Business Models

Entrepreneurship and Innovation: Creating a New Business Model

If you feel that existing business models are not going to work for you, create your own. Business model innovation can give you the competitive edge you need for success. You can develop such innovation using the principles of a straightforward business structure.

Designing Your Business Model

Designing your innovative business model simply requires a sheet of paper and a pen. Divide the paper in two with a vertical line down the middle. On the left, note the four questions that follow. Your business model develops from the notes you make on the right.

This exercise may take more than one attempt; after all, you need to refine your thoughts and possibly run them by colleagues. What you should finally have on the right side of the paper is a series of bullet points that answer each of the four questions.

These bullet points represent your new business model.

Your Customers–Who Are They?

Who exactly do you wish to sell your products and services to? This is not as obvious a question as it may seem. Thanks to technology and modern logistics, your target customers can be anywhere in the world.

Do not limit your concept of your ideal customer: Expand the concept as much as you can.

Business Model Innovation

What Are the Benefits–For Everyone?

List all the benefits of your products and services for all your customer types. In other words, explain concisely how your products and services solve customers’ problems. If you are using external business partners, be sure to include how your business benefits them and adds value to your supply chain.

How Do You Provide the Benefits?

Consider how you intend to sell your products and services. These sales channels must provide the benefits and value that you have outlined above. For example, will you sell to people directly in their homes or workplaces? Or will you offer click-and-collect by combining an Internet catalog and brick-and-mortar stores?

This aspect of your business model must also reflect how you wish to create and maintain customer relationships. For instance, do you want these relationships to be personal? Or do you want to create a relationship based on the convenience of advertising and mobile technology?

How Do You Earn Your Money?

This is where you explain your income sources. You also need to bear in mind that your business model’s success depends on your gross profit. So, as well as considering your revenue, you must outline your costs and how you incur them.

A basic rule of business applies here: Keep the costs down, the revenue as high as possible and the gross profit at an acceptable level. The word “acceptable” is important here. Innovative business models sometimes aim for modest gross profits combined with sustainability. Large gross profits are not always the best target for new enterprises.

Too often, people regard innovation as a new product or service. While these can be profitable, a new business model can cut costs and ensure consistent revenue.

An innovative business model can ensure long-term commercial viability, a notion that appeals to all entrepreneurs.

Is Your Business Running You? A Fractional COO can help.

Kevin A. Nye

A veteran of multiple industries, Kevin A. Nye has parlayed more than 20 years of management and leadership experience into a consultancy designed specifically for the benefit of small businesses. Having served in roles in Supply Chain, Operations and Regional management, Mr. Nye was most recently the Chief Operating Officer of a regional steel company and is currently focusing his expertise to help small business owners create the organizational foundation required to grow their enterprise.

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