Business Models, Plans, Strategies, and Key Tools
Business Models, Plans, and Strategies
A business model describes the logic of how an organization creates, delivers, and captures value. It outlines how a company intends to make money, without excessive detail.
Types of Business Models
- Free Model: Companies like Facebook and Twitter operate on a free model. Users don’t pay; they are the product. These models require a large critical mass and are typically profitable through advertising.
- Freemium Model: Spotify and LinkedIn are examples of the freemium model. The vast majority of users don’t pay, requiring a large critical mass. Added value is provided for users who opt to pay for premium access.
- Marketplace Model: The App Store is a prime example. It’s a platform where supply and demand meet. The marketplace charges for intermediation and requires a balance between bidders and claimants. Responsibility and collection operations can be challenging. Marketplaces cover very diverse themes.
- Lead Generation Model: Companies like Rastreator generate a layer of qualified leads. They don’t sell directly or make transactions but charge for intermediation. This model requires a significant investment in generating knowledge and traffic, and is only viable in markets where the margin allows it.
- User Generation Model: Companies like Amplifier generate a layer of qualified users. They do not sell or make transactions, but charge for each user (value) or their performance (revenue share). This requires a large investment in generating knowledge and traffic, and is common in the gaming sector.
A business plan is a document that describes how a project will be implemented. It aims to sell the project, as financing typically requires a business plan. It usually includes a description of:
- The team
- The business model
- A financial analysis
- An analysis of the environment
- A roadmap for implementation
- A risk analysis
Strategy is the path for an action plan and the allocation of resources necessary to achieve goals. It differentiates the company and offers a competitive advantage. Decisions must involve doing something different from your competitors.
A business model is considered an ecosystem for two main reasons: Firstly, they have grown significantly since the technological revolution. Secondly, their marginal cost is close to zero (e.g., Spotify adding a new song), making it difficult for physical stores to compete. They also benefit from a better rotation margin.
Current Business Trends
- Base of the Pyramid: Creating a business model based on people with very low purchasing power (e.g., low-cost vehicles).
- Blue Ocean Strategy: Seeking a new market space that rethinks differentiation and low cost, going beyond the limits of the existing industry (e.g., Cirque du Soleil).
- Cloning Strategy: Cloning successful websites and replicating them in other countries (e.g., YouTube = Youku in China).
Essential Business Tools and Concepts
TOOLS:
- ABC Method: Acquisition, Behavior, Conversion.
- Customer Development (Steve Blank): Divided into customer discovery, customer validation, customer creation, and company building.
- Lean Startup (Eric Ries): A cycle of ideas-code-data, with three steps: build-measure-learn.
- Business Model Canvas (BMC): (Focuses more on entrepreneurs): Includes key partners, key activities, key resources, cost structure, value proposition, customer relationships, customer segments, channels, and revenue streams.
- Lean Canvas: (Similar to the Business Model Canvas, but for startups) It is divided into two main sections:
- Product: Problem, solution, key metrics, cost structure.
- Market: Unfair advantage, channels, customer segments, and revenue streams.
- Pareto Principle (80/20 Rule): 20% of the input (time, resources, effort) accounts for 80% of the output (results, rewards). It suggests maximizing profits by focusing on a small number of high-profit products.
- Long Tail: A niche strategy that involves selling many unique items in relatively small quantities. It considers niche markets as a significant sum of sales, and although individual sales are low, the curve tends towards infinity.
Emerging Technologies and Approaches
Blockchain is a database with stamped and immutable time information for each transaction, replicated across servers worldwide. Blockchain is the foundation of Bitcoin, a cryptographic currency. Bitcoin is a leading example of blockchain technology, aiming to change the payment system.
SoMoClo (Social, Mobile, and Cloud) is the convergence of collaborative, on-the-go technologies, allowing users to access data and applications from anywhere at any time. It represents a decentralized approach to computing, where data and applications reside in various locations, are accessed from multiple endpoints, and are shared more easily. SoMoClo promotes decentralization: cloud companies often hire rather than buy, and they lack physical stores, providing companies with savings, flexibility, and mobility.
PENTAGROWTH: Centers around the WWW and outlines five levels of exponential growth:
- Connect: Things, mobile, social.
- Collect: Commons, distributed, centralized.
- Empower: Any role, users.
- Enable: Co-create, co-market, provider.
- Share: Open, non-commercial, proprietary.
Customer Centricity: An approach to doing business that focuses on providing a positive customer experience to drive profit and gain a competitive advantage. A customer-centric strategy aims to put customers at the core of the business to create positive experiences, thereby building long-term relationships.
Design Thinking: Shifting from traditional design (individuals, products) to design thinking (teams, experiences). It emphasizes being human-centered and using prototyping. It’s about showing, not just telling. Traditional thinking focuses on flawless plans and avoiding errors, while design thinking embraces “enlightened error,” failing fast, and continuous iteration. The design thinking process includes: empathize, define, ideate, prototype, and test.
Agile: SCRUM is an agile process that allows teams to focus on delivering the highest business value in the shortest time. It enables rapid and repeated inspection of actual working software (every two weeks to one month). The business sets priorities, and teams self-organize to determine the best way to deliver the highest priority features. Every two weeks to a month, stakeholders can see real working software and decide whether to release it or continue enhancing it in another sprint. Scrum characteristics include self-organizing teams, no prescribed specific engineering practices, and generative rules for an agile environment.