Why Vertical Business Model still matters?

Ostensibly, large number of businesses throughout the globe still operates under the tag of vertical business model. One reason is that it is quite easy to establish a business on vertical base. The second compelling reason is that vertical business model passes two cardinal tests: it conveys its business concept clearly and its profits add up to positive integer. Read more…..

Ms Joan Magretta, management consultant penned up an article in Harvard Business Review titled “Why Business Models Matter?” (HBR May 2002). Therein she described a business model as one telling a good story. In addition she presented two tests a business model should breast-up. Narrative Test requires the story must make sense. Numbers Test commands Profit & loss must add up. When I looked deeply into this matter, I found that in most cases vertical business model passes muster in both tests. Let me explain what vertical business model is and how it functions:

Vertical Business Model

When a business manufactures and sells or otherwise deal with such activity in an upward integrated manner it comes under the portal of vertical business model. Though of common type, vertical business model deals in specific area. Its focus is specific and it sells mainly a line of product that shows high degree of specialization. Jewellery manufacture, diamond processing, manufacture of parts or components to computers, autos, electrical and electronic goods are few of these specialized ventures. Vertical business model seeks market domination in the chosen sphere or a monopoly position in a particular market segment. As a result operational activities tend to be sophisticated using technology in appropriate manner. In addition to in-house staff vertical business model seeks and obtains services of external consultants and advisers.

Both supply chain and value chain are strictly planned and maintained. In the case of supply chain machinery and materials are acquired from dedicated sources. You know that value chain deals with making and selling of products or services. Here again business reinforces the value chain by stringent quality control and sticking to delivery schedules along with dynamic sales programmes that target segmented market using varying channels anchored on a win-win customer relationship. In sum, vertical business model facilitates efficient co-ordination of key income drivers such as sales and key expense drivers such as cost of sales.

As the name goes, vertical business model depends more or less on vertical integration as part of the business philosophy. Acquiring resources such as warehouses, stores manufacturing facility is key to this business type. Hence, we notice that tremendous amount of assets are built –up within a business, financed by internal revenue, long term loans or buyer credit. The last is much more common in the case of automakers. Even though enlarging size and scope to meet up with increased demand could present, in the short term, a challenge to a vertical business, in the long term it translates such event into a rewarding business opportunity. Computer parts vendors, for example, go through this phase, mainly encouraged by what we call “scalability pluses”. Scalability refers to the ability of the business to handle growth in the market demand for its products. Scalability pluses arise when a business invests in increasing its scalability and finds that the additional capacity could be sold to different buyers. Amazon.com had invested huge money on its IT infrastructure. Later in 2006 it offered cloud computing services creating altogether new customers in the form of web companies. This event is cited and noted by Professor Alexander Osterwalder in his book on “Generating Business Models”.

A vertical business model fits easily into creator and distributor type companies. A creator is a business that manufactures product and sells it with a margin. On the other hand, a distributor business buys from a manufacturer and re-sells to ultimate buyers after adding its mark-up. Since both these types border on product or service specialization we note that many businesses today can operate a vertical business model with much ease. More than that, with lot more profit.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Whose job is it, designing new Business Model?

Henry Chesbrough once lamented that business model is nobody’s job. That is changing now. Presumably after his assertion that “the most importance, effective and disruptive innovations are often the result of new business model, not new products or technologies”, many companies are learning to cope up with designing and innovating business models to keep up with competition. The job of designing new business models is now entrusted to all C-level officers.

1. Chairman/ President of the Board of Directors: The chair is responsible for drafting business concept, policy, vision & mission, goals & objectives in consultation with the senior management comprising C-level officers. He must articulate the value proposition after assessing the internal and external environment. The chair is the beacon of light and patron for designing new business model. Hence, he functions as friend, guide and philosopher to the senior management

2. Chief Executive Officer: The CEO is necessarily the team leader whose job is to define the value proposition in practical terms involving segmented markets, competitive strategy and identification of chief players in the value network comprising production and sale of a line of products. He must be squarely guided by what Peter F Drucker said about business: “The purpose of business is to create a customer”. Undoubtedly, his prime concern is to satisfy customer needs and wants which he seeks to obtain by chalking out a business model. To do that, he ropes-in his colleagues who are chiefs of operations, marketing, finance and information who by nature and training should display the same level of enthusiasm as he does

3. Chief Operations Officer: After corralling the services of human resource, supply, logistics and admin departments, the COO is tasked to identify and evaluate the supply chain along with core competencies within and the partner network outside. This helps him to design the three components in the value creation segment namely key activities, key resources and key partners

4. Chief Marketing Officer: Value delivery is his key forte. The components under this area include customer segments, distribution and delivery channels and the hallowed aspect of customer relationship. Thoroughness of identification and analysis being the chief trait of the COO, he would be in action from the time designing business model is flagged on. In fact he is the one who is most concerned with the customer and he is the one who is the bread winner

5. Chief Financial Officer: Inevitably the COO is saddled with tending the house of finance, a most difficult task to do in any business. In the case of Blue Nile Diamond and Jewellery there has been constant turnover of CFOs whose stint is invariably cut short. This does not mean that the CFOs there are not competent; simply they cannot cope up with the demands of the particular business model that was employed in Blue Nile. In every business model the CFO has unenviable tasks of assessing the cost structure in creating value in its perspective and balance with revenue stream generated from income mechanism. More than that, he has to make sufficient margin to keep the business oiled in all its wheels and return attractive dividends to owners/shareholders. CFO is never spared to mend finance alone. He has to do the thankless job of charting the strategic course; handle risk management; and top of it he is often called upon to act for the CEO when the latter is on holiday or under pressure of work

6. Chief Information Officer: While Chairman downward to the C-level officers described until now are concerned with business model and its logic at the strategic level, CIO is a different kettle of fish. He is given responsibility to identify and draw the activities indicated in a business model as process flow charts. Using systems theory, computer logic along with communication and information network, the CIO does what we call as process design at the operational level. Activities and decisions taken at various points in the conduct of business generally conform to the process design introduced and implemented by the CIO.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Business Model: Blue Nile Diamond and Jewellery

As the largest on-line retailer of certified diamonds and jewellery Blue Nile Inc., has been in business even after most of the dot com companies have shuttered their doors. Founded in 1999 by Mark Vadon, the Seattle, Washington based company caters to customers in 44 countries in addition to United States. Holding about 4% of the US diamond engagement ring market, Blue Nile is noted for two opposite laurels. On the negative side, financial press often reports its CFOs quitting in quick succession. Counterpoised to this is that, the business model has stayed put in almost in the same condition Mark Vadon has designed it. Here is the Bizmodel, described in ten components:

1. Business Concept: “No pressure, No commission, you’re too smart to shop in a Jewellery store” goes the welcome statement of Blue Nile web page. True to this concept statement, Blue Nile is anchored on three limbs. Firstly, choosing engagement ring is not complicated. Secondly, diamond is simple to understand and designing jewellery is within customer reach. Thirdly, making choice is easy and affordable. All these add to a simple theorem: effective customization

2. Value Proposition: Basking on the glory of Blue Nile brand the company offers customers quality diamonds and jewellery at an affordable price with lot of convenience. The bundle of product is in two classes:

a) “Build your Own “diamond and jewellery in the form of rings/earrings/ pendants

b) “Just-in- time” diamond and jewellery in an array of products including rings, earrings, pendants, necklaces, charms and other accessories

3. Key Activities: Designing jewellery piece as agreed by the customer is the key activity. To assist this, a display of more than 60,000 individually cut and polished diamonds is exhibited for the customers to choose from. Orders for the selected diamonds are then placed with the suppliers. The design activity is also customer driven but aided and assisted by the Blue Nile jewellery consultants

4. Key Resources: Human resource is the key in this operation. About 206 employees work on full time and are supplemented with temporary hands in busy seasons. Intellectual resources in the form of design and designers are another resource. As a cash rich company, inventory policy is attuned to keep quantity of diamonds in store at lower levels in order to reduce holding risk

5. Key Partners: Exclusive relationships are struck with strong and reliable suppliers of diamonds worldwide. In addition, services of reputed diamond labs are procured as and when necessary

6. Customer Segments: The major segment catered to by Blue Nile is young, educated men with good earnings even though they may be low in assets. This segment needs help in choosing, verifying and buying diamond rings and other jewellery pieces. Quite a number of them may wish to design their own jewellery or suggest improvements in standard designs. They also wish to be in control of their buying decisions

7. Channels: Internet is the basic channel where customers are identified through search engines and initiation is made via email or chat. Telephony is another tool that is employed. A key responsibility of the channel is to make customers aware of the products in the Blue Nile catalogue and make them evaluate the products and designs and thereafter to lead them to choose the ones that they are willing to buy. Once this is done the item is ordered and delivered within 3 working days. After sales is meticulously followed. The proverbial middle-man is entirely eliminated

8. Customer Relationship: Anchored on the maxim of ‘attract, obtain and satisfy customers’, Blue Nile is doing just that in a cost-effective manner. Customer Service Groups in different product lines are formed and jewellery consultants are used. When orders are placed these are processed and shipped within three days free of charge to the address indicated by the customer. Additional frill allowed is that the customer can opt for insurance of possession of diamond and jewellery. Customers are free to return the goods, if they are not satisfied, within 30 days of purchase

9. Cost Structure: Several pluses accompany the cost structure. Working capital efficiency is indicated by its turnover. For the Fiscal 2011 cost of sales is US$ 276 Million while working capital is US$ 20 Million leaving a turnover of almost 14 times. Out of current assets of US$ 125 Million cash alone accounts for US$ 89 Million; in comparison inventory is low at US$ 29 Million indicating a mixture of cost-driven and value-driven strategy weighted more towards the former. Blue Nile is scalable in that at higher levels of sales it can reduce the cost further downward. Moreover, economies of scale is observed in the way its inventory is controlled and costed

10. Revenue Stream: Net sales is US$ 348 Million cost of sales is US$ 276 Million leaving gross profit of US$ 72 Million and returning an excellent GP ratio of 21%. Operating cost is controlled at US$ 55 Million leaving an operating profit of almost US$ 17 Million. Entire sales is booked by sale of diamond and jewellery sold at list price.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Nine Building Blocks for Business Model

Alexander Osterwalder and Yves Pigneur authored a breath-taking book titled “Business Model Generation” in 2010. After defining a business model as “the rationale of how an organization creates, delivers and captures value” they have introduced a canvas consisting nine building blocks that sketch the core elements behind a business model. Let me show you the canvas:

1. Customer Segments: This block defines the different groups of people or organizations an enterprise aims to reach and serve. There are distinct segments and these may be small or large. The business must decide which segments to serve and which ones to ignore. This could result in mass, niche, segmented or diversified markets

2. Value Propositions: This block describes the bundle of products and services that create value for a specific customer segment identified. Each bundle of products/services caters to the requirements of a specific Customer Segment. The proposition could result in new offers, improved ones or customized products

3. Channels: In this block, we see how a company communicates with and reaches its customer segments to deliver value proposition. Communication, distribution, and sales channels comprise a company's interface with customers. Channels encourage customers to move through the process of buying starting with raising awareness of the products. Thereafter channels make them evaluate and buy the products. Delivering and after-sales are the ending part of the process.

4. Customer Relationships: Here the block describes the types of relationships a company establishes with specific customer segments. Customer acquisition, retention and boosting sales are the forces that drive customer relationships and result in develop0ment of types of sales such as personal assistance, self-service or automated service

5. Revenue Streams: This block represents the cash a company generates from each customer segment. A business model can generate two types of revenue stream: one-time sale and recurring sale. It can arise in number of ways, chiefly by asset sale, usage fee, subscription fee, and lending/renting/leasing payment, licensing fee or brokerage

6. Key Resources: This describes the most important assets required to make a business model work. These resources allow an enterprise to create and offer a value proposition, reach markets, maintain relationships with customer segments, and earn revenues. Key resources can be physical, financial, intellectual, or human. Key resources can be owned or leased by the company or acquired from key partners

7. Key Activities: In this block, the most important things a company must do to operate successfully are described. These activities include production, problem solving etc.

