Innovating your Business Model forward

In a fast-paced, dynamic business landscape the need to constantly review and reinvent our value is undoubtedly critical. In this article we will look at using Alexander Osterwalder's Business Model canvas, coupled with the techniques taught in the book "The Business Model Navigator".

Broadly, we will be going through a 3-Steps process to define our value proposition statement and reinvent our business model.

1. Identify our existing Value
2. Defining our current Business Model
3. Innovating our Business Model forward

STEP 1: Identifying your Existing Value

A value is the worth, importance, or usefulness to the customer.

The value proposition defines the company to the customer. Most value propositions can be described using five categories of values, as illustrated below.

Let's look at some examples of how the categories of values are applied to some big companies.

What are the primary and secondary values for Google?

It offers product as its primary value with fast, relevant results for the most ill-described inquiry.

Its secondary value is access, which is embodied in the easy online connection right to the search page without annoying pages or advertisements obscuring the search box. 

What are the primary and secondary values for Amazon.com?

An easily accessible Internet site that is always convenient and provides a wide selection of products at a fair price to the busy, computer-literate customer. 

Primary value: Access, convenient & wide selection of products.

Secondary value: Price, fair price

What are the primary and secondary values for Starbucks?

A friendly, comfortable, well-located café offering a wide range of fresh, customized quality coffees, teas, and other beverages for the person who enjoys a good experience and a good beverage. 

Primary value: Experience, friendly, comfortable, well-located café.

Secondary value: Product, wide range of fresh, customized quality coffees, etc.)

So, what are your company's Primary and Secondary values? You may consider developing your company's values using the below template.

Below depicts an example of Apple's Value Proposition Statement.

Now, have a go in defining your company's value proposition statement.

STEP 2: Defining your Current Business Model

In future, competition will take place between business models, and not just between products and technologies.

Most Managers consider business model innovation to be more important for achieving competitive advantage than product or service innovation.

However, very few managers are able to explain their company’s business model, and even fewer can define what a business model actually is in general. 

A business model describes the rationale of how an organization creates, delivers, and captures value.

With your newly formulated Value Proposition statement, you are now able to populate the "Value Proposition" block and the "Customer Segments" block.

With these 2 main blocks covered, it will be easier for you to rationale with your team to populate the rest of the 7 blocks. Henceforth, I would encourage you to have a read on the book "Business Model Generation" by Alex Osterwalder.

Some prompts below to help you fill in your Business Model Canvas.

With all the 9 blocks covered, your business model canvas allows you to better articulate its business logic to your stakeholders. At this stage, what we have done is merely defining our current business model. To stay competitive, we must innovate it!

STEP 3: Innovating your Business Model forward

Business Model Innovation: Success Stories

• Amazon has become the biggest bookseller in the world even though it doesn’t own a single brick-and-mortar store.
• Apple is the largest music retailer even though it doesn’t sell CDs.
• Pixar won eleven Academy Awards in the last ten years without there being a single human actor in any of its films.
• Netflix reinvented video rental despite not owning a single physical shop.
• Skype is the largest telecommunications provider worldwide even though it does not own any network infrastructure.

What was taught in the book "The Business Model Navigator" was to confront your current business model with various business models of other companies. In their research, there are 55 different business model patterns in the industries they have studied.

Below examples of various business model patterns were extracted from their book.

To download a full list of the 55 business model patterns, I've chanced upon this website that summarize the book in an easy-to-read 15-pager - https://www.thegeniusworks.com/wp-content/uploads/2017/06/St-Gallen-Business-Model-Innovation-Paper.pdf

Try to "creatively imitate" other business model(s) into your current business model, and rationalize how it will work for your organization. Try combining 2 or more business models to further transform your existing business model radically.

By confronting your business model with other business model patterns, this session facilitates strategic discussion among your team, developing the 'much-needed' strategic thinking ability every manager should have.