Changing Beliefs: Business Models

by Jay Deragon on 10/12/2010

A business model describes the rationale of how an organization, creates, delivers and captures value. Rationale means an explanation of opinion, belief, practice, or phenomena. Anything not having to do with create, deliver and capture value is waste. In business there is no rationale for waste.

Many businesses fail to constantly examine their business model and scope creep sets in, wasteful processes get created and the bureaucracies consume time, productivity and people’s attention. A business model is created by beliefs and believing the wrong thing can destroy your business.

Most business beliefs are grounded in past examples of how to organize resources to produce something for consumption by the market. The problem with these past examples is that the market dynamics of consumption has shifted from supplier driven strategies to demand driven communications by buyers. Old business model beliefs must change in order to keep up with demand driven communications by buyers.

Business models are based on 9 basic beliefs that drive how the company will make money:

  1. Customer segment: the group/s of people the enterprise aims to reach and serve.
  2. Value proposition: the bundle of products and services that creates values for a specific customer segment.
  3. Channels: how the company communicate and reaches customers segment to deliver its value proposition
  4. Customer relationship: the types of relationship a company establish with specific customer segment, it can range from personal, automated, community, self service, etc.
  5. Revenue streams: the heart of the model, where the cash will come from?
  6. Key resources: physical, financial, intellectual, or human resources required for the business model to work.
  7. Key activities: key action to make the business model work.
  8. Key partnerships: partners and suppliers to make the business model work.
  9. Cost structure: to all of the above.

Now look at 1-9 above and consider how social technology influences each one of the nine factors that drive your business model. To optimize the influence you have to understand the technology and its impact on your existing business model. Most organizations consider social technology as a marketing tool rather than understanding the implications of the technology on the entire organization

Starting Asking Questions

A critical question for leaders is, “When do you stop pouring resources into things that aren’t creating, delivering and capturing value?” The most dangerous traps for organizations are thinking within the confines of old business models.  Using social technology within old business models create waste, rework and frustrating experiences for people. The market already knows what you’re doing wrong. What the market wants to know is when you stopped doing it. Doing what? Anything and everything that doesn’t allow a market to create deliver and capture value from what you do.

Prisoner of Your Own Business Model

Most of today’s business models have created prisons of ideas and innovation. Stuck in old beliefs and organizational structures people’s experience feels like being contained in a prison. Employees can’t break out and do what is right for the buyer because of policies and politics. Buyers can’t get it without experiencing traps, tricks and attempts to be contained. Most of today’s leaders fail to recognize the “prisons” they have created and consistently miss the opportunity to create, deliver and capture value with and from human interaction.

The human network has escaped from the prison of old business models and sharing, creating, delivering and capturing value from each other. If you don’t believe it and aren’t embracing it then don’t be surprised to find yourself alone stuck in the prison of old beliefs.

{ 1 comment }

Gabriele Maidecchi October 14, 2010 at 4:09 am

That’s why I like to work with startups, out of the usual schemes of things and thinking more (sometimes too much) about “get things done” rather than the bureaucracy behind it. If you get stuck too hard behind the paperwork and business concept of a project, you’ll find yourself sitting through meetings rather than thinking about delivering a great product. I am not saying a careful planning isn’t necessary, just that sometimes it goes a bit too far.

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