How to update your Business Model?

Changes in the environment require validation of business models as competitors, inputs, consumers, suppliers, technologies, complementary and substitute products, regulations and other market conditions come and go. All these changes suggest that we need to adapt our Business Model (BOM). And, we are not just talking about companies, but also about any organization, public or private, for profit or not.

A MoN is a consistent set of attributes market that is offered to consumers as a unique value proposition. Imagine a flowchart in which various components are interdependent in pursuit of the end result, which is customer satisfaction and the different actors involved in getting that good or service to the consumer (value chain).

The MoN is not just represented by a sentence that summarizes the value proposition for communication purposes; for example, “We bring you the most user-friendly computer”, but by a set of attributes and activities that put that computer in the hands of a satisfied consumer: components, labor, production, distribution , advertising, etc.

Although many products look alike, the corresponding business models are not the same. For example, IBM offers an MoN aligned with a unique value proposition (USP) aimed at Accompany the Customer, that is, to formulate, build, maintain and update an integrated system of computers, servers, printers, etc. On the other hand, Apple also offers computers, but it offers another set of attributes aligned according to another USP, which is Product Excellence through intense technological innovation to offer versatile and, at the same time, user-friendly products. Dell also sells computers, but its USP is organized on the basis of the Process Excellence to build the computer that suits the customer and deliver it in a few days. Obviously, IBM, Apple, and Dell offer computer and related equipment, but their MoNs and market segments are different.

And what happens to these business models if circumstances change? Let’s look at two scenarios: one of depletion and one of recovery.

In Impoverishment, the three brands must adapt to less sophisticated, less expensive models, payment facilities, fewer technological developments and more extensive equipment repairs. The one who will have the most difficulty in adapting will be IBM because the sales of embedded systems to the large customers who characterize it will be reduced. In the case of Apple, there is perhaps a little more flexibility than IBM to adapt to a market with less purchasing power; however, Apple is not lowering prices, so a used market will emerge. In the case of Dell, its MDN is the most compatible to manage in a disadvantaged environment because its models include simpler versions than the other two brands and it is mass produced.

In Recovery, IBM recovers opportunities in the installation of large integrated systems, new large customers appear; it requires producing and offering new technologies, and is requested by its former customers to upgrade existing systems. In Apple’s case, demand for high-tech, high-priced models is reviving and could look to compete directly with IBM in installing embedded systems, especially in organizations that do creative and complex work. The Apple department looking to compete with IBM needs a change in corporate culture focused on customer support. In Dell’s case, fewer adjustments to its MoN are needed because it offers the most versatility in its models. Simply put, Dell is trying to keep up with the demand for more sophisticated and more expensive models. Like Apple, Dell may seek to compete with IBM in the enterprise segment by installing embedded systems. But in this case, just as Apple’s comparative advantage over IBM is in the segment of complex creative work, such as serving customers in Silicon Valley, in the case of Dell, its comparative advantage is in serving large customers whose business models are oriented towards Process Excellence, i.e. massive, standardized and centralized activities, such as those of Wal-Mart or FarmaTodo.

If you want to update your MoN, 1. Analyze the competition. 2. Identify the market attributes and identify the closest or furthest competitors for each attribute. 3. Apply the Blue Ocean Strategy to differentiate yourself by adding, increasing, reducing or removing market attributes to your MoN. 4. Summarize the above in a Unique value proposition depending on whether you decide to focus on product excellence, process excellence or customer support. 5. Adapt key aspects of the organization to the selected value proposition. 6. Build or upgrade the Business Strategies Flowchart to meet selected market attributes that define the MoN. This flowchart is your MoN: what makes you unique is not one of its components, but the combination and consistency between them all.

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