The Importance of Business Models
Recently an entrepreneur came to me and asked me about the business model of his business. He is an entrepreneur who imports high quality beef from abroad and has been confused about the business model. The stuff is good, just not as well received by the market. I examined his business and studied his business model. I put forward the following points:
First, the flour made into buns, is the traditional thinking
He operates beef, the thought of a chain, many people will also encourage him to do this. I said beef chain, this is not a new concept. This model does not work. As if the flour is made into steamed bread, how to do is also traditional, can only be with millet thin rice with pickles, do breakfast. Then how to do it?
Second, to have the flour into bread thinking
Flour is the raw material, made into bread is not how good, but belongs to a kind of innovative thinking , beyond the traditional, can be with milk, eat bacon bake, which is innovative.
This is to think of the whole operation of the resources are different, the results are certainly different.
Third, flour made into a birthday cake, but a greater innovation, this time there is a business model flavor
Flour made into a cake, the first thing you need to have the cream of the match, not the concept of a product, with a deep into the life of the meaning of the birthday gift, this is the functionality of this functionality, can be made into a chain, and can be made dozens of times the profit of the steamed bread. This is the best combination of business model and product innovation.
So flour is the raw material, steamed bread is the product, bread is upgraded, steamed bread with pickles called solution, but is traditional. And bread and milk is the advanced solution. And cake and chain is the business model.
It can be seen that a good business model can create raw materials dozens of times the profit.
Buy beef is to buy raw materials, but how to develop into steamed bread level beef, bread level beef, and even cake level beef, is the idea of business model design. According to this idea, I gave this entrepreneur to design the business model, and achieved better results.
Therefore, the business model is important! Author: Li Jiangtao
Business model breakout
In the army of entrepreneurship, there is never a lack of ? Passionate people? Especially with the listing of GEM at the end of last year, the enthusiasm of entrepreneurs has once again been ignited. But there is one uncomfortable fact that makes people uncomfortable. Most start-ups fail. Why? It has to do with resource allocation.? The more important reason is that the business model doesn't work.? Professor John Mullins of the London Business School points out that? Angel investors get much more out of Plan B than Plan A.
So, what's the point of having a business model that doesn't work?
So, do you have the courage to move your business model from A to B?
Business School magazine's first manager community event of 2010. featured Professor John Mullins of the London Business School. He has just published his new book Gettingto Plan B. He and Liu Yan, COO of Centillion, share with readers about business models.
? If you were asked to create a business model for a ? How to eat ice cream without getting your hands dirty? business plan to go to Wall Street to find investors, such as Trump, how would you impress him?Professor John Mullins kicked off the event with a VCR, ? and the conclusion of this entrepreneurial program was a pair of $19 gloves for each person. Will the plan for a pair of ice cream gloves for everyone work?
? It won't work. Eating ice cream with gloves on takes away all that feeling and atmosphere, and it's inconvenient.? The listener replies.
? Yes. And, maybe you'll find the investor hard to deal with, it seems hard to have a point that touches his heart that makes him want to invest. ?Professor John Mullins said, ? Today, most entrepreneurs start their business plans based on some childish assumptions and too much imagination. This type of business plan is what we might call Plan A. Plan A is rarely successful, and it's not the entrepreneur's fault because it's what is taught in business schools like the London Business School. Think about it, is this how your business plan is made: first you convert it into an Excel spreadsheet, then we make some not-so-smart assumptions, put them together, and you're rich? Is that the process? How do we make a real business model work? My suggestion is that you stop using Excel sheets!!!?
It wasn't Plan A that made them win
In Professor Mullins' view, it's important to be brave enough to move away from ? unreliable? Plan A to Plan B, and the basis for that is to have real data. It is some product or service that gives users what they really need.? To innovate a business model, you need to think in terms of: revenue model, gross profit model, operating model, working capital model and investment model. ? said Prof. Munins.
The first company Prof. Mullins mentioned was the famous Apple.? Ten years ago, it mainly sold PCs, but now there are iPods, iPhones?Steve Jobs saw the demand for mobile music? Sony had sold 130 million Walkmans by then. And in the music industry, where the issues of copyright and remuneration are relatively sensitive, many copyright holders don't get a fair return. There was a company that made MP3 players, but their product was very bad. Steve Jobs then did the work to fill that gap, what we call a crossover leap. Of course Jobs had to put his hypothetical ipod+iTune?model to a very rigorous test: did consumers really want the ipod+iTune?model? to conduct a very rigorous test: in the end consumers will pay, in the end the music industry is willing to cooperate? In the end, Apple's results are there for all to ****. Mullins introduced.
Another example is Google, a company that didn't even have a plan A at the beginning, and a plan B that didn't work. But then they had a pretty successful Plan C and a big success with Plan D.? The two founders thought search was a great thing to do, and then people used the search engine more and more, and they had to buy servers to support the search service. But charging users of search? Did anyone pay when people were doing search? No, I don't think so. Mullins said, ? Their Plan B was to sell such a search technology to some portals like Yahoo, but that didn't work out. They then had to do Plan C. Plan D was for Google to put its own search engine on other sites, which was also a source of revenue.?
