A business model describes which essential stakeholders influence the innovation process and how they can get more involved. We do this by setting up a stakeholder analysis in which we cover among others::
· Clients and prospects
· Investors
· Shareholders
· Developers
· Managers
· Suppliers.
The pivot within the innovation process is creating added value for the most important stakeholders. With the aid of the stakeholder analysis a business model can be designed which provides us with the means to generate as much value as possible for the most important stakeholders. The business model has to, among others, define out of which competencies and means these values can be realized in the most suitable manner. The business model therefore also plays a vital role when generating ideas which in turn lead to a value proposition.
A practical example: Microsoft
The business model of Microsoft is partly based on the so called ‘network effect’. A distinctive feature is the interdependent relationship between the operating system Windows, the applications running on it and the large number of users. We shall give a short description of how it has been put into practice:
· Extreme high market share of Windows.
· Developers, Microsoft among them, are encouraged to introduce software upon the market specifically designed for Windows.
· This results in a wide range of choices attracting consumers and corporations alike.
· Stores are therefore willing to admit these applications into their assortment.
· This in turn encourages computer manufacturers to deliver their systems with Windows.
· The number of users increases further and therefore also the interdependency of the application running on Windows.
· Sharing files and documents is virtually only possible with those specific applications like for instance MS Office.
· Consumers and corporations are now more or less forced purchasing computers running on Windows (and MS Office).
This is a clear example of a self reinforcing loop. It keeps on creating more and more value and additionally a ‘join the club’ effect.
When drawing up a business model it is of the utmost importance to protect yourself against rival competitors. For instance by setting up barriers. MS Office presents a clear example. The application suite is available for both the PC and Mac. However, the Mac version lacks important business applications like MS Access. For many companies this presents a reason not to purchase a Mac at all.
The success of a company is largely based on the quality of its business model. It starts with assigning the role of your company within the value chain. The business model of a supplier of semi-manufactured goods will look completely different than that of a bank. Customization is hence necessary.
The INPAQT Business Modeling Tool presents you this customization by systematically filling in all elements of the business case in combination with its adaptive nature.
The INPAQT approach for elaborating the business model
· Determine the role of your organization within the value chain
· Determine the role of other players within the value chain
· Map out the most important stakeholders and their needs
· Determine the most important competencies and means of your organization by:
o Defining unique selling points,
o Redefining your role within the value chain if required
· Determine where your organization can build up a durable competitive advantage.
The next step is examining the relative power of each player within the value chain. Henceforth we get a clear view of the proportions. We determine the drivers for ach stakeholder and assess how we can fulfill them. There are various ways to do this. We would like to mention two of them:
Looking through the eyes of the final consumer
Let’s say you are a supplier of car seats. Your current clientele consists mainly of car manufactures operating in the middle class segment. It appears that higher margins can be obtained in the luxury cars segment. Seats in such cars have to meet extremely high standards. You have decided to conduct an extensive research resulting in a design which meets the demands of the luxury car driver. You come up with a seat having an unrivaled level of comfort.
The seats are send to numerous manufacturers and eventually a deal is signed with one of them. From this point the self reinforcing loop comes into existence:
· Drivers experience the unique level of comfort
· Sales of the car manufacturer increase
· In turn your company receives more orders
· The level of comfort of the car is now, through the eyes of the consumers, interconnected to the level of comfort of the seat
· The car manufacturer is now dependent on your seats.
These analyses present us with the possibility of assigning the place of your organization in proportion to the most important stakeholders. Your position in the industry becomes clear and possible bottlenecks can be identified. An analysis of the drivers for each stakeholder will present you with sufficient insight on how to maneuver thus generating maximum profit potential.
A business model is not worth much though if we are not able to implement it. That is why the Business Modeling Tool goes one step further. Specially developed tools will assist you implementing the model into your organization.
A solid foundation for commercial success is thus created.
INPAQT will gladly tell you more regarding the extensive possibilities of these and other tools.