Few Business Model Thoughts

·         There are two types of risks in a business model that we can increase or decrease, by the choices that we make. These are the Information risk and Incentive risk.

·         We can make our business (model) to outperform by changing the way we take decisions, like, what decisions are made, when decisions are made, who makes them and why they are made.

·         Unlike common misunderstanding, making a business model innovation (BMI) is easier than making a traditional form of product innovation.

·         Often changes to Business Model Innovation (BMI) are invisible to other companies, compared to traditional ‘product innovation’, which can be easily seen and copied.

·         Innovating the Business Model (BM) of an established business in an established industry is more difficult and challenging than in a new business. Established business will be entrenched in their out dated cultures, processes and egos. While new business can develop unique innovative BM that give them advantage and there by defeat the established play on.

·         In business, its best to “disrupt yourself” then to be “disrupted by others”.

·         Thomas Alva Edison invented the “light bulb”. Along with it he also invented the business model where by the electricity was generated, transmitted, metered and purchased so that the “light bulb” (his invention) could be lit. So it’s not just about inventing a new product or services, but it’s also about inventing its business model as well.

·         Steve Jobs did not just invent a product “I pod” but he also invented the Business Model (BM) at iTunes store and that helped people to buy more iPods.

·         A new product will need a new business model to support it, to help it survive. The Business Model Innovation (BMI) is not the product, it is the whole dynamism around it-both before and after sales, which ultimately makes it attractive to the customers.

·         Most businesses are accustomed to following established practices and processes for funding and developing products, but they are less focused on developing their business model which is dangerous for their seemingly successful business.

·         When sales are down, many a times the problem may not exist in your product or services, but in the business model that deliver it to the market. But by ignoring the business model we tend to waste time, money and resources on changing the product or services.

·         The path to reinventing a business model involves changing how “decisions are made”. It could be changing “what” decisions the business model involves, “when” decisions are made,” who” should make the decisions and “why” decisions makers make the decision the way he does.

·         The initial decision you take while starting a new business like what, when, who and why decides your business model. If these choices (what, who, when and why) are wrong; then your business is bound to suffer. A change is possible, but could be very difficult especially if you have invested heavily into fixed assets, recruited senior staffs whom you can’t lay off etc. That is why we recommend proposing a business plan focusing on a long term business model.

·         A good business model addresses two important aspects, reducing or eliminating the “information risk” or “incentive alignment risk”.

·         The time that you have to take a decision (starting point) and the time when you have sufficient information to make the decision; defines its information risk.

·         Delegating decisions to the best informed party (like the floor manager at a local shop who knows more about what customers want) or the party better able to manage risks; will help reduce “information risks”.

·         A business performance goes down due to factors like “information inefficiency” and “incentive alignment inefficiency”. This can be changed or improved by changing decisions like what, when, who and why.

·         If the decision makers (customers) are unable to make a “buy” decision, due to lack of information (information risk), then change your business model, so that the person who takes the decision is someone who has the information.

·         Risk can be managed by moving it from the least to the most suitable party who can bear it. And this point is very interesting- The Risk Shift.

·         Businesses when they become established, large and complicated, become hostages of their own success. Often looking to the past for future successes. In a dynamic business world, where disruption of existing business models can be initiated by startups, the sticking to “old ways business model” can cause sudden demise to the established player.