8. Key Partnerships: Inside partnerships block we notice how the network of suppliers and partners contribute to the success of a business model. Partnerships include strategic alliance with non-competitors, business alliance with competitors, joint ventures with new parties and buyer-supplier relationship ensuring reliable supplies. Consequently a business experiences reduction of cost, risk and uncertainty and is in a position to acquire specific resources

9. Cost Structure: The Cost Structure describes all costs incurred to operate a business mode. Such a cost schedule Includes fixed cost, variable cost and the manner in which economic scale and scope are to be managed.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Business Model: Shree Ganesh Jewellery

As one of the largest manufacturer and exporter of handcrafted gold jewellery in India, Shree Ganesh Jewellery House Limited has excellent financials to report. What is more, the company has rolled out a business model that works well for its export market drive as well as the domestic retail market within India. Look at the business model:

I have canvased the business model of Shree Ganesh Jewellery on nine building blocks developed by Alexander Osterwalder.

1. Value Proposition: The bundle of product includes:

1. Handcrafted hallmarked gold jewellery and gold enamelled jewellery

2. Gold jewellery studded with precious stones like rubies, emeralds, sapphires, pearls and diamonds

3. Portfolio includes rings, earrings, pendants, bracelets, necklaces, bangles, medallions, gold coins

All these products offer quality, craftsmanship and glitter. There is something else for the buyer: insulation from price volatility. Everyone agrees that gold jewellery acts as natural hedge against inflation and that it can function as an investment vehicle.

2. Key Activities: Value configuration is from the way operational activities are scheduled. Latest technology is harnessed to reduce waste, which is concomitant in hand crafted jewellery manufacture. Efforts are made to introduce gradually machines into production. Finished goods are tested for quality and craftsmanship.

3. Key Resources: The Company uses core capabilities as follows:

1. Production capacity of nearly 21,500 kg of gold jewellery per annum, out of which major portion is manually crafted

2. Manufacturing facilities located at Manikanchan, Kolkata, where the state government has sponsored export zone. The location enjoys pluses such as easy access to skilled Bengali karigars(craftsmen) and proximity to Airport

3. Employs over 562 ‘gold karigars’ from West Bengal

4. Strong designing capability is enhanced by 15 member strong in-house design development team along with external advice on designing that result in intricate handcrafted design that is in big demand throughout India and Middle-East. Moreover, technological innovation in design methodology is appropriately used

5. Management of the company is spearheaded by the founders Nilesh & Umesh Parekh, belonging to a family of jewellers for generation who have more than five decades of experience in jewellery

4. Key Partners: Partner network includes:

1. Tie up with Sabyasachi Mukherji, renowned Indian Fashion Designer for high end exclusive jewellery

2. Shree Ganesh Jewellery continues to pursue alliances with more domestic and international designers

5. Cost Structure: Total operational cost is reported as Indian Rupees 27,307 Million

6. Customer Segment:

The company is primarily focused on export markets especially UAE, Singapore and Hong Kong which contribute over 95% of total revenue. Some of the International customers such as Ibrahim Al Sayegh Jewellery, Sparkle Jewellery FZE in UAE, Denzong in Hong Kong, Wondercut Pte Ltd, Abhusan (S) Private Limited and Excellency Pte Limited in Singapore have been company’s long standing customers.

In addition to export market Shree Ganesh Jewellery is also expanding its retail presence in domestic market. Initiatives are:

1. Expanding retailing of branded jewellery under GAJA brand through existing 13 outlets and proposed outlets

2. Focus on shops & franchisees in Kolkata, Ahmedabad, Bangalore Chandigarh, Patiala, Bhatinda, Jalandar, Rajkot, Amritsar,Ludhiana, Mangalore and Siliguri

3. Company has other brands with different themes mainly targeting young men and women

7. Channels:

1. Overseas: Establishing franchisee outlets to penetrate market at low capital expenditure on the part of the Company along with overseas retail outlets for high end customers is main focus of sales. Distribution is handled through Four Star Export House. Expanding market via nominated agency & channelizing agent is to be balanced with opening overseas subsidiaries for foray into untapped market

2. Domestic: Strengthening GAJA brand owned by the Company along with expanding from existing 13 retail outlets to 49

8. Customer Relationship: Excellent client relationship is built by nominating super distributors for bulk orders and strengthening long standing association with buyers who return with repeat orders

9. Revenue Stream: All these measures have positively impacted the sales as revenue tops Indian Rupees 29,426 Million.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Taking Risk and Making Decision in Business

You are already in business or you wish to move in there. Whatever your circumstance is you know business is all about taking risk and making decisions.

In business you are constantly on the move or busy in your office handling various issues, questions or problems or be placed in a situation where you are expected to make the right decision at the right time. Successful decision making is nothing to do with your just being lucky. It is the result of your understanding and evaluating facts and associated risk surrounding a decision making situation. Thereafter, you have to take risk and make decision. Here is a list of ten situations along with major areas where you have to take business risk and make decisions:

1. Launching your own business: business idea, industry sector, business name, location, business logo, corporate colour, personal branding etc.

2. Buying an existing business: opportunities, selection, valuation, suitability, negotiation, transition management etc.

3. Timing decisions: business cycle, business confidence, opening new business, launching new product etc.

4. Planning: business concept, mission & vision, goals & targets, strategy & tactics, business model etc.

5. Finance: bank proposal, managing debt, assets & liabilities, profit & cash-flow, capital expenditure, wealth management etc.

6. Networking: business relation, business promotion, closing deals etc.

7. Controlling: monitoring, feedback, evaluation etc.

8. Investing: expansion, diversification, merger & acquisition, strategic partner, joint venture, etc.

9. Re-structuring: turn-around plan, survival strategies, revamping products, re-scheduling debt etc.

10. Divesting: disposing subsidiaries, closing joint venture, settling partners, selling core business etc.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Four Business Aspects

Business is all about ideas, risk, competition, profits and finally success. To manage and achieve success you have to use appropriate strategy and right tactics; you need to have unique business concept and a workable business model. Just look at these four aspects in detail below:

Business Concept

Business concept encompasses every business activity undertaken by an enterprise in creating value for customers, suppliers and other stakeholders. 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 your business concept is the primary task.

