Behind every creative action is a plan that aims to generate profits. A strategy becomes meaningful only when it is practically transformed into a plan where everyone can understand the direction and direction.
A business model consists of five components:
- Unique positioning to meet long term trends in the market,
- A consistent product and service rationale,
- An appropriate value creation architecture,
- Effective sales, marketing logic and a working profit formula.
Success is based on a unique, innovative and consistent design of business model components. The strategy is about being different. In the long run, companies that succeed in creating a continuous competitive advantage will be successful. For this reason, a company should be different from its value creation process competitors. It must be both more effective and more productive.
A business model defines how a company captures value generation (value creation) and a portion of that value as profit (value capture).
Value creation refers to the benefits that the company creates for its customers. Customer value means that the customer corresponds to a request to pay for a product or service. If the product exceeds the perceived value of the price, the customer value is added. If the product is lower than its cost price, the company generates profit (value capture).
How do we create value for our customers? (Creating value)
How can we make money with this value, in other words, how can we turn value-added profit into profit? (Value capture)
The answer to these two questions is the essence of a business model. As "the theory of the operator", it explains its internal logic and strategy. Innovating an effective business model always embodies these two directions. To turn this "business theory" into a successful value creation system, we suggest that you enrich these two basic questions with two additional questions:
- How does the value creation system work? How do we organize value delivery and create sustainable cost advantages?
- How does marketing and distribution logic work? How are we going to attract and retain customers?
The starting point for the design of these four components of the business model is the market position for sustainable differentiation. This specifies the customer needs that a company is trying to fulfill in order to create and maintain a "monopoly" position in the minds of its customers. Market conditions and core competencies form the framework.
Components of the innovative business model;
Product innovations no longer provide ample opportunity for differentiation. Life cycles are as short as ever, imitation times and increasing competition from low-wage countries require new and constantly competitive advantage. Unique, non-copyable business models are at the root of today's new business opportunities. The task of a company is to find new ways of creating added value for customers and making a portion of this surplus value. A business model innovation consists of five components:
- Innovative, unique positioning;
- Consistent product and service logic;
- An appropriate value creation architecture;
- An effective sales and marketing logic; and
- A working profit formula.
In the end, companies that do not create enough value for their customers, and that can not develop a functioning value creation system and revenue model, are doomed to failure.