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Transforming a Firm's Business Model Elijah Ezendu

Transforming a Firm's Business Model

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Discovering business model as a blueprint for charting, embedding and leading evolution of mutually rewarding values thereby achieving business success.

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Page 2: Transforming a Firm's Business Model

Preface

This piece of work serves as introduction to key concepts in business model development and the standard method for transforming a firm’s business model from ineffectiveness & mediocrity to unparalleled cascades of peak performance. A clear understanding of requirements provides impetus for clutching systemic solution. That’s why the complete relationship network existing in a business system must be captured and sorted out, with the intention that all arrays of dependencies occurring at every activity stratum would be discovered, fathomed and appropriately exploited for achievement of peak performance. Business Model is a simplistic representation of the interlocking factors in business operation, showing connectivity, dependencies, in addition to establishment of the right mix of configuration for each factor that would facilitate peak performance. Business Model exists in every organisation either in the form of unstructured or structured scheme. When an organisation deliberately craft perceivably workable business model: It serves as a structured one. If an organisation fails to deploy an objectively tested business model for its operation, the incessant multi-polarization of decisions and practices therein would continue to embed unstructured business model, which may jeopardize the established business intent. A well structured business model serves as fitting alignment between business intent and peak performance. I believe this know-how will be beneficial for transformation. Dr Elijah Ezendu Award-Winning Business Expert

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Introduction

Linder and Cantrell indicated Business Model is an organisation’s core logic for creating value. Bill Vorley, Mark Lundy and James Macgregor identified Business Model as a way of creating and capturing value within a market network of producers, suppliers and consumers. Alexander Osterwalder postulated “Business Model is nothing else than a representation of how an organisation makes or intend to make money”. While Mitch Thrower affirmed, "in all enterprises, it's the business model that deserves detailed attention and understanding". Steps in Transforming a Business Model

• Business Model Analysis • Development of Solution Options for Identified Problems • Restructuring of Business Model to More Efficient Alternatives • Identification of Most Efficient Alternative • Deployment of New Business Model and Review

Elijah Ezendu, Business Model

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Business Model Analysis This is the critical identification and evaluation of a business model for purpose of ascertaining its internal alignments to operational effectiveness and external alignments to efficiency of the total business stream. Business stream is a schema that shows the five layers in business development framework, from business intent to business performance.

Layers of Business Stream

• Business Intent • Business Strategy • Business Model • Business Process • Business Performance

Elijah Ezendu, Business Model

Page 5: Transforming a Firm's Business Model

Business Intent Business intent is the description and accentuation of a structured focus, highlighting vision, mission, goals and objectives, while symbolizing direction and destiny.

Business Strategy Business strategy represents clearly identified feasible route for steering activities onto attainment of goals and objectives. There are three levels of business strategy.

Three Levels of Business Strategy

• Corporate Level Strategy • Business Unit Level Strategy • Functional/Operational Level Strategy

Corporate Level Strategy This comprises overall strategy elements for the firm. Resolving issues pertaining to mix of businesses and means for coordination and integration of individual unit strategies. It’s concerned with the following:

� Managing Activities and Business Interrelationships � Corporate Responsibilities � Management Practices � Competitive Contact

Business Unit Level Strategy This involves translation of the corporate level strategy into suitable strategies for individual business divisions or portfolios, required to develop and sustain competitive advantage for products or services of the firm. This is concerned with the following:

� Influencing the layout of competition by means of action such as vertical integration. � Positioning the firm’s business against competitors. � Modifying action to cope with changes in demand, supply, regulations & technology.

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� Developing useful partnerships with customers and other business units.

Functional/ Operational Level Strategy This involves development of strategies for functional catchments such as production, finance, human resource, research, logistics, business development and materials management. It’s concerned with implementation of the strategic plans established at corporate and business unit levels in order to ensure functional silos partnership in organisational leadership.

