Business Models are the engine of a business or
organization. They describe, usually in graphical form on a single page, the
relationship between customers and clients on one hand and the business and its
suppliers on the other hand. They must also include an orthogonal dimension—the
marketing dimension which shows how the enterprise acquires customers and
clients in a cost effective manner.
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1. We deliver the PODS® container to your door using our patented hydraulic lift system. 2. You pack the PODS® container at your leisure. 3. We pick up the PODS® container and deliver directly to your destination or to our secure PODS® storage. Peter Hauderowicz, President, PODS Ottawa 2750 Sheffield Rd, Unit 130, Ottawa ON Email: ph_pods@rogers.com |
To better understand business modeling, read: The Complete Business Model.
Business models need to include:
-significant differentiated
value;
-emphasis on pre-sales
and building cashflow through early acquisition of customers and clients;
-focus on self-capitalization;
-involve smart
marketing to keep the cost of acquisition of customers and clients low: make sure you have some type of 'Magic Marketing Button';
-reverse out some of
the work to clients or suppliers*;
-design an enterprise
that creates
custom products (or services) from standard inputs;
-has a short or
negative cash conversion cycle*;
-provide an opportunity
that creates more value than a JOB and can outlive the Founder of the
enterprise.
| Winners 2011 |
Six teams from the 2011Exploriem.org/Telfer School of Management Business Model Competition are moving on to compete in the U of O Wes Nicol Business Plan Competition. To see these Business Plans and Business Models please go to: http://www.dramatispersonae.org/AssignmentsADM3396WesNicolBusinessPlanCompetition.htm Thank you to our judges: Peter Hauderowicz (PODS); Bob Wener (kpmg.ca); Schuyleur Seccaspina (Vittorio Motors); Dimitri Onistsuk (Demeter). Thank you to our sponsors: PODS Ottawa (http://www.pods.com/ottawa.aspx) and Vittorio Motors (http://www.vittorio.ca/) More on the Biz Model Comp: http://dramatispersonae.org/BusinessModelCompetition/DescriptionUOBizModelCompetition.htm More on the Wes Nicol: http://dramatispersonae.org/WesleyNicolBusinessPlanCompetition/UOttawaWesleyNicolBusinessPlanCompetition.htm |
| Other Entrants | SeizeIt: Biz Model |
| Versatil BPI: Biz Model Summary | |
| My eBrand: Biz Model | |
| Skillful Connections: Biz Model (Word Doc) | |
| Every Day Investors: Biz Model |
Students are encouraged to use the online tools provided
for this competition including:
Your Complete Business Model should include:
1. A one page Business Model Flow Chart. Start by using our online Business Model Generator, BMG (http://www.dramatispersonae.org/bmg/) to get a sense of what your final model might look like. Then improve it and let it evolve to describe using a pictogram the entire ecosystem that your new enterprise will live within. Your Business Model will show your ECQ Test Score, your 'Pixie Dust', source of Bootstrap Capital and Guerrilla Marketing/Social Marketing ideas, your Guerrilla Marketing Test Score and your Business Model Test Score. The BMG will lead you through this process.
2. You will also need to develop a one page spreadsheet showing how value is created for one individual client or customer. Here are some examples of how to demonstrate your Value Proposition: Value Proposition of a Residential Realtor, the spreadsheet, Value Proposition for a HR Professional, the spreadsheet. You are demonstrating in a clear and concise way how your new enterprise/product/service/division creates either lower costs or higher revenues (or hopefully some combination of both) for one customer.
Included with the above spreadsheet should be: 1. an estimate of the size of the market opportunity and the rate of growth (obviously a larger, faster growing market is more likely to produce value beyond what you could obtain by simply getting a JOB); 2. goals (expressed simply as N = ?) for the business for its first three months, first year and first three years in terms of, for example, the number of customers, the volume of sales, the volume of sales per employee or other fundamental measure of business success; 3. benchmarking your enterprise or organization against the best in the space using, for example, your sales per employee per year and comparing that to the best of breed in your industry or comparing the percentage of revenues used for good works (as opposed to administration) for a charity or not-for-profit organization.