Business Strategy

Business strategy is defined as “a well thought out long term plan incorporating chosen methods, moves or a series of maneuverers chalked out by business to achieve goals and objectives”. Strategy is perceived long-term, multi-dimensional, complex, and high-flown and having huge impact on business performance. It is the thinking part of the business process driven by the vision and mission giving direction and sense of purpose towards achieving business goals and objectives.

Business Model

Business Model is primarily “a business concept that has been put into practice”. It translates strategy of a business into a framework for action. Logic of a business, choices a business takes in creating, delivering and realizing value are shown in clear and concise manner in a business model. It is a road map, a motivator cum evaluator of business performance and a communicating tool of business purpose. It broadcasts to the outside world the distinct and discerning value proposition the business offers. More than that, business model bridges strategy with tactics. It displays tactical steps that could be taken by a business at any time to implement the business strategy.

Business Tactics

Business tactics are defined as “specific moves, manoeuvres and actions taken in isolation or as in a series by a business in order to move from one milepost to another in the pursuit of business strategy”. Tactics are short-term, linear with localised focus and having fairly limited impact on business performance. It is the action part of the business process; and symbolise movement towards mileposts within business objectives.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Difference between Business Vision and Mission

In the board rooms of many companies the subject of business vision and mission is consigned to, as public relation or corporate communication exercise. What disturbs more is that these words are often used by board members to denote an aim without bothering about its nature and characteristics. Understanding differences between business vision and business mission is definitely a key to survival and success.

Vision

1. In vision a business speaks of its beliefs and values. You write a vision statement indicating the philosophy in which you work, the concepts that guide and the value judgement you make in progressing towards your ideals

2. Vision portrays the standard that is set for achieving over a period of time. In other words, business makes a choice that has long haul. Hence, the overtone of vision is aspiration and inspiration. A good example is the vision of NASA in space travel

3. A vision statement answers the questions “What to become or Where to go”. It seeks an end that business wishes to achieve at the end of its business cycle. In order to do that, a vision statement provides direction and guidance in brief manner but with broad intent

4. “Brevity is better part of valour” goes the adage. Vision does just that. Savour the vision of Department of Commerce of USA: “By assisting the private sector, our vision is that the United States continues to play a lead role in the world economy”. Do I need to say any more?

5. Vision is chiselled as policies of a business that govern the conduct of transactions in every circumstance. Such policies are of general nature and do not give facts and figures but ideas and concepts. In fact, vision is born out of conceptual thinking. This type of thinking trains you to spot the missing link or information that is needed to solve a puzzle. In a vision statement you are looking for an over-awning concept or all-prevailing idea in global manner.

6. Vision relates to goals of a business. That is to keep the big picture intact and behind your table so that you turn back and watch your vision and then watch your steps

7. Board of directors is entrusted with the formulation of vision and accompanying goals and policies. Being lofty in nature and broad in outlook and perhaps too distant to view analysts are prompted to dub vision as star in the sky.

Mission

1. In mission a business sounds its attitudes and behaviour. Hence, concrete steps are laid within a mission statement indicating the methodology in which you segment your work along functional lines so as to achieve the stated mission. Therefore a mission statement includes, but not limited to, the following components: Customers & market, Products & operation, Profits & growth, Survival & solvency, Customer relation, Employee relation and finally Research & development

2. Mission indicates the states that arise in aiming for the standard proclaimed previously in vision statement. Hence, mission deals with the consequences that could arise in implementing the choice made in a vision statement. Ostensibly, mission is set for short haul. Motivation acts as the overtone in a mission statement. A good example is the way CIA fights global terrorism

3. A mission statement answers the questions “How to get there”. It seeks the means to obtain the end conveyed earlier in the vision statement. Coaching and counselling are twin tools employed to prod employees to do every mission with dedication and satisfaction

4. Mission is much longer and wordy when it comes to the subject of communicating it. But, the key factor in a mission statement must be under-lined: comprehensiveness. Let us look at the mission of Department of Commerce of USA. “The Department creates the conditions for economic growth and opportunity by promoting innovation, entrepreneurship, competitiveness, and stewardship”. As you agree all these four aspects make USA a business giant

5. Mission is crafted as practical guidelines for the conduct of a business in every circumstance. Such practices are specific in nature and exhort employees to take actions now so that at the end of the day they know where and how they have progressed. Facts and figures accompany a mission statement. A mission statement is born out of contextual thinking. This type of thinking trains you to understand the context in which you are placed in carrying out your mission

6. Mission relates to objectives of a business. That is to keep the focus on the current matter on hand. This enables you in placing mission just in front of your table so that you can glance over it as you progress

7. Senior management is entrusted with the formulation of mission and accompanying objectives and procedures. Being mundane in nature and narrow in outlook and perhaps too close to view analysts are goaded to christen mission as the moon in the sky.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Pakistan Business must shift to Colombo ASAP

Business tactics dictate Pakistan business must shift to Colombo, Sri Lanka urgently to keep its momentum. Troubled by political in-fighting, economic chaos and on the top of it ever growing militancy spilling over to commercial and industrial centres in many parts of Pakistan, it is time to have breathing phase, and a new location.

Economy in Pakistan has nosedived. GDP growth rate in Pakistan has fallen terribly. At 2.4% Pakistan is fifth after China, India, Sri Lanka and Bangladesh in 2011. Placed first China enjoyed tremendous growth at 9.5 % followed by India at 7.8%. Sri Lanka recorded 7.0% while Bangladesh bagged 6.3%. For various reasons Pakistan business shifting to China, India or Bangladesh is out of question. The only viable destination is Colombo where Pakistan is most welcome due to excellent and cordial relations both countries enjoy in every field.

