a superior value proposition isn't just about the product or service itself; it's also about how you deliver that value. This can encompass everything from customer service to user experience, brand narrative built around your product, and more. Every customer touchpoint is an opportunity to reinforce your value proposition and render the competition irrelevant.

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Moreover, a superior value proposition often evolves. What's considered "superior" today may not be tomorrow, owing to shifts in customer needs, technological advancements, or even societal and cultural changes. Thus, it's vital not just to establish but also to continually innovate and adapt to maintain this superiority.

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By focusing on crafting and preserving a superior value proposition, you not only attract and retain customers but also build natural defenses against competitors. You become the obvious choice in a sea of alternatives, and this not only drives short-term success but also lays a solid foundation for long-term growth and sustainability.

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The book "Business Model Navigator" by Oliver Gassmann, Karolin Frankenberger, and Michaela Csik serves as a comprehensive guide for those looking to understand and implement business model innovation. This book isn't just a theoretical read but a practical tool offering a set of 55 business models, each with its own set of rules, advantages, and challenges.

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The first thing that stands out in "Business Model Navigator" is the systematic approach to innovation. Instead of treating innovation as a stroke of genius or a fluke, the book presents a methodology that can be applied in any organization. This methodology is rooted in extensive research and analysis of numerous success and failure cases in the business world.

?One of the book's most valuable aspects is the set of 55 business models it introduces. These models can be clustered into various axes, such as:

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1. Product-Based Business Models: Focus on selling physical or digital products. Companies like Apple and Samsung exemplify this category, offering a range of electronic devices from smartphones to laptops.

?? - Licensing Model

?? - Direct Sales Model

?? - Product

?? - Subscription Model

?? - Personalization Model

?? - Razor and Blade Model

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2. Service-Based Business Models: These models center around providing services to customers. Uber and Airbnb are notable examples. Uber offers on-demand transportation, while Airbnb facilitates short-term accommodation rentals.

?? - Service Subscription Model

?? - Freemium Model

?? - On-Demand Service Model

?? - Consulting Model

?? - Agency Model

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3. Platform Business Models: Act as intermediaries, connecting different user groups and facilitating transactions between them. Amazon and eBay are classic examples, serving as online marketplaces where buyers and sellers can meet.

?? - Marketplace Model

?? - Social Network Model

?? - Platform as a Service (PaaS)

?? - Software as a Service (SaaS)

?? - Sharing Economy Model

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4. Customer Experience Business Models: Focus on delivering an exceptional customer experience beyond the product or service itself. Starbucks and Disney are examples. Starbucks offers a cozy environment to enjoy coffee, while Disney provides a "magical experience" in its theme parks.

?? - Concept Store Model

?? - Experiential Selling Model

?? - Brand Community Model

?? - Gamification Model

?? - Membership Club Model

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5. Social and Community Business Models: These models have a strong social or community focus. Grameen Bank and TOMS Shoes are examples. Grameen Bank provides microcredit to low-income entrepreneurs, and TOMS donates a pair of shoes for every pair sold.

?? - Microfinance Model

?? - Fair Trade Model

?? - Crowdfunding Model

?? - Social Impact Model

?? - Cooperative Model

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6. Distribution and Logistics Business Models: Focus on how products or services are delivered to the customer. FedEx and DHL are leaders in this category, specializing in global logistics and distribution.

?? - Dropshipping Model

?? - Wholesale Model

?? - Online Retail Model

?? - Reverse Logistics Model

?? - Integrated Supply Chain Model

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7. Content and Information Business Models: Focus on creating, distributing, and monetizing content. Netflix and The New York Times are examples. Netflix offers a vast streaming content library, while The New York Times is a trusted source of journalism.

?? - Publishing Model

?? - Content Aggregation Model

?? - User-Generated Content Model

?? - Content Licensing Model

?? - Citizen Journalism Model

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8. Partnership and Collaboration Business Models: Rely on strategic relationships with other companies or individuals. Microsoft and LinkedIn, as well as Google and Android, are examples of strategic partnerships that extend the reach and resources of both parties.

?? - Affiliate Model

?? - Joint Venture Model

?? - Franchise Model

?? - Brand Licensing Model

?? - Strategic Partnership Model

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9. Data and Analysis Business Models: These models focus on collecting, analyzing, and utilizing data to create value. Palantir and Tableau are examples, offering advanced data analysis solutions for a variety of clients, including businesses and governments.

?? - Data Brokerage Model

?? - Data Analysis as a Service Model

?? - Targeted Advertising Model

?? - Insights Selling Model

?? - Data Monetization Model

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10. Innovation and Research Business Models: Focus on developing new technologies or processes. SpaceX and Tesla are notable examples. SpaceX is revolutionizing space transportation, while Tesla leads the way in electric vehicles.

?? - Incubator Model

?? - Accelerator Model

?? - Innovation Lab Model

?? - Open Development Model

?? - Technology Transfer Model

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11. Hybrid and Diversified Business Models: These models combine elements from several of the above categories. Virgin Group and Alphabet (Google) are examples. Virgin Group operates in various industries, from music to air travel, while Alphabet is the parent company of Google and several other innovative companies.

?? - Multiplatform Business Model

?? - Conglomerate Business Model

?? - Cross-Subsidy Business Model

?? - Direct-to-Consumer (DTC) Business Model

?? - Virtual Community Business Model

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These are generic examples and might not capture all the nuances of the 55 business models mentioned in "The Business Model Navigator." However, they can serve as a starting point for understanding different types of business models and how they can be categorized.?

In conclusion, some tips for those interested in business modeling: First, start with a comprehensive analysis of your current business. Understand your strengths, weaknesses, opportunities, and threats. Then, identify which of the 55 business models (or a combination thereof) might be most relevant to your specific needs. Don't be afraid to experiment and iterate. Innovation is an ongoing process, and it's important to be willing to make adjustments as necessary.

Another key tip is to involve the entire team in the innovation process. Business model innovation shouldn't be left just to top management or a specific department. It's a collective effort requiring the participation and commitment of everyone in the organization.

• The image illustrates the concept of building a successful and growing business using the 55 business models. At the bottom of the image, different business models are represented, forming a strong foundation for a company. Above, a growing structure symbolizes a thriving business, with branches extending upwards, each adorned with icons of various business models. At the top, a flourishing tree canopy represents the successful growth and expansion of the business, incorporating diverse strategies.