4 Business Model Design Tips

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business model design map by alex osterwalder
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Knowing how to design business models for creating new market spaces and immobilizing your competition is a winning management skill for today's competitive business environment. Whether you're a startup entrepreneur or established executive, or you own an independent service business, exploring these ideas can help you create differentiation that leads to sustainable profits. Here are 4 business model design tips that anyone can use:

I. Define Your Target Customer Segment

Knowing exactly what profile of customer represents the best match for your company provides a fast track to success in marketing, strategy development and budgeting.

Strategy is defined by what you say no to when you have to make choices for your firm.

You can also make your strategy and organization more adaptive by keeping an eye on your peripheral non-customer.

These are individuals and organizations you do not currently target with your offerings, but to whom you might sell tomorrow, given your mix of organizational competencies, relationships, and built assets.

Very often these potential customers are being served by your value chain neighbors and by your indirect competitors. CEOs and other management leaders who form the habit of thinking about, and monitoring peripheral non-customers can get a jumpstart on potentially disruptive strategic trends in their industry and in adjacent industry sectors.

II. Understand Value Creation, Identify Profit Zones

Christopher Lovelock, in "Services Marketing", defined value as:

The worth of a specific action or object relative to an individual's (or organization's) needs at a particular point in time, less the costs involved in obtaining those benefits.
Value creation and profit optimization are 2 of the more important areas leaders must closely manage. Profits follow value creation, and value that matters is determined by the silent priorities and preferences of the customer.

Which products or services represent your high margin offerings (profit zones)? Which customer segments draw the highest profits? Which activities or steps along the value chain represent the future profit zones? These are questions leaders should have asked and answered.

III. Develop Your Differentiating Value Proposition

In the decades since Rosser Reeves first popularized the concept of a unique selling proposition (or USP), many marketers have continued to abdicate their responsibility to search for business model innovation that can be distilled into a short, concise and memorable selling arguement.

If you carefully examine a breakthrough businesses like Cirque Du Soleil, or market leaders like Southwest Airlines, you'll find that beneath the smiles and favorable customer reviews lie unique business model designs that can be communicated in a simple unique selling argument.

IV. Shut Out Your Competitors with Strategy (Strategic Control)

One of the most powerful insights you can have in your business is a strategic business mapping tool known as the "strategic control index". This tool takes the traditional "barriers to competitive entry" concept, and makes it systematic for the business model strategist.

While many excellent tools for understanding business models are out there, I hope this article serves to remind you that the most important aspect of business model design and innovation is the quality of thinking, customer/market knowledge, and business acumen that goes into it.

One of the most accessible methods I know of to effectively differentiate your business model is with hidden assets - the use of intangible assets. Such assets are embedded in the intellectual property, social networks, enterprise relationships and even the "spiritual capital", of the average small and mid-sized business.

Would you like to learn how to use the connection between intellectual property and the attention economy to grow or improve your business? The "Attention Leverage System" may be perfect for you.

Gogo Erekosima strategic marketing consultantGogo Erekosima, is the Lead strategist at Idea Age Consulting - a management consulting firm that helps solo, small and mid-sized businesses nationwide to grow using assets already hidden within the business itself.

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Business Model Design

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