Let us look at what Colombo can offer to Pakistan  in terms of business relationship:

1. Peaceful domestic environment, favourable government policies and improved investor confidence in doing business in Colombo

2. The improved performances in all key sectors of the economy, especially trade and services that account for a 59.3% contribution to the national economy

3. Per capita income of Sri Lanka for 2011 is U S $ 2,836/- second highest in the SAARC countries after Maldives. It is forecast that Colombo will rise to number one rank in per capita income as political instability takes its toll in Maldives

4. Spurred on by vibrant business environment and the strategic location of the country the government of Sri Lanka is setting in motion a grand plan to transform Colombo into a strategically important economic centre by developing five hubs: knowledge, commercial, naval & maritime, aviation and energy

5. Sri Lanka is ranked as the most liberalized economy in south Asia. For example, foreign investors are allowed to own 100% ownership of investment

6. Sri Lanka is the only country to have Free Trade Agreements with both India and Pakistan, giving duty free access to over 1.3 billion consumers from the island. The Pakistan – Sri Lanka Free Trade Agreement (PSLFTA), which came into effect in year 2005, provides strategic access from Sri Lanka for nearly 4,500 products into the Pakistan market. Consequent to this Agreement, Sri Lanka – Pakistan trade has grown more than 300 per cent over the last few years

7. More than anything, Pakistan business can operate from Colombo to trade with the entire globe sans any restrictions.

Business Opportunity

Inquiries are welcome from prospective businessmen, buyers, developers and investors from Pakistan who wish to shift their present operations to Colombo or start a new business in Sri Lanka or buy an existing one for convenience sake. Get a piece of action in Colombo Business Centre that has morphed into a star performer in the region.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Difference between Business Goals and Objectives

Very often business persons use the vocabulary of goals and objectives interchangeably. Their understanding is that these two words mean the same thing even if they are talking about long term purpose or a short term target. Though both are to be achieved in order to gain business success, goals and objectives have different aspects built around them. Here is a list of key differences between business goals and business objectives:

1. Goal is derived from the word “go” which is broader in meaning. Go where, is the question that props out from this. Basically a goal means an aim or purpose to be obtained. Objective on the other hand is derived from the word “object" that has specific and perhaps narrow meaning. Generally, objective is concerned with a target or mission to be accomplished

2. Goals are framed as guided by the vision of the company. The format of goal must answer the question “what we like to become”. For example, a business can declare its goal as “we like to become leading manufacturer of cars”; it does not give specifics, nonetheless. In contrast, objectives are set in reference to the mission of a company. The format of objective must answer the question “Who, What, When, Where, Why”. For example, a business can set a target of achieving 20 % of market share in sport car manufacture in Texas within 12 months by penetrating new market segments

3. We speak of goal as an end to be achieved during the business lifecycle; the effort to reach such an end is spearheaded by an objective

4. It is just easy to visualize goals; on the opposite side it is somewhat difficult to set objectives

5. Goals take global view while objectives zero in on peripheral view

6. Goal relates to a concept while objective is a construct

7. Goal focuses on long-term; objective is for short to medium terms

8. In the case of goal, results cannot be validated or measured in high degree of tangibility; whereas objective lends itself to be validated or measured in terms of tangible outcomes

9. There is something hazy, nebulous and abstract about goals. Clarity, preciseness along with concrete statements accompany an objective

10. Finally, we can move in the matter of goal in a leisurely pace; there is no need to hasten; time is the great arbiter so goal is not a matter of urgency. This cannot wash with objective; you are on the fast track; time is ticking; quite a lot of matters need to be done in achieving an objective; get cracking and this is pretty urgent.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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

 

Business Model: Pandora Jewellery

Pandora Jewellery with its logo statement “Unforgettable moments” displays a distinctive brand offering and a distinctive product range. Undoubtedly Pandora is one of the worlds’ recognised jewellery brands. A key reason for this success is the business concept that allows customers to design her article in unique, personalised and individualised style; this concept finds expression in its business model.

Founded in Copenhagen Denmark in 1982 by jewellery artist Per Enevoldsen and his wife Winnie in modest manner, Pandora (www.pandora.net) sells more than 6 billion Danish Kroner worth of jewellery pieces including charms, bracelets, rings, earrings, necklaces, pendants et cetera in exquisite designs. More than 10,000 outlets in about 65 countries cater to the sophisticated needs of women who love jewellery that tell a story. A work force of 5,300 people participates in this colossal and global enterprise guided by Allan Heighton Chairman of Board of Directors and Bjorn Gulden CEO and Henrik Holmark CFO.

Business Model

Pandora operates under a vertically integrated business model built literally and meaningfully around a forward looking pair of mission that offshoot from an ambitious yet achievable vision:

Vision: “to become the world’s most recognised jewellery brand”

Mission: 1. Offer women across the world a universe of high quality, hand-finished, modern and genuine jewellery products at affordable prices.

2. Develop jewellery portfolio in keeping with core values of affordable luxury, contemporary design and personal storytelling

Predictably, the business model speaks of the logic of a business in terms of creating value, delivering value and capturing value. Let us see how the business model of Pandora stands on these limbs.

Creating Value

Primary focus on creating value is design and product quality parameters. The business concept that consumer is allowed to morph her own design is the integral part woven into the system. This gives rise to expression of individualised and personalised product design cherished by the buyers. Nevertheless, pre-designed in-house jewellery articles continue to be the main stay of the product portfolio. Strict quality standards are enforced so that articles coming out of the manufacturing facilities chiefly located in Thailand conform to spotless product quality.

Delivering Value

Elements framed in connection with delivering value are shown below:

1. Product offering of charms, bracelets, rings, earrings, necklaces, pendants and watches are packaged into the business motto of unforgettable moments, so that women who wear a piece of Pandora has lingering thoughts of the one she has purchased

2. Broadening of jewellery portfolio through specialised collections. Some of these collections are noteworthy: Compose, LovePods and Liquid Silver launched in 2007, 2008 and 2009 respectively. The company envisages to launch potential collections captioned Moments and Stories both in existing and new markets shortly

3. Brand perception and promotion are finely balanced resulting in what we call as “brand consistency” that ultimately leads to customer loyalty and repeat purchases

4. Sales outlets either using franchises or direct operations are established in delivering the products. Out of these about 700 are termed as “concept shops” that account for about 43% of sales volume

5. Expansion of Pandora product range in existing and selected markets involves branded points of sale with a view to strengthen the perception of the brand by customers as well as to permit wide array of Pandora pieces

6. Expansion of Pandora products in new markets is tackled either serving them from existing outlets from nearby areas or setting-up branded sales outlets. Although most of these are to be directly operated, franchises would also be considered

7. Finally, customer loyalty is the ultimate component in the business model. Attracting and retaining customers takes place in multiple ways. Pandora Club and social network such as Facebook are chief among these methods.

Capturing Value

Revenue generation from operation has the following highlights:

1. Branded distribution is emphasised, consequently as per 2012 first quarter (1Q12) interim financial statement branded distribution accounts for three fourths of sales revenue

2. Direct distribution either using franchises or own operation is given pride of place; the figure of 96% of sales emanating from direct distribution in 1Q12 lends credence to this fact

3. A healthy net profit ratio is a must; for 1Q12 revenue is 1,424 million Danish Kroner and net profit is about 338 million Danish Kroner.

Integration

The business model of Pandora is integrated properly by linking with strategy and tactics. The company reports that feedback from major markets confirms that the strategy adopted by them is working successfully. Moreover, the recent stock re-balance in USA and UK as a tactical measure proves that business model allows leeway in handling operational issues and market challenges in cost effective manner.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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Business Model Connects Strategy with Tactics

The notion that business model is a stand alone concept was widely accepted in business for quite sometime. Originally founded by Peter F Drucker, business model gained currency with the dot com revolution. Like the dotcom it faded out of fashion soon. Changes that shook technology, economy, social mobility and the way business goes about in the last decade necessitated a second coming of business model. This time it was accompanied with quantum shift in analysis. Gone are the days when business model was treated in isolation. Researchers and practitioners have now begun to spot an integration between strategy and tactics.

What is Business Strategy?

Every business needs a unique proposition, be it a product or service to be offered to the market. Such a proposition must create and sustain value for the business and those elements connected with it. More than that, this proposition must give a distinct and discernible advantage for the business as against its competitors. Sustaining this advantage is a bounden duty of a business that should make every stratagem in order to keep it primary position in the pecking order. That involves two types of actions. One relates to defence and the other relates to attack. In commercial sense the former is developing ability to tide over any adverse eventuality. Attack on the other hand is framing a road map in translating business strategy into practical measures by way of designing a business model.

What a Business Model does?

To answer this question , let me cherry pick three definitions of business model found in academic writings. To begin with look at what Hamel ( 2000 ) sees a business model; it is “ a business concept that has been put into practice”. What is implied is that a strategy of a business is put into practical terms by way of a business model. Secondly, the form of business model and what it does is succinctly stated by Shafer et al (2005) when the authors pen “ We define a business model as representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network”. We have got a working definition of the way business model looks like. But wait a minute: what about delivery of value? Osterwalder (2009) has the answer when he writes: “A business model describes the rationale of how an organization creates, delivers, and captures value”.

Now we have the full spectrum of what a business does. It is about time to find out how the model connects with strategy and tactics. In a pioneering research work titled “From Strategy to Business Models and to Tactics” authors Ramon Casadesus-Masanell and Joan Eric Ricart explain in detail about how business model is integrated with strategy and success. Additional reporting by them in recent article tiled “ How to Design a Winning Business Model” (Harvard Business Review Jan-Feb 2011) continues the trend of expositing fundamental theory of business model as the logic of the company and by implementing strategy a business makes choices and face the consequences arising therefrom. They mention choices on policy, asset and governance. They also forecast consequences that are classified as rigid or flexible. The authors turn to the auto industry for an analogy: Strategy is designing and building the car, the business model is the car, and tactics are how one drives the car. By this time we have catapulted into the area of tactics

Business Tactics fill the Rest

These are steps a business take in order to implement the business model. A pre-explanation of how the business will re-act in a given situation could be easily gained from a cursory glance on a business model. In addition to planned tactics a business model allows leeway for the line managers to adopt ad-hoc measures in keeping with over-all thrust of the strategy. These measures could range from non-repetitive tactics, quick-fixes or actions made out of the gut feeling.

Muthu Ashraff

Business Adviser

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E-mail : cosmicgems@gmail.com

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Key Differences between Business Strategy and Tactics

Most of you know the differences between business strategy and business tactics. But when you are asked to state the differences you generally fumble for suitable words and phrases. Maybe phrases such as “long and short term” and “high and low stuff” are often muttered. But not much is followed thereafter. In this blog I elaborate key differences between business strategy and business tactics for your benefit.

Business Strategy

1. Business strategy is defined as “a well thought out long term plan incorporating chosen methods, moves or a series of maneuverers chalked out by senior managers for obtaining a set of specific objectives of a business”. This definition characterises strategy as long-term, multi-dimensional, complex, and high-flown and having huge impact on business performance

2. Analysts consider strategy as the thinking part of the business process driven by the vision of the stakeholders

3. Although static in nature, strategy gives direction and sense of purpose in movement towards achieving business objectives

4. Value optimization is the anchor on which strategy is fastened; by this, business seeks best possible benefits in a sustainable manner and over a long-term span

5. Integration is the means whereby strategy connects various competing and complementary elements within a business. Like an alchemist, corporate management tries to drive the best mix, blend or configuration of resources and capabilities of business. In sum, strategy fuses many parts together to form a meaningful whole with a view to achieve set goals. For example, a business that has trained human resource and has identified a niche market could use a perfect configuration to get optimum results from an opportunity

6. As I said earlier strategy is for long –term and by nature static. This theme can be further laboured to see a nuance in terms of how a business responds to changes. You cannot easily adjust strategy to changes that are taking place in the market on a day-to-day basis. Nether strategy allows you to re-act to each change in a short time. Factoring market movements, alteration in consumer preferences and shift of business cycle into strategy takes quite some time. This part is better left to be handled by tactics as explained below.

