This article by Patrick Concho was first published in Magtimes. It is reproduced here briefly with permission from the publisher and author. Read the full article In the May-June issue of Magtimes, still available for purchase.
Patrick Concho has devoted more than 40 years of corporate responsibilities to initiating, rejecting and supporting innovative global strategy, visions and offerings (re)shapes in a variety of professional sectors. As many of his bosses, colleagues or clients like to describe him, Patrick is a “SHERPA for Change and Innovation”. Here he shares the foundations and logic of the Business Models Board (BMC), an essential tool for helping companies develop their strategic plans and economic models.
Like my atypical path and as a putative rebellion, I will leave agreed paths very rigorous educational exchanges about strategy, management, leadership, innovation, the inevitable brakes, and resistance to change.
Before exploring the avenues that will be opened together with new approaches, I will dwell with you on two models: the “shadow and light” model and the “hammer and nails” model!
|the oshadow and light|
|Gaston Bachelard (1884-1962), philosopher of science and poetry, is credited with the following famous story of Shadow and Light:
Returning home on a moonless night, he saw a man kneeling at the foot of a lamppost. He seems drunk, the latter seems nervous.
Gaston Bachelard asks: “Have you lost anything?”
The man answers: “My keys.”
The philosopher asks as a way: “But, are you sure that you lost it here?”
It looks hopelessly empty.
“No. I lost it more but here it is clarified.”, replies the man.
|hammer and nails|
|This aphorism also known as “Maslow’s Hammer” shaped Abraham Harold Maslow’s “Tool Theory” (1908 – 1970):
“If the only tool you have is a hammer, you tend to see any problem as a nail.”
These two reflections seem important to me because, too often, we comfort ourselves in our comfort zones, in false light that is limited under a lamppost away from our challenges and with the Concepts, Tools, and Commentary (REX) boxes where the hammer oozes to allow us to see problems only if they resemble nails!
We all know that before choosing and mastering concepts and tools, however powerful they may be, we must maintain logic and always force ourselves to analyze our business environments better and in a comprehensive way.
This inevitable, continuous step is the source of any strategic reversal and will inculcate the vision, values, and blueprint of the company’s cohesion and then choices for current or future areas of strategic activities (DAS). In each of these DAS, it will have to (re)craft Value Propositions (BMC Pillar I) Offered to Customers, Expectations, “Suspects” (1) through Global Offerings “Products – Satisfying Needs – Benefits Offered – Uses – Associated Services – Data and Processing – …etc”.
In order to give tangible competitive advantages to these offers and not just the key success factors, companies have to build value architectures (BMC’s second pillar) to differentiate itself from competing offerings.
It will be necessary in these two first pillars of BMC to monetize the offerings in terms of value analysis and construction Economic Equations From BMC (third column of BMC).
business model panels
BMCs make it possible to map the essential elements of a project, segment global offerings, an economic model, and create businesses, by identifying and creating the values, economic structures and equations that will support them.
Conventional BMCs were organized into 9 blocks such as those identified by Alexander Osterwalder and Yves Bignor.
Without going into the details of the nine blocks, let’s revisit the breadcrumb for those who build BMC.
It is a matter of segmenting the market: identifying current and potential areas of strategic activity (DAS) and/or uses (2) in order to group customers, prospects, non-customers, suspects and descriptors by type and according to 5 criteria. Required in every DAS. The main success factors of each DAS will make it possible to highlight the competitive advantages that will be implemented by the global offerings and value propositions of the central block of BMC.
The “value proposition” is the heart of the BMC reactor. It relates to offers made to customers, prospects, non-customers, suspects (3), and descriptors. Several methods, guides, and surveys are available to initiate, enrich, and support this essential step.
This BMC building block is increasingly strategic in streaming environments for which supply chain management SCM has become an essential lever for the global village. Is it worth mentioning the high value-added BMCs and the competitive advantages of an Amazon startup.
Customer relationships must be selected, validated and monetized against competition in the strategic area(s) of business.
