Tag: business structureSubscribe 1 Posts
You just never know what pearls of wisdom Joanna will pop up with next. Welcome back for 2010, Joanna! I recently came across a Harvard blog post by Mark Johnson on reinventing your business model. A confession: I'm not the full bottle on business models, and have used only rudimentary or ad hoc versions in the past. But as soon as I read this post, I saw that here was a model I could implement - and so that's what I am doing right now. It works like this. First up 3 questions: Why would someone want to buy something from you? How will you make money selling it? What, exactly, are the important things you need to do to pull off the plan? The answers go into 4 boxes (question 3 is answered in two parts): Box 1:Your customer value proposition - what is it that you offer that meets a customer's needs in a way that is different and/or better than the competition? Box 2: How many can you sell at X price minus Y costs? Johnson has a more complex version of this question, that goes like this (I am quoting here): Revenue model - simply, quantity times price Cost structure - not only direct costs and indirect costs, but also overhead, which too many companies think of as immutable Margin model - though technically part of the cost structure, I break it out separately because all too often companies mistake their margins for their entire profit formula and have tremendous difficulty understanding how a lower - margin opportunities could ever be profitable Resource velocity - often overlooked as a profit generator, this measures how many widgets a company can invent, design, produce, warehouse, ship, service, sell, and pay for throughout the value chain for a given amount of investment, for a given amount of time. In some sense, it's a measure of not how much money flows through your company but how quickly it flows through it. Box 3: What resources are required to deliver your offering? Box 4: What processes are required to deliver your offering? I think this looks like a good model for those of us who tend to avoid models. What do you think? Joanna Maxwell, Owner, WorkInColour
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