3. A second spreadsheet is required that provides you with a Financial Model of your enterprise. Having done quite a bit of work in the field of urban economics, it has always amazed me that most cities, for example, don't have a financial model that can tell them what the fiscal implications are of one more resident or, for that matter, one more firm locating in their town. Most cities have budget processes that are a mess. I produced a financial model for a backorder domain name service that you can safely download from our server at:
http://public.sheet.zoho.com/public/profbruce/backorderdomaincorpfinancialmodel.
From this model, the firm can see what impact each additional client has on the top line of the firm. The firm is also able to test the sensitivity of its top line to changes in the success rate of backorder capture, changes in its COGS (Cost of Goods Sold) and other variables.
Your value proposition for your clients and their impact on your business (which is measured in your financial model) are mirror images of each other. We complete the business ecosystem when your suppliers provide you with their value proposition and you also insist that they have a financial model of how your business impacts them. Why should you care if your supplier's have a workable financial model? Well, the long term viability of your firm depends in part of a stable supply chain and it won't be stable if your suppliers are failing on a frequent basis.
4. Make sure you also calculate your Cash Conversion Cycle (http://www.dramatispersonae.org/BusinessModels/CashConversionCycleMeasurement.xls) and show that too.
5. You will produce and record a 2-munite video of your Elevator Pitch and load it to YouTube (if public) or otherwise provide it for viewing in class. See: http://dramatispersonae.org/HowToMakeAGreatElevatorPitch.doc and http://dramatispersonae.org/ElevatorPitchWorkshop.doc.
6. If you can build leverage into your business model, a means to multiply the force exerted by your own efforts, time and brains, you will have a greater opportunity to succeed. Leverage in your business model comes primarily from eight sources:
i. great HR,
ii. using OPM,
iii. forced savings,
iv. innovation,
v. capital equipment,
vi. location,
vii. branding &
viii. inflation.
Test your biz model: ask yourself do you have great HR, are you using OPM, benefiting from forced savings, innovating, do you have a great location or brand, is your capital equipment top notch/best-of-breed & do you benefit from inflation? If so, you are probably maximizing your leverage.
Leverage using OPM is increased when the project's or business' rate of return is higher than money you borrowed. Or when you use bootstrap capital, say, trade credit, where a supplier gives you credit at low interest or no interest to buy from them or a customer gives you a deposit on an order on which you pay no interest, you are then leveraging your own efforts and capital with theirs.
You also get leverage when other people are paying off your debts. This happens when, for example, you own rental property. Every time a tenant pays their monthly rent and you pay off some of the principal using their rent, you experience a form of forced savings and a wealth effect.
I have spoken to the need to have some type of innovation in your business model; as we saw above, Steve Jobs proved that you can think your way to wealth a lot faster than you can work your way there. That's big-time leverage…from ideas.
It would also appear self-evident that having top notch capital equipment provides greater leverage for your employees and means higher productivity.
You also get leverage from your location and your brand. In real estate terms, if you occupy a particular location, it obviously means that no one else can, so make it a good one.
Some people think that having a great brand is nice, actually it's essential. A strong brand creates trust and trust creates the opportunity to sell. Think about it? Ever bought anything from someone you didn't like and didn't trust? If you did, it was only once.
But a brand does other things for you. For example, Apple's incredible brand, its reputation for building insanely great products, allowed Steve Jobs to cajole out of AT&T a share of their monthly subscriber revenues for the launch of the iPhone, something that no other telecom had ever granted to a cell phone manufacturer before.
Cell phone manufacturers went from selling a 'shrink wrapped' gadget for a one-time payment in a brutally competitive market that was racing to the bottom to an industry with multiple sources of revenues, some of which are recurring: the holy grail of techdom.