Characteristics of Business Model

� Business Model is a blueprint pinpointing the flow of articulated value from a firm to its customers, and the dimensions of returns to the firm.

� Business model is a bridge providing appropriate linkage between business strategy and business process.

� Without a well-structured business model in place, there would be a disconnect between business strategy and business process.

� Business Model is the drawing board for designing Business Performance. � Business Model is the heart of Business Success.

Osterwalder & Pigneur Business Model Canvas

Alexander Osterwalder & Yves Pigneur, Business Model Generation

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Ezendu Business Model Template

Elijah Ezendu, Business Model

The business model template consists of four parts namely infrastructure, offer, customer and finance. The content of each part is as stated below.

Infrastructure

� Alliance Networks � Key Activities � Coherence � Key Resources

Offer

� Value Propositions

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Customer

� Customer Relationships � Influence � Channels � Target Customers

Finance

� Cost Structure � Revenue Stream

Alliance Alliance is an agreement between firms for achievement of defined goals and building mutual interdependence while remaining separate entities. The two alliance structures are as follows:

i. Transient Alliance ii. Strategic Alliance

Alliances can exist between a firm and its suppliers, distributors, competitors and non-competitors. Some types of alliance are as follows:

I. Preferred Suppliers II. Co-Marketing

III. Licensing IV. Joint Production V. Coopetition

VI. Minority Investments VII. Multi-Partner Consortia

VIII. Joint Research and Development IX. Outsourcing X. Equity Joint Venture

Alliance provides opportunities for leveraging external capabilities so as to evolve value, especially where outright acquisition may be unnecessary or premature.

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Key Activities

This represents the major work concentration of a firm in order to produce well-defined value proposition. Ascertainment of key activities gives room for mapping aggregate work requirements and ancillary projections.

Coherence Coherence is a cultural thrust that provides effective connectivity for all the components of business model, fusing them together in characteristic intimacies, and facilitating uniform drive onto specified goals and objectives.

Key Resources These are the resources required for producing a set of value propositions. The four types of resources are as follows:

� Material Resources � Physical Resources � Financial Resources � Intellectual Resources

Value Propositions

� Value propositions represent the whole set of values which a firm lays out to its customers, in order for them to find consummate worth therein.

� Value Propositions stand as the pivot of business intent. � Value Propositions give room for development of interdependencies between a

firm and its customers.

Customer Relationships This deals with identification and inventory of diversity of relationships which a firm should nurture with its customers. Where the customers are segmented, relationships may vary from one segment to another. If the customers are not segmented, then the ensuing relationships would be undifferentiated. Customer Relationships should be

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deployed for expanding value synchronization capacity of the firm-customer bond beyond primary transactional linkages that characterize customer touch points, with the intention of gaining resolute foothold in the belief structure of customers.

Goals of Customer Relationships

i. Customer Information Services ii. Customer Acquisition iii. Customer Retention iv. Cross-Selling v. Up-Selling vi. Price Optimization vii. Continuous Value Propositions Realignment

Influence This is the active strength that affects a person’s opinion, thereby inducing action in a particular direction. It provides productive link to customers. Its operability depends on pedestals of acceptance and belief.

Types of Influence

i. Social Influence ii. Brand Influence iii. Customer Influence iv. Religious Influence v. Economic Influence vi. Environmental Influence vii. Influence Predicated on National Pride

Channels Channels are paths through which a firm moves its value proposition to target customers, by means of designated sales points, distributors, and effective communication.

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Target Customers

These are the particular set of customers that a firm intends to be offering the right value proposition for their identified needs or wants. Customers can be segmented, aggregated or selected with specificity in the form of a niche.

Cost Structure The cost structure of a business model highlights profiles of incurrable costs and the ratio of fixed costs to variable costs. It facilitates identification of cost-containment method that would be deployed. It allows for application of cost management techniques to mitigate effects of identified cost drivers.

