Common Mistakes in Business Model Creation
Benson Garner, President — Innovation Principle
• competitive strategy • 2020 Vision • distribution management best practices • distribution industry trends • business model
Monday, September 14, 2015—I recently sat with Benson Garner to discuss the concept of a Business Model Canvas. Benson is an expert on the subject and has taught me how companies can use this model to close loops or gaps in their processes.
Just to set the stage, the Business Canvas Model is basically a nine-block visual diagram that you can use to help clients understand how to interact with customers, how to communicate, how to monetize their product, what sort of infrastructure they may need, and how to maintain profitability even as the cost structure changes.
"The thing that we struggle with in most businesses," Benson explained, "is that they tend to be very product-focused. Companies will create product portfolios and expect them to work within the same business model that they've always used. Companies should instead be creating new business model portfolios better suited to the products and services being offered so that the model supports what's being offered to the customers.
"We can use the same old channels that we've always used," Benson continued, "but maybe the customer actually wants or expects or needs a better or different channel that we reach them through or that we deliver that product or service through."
"For instance, what's the business model for an author? He writes a book, he finds a publisher, the book is published, and then the book is sold to readers. Who's the author's customer in that scenario? The automatic assumption is the readers but, in reality, his customer is the publisher. By failing to recognize the publisher's role in this process and not using the proper channels to reach them, an author creates a significant gap in his business model. Instead of spending a lot of time trying to figure out how to sell the book to readers, the author needs to instead focus on selling it to publishers and there's a vastly different structure related to that."
Benson explained that one of the problems in most organizations, is that they start off with one portfolio of products and services that they offer to a specific customer segment. A competitor will eventually see that the model looks successful and then attempt to offer their products and services, but in a slightly different way to a different customer.
This causes the first organization to test out a similar variation while assuming that it will still fit within the original model. In the case of wholesale distribution, many of these businesses have been in existence for over fifty years, and the problem has compounded substantially over time. Interestingly, these distributors have insanely large portfolios and none of them have been optimized around the right business model.
For more information about Benson Garner, visit: www.bensongarner.com