Imagine how much harder Steve Jobs and Apple would have to work and how much lower their productivity as measured in revenue per employee would be without recurring revenues from iPhone app sales and revenues, advertising revenues on their mobile platform, downloads of paid content from iTunes and a share of their carriers' subscriber fees.
From a simple question, asked by Steve Jobs, and a tweaking of his business model flowed great benefits. The harder they work, the more money they make and, in Apple's case, this relationship has become geometric.
(Jobs has created radical change in industry after industry: personal computing (the Mac), animation (Pixar), music (iPod), cell phones (iPhone) and now book/newspaper/magazine publishing (iPad) plus perhaps television and film (Apple TV). It is truly a remarkable record of achievement.)
Lastly, if you are in an industry that is experiencing price inflation, you are benefiting from asset value increases without putting in any effort of your own, i.e., more 'free' positive leverage for you. That is why it is almost always better to enter into buoyant sectors where 'all boats are rising'.
7. You will need to write a Summary of your Business Model that is 2-pages or less that summarizes:
a. Your value proposition including its 'pixie dust' (http://www.eqjournalblog.com/?p=9) or differentiated value and how you will create a sustainable competitive advantage. Make sure that you are abundantly clear about the costs and benefits that you are creating for each customer. Show how control over a factor of production (labour, capital, management or land) can create a defensible concession.
b. How you can acquire customers and clients, including pre-launch clients, in a cost effective manner through guerrilla marketing, social marketing or direct marketing. Explain how you will use negative cost selling to achieve this: http://www.eqjournalblog.com/?p=425.
c. How you integrated the Internet into your business model. (See: http://www.eqjournalblog.com/?p=1609). For example, how you were able to produce custom outputs from standard inputs; become scalable; take advantage of network effects and reverse out some of the work to suppliers or customers.
d. How the business can become a part of its business ecosystem thereby enhancing its survivability. Examine not only the relationships between the business and its customers and suppliers but the suppliers to its suppliers and the customers of its customers (at least 2 dimensions on each side of the business model).
e. How you can bootstrap your business and self-capitalize it (http://www.eqjournalblog.com/?p=1162).
f. How you will build cashflow and create a cash conversion cycle that is workable.
g. Why you and your team are the right people to execute this model.
8. We will require your photo plus one for each member of your group (jpeg please) if you are working in a group together with a brief bio of not more than 80 words for each member and a telephone number, mailing address and email address where each member may be contacted.
9. A letter stating that we may use your material, your bios and your likenesses on our websites and in any related Media Releases or public relations purposes. Student entrepreneurs may opt out of this.
10. Here are a couple of Business Model Pictograms for your perusal:
Sample Entry (2010): BadServer.ca
BUSINESS MODEL
COMPETITION PRIZES
There will be three prizes for the top business models:
1st place—GOLD MEDAL and $750
2ND place—SILVER MEDAL and $500
3RD place—BRONZE MEDAL and $250
4TH place, 5TH and 6TH
places—HONORABLE MENTION.
Prizes will be shared equally among team members.
SCHEDULE
- Submission: expression
of interest—Second Wednesday in January.
- Submission of one page
business model—First Wednesday in February.
- Final revisions—Third
Wednesday in February.
- Announcement of Six
Finalists—last day in February.
- Competition—First Wednesday
in March.
FOR MORE
INFORMATION
Dr. Bruce M. Firestone, Entrepreneur-In-Residence, (613)
422-6757 ext 250 or bruce.firestone@century21.ca.
www.Twitter.com/ProfBruce and www.EQJournal.org
http://dramatispersonae.org/EntrepreneurialistCultureFrontPage.htm
http://dramatispersonae.org/AssignmentsADM3396.htm
http://dramatispersonae.org/AssignmentsADM3396BusinessModelCompetition.htm
http://dramatispersonae.org/AssignmentsADM3396WesNicolBusinessPlanCompetition.htm