How to Design a Winning Business Model?

We have seen companies going out of business simply because they failed to create a new business model to suit the changing market. Developing innovative business models should be a priority for all companies if they wish to survive in the cut-throat competitive business world.

New business models help a company to adapt to new changes and challenges that may come it is away. The global pandemic last year showed us how companies that had a business model in place that could work digitally could stay in business, while the ones that failed to propose new solutions went bust.

It is a reminder to businesses time and again that the market is dynamic and innovative ideas can either destroy or save your business.

Companies focus on creating a business model when they want to break into a new market that is unlike their home market or the markets where they have already established themselves. This is a requirement if your company is looking into the markets of third world countries as their market structure will be entirely different from a developed country. It would be wrong to assume that the same strategy will work everywhere. There is no universal rule here.

All the big players in the industry like eBay, Facebook keep experimenting and innovating new models to see what works.

Let's take Microsoft as a business model example. Microsoft has Windows and Linux. Linux offers a wider range of functionalities than Windows and is also free of cost, but why are the numbers of Windows users more? Microsoft made sure to partner with tech hardware companies to ensure that Windows came pre-installed and made Linux a more complicated, less user-friendly software.

Yet, how do many companies still fail to create successful business models? It is not because they did not try to develop new ideas and restructure their business to make it work, but because they made one mistake, they tested out their new economic model in isolation. The companies failed to consider their competitors when coming up with a new business model. So, it is important to have a business model which is absolutely tailor-made. Here is a discussion to have the winning model driving growth.

What Is a Business Model?

In simple terms, a business model is an outline of how an enterprise works and how it is managing to make profits. There can be various types of business models depending on the industry and the organisation in question. Different companies will benefit from different business models.

Since different companies tend to use different business models, comparing two companies and predicting the outcomes becomes a tad bit difficult. Since the models used are not the same, in isolation, one model may seem better than the other, but in reality, when these models are implemented and interaction with the other players in the market happens, the result may be quite surprising.

In various cases, it has been seen that both companies have managed to create the same value and made themselves profitable using different business models.

Interaction with the rivals in the industry is essential to see if one model works or not because it is an oligopoly.

Designing a Business Model

You have come this far with only one thought remaining in your head— how to design a business model? To design a business model for your company, you must first look at your rival's business models. Study their business models and then start designing a model for your organisation.

Generally, when it comes to creating successful business models, you have to consider three choices or elements.

1. Asset choices: These are the tangible elements that a company owns and deploys to increase productivity.
2. Policy choices: These are choices that companies make for all their departments.
3. Governance choices: These choices involve the decision-making processes that the organisation follows.

You need to create a business model that considers all these elements.

Apart from the three elements, here are some helpful tips for you to outline a business model:

1. Compare the Rates of Your Products or Services With Your Competitors.

When you are part of a competitive market, you need to study the market rates of the products or the services that you are offering. If you provide extremely expensive products, they will not sell as your customers will find cheaper alternatives. Similarly, selling something too low will not help you attain your goal and generate profits.

2. Test Your Business Model

Just like engineers test their products, you must test your business model too, but not in isolation. Instead, you can pitch the idea to a focus group and get valuable insights and opinions about the model.

The focus group method is an excellent way of gaining qualitative data. You can then use the data to improve your business model.

Remember that when you pitch the idea, you are laying bare in front of them everything from marketing to distribution to pricing; it should not just be a brief.

3. Collect Customer Testimonials

Just like you ask for reviews when you launch a new product to get more sales and build trust, in the same way, you must also focus on collecting some customer testimonials and feedback for your latest business model.

4. Rollout a Pilot Model

When engineers develop a new product, they tend to release a beta version of it, which means that the software is still in the works and needs further development. What you will be doing is the same thing, just in the corporate domain.

Instead of arranging viral campaigns and spending all the funds allocated to you in the first go, start slow. Release the pilot model and wait for the responses. Maybe try it out in a single city. If the responses are positive, you can then further allocate resources to carry out the plan in its entirety.

Limited rollout helps you test out the model without some major risks. If the model fails, you can still recover.

5. Talk to Industry Experts

Talking to industry experts can help a lot. Seek a board of advisors who can give you some real suggestions and pointers on your business model. Their suggestions will be extremely helpful because of their vast experience in the field.

Also, when you are out networking, you are not only making contact with the industry leaders, but you will also have a chance to connect with several investors and other important people who can help you with the distribution and sales aspect of your business.

6. Participate in National Trade Shows

To gain some validity, it is necessary to participate in national trade shows. There you can receive the much-needed credibility from actual business leaders, and the positive feedback will be the green signal for you to launch the new business model and scale up your business.

These testimonials can be a real eye-opener for you. You can identify the faults in the new model and make the necessary changes.

Conclusion

Testing out a business model in isolation is of no use because it is not a monopoly. If it was, it would have been a completely different story. There would be no competition. Whatever business models you would come up with would work. So, while working on new business models be attentive, creative, specific, and out-and-out serious to implement the changes to enable you to do the business better. Thus, the best business model can be attained, and success will follow.

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FAQs

Q. When should a business consider creating a new business model?

Ans. A company creates a new business model when it wants to break into a new market or the market is changing, and it needs to update its current business model to continue operating.

Q. Why is interaction with rivals important?

Ans. Business models tested in isolation always fail because the makers tend to forget to consider the models of their competitors in the industry.

Q. How do I test my business model?

Ans. You can either pitch it to a group of customers and get their opinions or conduct a focus group. Conducting a focus group will be a better option as you can derive structured data from it, which can provide you with accurate information.