Business Tactics

1. Business tactics are defined as ”specific moves, manoeuvres and actions taken in isolation or as in a series by line managers in order to move from one milepost to another in the pursuit of operationalizing strategy”. By this definition it is clear that tactics are short-term, linear, and single, with localised focus and having fairly limited impact on business performance

2. It is the action part of the business plan process and driven by mission related to a particular set of circumstances

3. Tactics are in a state of constant of flux keeping in line with changes taking place in the environment; these symbolise movement towards goals and mileposts within business objectives

4. Value maximization is the anchor on which tactics are knotted, by this, business seeks best possible benefits in the short-term, and so that trend curve of business success never falters

5. Decomposition is the means whereby tactics dissect a single part from the whole strategy that needs correction or adjustment. In other words, tactics allow you to excise a part from the whole plan, work on it and re-fix without upsetting the overall gist of the strategy. An apt example is the pricing policy adopted in a business. When an existing old customer comes with a special order for a large quantity of a popular product tactics allow you to consider a special discount in addition to the usual ones.

6. Tactics are by nature short-term affairs that function in consonance with all-inclusive strategic policy, but tweak it each time a business faces an issue or snag. Nobody can keep a treasure trove of tactics that could be applied to, each time an unforeseen consequence slaps on the face of business. Each time you face a crisis situation you come out with a tactic that takes care of it adequately. Admittedly, tactics are developed on the spur of the moment. It does not mean planning tactics is not necessary in a business though. If you envisage how a situation could unfold, you can develop the wherewithal to meet it. What is in essence is that you have to quickly adjust to changing business environment and the consequences that arise in its wake? For this purpose a line manager who has an uncanny ability to use a blend of planned and ad-hoc measures with a view to tide over a difficult and perhaps desperate situation is an excellent tactician.

Muthu Ashraff

Business Adviser

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E-mail : cosmicgems@gmail.com

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Business Model: BNP Paribas Private Banking

Private banking deals with financial advice and management of money, investment and assets belonging to upper affluent, high net worth individuals (HNWI) and ultra-high net worth individuals (UHNWI). These clients may be wealthy individuals or big corporates. BNP Paribas, a Paris based bank with a successful private banking arm has been voted as seventh best private bank in global ranking. It continues to savour business success as the number one private bank in Eurozone. This laudable success is traced back to the business model that the bank has rolled out in many countries.

BNP Paribas Private Banking is one of the largest in the continent with a portfolio of Euro 255 billion in client assets spread in about 30 countries. France alone accounts for nearly 40 % of its client assets which is closely followed by a whopping 35 % in Europe - Off-shore- Middle –East and Latin America segment. Asia comes third with a 12% share.

Business Model

BNP Paribas has introduced an effective business model interwoven with four core concepts: value proposition, segmentation, leverage and synergy.

1. Value Proposition

Understanding the asset & liability base of client is the first limb in value proposition that takes it to next logical step of clarifying what the client expects or requires from the bank. Third step is to determine jointly with the client an appropriate long-term asset allocation model as well as a suitable investment holding structure. Once it is done, the agreed upon strategy is put through the works. To do that business model dictates the selection of the right products and securities. Regular review of the investment portfolio is the final limb that seeks to adjust the portfolio in terms of market evolution and changing client needs

2. Segmentation

Bringing in a remarkable focus and approach on client segmentation BNP Paribas has identified three client groups who are described as upper affluent, high net worth individuals (HNWI) and ultra-high net worth individuals (UHNWI). Each segmented group is serviced by strategy fine-tuned as per their predilection and personal needs. For example, in the HNWI segment, the focus is on net new assets together with general return on existing client assets. Whereas UHNWI gets further tweaked focus and approach; in their case absolute return is accompanied with attention on net new assets. Moreover, each segment is afforded with different commercial approaches. Upper affluent gets standardised ones that are in store, while the UHNWI is showered with tailor made innovative solutions

3. Leverage

Two mutually exclusive sub-models are displayed under leverage. A stand-alone model is employed in regions such as China, India, South East Asia and Latin America while a joint service model with inputs from sister entities within the BNP Paribas umbrella such as Corporate Investment Bank is offered to clients in Middle-East and Hong Kong segment. This serves two goals: one is that it leverages specialised services of different arms of BNP Paribas group in product delivery; the other is that this leads to corporate synergy within the group resources

4. Synergy

Harnessing significant synergies within BNP Paribas group resources is a key objective enmeshing well with the concept of leverage stated above. Corporate & Investment Banking and Asset Management & Services are two specialised entities that are identified in the business model as generators of synergy in terms of product offering and operationalization of customer mandates in private banking. Corporate finance, export project, structured finance and cash management from Corporate & Investment Banking arm along with asset management, Insurance and real estate services from Asset Management & Services division are pinpointed to contribute towards group synergy. Ostensibly, the linking pins between these two arms continue to be the concepts of client referrals, cross selling and platform sharing that exist and perhaps encouraged by the business model.

So the success story of BNP Paribas Private Banking continues. Would other private bankers take not?

Muthu Ashraff

Business Adviser

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E-mail : cosmicgems@gmail.com

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Deductive Reasoning in Business Research

In the process of doing business research, you will invariably be confronted with the choice of using the right approach of reasoning. There are two such approaches: Deductive and Inductive. In this blog post let me explain the deductive approach of reasoning.

Deductive Approach

Deductive approach begins from general perspective and ends in specifics. In deductive approach a business researcher uses formal logic where he states the problem along with possible causes. Afterwards he searches for rules, norms, principles, parameters that function as theoretical premises in guiding him toward his findings. He then turns to the observations he has made and/or phenomena that he has seen while considering the problem. After analysing these he finally seeks whether there is a connection between his findings and the chosen theory. At this moment he can opt for either of two models:

1. If… Then Model: This model is selected where the business researcher can state confidently that if a particular problem occurs in a manner then it is due to a particular premise. For example, if there is employee absenteeism then there is breakdown of motivation. The underlying theme in this model is that if we accept the premises are true, the observations/phenomena are objectively recorded and the argument led is sound then deductive reasoning enables us to conform the theoretical premises

2. Yes or No Model: In this model the theory and expected consequences are matched. Theory remains sacrosanct and expected consequences can vary. At a given moment if the observations and expected outputs are one and the same it proves the theory. On the other hand, if observations are dissimilar to the expected outputs it does not prove the theory forcing the business researcher to begin his enquiry afresh.

