Business modelling

Business modelling and planning starts with giving some ideas which your flat world business idea should take in to consideration, before getting started.  After reading through this section, I’ve added a presentation from Alex Ostenwalder and Steve Blank where the why and how of a business model is shown.  It’s the innovative approach in to the business model you are setting up, that will make it happen. But to get started…why is business modelling so important?

Off course business modelling isn’t something new. If you want an overview on how business changed since early 80ies, you can take a look at this page, where I’v added a graphical overview on the changing business models.

Business planning in the web-era will obsolete entire industries.

Traditional media got into economic trouble because with Web 2.0 it no longer controlled the distribution channel for news and entertainment. Media channels fragmented into thousands, than tens of thousands if not hundreds of thousands of internet sites. Access to other information has similarly been controlled by other industries. Instantaneous communication coupled with cloud computing applications and services will shatter these industry monopolies as well. Here is but one example: You can now track all the on-line information for your competitors (e.g., Trackle.com) and connect to customer and outside groups to unearth and evaluate new product ideas with live chat rooms, video conferencing and on-line surveys. Do companies need external market research firms?

A new test for your value promise.

With the Internet making supply chain performance easier to accomplish, customer satisfaction is no longer the differentiator that it once was. Many satisfied customers shift their loyalty as soon as a better deal shows up. And customers are increasingly using word of mouth, not marketing messages, to decide which brand or product to purchase. The socialnomics are coming into the picture. The network set the customer value, and create value even for small businesses!

[…]

Just as the Internet made sales forces and brick and mortar locations obsolete as barriers to entry, cloud computing will likely eliminate high IT investments as a barrier to entry.

Cloud computing significantly lowers the cost of IT and turns fixed costs into variable per use costs. The presence of a public cloud means that existing company’s significant IT investments will not automatically trump a new entrant’s cloud-based IT. Rather, companies had best use their IT investments to create advantages that lower costs or deliver benefits other companies cannot easily match.

IT can become a competitive advantage if your organization thinks about what internal and external customers want to do with information and you make that information easy to acquire. […] The new organizational structure is flat and organized around customers versus around functional silos. Everyone owns customer loyalty.

Vertical and hierarchical organizational structures emerged from a need to communicate information not readily accessible. Today, these structures interfere with creating customer loyalty and are no longer necessary. […]. Organize around processes and customers (and not functions) to create alignment.

The customer is now in control of the conversation. Successful companies will be highly relevant and have permission to communicate with them.

Forget standard marketing messages focused on features and benefits. Customers have tuned out to traditional messages. You must now offer customers compelling content, highly applicable to their lives, when and where they want it. And you must be credible—lying about a value promise you have no intention of fulfilling will get you nowhere fast.
If we speak in marketing terms we talk about 4P’s, besides the traditional 4P’s:

  • participation
  • peer-to-peer
  • predictive modeling
  • personalization

In the next presentation the strategy for a successful flat business is explained WITH the 4 new P’s

Social networking and socialnomics has become a requirement for companies to communicate with their customers and prospects. And the conversation must be two-way.

On-line is the place to sell.

On-line purchasing is growing much faster than brick and mortar and once you extract Amazon’s growth, manufacturers are driving the gain. Many manufacturers have decided to add on-line as a channel, no longer relying on retail stores/distributors and dealers to reach customers. […]

If we try to get an overview on different online business models, we can describe 4 ways in which flat world business can be divided:

  • content, where we pas through information
  • commercial, where we try to sell a product or service
  • audience pays, where de customers pays for the experience
  • sponsor pays, where the audience gets free access to the experience

Business Model Generation – creating a start-up success

Taken from The Entrepeneur Magazine, april 2010.

Authors Alexander Osterwalder and Yves Pigneur use the creative visuals to explain how to break down business models into nine building blocks–elements such as partnerships, revenue streams and key resources–and how to re-imagine them to reflect the changing times.

“The lines between industries are blurring, and a lot of new models are emerging,” says Osterwalder, an expert on business model design and innovation. “It’s time for a better unit of analysis and a joint language to describe a process that every company goes through.”

Business Model Generation doesn’t just preach innovation, it puts it into practice: Osterwalder and Pigneur elicited insight for the book from more than 470 “co-creators” from 45 countries. Each paid a small sum–$24 to $243–to participate in the idea exchange, which partially financed the initial print run of 5,000 copies. The books sold out in eight weeks, and the project now funds itself.

The lesson? Says Osterwalder, “We demonstrated that even for an independently published book, you can think of an innovative business model to make it work.”

Quick explanation of the business model canvas

10 New Business Models explained with the Business Model Canvas

Sources:

Web 3.0 Demands Business Model Innovation (Kay Plantes) – http://www.plantescompany.com/blog/business-model-strategy-framework/web-3-0-demands-business-model-innovation/
Alex Osterwalder – http://www.alexosterwalder.com/index.html
The business model database – http://tbmdb.blogspot.com/

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