Designing a business model is a definite pleasure if you know simple home garden truths. You always arrange flower pots in logical order displaying simplicity and style. Extend this to the business model. Make your business model simple but substantive; robust and at the same time coherent. So placing components of a business model in a logical order is as easy as arranging flower pots in your garden if you follow the framework introduced by Gary Hamel in his book “Leading the Revolution”. Though the title sounds rebellious, the elements are conveyed matter-of-factly. Let me show how this works out:
Framework for Business Model
Gary Hamel defines a business model in most simplistic language. He says a business model is “a business concept that has been put into practice”. Extending this simplicity he fashions a business model framework based on elegance and coherence. Anchored on the two dimensions of coherence, namely, internal consistency and logical order, Gary Hamel makes the elements flow seamlessly like poetry. His framework does this by firstly detailing core strategy thereafter leveraging internal resources and external partners to offer customers an effective sales interface. Allow me to detail the elements of the business model so that you can design one for your business:
1. Core Strategy: Before we talk about core strategy it is better to find business vision and mission. From vision we have goals and from mission we get objectives. Vision and goals are of fairly long term nature whereas mission and objectives are of short term duration. Strategy is framed keeping in mind the achievement of both goals and objectives. Moreover, strategy covers production, marketing and the co-ordination between these two areas to spawn a bundle of products or services. Detail description of the products need to be given along with the scope and extent of the market to which the products are aimed at. Furthermore, calibration of the market is to be done on the basis of differentiation. Each segment will be treated with a strategic focus fine-tuned to the needs and characteristics of that segment.
2. Strategic Resources: These are internal resources configured to practice the core strategy; leveraging internal strategic resource is part one of the agenda taking a designer of business model to walk through core skills, core assets and core processes. The first one, core skills relate to human resource, technical excellence, brand name and financial muscle all of which boost up a business as a strong tower with much power. For example, Louis Vuitton Brand plays a big role in driving sales for the luxury leather bag manufacturer according to BrandZ an annual survey published by Millward Brown a consultancy organisation active in the field of brands. Core assets include land, premises, factory, plants, machinery, offices all of which are generally treated as fixed assets liable for depreciation. In the case of core processes these may be fully owned and patented or used under licence for a specific period with upgrades provided by the license holder.
3. Value Network: Here we trace external partners of a business. Leveraging external value network hovers around suppliers, partners and collaborators. Suppliers may range between dedicated to on-demand ones; specialised to general ones; materials to know-how providers. On the other hand partners cover gamut of service providers such as designers, consultants, joint venture partners, assured suppliers who combine their function with technical know-how sellers. Additionally, line of business partners masquerading as agents, representatives distributors and re-sellers are functionaries in sales. Collaborators are generally likeminded businesses that seek to have common ground in persuading and pressurising government agencies and other regulators to toe their line. Or seeks degree of co-operation amongst competitors to serve a common interest. In other occasions business teams up with non-commercial entities to ensure better business climate.
4. Customer Interface: This is where a business realizes its benefits after completing the above three elements. How customer inter-acts with the business and goes through the sale experience is a subject matter of customer interfacing. An effective customer interface is built with five limbs. Fulfilment of needs is the first one entailing channels and distribution like stores and internet; communication and promotion is the second limb that makes available information of the products to the potential buyers and provides insight into the functioning of sales department. Support covers after-sales and maintenance of the products sold; customer relationship works on attracting and maintaining the pool of buyers; finally pricing consummates the sales function. Attractive and affordable price makes the deal for both the business and the buyer. And that means both parties exchange value one parts with money and the other obtains a product or service. In sum, both get the benefits, really.
Muthu Ashraff
Business Adviser
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E-mail: cosmicgems@gmail.com
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Blog: http://cosmicgemslanka.com/blog/
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