Ostensibly deductive approach of reasoning prods the business researcher to travel in a matrix of theory - hypothesis – observation – conformation as if he is stepping out from top to down or falling from cliff to valley. Perhaps due to this form of southerly movement analysts describe deductive reasoning as “Top Down “or Water Fall” approach.

Choice

Professor Gunapala Nanayakkara, a management guru, educator and researcher states that deductive approach of reasoning is applicable to phenomena that are sufficiently documented and a substantial amount of knowledge already exists. In his opinion deductive approach may start from known realities about which facts exist.

Therefore deductive approach can be effectively employed in most if not all cases of business research. Nevertheless, in the business world of risk and uncertainty it may be a good thing to look into merits and demerits of the alternative approach of inductive reasoning as well. Let me come back on this matter in another blog post.

Muthu Ashraff

Business Adviser

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E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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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

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E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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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

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E-mail : cosmicgems@gmail.com

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Four Managerial Skills

Management researcher Robert Lee Katz identified three core skills: technical, human and conceptual abilities as vital ingredients in the management process. Yet there is something missing in this equation to make the management process seamless and successful. Read more…

Professor Gunapala Nanayakkara, a management guru, educator and researcher suggests that success in management processes requires managers and leaders to be task masters, people masters, context masters and finally masters of self. Combining these two theories let me present the following sets of managerial skills that are needed to transform men and women as effective leaders and managers in business and industry:

1. Technical Skills: Performing a given task requires that a manager must have technical skills in relation to his position. Skills do differ across the functions. Still, a manager is expected to demonstrate necessary and overall competence in areas under task management. Process, technique, technology, hands-on experience, knowledge and understanding governing the entire production or service centre are key capabilities in a typical manager’s portfolio. Task orientation is a result of the western civilization, especially American where relating to matter, materials and machinery take pride of place and where completing a mission to its exactitude is appreciated and perhaps rewarded

2. Human Skills: Unlike technical skills, managers see a different dimension in dealing with people. They breathe, and do have life, like other living creations. More than that, they have feelings, emotions, desires, aspirations and top it all every person is unique in terms of physique and mind set. Dealing with people inside organization is called “inter-personal relations” whereas relating to those outside is termed as public relation, customer relation and in such other expressions. Although handling people differ depending on their grades and positions, the least common denominator continues to be the display of human touch by an accomplished manager. From Shaolin temple to modern factories in sprawling industrial city of Shenzhen, Chinese showcase brilliant mastery in motivating people to deliver their goods exceptionally

3. Contextual Skills: Understanding the context in which you are placed is the key force that defines and derives you in arriving at a particular choice. Context can be a form like an organization, time like recession or situation like an emergency. The Arabs went on to explain it philosophically as space, time and being. Let us take the organization. If you are working for a business company your management inputs in terms of skills have to be combed for making profits and working for survival. In a public sector the context goes through a sea-change. Regularity, service orientation and the dictum “pro bono publico’ (for the public interest) demand that you fine-tune your managerial ability in the contextual perspective of public service. Quite a number of skills dominate the contextual area. Chiefly amongst these are, time management, communication, money management, leading, decision making, negotiation and trouble shooting

4. Conceptual Skills: Indians excelled in mastery of self from time immemorial. Vedas are about ten thousand years old. Hinduism as a religion must be older than that. Study of the self, led Indian society to harness the power of mind to do what was unthinkable. Rishis and Sadhus had the ability to fly from one point to another using “pushpak” (an abstract form of flying), recalling memories of past births and so on. Lord Buddha introduced the first conceptual framework in human history wherein he presented the philosophy of Buddhism. Conceptual skills need not be consigned to the realm of high stuff only. Generating ideas, developing concepts, conceptual thinking, problem solving, planning, forecasting, are some of the basic skills needed in everyday business life. Equally important is their use in family life resulting peace and harmony which finally motivates managers and leaders to do excellent jobs in their offices.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

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Clearing Confusion Surrounding Concept Documents

Many readers are confused regarding the titling of concept documents. There are three such documents: concept statement, concept note and concept paper. Each differs in terms of definition, length and the purposes intended. Using statement, note and paper interchangeably defeat the purpose.

Concept Statement

What it is?

It is a quick glance document defined as a brief verbal and/or graphical presentation made by one party to another in order to obtain approval or decision over the matter raised in such statement. Concept statement does not ordinarily exceed three pages.

What is used for?

1. Charting a course of action in business management

2. Arguing why customers be given better business terms

3. Alluding distinct advantages of doing business with collaborators

4. Clarifying purposes of a sales & promotion campaign to an Ad agency

Concept Note

What it is?

A concept note is defined as “a brief outline of a proposed research matter, submitted to management for their approval”. As regards to length, concept note ranges 3 to 6 pages excluding cover pages and/or annexures

What is used for?

1. Laying out an un-biased, objective document for the management in order to obtain approval to undertake business research

2. Stating major highlights of a proposed research project to research organizations that call for it as a preliminary document to be appraised before considering a detailed research proposal

Concept Paper

What it is?

Concept paper is defined as “a summary of information relating to a subject matter under discussion, presented in logical sequence explaining the underlying concepts and how these are inter-linked”. As an all-purpose document concept paper can be brief and precise or elaborate and in-depth, depending on the subject matter explained therein. Hence, ordinarily it runs 6 to 15 pages in length

What is used for?

It is a multi-task document that can be utilized for every conceivable business needs where a proposal needs to be prepared and presented.

Muthu Ashraff

Business Adviser

Mobile : +94 777 265677

E-mail : cosmicgems@gmail.com

Web : http://www.cosmicgemslanka.com

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