and Virtual Reality technologies. Other current examples include search engine giant Google, that has pivoted from Internet search to other Internet-related services (email, maps, YouTube) to selfdriving cars and renewable energy farms. But how do you know if you need an entirely new business model or just need to update? How do we know when it is time to pivot? Rita McGrath in "When Your Business Model is in Trouble" suggests when innovations to your current business create smaller and smaller improvements there is need for evaluation. There also could be concern when owners/staff have trouble thinking up new improvements or, worse yet, when customers are increasingly finding new alternatives. HOW TO DESIGN YOUR BUSINESS MODEL Each business is distinctive in its history, culture, size, markets and future challenges, so the blueprint for your own business model will be unique. That being said, every business should be looking to evaluate its current position on how to improve. CONCLUSION Ultimately business model design is about seeing the big picture, the core aspects of your business, its purpose, processes and structure. The simpler the understanding of this vision the better. Of course, simple does not necessarily mean easy. Each business owner/ manager must be honest about what you can and are willing to change, as there will be consequences with each decision. Once the building blocks of the business model are established, in the following issue we move to the next phase of the entrepreneurial process: TK growth.
FIVE KEY FACTORS
to evaluate when building the process of a business model design.
1
What is your value proposition? Are you different from competitors?
2
Who is your target market? Are there other demographics, industries, niches?
3
How do you make money? Can there be additional revenue streams, are costs too high?
4
Can you develop internal advantages? Production, management, processes, partnerships?
5
Can it scale/grow? How is this done and what amount of time will it take?
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adjust the model and pursue Plan B, and Plan C and so on. For example, many well-known companies have changed their business model in order to take advantage of opportunities, keep up with competitors or to simply survive. The 3M Company is a huge multi-national corporation that sells industrial and consumer products worldwide in a number of different industries, from electronics, automotive to healthcare. But the company started out as a mining company (originally the Minnesota Mining and Manufacturing Company—3M) and almost collapsed until it diversified—and changed its business model. The same can be said for one of the worlds’ largest video game companies Nintendo, which began selling playing cards, or Wrigley Gum entrepreneur William Wrigley who started selling soap and baking soda until he realized there was more demand from his customers for chewing gum he was giving away as a promotional product. These types of changes to a business are often termed “pivot” points, where companies will notice an opportunity or threat and make the necessary adjustments to what they do. Innovative companies tend to have this ability to pivot quickly, and this skill is now more important than ever as the length of market advantage gained by innovations is becoming depressed. Take Facebook for example, an incredibly successful company but one that is still looking for ways to expand. If the firm finds itself limited by its current business model (i.e. advertising revenue through social media), it attempts to pivot in other ways, which may mean acquisitions with the purchase of companies such as WhatsApp, Instagram
Dr. David Price is the Associate Professor of Marketing and Lecturer in Entrepreneurship at Washburn University.
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FALL 2017
TK Business Magazine