What Is The Business Model?

< p > what is the business model? My experience tells me that most people do not understand this problem.

Many people still understand this word at this stage: what do I do? What do I earn from it? This is certainly part of the business model, but certainly not all.

So what exactly is the complete understanding of the business model? < /p >

< p > although the term "business model" has been widely known, it has only been 20 years since it became popular.

Among the various definitions, I prefer Clayton Christensen's version of Harvard Business School: the business model is how to create and deliver customer value and company value.

Although each person has different understanding of the elements contained in the business model, the definition of this word should be acceptable.

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< p > < strong > What are the elements of the business model? < /strong > < /p >

< p > What are the elements of the business model? Clayton Christensen's understanding includes four elements: customer value proposition, profit mode, key resources and key processes.

The popular point is the following four points: first, what value can you bring to your customers? Second, how do you make money after bringing value to customers? Third, what resources and capabilities do you have to bring both customer value and company profitability? Fourth, how can you bring customer value and company profits at the same time? < /p >

Alexander Ostervad and Eve Pinioz, the author of the new business model P, divide the business model into nine elements: value proposition, customer segmentation, customer relationship, key business, core resources, key cooperation, distribution channel, cost structure and revenue source.

Analyzing these nine elements, we will find that value proposition and customer segmentation are related to customer value proposition. Cost structure and income source relate to the profit model. The other five elements can be attributed to key resources and key processes respectively.

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< p > customer value proposition is the core element of business mode and the presupposition of other factors.

This is also consistent with the most basic business logic: do you want to make money? Well, what value can you bring to others? If you can't bring value to others, you want to make money, then you should go and touch it. The essence of business is exchange of value. To exchange value, you must first create value. Therefore, there are two problems: entrepreneurs must be clear: who are your target customers? What value can you provide for them? < /p >

The problem of < p > is not complicated, but many start-up companies have not yet figuring out the problem.

Technology startups are more likely to get into a cognitive misunderstanding: as long as the technology is strong enough, customers will naturally pay the bill.

In fact, market demand and technical leadership are two different things. Many seemingly dazzling technologies have almost no market.

Most of the scientific research results are very dazzling, but less than 10% can be converted into market demand. This is also the main reason for the failure of most technology innovation companies.

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< p > the successful case in this respect is melatonin.

You may not like the commercials of melatonin very much, but its products have little technical content, but its customer value proposition is very successful.

Its target customers are not product consumers, but young people who want to buy a decent gift with little money.

Its value proposition is not sleep and health, but a carrier of emotional expression.

Therefore, many people buy gifts to their parents in supermarkets. The first reaction is to send gifts to the brain.

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< p > customer value proposition is not enough. You have to have a good profit model.

This is a mistake that many Internet Co can easily walk into. They like to tell the story: as long as our users reach 10 million, 10% of them pay, then we can earn a lot of money. In most cases, this can only be a story. It is two different things to make a profit and a real profit model, because profit requires a reasonable income pattern and cost structure, which many companies do not have.

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< p > for example, the main source of income of many Internet media companies is advertising.

But people familiar with the Internet know that Internet advertising is a "winner take all" market, with 1% of the company occupying 90% of the market share.

If you can't get to the top three in a niche market, the advertising revenue you can get is basically negligible.

In addition, most Internet Co burn money very much, cost institutions are very unreasonable, resulting in these companies' profit model basically "messy".

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< p > of course, many entrepreneurs also want to be very clear that they can not earn money from consumers, they want to earn investors' money.

Indeed, some entrepreneurs have succeeded in taking a lot of money from investors, but they are not profitable, but such stories often end badly, because patience is often limited.

The cake is round again, and it will be cashed one day.

If we can't make a profit after a certain period of time, the value of the company is basically zero. Naturally, it won't win the favor of investors.

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< p > if the customer value proposition is related to strategy and profit mode is related to sales and operation, the key resources and key processes will test the execution ability of an enterprise.

