Differentiation via business model innovation
How do you make your big, bold, and breathtaking dream come true? For sure, you do not need a five-year strategy plan resembling a communist planned economy. Instead, you need strategic agility – the ability to identify and react to opportunities and threats that occur suddenly in the market. You need a strong business model that answers the very important question: How are you going to deliver value to your customers, thereby making a profit? To many, it actually comes as a surprise that the easiest way to differentiate a company from its competitors is by means of the business model, not the products and services.
Designing a business model that makes you stand out
Recent examples of companies who have become successful by means of business model innovation include Amazon, Netflix, Airbnb, and Uber, but my favorite example is this: In 1959 Xerox introduced the revolutionary dry-process, plain-paper Xerox 914 copier. There was one problem though; it cost six times the price of the traditional alternative and consequently was extremely difficult to sell. Therefore, they had to develop a new business model. Rather than selling the machine, they leased it for $95 a month and charged a few cents per copy for copies made in excess of 2,000 per month. Due to the speed and convenience of the Xerox 914, customers started making many more copies than they had previously, which meant that the copier that could not be sold suddenly became a huge revenue generator - because of an alternative business model. You must find a way to do the same.
The 6 steps of business model innovation
- Who is your target group?
- What problems, frustrations, and challenges should you solve?
- What value proposition do you deliver?
- How will you reach, acquire, and keep customers?
- How will you generate revenue?
- What is your cost structure?
I do not know if Amazon, Netflix, Airbnb, and Uber sat around a table and answered these questions before they came up with their strong business models. However, I am certain that, in one way or another, they considered several different business models. You must do the same to reach your goal. Just imagine that for each of the six questions above you could answer in three different ways. That gives a total of no less than 729 different combinations (business models). Of course the idea is not to investigate all of these, however, you should consider more than just a few. And the one you end up selecting must be scalable – otherwise, you will not be able to grow rapidly enough.
The designing of innovative business models is an integral part of Lindberg International's 8-step Mission to Mars growth concept. For further insight please download our free Mission to Mars whitepaper by clicking below: