In general, you will not find precise definitions for the business model. Indeed, it is not necessarily something that is defined in a clear and simple way. But before you get started with your doubts, we are going to explain the various elements that you can find on the Internet concerning the business model.
From the 1990s people started to see things change in terms of entrepreneurship. Indeed, at that time, the company was focused on itself. She had to make a profit without necessarily worrying about what was going on around, which was a shame.
It was with F. Drucker that the company decided to focus on something other than itself: namely the real strategy, the objectives set, but also the customers. Indeed, these days, it would be unthinkable for a company not to take customer reviews into account. Well, it wasn’t that long ago it wasn’t necessarily a necessity.
Still according to F. Drucker, for a company to establish its economic model, it had to answer 5 main questions:
- What is the mission of the company?
- Who is the main target customer?
- What is the value of the customer?
- What results are you looking for?
- What is the short, medium and long term plan?
A company that was unable to answer these 5 questions could not have a business model. Today, these are questions that must always be asked when a company is born.
The second “definition” we can find for the business model was created by Axel Osterwalder: the Canvas model.
The latter is a table which is divided into nine sections which are interdependent on each other:
- Key partnerships.
- Key activities.
- Key resources.
- The cost structure.
- The value proposition.
- The customer relationship.
- The income stream.
- Customer segments.
Is there a difference between a business model and a business strategy?
There is a difference between the two. Explanations:
- The business model is more oriented towards business strategy. In other words, it’s about how a company will be able to position itself in relation to these competitors.
- The business strategy is the strategy put in place to easily reach these customers, keep them and retain them over the long term.
A business model, if the latter is well constructed, allows a company to become a leader in its market. On the other hand, if it does not have a clearly defined business model, this could lead it directly to bankruptcy. Thus, it is easy to understand that a business model is essential in the economic field. Also, a business model allows a company to innovate and better position itself over the years!
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Have you decided to create your own business model? Do not panic, we will give you 3 main characteristics that you should not forget when thinking about it:
- They must be linked to company values and set goals : the business model allows you to start your business. Whether focused on values or objectives, these are still important for the life and survival of your business.
- The business model must hold water : and it’s not easy. Three main axes are important to take into account in your business model, the resources available in your business, the ability of the competition to copy / imitate your business model and consumer consumption trends, in general.
- Have opportunities for innovation to stay in touch : Your business must always have a string to its bow. Indeed, this will allow it to always stay in the nails during the next developments.
Before you start building your business model, we will give you some specific cases that have worked. This can perhaps inspire you:
Connecting buyer and seller
There are several platforms that connect buyers and sellers. For each transaction made on these platforms, the latter receives a commission.
Make a product grouping
Everyone knows about Apple’s products and their ability not to work with other software. Product grouping corresponds to this: not having the possibility of using a product, if you do not have anything else complementary to it, but also of the same brand.
Dedicated platform where a user can propose and create elements, hoping that the general public decides to participate and intervene, financially or not. For the content creator, crowdsourcing is free.
Disintermediation during a sale
In the 21st century, store sales are less and less popular. In addition, it is perfectly possible to buy anything and everything on the Internet today.
It is mainly the applications that use this economic model. This allows a business to pass on part of the service to its customers free of charge. But to use the app 100%, you have to take a paid subscription.
Very used by car dealers, leasing is still a very good business model. A customer can buy a car by paying the rental of it over several years. He can then decide whether to acquire the car definitively or not at the end of this period.
It is a business model whereby customers pay for the service as and when the service progresses.
Like Netflix, a subscription club allows users to benefit from a service with different subscriptions as needed.
This is a business model that allows certain internet users, when they are part of a community, to generate income in a simple and easy way.
The negative operating cycle
Invented by Amazon, this business model simply offers to work with companies and very little stock. The Amazon platform obtains payment in advance and can therefore send products to customers.
It is simply a matter of selling products of poorer quality than its competitors, but at a better price. It is a rather risky business model.
This business model allows you to let a customer buy part of a product or service, for a given period, for example.
As we saw above, the business model according to the Canvas model is divided into 9 different sections.
We will quickly detail them together:
- Key partnerships : these are the people around you, such as your partners, your service providers or even your subcontractors. It is necessary to have a global vision of the business for this stage.
- Key activities : these are the main activities of your company. You have to define them correctly so that everything is clear in your head from the start.
- Key resources : Quite simply, these are the resources you will need to be able to succeed in your key activities in general.
- The cost structure : these are all the expenses to be expected when setting up and running your business.
- The value proposition : here you must find an advantageous solution offered to the customer. Obviously, the value proposition must be related to your product or service.
- The customer relationship : this concerns the dialogue that you wish to set up with your client. In general, he wants to stay in an open discussion better so that the latter cannot turn his head.
- Canals : are the different means of communication that you will have with your customers. This is a very important element to take into account.
- The revenue stream : how will you generate income? As you can see, this brings together the levers that you will use to earn money.
- Customer segments : the customer is the heart of the project. Before creating your business model, you must choose your target client, but also some client segments to know who you can talk to.
You will understand that a business model is not easy to build. It takes a lot of time and thought to be designed correctly! We hope this guide will point you in the right direction for your activity.
To learn more about the Canvas model and how to put it into practice, we invite you to discover our article: “Defining your Business Model using the reference canvas”.