Clare Griffiths is a Director of Think Innovate Change, a company which enables individuals and organisations to become more innovative by designing and delivering practical innovation management courses, tools and solutions. Last month Clare began the first of a series of helpful articles when she wrote about how you can generate creative business ideas. This month she goes on to talk about business models, understanding them, and creating a model that fits your business...
"Without wanting to generalise, I bet if I were to ask a random group of people in business what a “business model” is, not many of them would be able to confidently explain the concept to me. You yourself might even fall into that category. Don’t panic if that is the case though, as you will definitely understand what one is by the end of this blog post! Not only that, you will even know how to innovate new business models for your own venture.
So, “what on earth is a business model”, I hear you cry! Well, put simply, a business model is the skeleton of your business. It refers to how you plan to generate an income – and hopefully a profit – for your business. A business model gives structure to a business and is essentially the means by which you intend to gain economic value (i.e. money!) from your idea. Just like a skeleton, a business model is made up of different pieces, which slot together to form a dynamic instrument which can be changed by you, in order to find the most profitable way to run your business.
How can I mix up my model? When writing about business models, it would be foolish not to mention Osterwalder’s Business Model Generation canvas. In 2008, after considerable research with entrepreneurs and business managers, Osterwalder developed a very handy strategic planning tool to help enterprises “describe, design, challenge, invent, and pivot their business model” (www.businessmodelgeneration.com). Sounds great? It is! Made up of nine sections, this accessible visual planning tool is designed to help you generate different business models by developing and testing hypotheses about your business.
It is the perfect tool for you to use if you want to play around with your own business model. They say practice makes perfect, and that is undoubtedly true of this type of innovation. So, if you want to explore the impact of mixing up your model, then I recommend you download the canvas found here, and start experimenting with different ideas to change or vary your current business model. It is free to use, and is something you can either work on by yourself, or with your team. Just in case you have not seen Osterwalder’s canvas before, it is made up of nine sections (Key Partners; Key Activities; Key Resources; Value Propositions; Customer Relationships; Channels; Customer Segments; Cost Structure; and Revenue Streams) – each of which reflects a different area of a business model. If this all sounds like a lot of unfamiliar business jargon, the prompting questions in each section on the canvas will help you understand what Osterwalder is referring to, and will guide your thinking accordingly.
If you want some inspiration from what other businesses have done with their business models, then look no further. Here are a couple of examples, to conclude with, which should whet your appetite: