A business model is a story about how you create, deliver, and capture value. Map the core pieces: value proposition, customer segment, channels, revenue, costs. Then test alternatives fast. Skype used freemium. Nespresso locked customers into capsules. Don't fall in love with your first model.
Chapters
You can think of a business model like a story. A story of how your enterprise will create, deliver and capture value. And like a story, it can be one you've heard over and over before. For instance, you can start with what most people are fixated on. The value proposition. Travel for retirees. Then decide whom you can sell it to. Yep. Boomers. Sketch in how you'll get it to them. Okay, a website. And how that will generate revenue. Sure. Sales fees. You'll make it easy and automated. Next, you figure out what key resources you need to offer all that. Like a reliable website and brand recognition. Carl's thinking his key activities will be marketing, website and maintenance. And then partners will do the booking. And finally, where your costs will come from. Sales, marketing, platform development. All that will cost you. There you go. Your first model. But don't expect a medal or a breakthrough. Predictable models can work, but rarely give you a competitive advantage. So don't fall in love with your first idea. To compete in a world where the best model wins, you'll need to think harder and explore alternatives. For example, prototype a model where you give away your value proposition for free. This will instantly change everything. You might not find this model realistic, but exploring it will force you to think hard about potential alternatives. As an entrepreneur, you're thinking of your model 24 7. Now you have a tool to structure your ideas as quick prototypes to consider with your team. Who knows, you might wind up with a disruptive model that changes an entire industry. Like Skype with its freemium model. Or Nespresso which became a multi billion dollar business by locking customers into purchasing high margin espresso capsules. In fact, understanding innovative or simply successful business models in other industries can be a great place to start getting to your breakthrough. There's no right or wrong way to do it. Just three rules to start with. First, focus on the business model, not just your product, technology or service. Second, don't fall in love with your first models. The best models are built on clever, unexpected elements. And that comes from creating many less obvious versions. Which leads to the third. Iterate rapidly and test your models early in the real world. How do you do that? Don't worry guys. We're about to learn all about the real world. World beyond our canvas.