Google's "key resources" are gifted engineers. "Key processes" are Apple Corp's innovative company system, enterprise culture and daily management. These processes ensure that Google's innovation is replicable and extensible, so as to continuously develop products that are disruptive and innovative.

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< p > this is easy for many entrepreneurs to overlook.

They often regard themselves or so-called relationships as key resources, but at the same time overestimate the strength of themselves and the so-called relationship, but do not establish the competitiveness of their organizations.

In terms of system and process construction, it is the weakness of most start-up companies. They tend to be superstitious in their personal abilities and neglect the construction of systems and processes.

Such carelessness often results in these enterprises failing to get through the initial stage, or they will not grow up.

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< p > < strong > how to innovate the business mode? < /strong > < /p >

< p > business model is not only an explanatory model, but also a guide tool that can help you design business models or innovate existing business models in order to develop better business strategies.

In terms of innovation, business model innovation is more important than product innovation and service innovation, because it involves the value creation system of the entire company.

Real change is not confined to great technological inventions and commercialization. Their success lies in combining new technologies with just right, powerful business models.

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< p > business mode innovation can change the whole industry pattern and let the market reshuffle.

This innovation has a long history, whether WAL-MART or best buy, or Southwest Airlines and Amazon, is a successful example of business model innovation.

From 1998 to 2007, there were 27 successful companies in Fortune 500, and 11 of them believed that the key to their success lies in the innovation of business models.

This shows that the power of business model innovation is much greater than that of technological innovation.

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< p > business mode involves all aspects of the company including strategy, operation, human resources, innovation, finance and so on. Therefore, the innovative business mode is a systematic project, and its difficulty is much more difficult than that of single function innovation.

When designing or innovating business models, we should take the innovation of "customer value proposition" as the core, rely on the key resources and key processes, and seek the coordinated development of all aspects with the profit model as the baseline for financial safety, so as to achieve long-term success.

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< p > first is to define what is "customer value proposition", which is related to the strategic positioning of enterprises: who are your core customers? Why do they want to buy your products? Many people are prone to take for granted mistakes on this issue, so when we first define the "customer value proposition", we must first ask the right questions.

Users buying iPhone 5 just need a more powerful and lighter mobile phone? Of course not! Most people who buy iPhone 5 buy that kind of social identity.

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< p > if we want to innovate "customer value proposition", the value innovation curve of blue ocean strategy will be a good tool.

By decomposing various aspects of customer value proposition, enriching the value proposition that differentially and seducing consumers, and reducing the value proposition that is not so important but cost effective, it is entirely possible to create a new market, taking into account the two competitive advantages that are not compatible with the theory of competitive strategy.

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< p > take the economic airlines as an example, they mainly aim at the concept of price performance ratio, and provide customers with punctual traffic services at a much lower price than that of similar airlines.

In pursuit of "differentiation", they have opened up many routes for two or three line cities. In pursuit of "cost leadership", they have removed the non core catering services.

Because it meets the core demand of many price sensitive customers, and at the same time, it controls the cost as low as possible, thus opening up a brand new "blue ocean market".

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< p > for an entrepreneurial company, because its key resources are limited and the key processes are incomplete, it is necessary to focus on choosing the target customers, the value proposition must be clear, and strive to create a clear "customer value proposition" with limited resources.

For an entrepreneurial company, specializing in a niche market is the most competitive strategy. Only when it has an absolute leading edge in a niche, can it expand in related fields.

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< p > according to my experience, an entrepreneurial company must firmly remember the following ten words in designing business models: "professionalism, focus, differentiation, and strong inspection".

Professionalism means that we must uphold the professionalization line, focusing on small businesses and small businesses.

Differentiation means to do what others can't do and determine your unique positioning.

A strong test means that it is possible to create profits that can be measured and immediate for customers.

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< p > no matter whether your company is in the stage of entrepreneurship or change, a deep understanding and shaping of your business model will make your goal clearer on the way forward and create value continuously, so as to realize the company's everlasting foundation.

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