Great Leaders Have a Strategic Business Model: Part One

Great Leaders Have a Strategic Business Model: Part One

What defines a great leader? Why do some businesses grow and prosper, while others get stuck and eventually disappear?

What’s the secret? Great Leaders differentiate their business in a crowded marketplace by intentionally designing a strategic “Business Model”.

At Awesome Journey we believe that a strategic “Business Model” has 4 key building blocks.

  • Client Value Proposition (CVP): “Why should a client buy from you?”
  • Profit Formula: “How will you create revenue and profit from your CVP?”
  • Key Resources: “What resources do you need to deliver your CVP?”
  • Key Support Structures: “People, Process, Practices and Tools that support the CVP”

 

  1. Define Your “Client Value Proposition”

To understand your “Client Value Proposition”, answer the following questions:

  • Who is your key target client?
  • What type of relationship does your company have with your client?

Personal (face-to-face)

Automated (through technology)

  • What is the job that the target client needs done?
  • What is your product and service offering?
  • What is your distribution method to reach your key target client?

Two key distribution methods are:

  1. Direct Distribution – a sales team or web based
  2. Indirect Distribution – through a franchise network, licensing agreement, partner stores and wholesalers

 

  1. Define Your “Profit Formula”

To understand your “Profit Formula”, answer the following questions:

a. What is Your Revenue Stream?

How does your company create revenue streams from your value propositions to your clients?

  • Transactional Revenue stream
  • Product sale
  • Recurring Revenue stream
  • Rent
  • Franchising
  • Licensing fee
  • Usage fee
  • Subscription
  • Leasing

b. What is Your Pricing Model?

Fixed Pricing Model

  • List price
  • Product feature dependent (dependent on uniqueness of your products)
  • Client segment dependent (dependent on uniqueness to target market)
  • Volume discount

Dynamic Pricing Model

  • Negotiation
  • Pricing is dependent on market conditions – Hotels room and airline seats – price depends on inventory and time of purchase
  • Auctions – pricing is determined by competitive bidding

Specific Pricing Models

  • Lowest cost through scale advantages
  • Lowest cost through scope and replication advantages
  • Premium prices due to unmatchable service
  • Premium prices due to propriety product features

c. What are Your Cost Structures?

  • Fixed costs?
  • Variable costs?
  • Economies of scale?

 

  1. Define Your “Key Resources”

What are your key resources that are required to deliver the “Client Value Proposition?”

  • People
  • Technology
  • Products
  • Assets – Equipment, Mineral rights, Real Estate
  • Reoccurring revenue streams
  • Equipment
  • Information
  • Partnerships/Alliances
  • Brand

 

  1. Define Your “Key Support Structures”

To understand your “Key Support Structures”, you need to determine – “do we have the right”:

  • People
  • Processes/Systems
  • Practices
  • Tools

 

Once you have a clear understanding of your Business Model, then the collaboration begins! Bring your team’s creativity and innovative mindsets together and see how you can alter your Business Model to differentiate your business and stand out in a crowded marketplace.

 

Challenge:

Sit down with your leadership team and find 5 – 10 gaps in your current business model to differentiate your business.

 

References:

  1. “Reinventing Your Business Model”, by Mark W. Johnson, Clayton M.     Christensen, and Henning Kagermann (HBR paper – Dec 2008)
  2. “Business Model Generation” by Alexander Osterwalder & Yves Pigneur (Book – 2010)
  3. “Are You Sure You Have a Strategy?” by Donald C. Hambrick & James W. Fredrickson (Academy of Management Executive – Nov 2001)
  4. “Disrupting Beliefs: A New Approach to Business-Model Innovation”, by Marc de Jong & Menno van Dijk (Mckinsey Quarterly – July 2015)

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