Modern Business Models

Innovative business models are changing the world as we know it. While old traditional business models are dying a slow death, companies that are working tirelessly to reinvent their business are winning over those that have leaders who hang on to old beliefs and business models of the past. Many companies now claim to be undergoing transformation, but only the minority have leaders who invest in in reinventing their business models. My name is Rob Llewellyn, and as you know, companies need people with the right capabilities to manage and lead transformation. As you know, orchestrating successful transformation isn't that easy. And I mean innovative transformation which creates a new future without the constraints of the past. Which is why I hope that what I share in this episode will help you get better equipped to perform at your best as a manager, leader or consultant. If you want to learn more, go to studythrive.com A product is the center of a business model, but it's not a business model in and of itself. So regardless of how great your products and services might be, they'll only enable the company to be successful if they're part of a very effective business model. So competing on products alone won't lead to any significant level of success. You need to compete with business models. Now, new business models are really at the heart of new disruptive companies that we sit up and take notice of, and antiquated business models. They're at the heart of the companies that are on a downward trajectory. A business model is about delivering value and capturing a portion of that value in the form of revenue and profits. And while some business models have always existed, others are new and more are waiting to be discovered or revealed to the world. The big success factor in business is no longer better quality or lower prices. It's all about having a superior business model. As Peter Drucker once said, a business model is supposed to answer who your customer is, what value you can create or add for the customer, and how you can do that at reasonable costs. Now, a business model is a conceptual structure that supports the viability of a product or company and explains how the company operates, makes money, and how it intends to achieve its goals. What all the business processes and policies that a company adopts and follows are part of the business model. So a business model is a description of the rationale of how a company creates, delivers, and captures value for itself as well as a customer. And different companies can have similar offerings, but different business models. Most people know that customers are extremely important, and without them, we wouldn't have a business. So if you can imagine customers being at the heart of a business model? Well, you can think of revenue streams as the arteries. Although there's not a single way to define a business model, there is a popular approach involving what's called the Business Model Canvas, which is a really good way to start to understand what are the pieces and the moving parts of a business model. Then the Business Model Canvas led to the Lean Canvas, which is a one page business plan template created by Ash Maurya. And that helps you deconstruct your idea into its key assumptions. So that was adapted from Alex Osterwalder's Business Model Canvas and it was really optimized for startups. Basically it replaces lengthy and elaborate old fashioned business plans with a single page business model. So these are just two of the tools that you can use to develop a business model. We don't have the time to go into these, but you can search Google and find a lot more on the Business Model Canvas and the Lean Canvas. Some of the fundamental business considerations that any organization should be considering when looking at new business models are how does the product and service generate revenue? Who pays you? How do you charge? When do you get paid? How do you collect money? What's your pricing model? What's the lifetime value of each customer? And is your revenue model scalable? These are just some of the key questions that you should be answering during the development of a new business model. Now, there are many different types of business models, so let's explore some of them. You've got the platform business model. Whereas traditional business has been done by one company selling products and services to a customer, the platform changes this fundamental element of doing business. It simply uncovers new sources of supply and demand. The fastest growing companies are now those that build and manage platforms that facilitate the interaction of customers and companies to create and exchange value together. The notion that bigger is better is diminishing really fast. As the laws of competitive advantage are changing dramatically. Digital business leaders are now creating the scalable and interconnected platform economy that underpins success in an ecosystem based digital economy. We've got Uber, Amazon, Apple, Airbnb, Facebook, Google and so many others. They all have platforms. That's the one thing they have in common. They all thrive and they scale at a phenomenal rate as a result of this business model. Let's look at a few examples. The traditional pipe business have been TV channels. In a platform model, it's YouTube. In a pipe business we had Encyclopedia Britannica. In a platform business we had Wikipedia. And in a pipe business model, we had classrooms in. In a Platform business. We had the likes of Udemy, then we've got multi sided platform models. Any company that offers services to both sides of a business carries out a multi sided business model. For example LinkedIn and Freelancer.com this the freemium business model, a mix of free and paid services to grow business and acquire customers. Companies offer free or light versions to customers, but for a limited time or with limited features. And to unlock the upgraded features, the customer has to opt for paid services. Example as Zoom, Dropbox and mailchimp. The subscription business model. This model allows the customer to get services by paying a fixed amount every month or year. In this case, the company has to provide enough value to its customers so that they stay subscribed. Typical examples are Netflix, Amazon prime and the Dollar Shave Club. You've got hidden revenue business models which refer to a revenue generating system in which users don't have to pay for the services offered, but the company still earns revenue streams from sources. For example, Google earns from advertising money spent by businesses to bid on keywords, while users don't have to pay for Google, of course. Other examples of Facebook, Instagram and Twitter. You've got the vertically integrated supply chain business model. This model is about owning and managing the supply chain activities for a company's products or services. When a company has better control over how a product is produced and delivered to end users, it can provide products at lower prices and often with a better service. Think about companies having both factories and retail online stores such as Amazon, Tesla, Walmart and Apple. Then we've got the data licensing business model, which is a business model based on data. For example, Twitter sells real time data to its partners, which is then used for advertising and customer insights. Another example is how Google licenses data to Uber. Uber's core business is to help passengers connect with cabs in their neighborhood. And to do this, both the passenger and the driver need to know the exact GPS coordinates of each other over a map. And Uber does this by licensing the rights to use Google's data. This way Uber doesn't have to reinvent the wheel and can focus on their core business. And there are many more. You've got the crowdsourced business model examples Wikipedia, YouTube, Kickstarter, Lego ideas, Unilever, Coca Cola. And you've got the product as a service model, which is where you sell the serviceable a product rather than selling the actual product itself, such as Zipcar or FedEx. While there are many aspects of an organization that can be part of transformation business models, the blueprint to create deliver and capture economic value. And the purest form of transformation is business model transformation. If you want to take your transformation capabilities and credentials to the next level, go to studythrive.com.