Your business model strategy answers 5 core strategy questions about your business.
Where will we compete?
- Who is (are) our target market(s)?
- What business are we in?
Why will we win?
- What value promise (where value = benefits received less the price paid to acquire these benefits) will earn target customer loyalty?
- What differential advantage(s) will enable us to reliably deliver on our value promise and leave competitors unable to easily copy it?
Why will we be profitable?
- What factors will lead our benefit-price exchange with customers to generate economic value (profits and shareholder value) for us?
Wait, you might argue. Aren’t these questions product-positioning questions we ask marketing to answer? Yes.
Business model innovation defines and position your organization’s entire offering. It forces you to think synergistically about your entire portfolio. In an economy in which the copying of individual products and services has become pretty easy to accomplish, you must position your overall offering because an overall offering, built from companywide advantages, is hard to copy.
Products, categories, business units and corporations all have a business model. Each layer of management — product managers, group product managers, VP/General Managers and their teams, even CEOs and their teams – must consciously decide on their business model.
Do you know your business model strategy? Does everyone on the leadership team have the same answers?
For insight on business model innovation and business model differentiation, read my recently released book, Beyond Price.