Types of Cost Structures

1. Cost Leadership 2. Value Maximization 3. Integrated Cost Leadership & Value Maximization

Revenue Streams These are applicable means of obtaining revenue from customers as a measurable and deserved return for values delivered.

Testing a Business Model The four criteria for testing a business model are as follows:

1. Conveys Business Intent 2. Positive Alignment with Strategy 3. Translates Strategy to Process 4. Practicable Design for Performance Optimization

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Elijah Ezendu, Business Model

References

Osterwalder A, Pigneur Y (2009), Business Model Generation

Bill Vorley, Mark Lundy & James Macgregor, Business Models that are inclusive of small farmers

http://www.businessmodelalchemist.com

Elijah Ezendu, Business Model

Linder J.C., Cantrell S (2001), Changing Business Models: Surveying Landscape, Institute of

Strategic Change, Chicago USA, Accenture

Mitch Thrower, The Attention Deficit Workplace: Winning Strategies for Success in Today’s

Fast-Paced Business Environment.

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About The Author

Dr. Elijah Ezendu is an award-winning business expert. He is a Certified Management Consultant, licensed by International Council of Management Consulting Institutes which has a Special Consultative Status in United Nations Economic and Social Council. He is concurrently Senior Partner, Shevach Consulting; Lead Assessor and Member of Governing Council, Institute of Management Consultants; Member of Strategic Planning & Implementation Committee, Chartered Institute of Personnel Management of Nigeria; Member of Training Development and Delivery Committee, International Association of Software Architects; Lead Resource, Center for Competitive Intelligence Development; Honorary Global Advisor, International Project Management Commission; as well as Visiting Lecturer & MBA Programme Coordinator (Nigeria), Regent Business School, South Africa; in consonance with active service on boards of some firms. He has been a key player fostering global certifications development and manpower upping in Business Development and Competitive Intelligence. He holds a doctoral degree in Management from St. Clements University, British West Indies. He is a Chartered Manager certified by Canadian Institute of Management, Canada and holds numerous professional qualifications including Master Project Manager; Project Manager E-Business; Fellow, Institute of Management Consultants; Fellow, Certified Institute of Cost Management; Fellow, Institute of Business Development; Fellow, American Academy of Financial Management; Fellow, Institute of Internal Auditors; Fellow, Society of Sales and Marketing; Member, Nigerian Institute of Training and Development; Member, Institute of Analytics Professionals; Associate, Chartered Institute of Personnel Management of Nigeria; Associate, Chartered Institute of Arbitrators (Nigeria). He is a Certified Business Development Analyst, Outsourcing Professional, Mergers and Acquisition Advisor, Intellectual Property Professional and Competitive Intelligence Professional. Additionally, he is an information technology management professional certified by Institute for the Management of Information Systems, UK along with Microsoft Corporation, USA and stands as a Member of International Association of Software Architects holding assortment of certificates in computer programming and web systems. He is a world-class consultant, who has functioned as Speaker/Facilitator at myriad programmes of professional institutes, international development organisations, private and public firms including extra-governmental agencies and institutions. He is a prolific writer and author who had served as Editor-in-Chief, Cost Management Journal; Part-Time Lecturer & External Examiner (MBA Programme), Ladoke Akintola University of Technology; Director of MBA Programme (Nigerian Outreach), Management Institute of Canada; Chief Operating Officer, Rohan Marine; Second Vice President and Member of Governing Council, Certified Institute of Cost Management; Director of Programmes and Member of Governing Council, The Institute of Business Development; Member of Executive Council, Institute of Internal Auditors; Director, Refined Shipping; Lead Consultant/ Country Manager in some consulting firms including JK Michaels Consulting, D & E; and Examiner to various Professional Institutes.

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E-Info

http://advancingbizmodel.blogspot.com

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http://elijahezendu.blogspot.com

http://www.slideshare.net/ezendu/presentations

http://www.focus.com/profiles/elijah-ezendu/public

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