The Business Model.
Models are like toys. They’re for playing and for testing. How does this model plane handle itself in a wind tunnel? What happens when I knock this pile of blocks down? How do I look in a Superman outfit? How does this doll float?
How does this business create and distribute value and make a sustainable profit?
Here are some classic examples of business models:
My clients draft a basic business model outlining:
· The value offer,
· The target market together with the means of distribution, exposure and a summary of the relationships.
· The infrastructure, including the principle resources, the main activities and the partnerships required to create and deliver the value offer to the target market,
· The expected cash-flow in and out generated by the above activities.
Here is Alex Osterwalder’s graphic image of a Business model template:
How does this business create and distribute value and make a sustainable profit?
Here are some classic examples of business models:
- The shop, (new models of internet shopping have appeared)
- The contracting business, with all the interrelated structures of sub-contractors, designers, specialist designers, project managers and supervision around it. Turn-key contracting is a variation on this model.
- The publishing business. There is now a revolution in this area with the advent of new models – self publishing and direct sales via Amazon. Amazon’s “Kindle” also constitutes a revolution to the classic publishing model.
- Michelangelo’s model was to create artworks on order from wealthy and powerful patrons. Van Gogh’s model was different and somewhat less successful.
- Nike’s model is to manufacture shoes cheaply in the east, to invest heavily on high profile sportsmen’s sponsorships thereby ensuring a wide distribution in sports shops and high prices.
- Being a freelance professional is a model, similar to the model of being an employee but with the difference that the freelancer has many bosses.
- Both entrepreneurs and freelancers are independent. The difference is that the entrepreneur is creating something which has a value of its own which can be sold. A freelancer’s business depends solely on the knowledge and skills of the proprieter and cannot be sold.
My clients draft a basic business model outlining:
· The value offer,
· The target market together with the means of distribution, exposure and a summary of the relationships.
· The infrastructure, including the principle resources, the main activities and the partnerships required to create and deliver the value offer to the target market,
· The expected cash-flow in and out generated by the above activities.
Here is Alex Osterwalder’s graphic image of a Business model template:
We then test and improve the model by rigorously submitting it to a series of brainstorming sessions, questions, presentations and experiments until the model is ready for implementation in the real world. Here too the process is one of step by step progress, constant testing and improvement.