Strategic Business Model Template
The first time I came across the word business model, the thought that came to my mind was modeling. I was taught a very important concept during my university day in econometrics class, it was about model and modelling.
The experts said the model is the representation of the real world situation in a design or equation form. We have models such as architectural plans, economic models , which are in the form of equations, we have other forms of models.
At Tekedia, we have come to see the business model as the nervous system of a business, it is a design of how a business will solve market frictions in the market in order to unlock value.
Can you answer these questions? What is the use of an architectural building plan? To me, it is to serve as a guide in building the real house.
When well designed and executed the builders end up building the expected house.
That is what a business model does. When well designed and executed it can build a billion dollar business.
Our interest today is to know the simplified template to develop a business model.
Simplifies Template for Designing a Business Model.
To gain mastery in doing anything try to have a simplified template. Here are the dots that you need to connect in your business models. This serves as an upgrade to business model canvas.
Step1: Market Friction.
The term market friction is simply the problem you want to solve in the market. Business models are built on certain problems discovered in a market. Those problems serve as the foundation upon which other things will be built.
For example, in 1975 Bill Gates and Paul Allen discovered the need for software for microcomputers. As explained in 3S Rules, they built Microsoft business model on that market friction.
Step2: Value Chain.
The value of a business is in its chain, that is why they call it value chain. The beauty of the value chain is that it divides the processes of a particular business into segments. It now allows entrepreneurs to focus on solving problems of individual segments.
What value chain are you focusing on?
Step3: Value Proposition.
Value proposition as I explained in one of the series of my business model analysis is the value that the target market will get from your solution.
For example, Uber makes it convenient for people to order a ride. Pollstalker makes it easy to compare product prices across the globe.
The products should emanate from the value propositions and the ideas of solutions you imagined. It is always by you answering this question ; how do we solve this problem in real terms?
Bitcoin makes it possible to have a peer to peer transaction. This has eliminated the need for intermediaries.
Step5: Target Market.
Who do are the people that have this solution? Business solutions or products are developed for people and not for the business. Your modelling should identify who has the solutions.
Step6: Key Activities
At this stage, we need to know what we are going to do in order to provide the solution to the market target in practical terms. Do we need to develop a digital platform?
Do we need to build a team? Do we need to raise money? What are your key activities?
As you model key activities, have it in mind that it works with key resources. You need key resources to execute key activities.
For instance, you need developers (key resources) to develop digital platforms (key activity). You need funds to pay for what you use.
Step 8: Key Partnership
What are the things that you will need from others in order to be able to provide the solution? Partnership is taking what you don’t have from others and giving them what they don’t have.
It is a win-win situation. Model this in your business model.
Step9: Customer Services.
Your solution is not complete if your customers are not happy. That means you need to model what you need to do in order for your customer to be happy using your solution. It could be after sale services.
Step10: Revenue Model:
How will the business make money ? How will the business unlock value? How will entrepreneurs and investors make money from solving this problem? This is called revenue modelling.
For instance, Uber makes money from commission, Facebook and google makes money from ads etc
Step11: Cost Structure.
What is the cost of providing the above solution? How much will it cost to provide that product and take it to the target market?
Consider Fixed Cost(FC) and Variable Cost(VC) when modelling this.
Step12: Financing Model.
How do you finance the business? What are the strategies you will adopt to raise money to launch your minimum viable product? We have equity financing, debt financing, crowd funding and creative financing as explained in 3S Rules?
When you follow the above steps, you will end up having a comprehensive business model that shows you a map or the nervous system of your business.
A good business model is the first success of a successful business. Check out other series on business models here. Reach me to help you out with your business modelling project.
The Business Models of Billion Dollar Worth Entrepreneurs
Have you ever wondered what makes some business start-ups to succeed and become global giants
while others fail?
With 3S Rules you will learn from global icons who founded companies such as Amazon, Microsoft, Lyft, Apple, Alibaba and many others on how they discovered their business ideas.
3S Rules will give you a first hand founder mindset on how to build your billion dollar startup idea.