Posted by: Bill von Achen | September 23, 2011

Seven Questions to Ask About Your Business Model

This past June, I attended the 15th International Conference on Thinking in Belfast, Northern Ireland. While there, I presented my ongoing research into the thinking processes of groups, based on more than 15 years of experience facilitating CEO peer groups. But I also benefited immeasurably from the ideas and concepts on a wide range of subjects I learned from dozens of other presenters.

One of the most insightful and thought provoking presentations I attended was the one given by Alex Osterwalder, a leading thinker and commentator about innovative business models, and the co-author of the best-selling book, Business Model Generation.  In his presentation, Osterwalder dissected the key elements of a successful business model, which he’s captured in his Business Model Canvas, a one-page sheet that allows business owners to “describe, design, challenge, invent and pivot your business model.” (A free copy of the Business Model Canvas can be downloaded at www.businessmodelgeneration.com.)

There’s no substitute for reading Osterwalder’s book and applying the filter of his Business Model Canvas to your business model. But, in a recent blog posting, Osterwalder posed the following seven questions that may help you to get to the heart of what’s working, and what’s not working, about your approach to business:

1.  Does your “switching cost” prevent your customers from churning?  The more costly it is for a customer to switch away from your services to those of a competitor, the less likely it is that they’ll switch. And remember that “cost” can mean time or energy, not just money.

2.  How scalable is your business model? Scalability allows you to expand your business without increasing your cost base (such as web-based business models). But even traditional businesses should think about scalability when it comes to new products and services.

3.  Does your business model produce recurring revenues? Think King Gillette, and the razor/razor blade model, or printers and ink cartridges. You incur the sales cost only once, and continue to reap the benefits from the initial sale with minimal additional investment.  

4.  Does your business model enable you to earn money before you spend it?  It’s always better to earn before you spend. Osterwalder points to Dell Computer’s early modeling of this approach, building computers only after an order is placed.

5.  How much of your business model leverages the work of others?  Here, the model is IKEA, which sells you furniture parts that you take home and assemble, or online networking sites, where information posted by participants actually builds value for the company.

6.  Does your business model protect you from competitors?  The strength of your business model can actually deter competitors from entering your space. For Osterwalder, Apple is a prime example of a company whose strength makes partnership a more inviting option for potential competitors.

7.  Is your business model based on a game-changing cost structure? In the airline industry, Southwest pioneered a cost structure that enabled them to effectively compete on price. More recently, Skype has built a business on the model of a software business instead of a telecommunications company with major infrastructure investments.

You can read the complete text of Osterwalder’s blog, entitled “7 Questions to Assess Your Business Model Design,” at http://www.businessmodelalchemist.com/2011/09/7-questions-to-assess-your-business-model-design.html.

How does your business model measure up to these questions? What changes could you make to your current model to improve your competitiveness and your profitability? Post your comments and ideas here.  Thanks!

Posted by: Bill von Achen | September 16, 2011

Planning for the Next Business Emergency

Following Hurricane Irene three weeks ago, I was personally reminded of the need for business continuity planning.  We were without electricity for nearly five days, and I became good friends with the local librarian, who had the only reliable source of power necessary to keep my laptop computer and cellphone operational.

Of course, the challenges I dealt with were miniscule compared with those facing companies with employees and tangible assets such as equipment, machinery and inventory.  So I began asking some of you about your contingency plans for dealing with all manner of natural disasters and man-made tragedies, and the processes you have in place to ensure that your employees remain safe and your business operational.  It’s probably not surprising that the extent of planning is all over the map.

So, to prepare for your next business emergency, check out www.ready.gov/business, the website of the U.S. Federal Emergency Management Agency (FEMA). There, you’ll find a ton of information, publications and templates that you can use to develop and implement an emergency plan for your company. At the very least, take a look at the FEMA publication, “Every Business Should Have a Plan” (http://www.ready.gov/business/_downloads/ReadyBusBooklet_12pg.pdf).

For those who are more ambitious, FEMA has also produced an “Emergency Management Guide for Business and Industry,” which provides a step-by-step approach to business emergency planning and recovery. Finally, the September issue of Inc. Magazine has a list of 12 products to help keep your business running should catastrophe strike.

You can access copies of the last two items by going to our Resources page, and by clicking on the links under the heading “Business Continuity.”

How prepared is your company to survive a natural or man-made emergency?  What plans do you have in place to maintain critical operations?  If you have plans, do your employees know about them, and what they’re supposed to do?  Post your comments here.  Thanks!

Posted by: Bill von Achen | September 11, 2011

Howard Lutnick on the Economy

Last Thursday evening, I watched the President speak before Congress about his plan to reinvigorate the U.S. economy and to put millions of unemployed Americans back to work. Then, on Friday evening, I heard a fascinating interview with Howard Lutnick, the head of the investment firm Cantor Fitzgerald, that touched on the very same subject.

As you may remember, Cantor Fitzgerald lost almost 700 employees in New York 10 years ago today. Lutnick escaped because he delayed his arrival at work to take his son to his first day of school. Despite overwhelming grief (Lutwick lost his own brother in the attack) and with the deck stacked against him, Lutnick rebuilt the firm, which now boasts over 1500 employees in New York alone. I think that qualifies him to offer an opinion about what’s necessary to rebuild our economy.

You can view the relevant clip from Piers Morgan’s interview with Howard Lutnick by going to our Resources page at www.bestpracticesforbusiness.com/resources and clicking on the first link under “Leadership.” The interview segment runs a little more than two minutes, but you’ll have to sit through a 30 second commercial first (!).

Spoiler alert-You’ll love what he has to say about Warren Buffet’s call to increase taxes on the wealthiest Americans.

Share your thoughts about Howard Lutnick and his proposal for the economy by posting your comments here.  Thanks!

Posted by: Bill von Achen | August 24, 2011

Steve Jobs on Leadership and Life

We’re all trying to fit in a few days of rest and relaxation before the unofficial end of summer a little more than a week from now. But today, Steve Jobs, the co-founder and legendary visionary of Apple Computer, announced his decision to step down as the company’s CEO. So, despite the hour, I’m compelled to send this post.

Jobs has been a controversial figure during his more than 30 years in the public spotlight. Genius, ego-maniac, visionary, iconoclast. But, whatever your perspective, it’s impossible to deny his impact on technology and on our world today.

In a rare public appearance unrelated to Apple, Jobs gave the 2005 commencement address at Stanford University. His speech is short, less than 15 minutes, but moving beyond words. And it provides an important perspective on business and on life that’s always worth remembering.

To view Steve’s 2005 commencement address at Stanford, go to our Resource page at www.bestpracticesforbusiness.com/resources, and click on the first link under “Leadership.”

Share your thoughts and reflections on Steve Jobs here. Thanks!

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