The recently released book, Business Models for Dummies, offers both ‘beginners’ and experts’insight into the fascinating world of business models. The book is comprised of three main sections: creating a business model, assessing the model, and ongoing innovation.
Creating a business model
There are countless methods to create a business model – from the back of a napkin to a highly formalized methodology. This book offers a structured approach to a business model using The Business Model Wheel™. The wheel breaks down a business model into offering, monetization, and sustainability. Each of these areas is further broken down into more finite components:
- Market Attractiveness
- Unique Value Proposition
- Profit Model
- Sales Performance Model
- Ongoing Competitive Advantage
- Innovation Factor
- Pitfall Avoidance
- Graceful Exit
By using a structured approach to the business model, a more complete and robust model can be created.
Assessing a business model
The Business Model Wheel™ can also be used to score a business model. By using the version below, the business owner or model creator can assess the quality of each area of the model. The book goes into great deal on what factors are important as well as what to look out for.
One of the often overlooked areas of a business model is the Sales Performance Model. Many people create a model of something they think customers will want and it will be sold at a significant profit. However, if there is no proven and repeatable sales system in place, it’s nothing more than a coulda-woulda-shoulda model. Only models that produce actual sales, not theoretical ones matter.
Perhaps you remember the companies below. All of them had good business models and were leaders in their field. However, competition, economics, technology, and other factors are working to erode your business model. In order to combat these negative influences, you must innovate.
The book offers many potential sources and methods of innovation but my favorite is the section on Advanced Innovation. One entire chapter each is devoted to three techniques: “Getting in the insurance business, Advance Crowdsourcing, and Sales Virtualization.” If you own a business, jump ahead to these chapters. There’s gold in there.
The author uses several case studies and examples to drive home these important points. I must admit, a business model is far more complex than I originally thought. I enjoyed the systematic breakdown of the model into understandable pieces as well as the many examples that made the lessons “sticky.”