Tuesday, August 10, 2010

7 QUESTIONS TO CREATE A GREAT BUSINESS MODEL

1. Do you feel inspired by your organization's current business model?

If you are like most people, the answer will be "no." That's just the beginning of your learning. You should go on to ask yourself, what's missing to make me feel inspired by our business model? Go on to ask at least five other people, and exchange ideas about what is missing. As you think about potential business models, focus on those areas.

2. Does your company's business model provide greater economic and nonmonetary benefits for all stakeholders than the alternative of not doing business with your company?

In asking this question, consider each end user, customer, distributor, partner, supplier, employee, shareholder, lender, regulator, and the communities you serve. If not, what's missing? These answers should help you see where your business model could be improved to create a more supportive relationship with stakeholders where their self-interest is furthered by your success.

3. What would have to change for the economic and nonmonetary benefits your organization provides to double for each stakeholder?

Most people focus heavily on customers. But the most successful business model will distribute the rewards it generates in supporting customers extremely well to all those who contribute to enabling the company to operate excellently and to prosper.

Answering this question should flesh out whether your challenges are to push innovation in new directions, or simply to redirect the way the fruit of that innovation is shared. Most organizations will have issues in both dimensions.

4. How long would it take an existing competitor or new entrant to overcome your business model's advantages for stakeholders?

If the answer is less than ten years, you definitely have some work to do.

5. What are the biggest risks your company takes now that could set back your progress?

Although it is exciting to "bet the company," the most successful business model builders avoid doing so except when they see no choice. It only take one loss when the stakes are high for disaster to follow.

6. How can you change those big risks for smaller ones?

For example, if each new investment is too big for setbacks to be easily swallowed, can you share the risks and rewards with others? Of, if you lack resources, can you team with organizations that compliment your own?

7. If all of your business model improvement tests were successful, how close would they come to providing an outstanding business model?

If you are like many organizations, there will still be significant gaps. How can you fill those gaps? Tests aren't the only way to establish new business models. Sometimes new business relationships are needed because it will be too slow and expensive to add the resources internally.

[Source: Prof. Donald Mitchell, strategy consultant & author of 'The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model', among many other great works;]

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