Innovative business models

Business model change is a key lever of value creation. Another fact: it was the outsiders who used it to overthrow the competitive hierarchies. In other words, this is good news for entrepreneurs. But beware, there is no change in the business model without subversion!

The pulse of the PWC CEO raises 5 important questions that are likely to influence the evolution of business models:

  • How to respond to customers who are more demanding, more flexible, more knowledgeable and less loyal to a brand. (Internet changes all habits)
  • How to deal with the growing number of young, better and more agile companies disrupting every part of the economy (the development of start-ups has removed hierarchical systems, factors of inertia)
  • How to take advantage of the opportunities offered by multiplication channels, connected objects, artificial intelligence, big data and the sharing economy. (The need to understand a new way of communication)
  • How to adapt production processes and methods by integrating new technologies to accelerate the development of products and services. (Adaptation to whatever evolution has become is a factor of survival)
  • How to adapt to new, stricter regulations to which many sectors (finance, energy, transportation, etc.) are subject (Borders are permeable and regulations become a headache)

Dell, Zara, and Easyjet have become benchmarks in terms of value creation and growth in recent years. These companies with different sizes, sectors and geographical backgrounds have collectively designed and deployed a radical change in their sector. This change does not concern the product itself, nor does it reside in a technological breakthrough. These companies have become innovative in the way they generate and capture value, each of which they have achieved a change in business model.

A new continent of innovation beyond technology

As some of these examples show, business model change is not born with a digital economy and digitization, nor is it necessarily linked to technological change. The change in business model can be applied to both products and services, regardless of the level of technology, regardless of the size of the organization. Thus, the Freemium model offers to go from free towards payment with high added value. This freemium strategy consists of getting as many people as possible to join a free service to lead them to a more complete paid service, with high -value -added features. Many software or digital platforms work this way: Facebook, Dropbox, Hootsuite, Hubspot, LinkedIn, Skype, Prestashop, etc. Similarly, the subscription model offers to pay for access. It is no longer the product that has value but its use. We pay for the actual use of a product that is always up to date.

The business model is broader than the revenue model

We often limit the model
economic to revenue model: freemium, subscription, pay-per-purchase, free, and therefore innovative economic model to a new way of putting a price on a product or service. The economic model is certainly a revenue model, but more importantly it is a good synchronization between this revenue model, the value proposition offered to customers on the one hand and the organization set to achieve. it on the other hand. . The innovation undertaken by Dell, Zara or Easyjet has more to do with value proposition (choosing your configuration, changing clothes more often, traveling cheaply) and organization (finding production close to consumption areas, increasing as the daily rotation of an aircraft, manufactures on demand) rather than the method of formulating their price.

How is this good news for entrepreneurs?

This means that innovation (and therefore value creation) is not reserved for large corporations or tech startups. All companies, regardless of their size or sector, can undertake innovations that will create value as long as they question the right match between the value proposition, revenue model and organization. L’atelier des chefs is a very good example of business model change in a mature industry. What are the two important costs of a restaurant in town? The door step and the salaries. The answer of L’atelier des chefs is to go to the backyards and operate the customers. Powerful change in the catering business model: a new value proposition supported by an innovative organization where customers make up part of the value.

How to get there?

The good news is that the change in terms of business models is accessible to everyone! Make no mistake, however, driving change in business model is a daunting task that requires significant effort and a subversive posture. Violation of the rules: no change in the economic model without challenging the accepted rules in an industry (air travel is an external sign of wealth, low-cost countries are the only relevant areas to produce of goods produced in bulk, you must admit the fixed costs of the store).
Experiment: plans and expectations have no definite belief in testing the customer’s appetite or the ability to deliver a service. You need to do a lot of small testing to find the right value -for -revenue measure that fits the organization. Allow failure: when you experiment, you seek to learn, not to succeed and learn, you have to make mistakes. Have a transversal vision: to find the right match between the value proposition – revenue – organization, you must simultaneously think about the offer, organization, price, partnership, purchase.

Focus on the DELL example

Dell achieved its success by establishing a model that detached from the dominant model in the computer hardware industry. Three points are particularly interesting in this model:

  • A new value proposition : while the computer industry is structured in a standardized offer, Dell offers its customers to define themselves in the configuration they want, when they purchase the product.
  • Changing the order : While the industry rule is to sell after mass production, Dell sells first and then assembles. This development has many advantages. In terms of cash, improvement in WCR (Dell cashes in before mobilizing assembly resources), in terms of turnover, increase in sales by better meeting expectations, in terms of costs, reduction in not items sold.
  • Live distribution : distribution is done directly through the website that was first used as a specific sales channel, traditional distributors are not in the game. This direct distribution allows Dell to gain additional value over its competitors.

These three points work in interaction: the value proposition cannot be imagined without a direct distribution and without an operational sequence that differs from industry rules. To maintain promise and especially the short delivery time, Dell has set up an industrial tool that is very different from its competitors: internalized distribution, assembly plants located near the points of consumption (while the factories are all located in Asia to benefit from low labor costs) and particularly efficient factories to keep costs in line with competition.

Leave a Comment