Ryan air is a famous airline. Unlike other airlines that make money mainly by selling tickets, this budget airline has come up with a lot of cost savings and other ways of making money to keep their one-sided price of tickets very low.
? How would you cut costs if it were you?Mullins asks.
? Remove dining? Turn it all into an economy bin? Rent airplanes instead of buying themAudience responds enthusiastically.
? It's important that we make sure this airplane can fly in the sky. ?Prof. Mullins joked, ? The other cost cuts I know of are that they removed that bag in the back of the plane for garbage, removed the visor, and replaced it with a pay toilet lock. Importantly, their routes are all shorter routes of an hour or so. That's working on the operating model. One of the more successful ones in terms of investment model is Skype. they already had 7 million users in the first year, but zero investment in marketing. It breaks another traditional path. who says you have to have a phone to make a call? Skype was eventually sold to EBay for 2.6 billion dollars. here's the thing about EBay, it's one of the few businesses that can be successful with Plan A. EBay takes something that was transferred from one friend to another, they never touch the actual one, and the switching cost is virtually nil, and yet they can make a profit in the process. profit in the process.?
So where would your business break through to a better business model?
Disrupt with what?
Professor Mullins argues that it's not the quality of the initial business model that matters, but the ability of your team to implement a successful business plan that? Finding what is going to work? s approach. And also be aware that the trick is that we have to experiment quickly.
Ryan air is indeed very ? smart? Liu Yan introduced, ? It has disrupted the traditional airline profit model of the past, realizing a 15% profit miracle. A similar airline in China is Spring Airlines, which was the only one to make a profit during the 2008 financial crisis, when almost all airlines lost money. They have a very interesting role in the company called ? General Manager of Revenue Enhancement. His mission is to increase revenue. Spring Airlines can even sell houses on the airplane. How? It sells discount coupons for house selling, for example, you can enjoy 10% discount when you buy a house with this coupon, maybe you really buy that house one day. So, a lot of models can break through if you see what's behind them.?
In fact, Starbucks, which has always been considered a success, is facing challenges today. They also need to continue to move from B to C or D?One of their challengers is 85°C. One of their challengers is 85°C, which is now beating Starbucks across the board in Singapore. 85°C has a completely different coffee culture to that promoted by Starbucks, which believes that coffee is just coffee, it's just for drinking, it's just for refreshing and revitalizing the mind. It doesn't think it's necessary to stay in the store for so long, so it advocates takeaway. It defines the coffee product that Starbucks makes money on as an open-door product: $8 a cup. It makes money on bread. In doing so, it drastically reduces its fixed costs and far outperforms Starbucks in overall profitability. But if you bake bread and sell it in Starbucks, the aroma of that bread will overpower the coffee flavor, and it may not be a treat for the consumer sitting inside.? So, I agree with Iohn's view: the business model is not static, from A to B, or even to C to D. Only by realizing a good jump, can we create a better future. Liu Yan said.
? In fact, nothing is brand new. It's like the plot of a movie you see. ?Professor John Mullins said, ? For a new movie, on average only 37 plots are new, and the rest are actually things we've seen before. So, all movies actually innovate inside 37 little plot stories. Can we have a way of doing this, like our own business with Starbucks, Apple, 85°C? Hybrid stuff? Synthesized together to innovate into something of our own.
Business Model Success Characteristics
Any business model is a three-dimensional model consisting of customer value, corporate resources and capabilities, and profitability.
The White Paper on Business Model Innovation, co-authored by Harvard professors Mark Johnson, Clayton Christensen, and SAP CEO Henning Kagermann, summarizes these three elements as:
? The customer value proposition? , refers to what a business needs to accomplish when it offers a service or product to its customers or consumers at a set price.
? Resources and production processes?
? Profitability formula?
According to companies that have long been involved in business model research and consulting, there are three characteristics of a successful business model:
First, a successful business model provides unique value. Sometimes this unique value may be new ideas; more often it is a combination of product and service uniqueness. This combination can either provide additional value to the customer; or make the customer can use a lower price to get the same benefits, or with the same price to get more benefits.
Second, business models are difficult to imitate. Companies raise the barriers to entry in the industry by establishing their own distinctiveness, such as attentive customer care and unparalleled implementation capabilities, thus ensuring that the source of profit is not infringed upon. For example: The direct sales model (based solely on ? direct selling? point, can not be called a business model), everyone knows how it works, also know that Dell Inc. is the benchmark of direct sales, but it is difficult to copy Dell's model, the reason is that ? Direct marketing? Behind the direct sales, is a complete set of resources and production processes that are extremely difficult to replicate.
Third, a successful business model is down-to-earth. Businesses need to live within their means and break even. This seems self-evident, to do it year after year, day after day, but it is not easy. The reality is that many businesses, both traditional and new, do not have a good understanding of where they make their money, why customers value their products and services, or even how many customers actually do not bring in profits for the business, but instead are eroding the business's revenues and other key issues.
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