This block relates to the economic equation with sources of income and the structure of values.
Key Resources – Main Activities – Cost Structures
Three templates to be filled precisely: See below some examples of how to formulate questions to ask yourself.
They complement specific internal key resources versus key activities.
Some examples of questions to be asked and dealt with in a multidisciplinary project team for BMC construction and the bricks that make it up
Who are the “customers/non-customers/potential/suspects/descriptors/…” who are or will be targeted? What are the needs (unsatisfactory, formulated, latent, must be created, etc.)? What are the target segments (DAS, DAP, DUS) and their key success factors? What strategies should be adopted to increase value creation? What are the competitive advantages generated and monetization operations?
How acute are the inventories and needs analyzes of “customers/non-customers/potential/suspects/descriptors/…”? The perceived importance of global offerings “products/functions/benefits/uses/services/data/…” and creating customer value? Indicators to measure customer satisfaction, benefits and values created?
Protecting offerings on value chains?
Selecting value chains and supply chain management selected for each segment “customers/non-customers/potential/suspects/descriptors/…”? Adequacy with the strategies selected in each DAS? Competitive advantages generated and monetized? The importance of the internal and/or external resources placed? KPIs and values generated?
Choice of customer relationship models selected for each segment “customers / non-customers /
Prospects/suspects/descriptors/…? Adequacy with the strategies chosen for each DAS (co-development, etc.)? Competitive advantages generated and monetized? The importance of the internal and/or external resources placed? KPIs and values generated?
Choosing compensation models with clients for each segment and/or “customers/…”? Income breakdown (business volume, margins, etc.) is a component of global offerings? Effects on the company’s financial flows (capital, working capital, debt, ROI, cash, etc.)? Why is risk analytics important? Indicators for measuring economic and financial performance?
Selection of tangible and intangible assets on the basis of which BMs are selected for each segment? And that’s according to value propositions, distribution channels, customer relationships, and sources of income? Adequacy with the strategies selected in each DAS? What about current and/or in-house experience to be gained (HRM, GPEC, etc)? What about the resources that can be mobilized (capital, fixed assets, working capital, cash, patents, t/or to be acquired (GRH, GPEC, etc)?
Determine the activities needed to achieve the selected BM for each slide? And that’s according to value propositions, distribution channels, customer relationships, and sources of income? Adequacy with the strategies selected in each DAS? What about design, production, sales, SCM, infrastructure, information systems, etc.? …etc…?
Define the strategic partnerships needed to achieve the selected BM for each sector? Is this according to value propositions, distribution channels, customer relationships, revenue streams, resources and key activities?
Adequacy with the strategies selected in each DAS? What about prime contracting, open innovation, marketing, co-branding, sales, information systems, data, etc. partnerships? …etc…?
Identifying cost drivers for the accomplishments of the selected BMs for each part? That is, according to value propositions, distribution channels, customer relationships, revenue streams, key resources and activities, and partnerships? Define, classify, prioritize and analyze risk for cost items? What about fixed and variable costs, potential pooling, economies of scale, etc.?
In the original article published in Magtimes you will find examples and commentary from BMC as well as a very useful bibliography and sitography for those who want to deepen the topic.
(1) Alexander Osterwalder, Eve Bignor: “Creating a Business Model: A Guide to Visionaries, Game Makers, and Challengers” (Wiley, 20210).
(2)Domains of Use Activities (DUS) are related to the innovative offerings of companies that adopt a functional economy strategy by not selling their products but by renting and monetizing the uses that customers will use from them. For example, Michelin Fleet Solutions, which rents tires by the kilometer to some DAS logisticians who operate fleets of trucks, or some compressor manufacturers, who rent their compressors by the cubic meter of gas delivered to customers.
(3) In terms of strategic marketing, a “suspect” (in criminal terms, that’s another thing!) is an actor who can’t go into potential customer status because he doesn’t know the potential supplier we exist! In the middle of 2020, there were 7.1 billion suspects on Facebook worldwide!