The Typical Business Model

Consisting of 6 elements –
The value proposition answers the question: what are we offering to whom? It reflects explicit choices in the following three dimensions:

– target segment(s). Which customers do we choose to serve?  Which needs do we seek to address?

– Product or service offering. What are we offering our customers to satisfy their needs?

– Revenue model. How are we compensated for our offering?

The operating model answers the question: How do we profitably deliver the offering? It captures business’ choices in the following three critical areas:

– Value chain. How are we configured to deliver on customer demand? What do we do in house? What do we outsource?

– Cost model. How do we configure our assets and costs to deliver on our value proposition profitably?

– Organisation. How do we deploy and develop our people to sustain and enhance our competitive advantage?

Lindgardt, Reeves, Stalk Jr., Deimler, 2013

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2 thoughts on “The Typical Business Model

  1. Pingback: Maintaining The Product or Service Value Proposition – Executive Leadership Systems

  2. I have had the opportunity to assess the financial and operational performance of many businesses. At the point I often am invited in, the required prescription can be painful medicine. The extent to which businesses fail to consider the interest of the consumer in their product or service is pretty astounding. In many cases, it appears to me that the decision-maker simply decided to put the product or service on the street, without consideration of demand or point in product or service lifecycle. Often too, where there is a level of demand, the decision-maker fails to consider saturation. This is the awareness that demand will, at some point, level off or even begin to decline. “Latency kills”. This speaks to the point that a decision to go into a market must reflect an understanding of the life cycle of any product or service in a competitive and evolving marketplace. If a decision-maker acts too late on an idea, the opportunity may already be lost, though not apparently. Finally, it is worth noting that the “Best Practices” I have observed in maintaining the value proposition involve some form of Strategic Conversation around the “state” of the product or service in its lifecycle. The Strategic Conversation looks forward to ensure critical changes are made to evolve the product or services to reflect the changing marketplace. This ensures the value proposition stays current. Readers interested in the Ten-Step Process of Strategic Conversation can find it as a page on my blog site: http://www.elsleadership.com. Thanks, Dr. Ed

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