Knowing Your Business model

Most businesses engage in some form of business planning by thinking about strategy and performance of the business. However, far fewer think about their business model in terms of understanding, in simplest terms, how the business makes money.

More often than not the business model provides a strong basis for developing a business plan, so make sure you know the pillars of your business model.

It is important for business to identify what services your customers and end users value and understand as well as what, how and why the customer pays for your product, process or service. Central to any business model is understanding the different ways in which a business creates and captures value. Explore how well you can explain your business model in terms of the offering (i.e. product/process/service), experience (i.e. how you engage with the customer) and configuration (how the business operates).

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The offering refers the product, process or service that your company offers. It is the key dimension whereby companies create value for their customers and is therefore the main focus of innovation activities within most companies. A typical question to help you understand your offering is how does your business create value and enhance the performance of your customers?

However, while innovating the offering is important, going beyond the product, process or service is essential to set yourself apart from your competitors in today’s increasingly complex and competitive business environment.

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Experience refers to how you engage with your customer or end user and how they engage with you. It includes aspects such as interaction, brand and channel to capture the multiple ways in which your customers experience your product, process or service. Typical questions to help you understand this dimension of your business model are, for example, how do your customers interact with your business (i.e. physically, digitally or both)? and how does your branding reflect what your business does?

Innovating the experience can help your company develop a unique competitive advantage, with innovation in this area being increasingly prompted by the digitalisation of business.

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Configuration refers to how your business is organised to not only create but also capture value from its customers. It includes aspects such as the profit model, network, structure and transactions. Typical questions to help you understand this dimension of your business model are, for example, how and where do you carry out transactions with your customers? and what, if any, other businesses is your business dependent upon?

Innovating the configuration can help your company leverage its strengths, reduce costs and develop new revenue streams, and represents a key opportunity in an increasingly connected and digitised business environment.

Doing Business Model Innovation

Over the past couple of years the notion of ‘business model innovation’ has become increasingly popular.

While many businesses think about innovation in terms of their products, processes and services, business model innovation is about creating and capturing value from different aspects of the business model.

Business Model Innovation:


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