How to Create Your Business Concept

A business concept encompasses every business activity undertaken by an enterprise in creating value for customers, suppliers and other stakeholders. Therefore, business concept extend its arch from manufacturing a product to marketing it successfully in order to amass revenue; in similar vein business concept drives every functional area in a business to co-ordinate activities so that goals and objectives are achieved in an optimal fashion. Creating a business concept is an easy task if you adopt a step-by-step approach explained below:

1. Concept Initiation: Firstly, prepare the groundwork by stipulating your purpose and objectives in setting up a concept. Review both internal and external environment and look for clues as to how you can make progress, fix a problem and enhance your value chain. Assume you wish to maximize revenue by introducing a new product. Just check out whether it is an original one, a substitute for an existing product, improvement over what you already have in line or adaptation of a competitor’s product or just a re-make of a common item

2. Concept Generation: Get contribution from your staff, colleagues as regards to the findings or fine-tuning of concepts. Teamwork is better; you can invite participants to put it in writing or just allow them to think out loud. A brainstorm is a better way of garnering new concepts or new twists to a concept that is already known. Yet there is a caveat: never interrupt, rush to criticise neither scurry to cut it down. Generation of ideas could take place in two forms: in-box solutions that have had previous history of successful implementations or out-of-box solutions that originate with parameters un-known or not tested before. More is merrier when it comes to concept generation, as you have a wide selection to choose from

3. Concept Evaluation: The maxim is that every subjective or objective matter can be evaluated by setting norms and specifications. Therefore, concept evaluation cannot be an exception. In evaluating concepts, you go in quick steps through screening, scoring and testing processes. As you begin to screen, most, if not all, concepts would fall on the way side. If there is no viable option you have to brainstorm once again or chose an external adviser. If you have concepts worthy of further analysis you have to apply a scoring system in consultation with your team members. One such scoring system that is widely used is Pugh Matrix. It is an evaluation tool, where you presume a base case with score of 5 and rank the new concepts introduced by your team on the scale 1-5-9. Any concept that is worse than the base case is ticked 1, concepts equal to base case is marked 5 and the ones that are better than base case are scored 9. Thereafter, concepts with the score of 9 are zeroed in for preliminary testing. Once again, using objective standards, a dry test must be carried out so that you cherry pick about two to three concepts

4. Concept Selection: Hard thinking, minute analysis along with “what – if “scenario casts are made so that the chosen concepts could be put through baptism of fire. At this moment, you have to make a trade-off between internal capability and external opportunity, objective standards and subjective demands, theory and practice so that you strike a via-media. The concept that has the best line of fit is generally selected for further development

5. Concept Development: A task force is named and nominated to develop the selected concept. The members of the task force would be briefed in all areas of development including technical, technological, human side, operations, marketing and last but not least financial considerations. On the up-stream, concept development takes into account objectives, purposes and specifications; on the downstream it must address the needs of the ultimate users who seek value for money

6. Concept Validation: After developing a concept in full stream it must be subjected to internal and external validation. Internally it must conform to corporate belief system, shared culture and the obvious necessity to conform to internal standards covering sustainable profit for the business. External validation is via industry standards, B2B ethics, customer perception of quality and durability and overall market acceptance. A product concept might have made waves on the drawing board. Nonetheless it could prove to be a laggard in the market. Recent initial public issue of the Facebook suffered this fate. Even though the market is willing to absorb there is no internal validation of sound financial proof available. Technology guys have a red book on separating chaff from the grain: proof of concept

7. Concept Institution: By this time the business concept is created; it is understood and ready for installation. Lovingly it is named may be after the boss who started the ball rolling; finally it is institutionalized. In this context, the definition of concept stated by American philosopher and psychologist John Dewey may not be out of place. Just check this: “A concept is meaning sufficiently individualized to be directly grasped and readily used, and thus fixed by a word”.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

Blog : http://cosmicgemslanka.com/blog/

 

Core Concepts in Building Business Models

Designing effective business models mandates that stakeholders of business enterprises understand the core concepts that lie beneath such models. A Business model that is built on sound concepts can take your business to the top range whereas a poorly made one spells doom.

Investopedia defines business model in plain language as “the plan implemented by a company to generate revenue and make profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs”. This led business practitioners to add or subtract components to a business model at will, without ever understanding the business process and the core concepts that function as building blocks around which a business model is built.

Addressing the lack of awareness of concepts academic researchers spawned several definitions of business model incorporating a number of core concepts. Surveying the literature on business model definitions and core concepts Suvi Nenonen and Kaj Storbacka of Hanken School of Economics, Finland have published a thought provoking article titled “Business model design: conceptualizing networked value co-creation” wherein they have painstakingly analysed definitions of business model given by several academic writers and have succeeded in tracing five core concepts that form main threads in these definitions:

1. Value Creation: As a core concept, value creation ranks first in the list as most academic writers harp on this issue in one way or another. Alternate phrases such as value proposition, value design, value configuration or simply value for customers adorn in their writings. Designers of business models are reminded of the necessity to convey their customers how their firms create value in the first place

2. Earnings Logic: Resorted to by many authors, earnings logic is spelt out at varying length of details. Profit potential, revenue model, revenue logic, capture value, profit formula, return to stakeholders, transactional link to exchange partners, cost structure are chief amongst these. The fundamental aspect of making profit has never been lost on these authors

3. Value Network: Thirdly, value network is emphasised as vital concept in building and sustaining business models. This was worded differently by academic writers as: structure of value chain, partner network, value network, link to external stakeholders, transactional links to exchange providers and so on. This concept cultivates external orientation of a business and defines structure, content and governance of transactions with external actors

4. Resources & Capabilities: As juxtaposition to value network, resource & capability element prod business to look more inwardly by employing assets in a suitable manner. This concept theme is illustrated by writers in the following ways: core competency, resources, assets, processes, activities and strategy & structures of material aspects residing within a business. Capability and capacity is the bulwark on which a business is built and sustained, as does the business model itself

5. Strategic Decision: A key concept confronting designers is the framing of strategic choice within a business model. Such a choice is found in expressions in academic writings as: target market, target customers, position within value network, competitive strategy, market segmentation and others that seek to differentiate the market niche and produce products and services that could satisfy the chosen segments

6. Belief System: Even though belief system was not identified by Suvi Nenonen and Kaj Storbacka as a core concept, I trust that the degree of conviction a business has on its name and goodwill ultimately decide on the success of a business model. This particular point is stressed by H L Tikkanen et al who speak of belief system in such terms as reputational rankings, industry recipe, boundary beliefs, and product ontologies.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

Blog : http://cosmicgemslanka.com/blog/