Transforming a Firm’s Business Modelfor Performance Optimization

Yield

Time

Dr. Elijah EzenduFIMC, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM,

PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC, CMgr

“Business Model is the logic behind value generation”

- Linder

“Business Model is a way of creating and capturing value within a market network of producers, suppliers and consumers” - Bill Vorley and Mark Lundy

“Business Model is nothing else than a

representation of how an organisation makes or intend to make money”

- Alex Osterwalder

“In all enterprises, it’s the business model that deserves detailed attention and understanding”

- Mitch Thrower, The Attention Deficit Workplace: Winning Strategies for Success in Today’s Fast-Paced Business Environment.

Steps for Transforming a Firm’s Business Model

Elijah Ezendu, Business Model

Business Model Analysis

This is the critical identification and evaluation of a business model for purpose of ascertaining its internal alignments to operational effectiveness and external alignments to efficiency of the total business stream.

Business stream is a schema that shows the five layers in business development framework, from business intent to business performance.

Business Stream

Elijah Ezendu, Business Model

Business Intent

Business intent is the description and accentuation of a structured focus, highlighting vision, mission, goals and objectives, while symbolizing direction and destiny.

Business Strategy

Business strategy represents clearly identified feasible route for steering activities onto attainment of goals and objectives.

There are three levels of business strategy.

Three Levels of Business Strategy

• Corporate Level Strategy• Business Unit Level Strategy• Functional/Operational Level Strategy

Corporate Level Strategy

This comprises overall strategy elements for the firm. Resolving issues pertaining to mix of businesses and means for coordination and integration of individual unit strategies.

It’s concerned with the following: Managing Activities and Business Interrelationships. Corporate Responsibilities. Management Practices. Competitive Contact.

Business Unit Level Strategy

This involves translation of the corporate level strategy into suitable strategies for individual business divisions or portfolios, required to develop and sustain competitive advantage for products or services of the firm.

This is concerned with the following: Influencing the layout of competition by means of action such

as vertical integration. Positioning the firm’s business against competitors. Modifying actions to cope with changes in demand, supply,

regulations and technology. Developing useful partnerships with customers and other

business units.

Functional/ Operational Level Strategy

This involves development of strategies for functional catchments such as production, finance, human resource, research, logistics, business development and materials management.

It’s concerned with implementation of the strategic plans established at corporate and business unit levels in order to ensure functional silos partnership in organisational leadership.

Business Model is a blueprint pinpointing the flow of articulated value from a firm to its customers, and the dimensions of returns to the firm.

• Business model is a bridge providing appropriate linkage between business strategy and business process.

• Without a well-structured business model in place, there would be a disconnect between business strategy and business process.

• Business Model is the drawing board for designing Business Performance.

• Business Model is the heart of Business Success.

Characteristics of Business Model

Business Model Canvas

Key Partners

Key Activities

Key Resources

ValuePropositions

Channels

CustomerRelationships

Customer Segments

CostStructure

RevenueStreams

Alexander Osterwalder & Yves Pigneur, Business Model Generation

Business Model Template

Elijah Ezendu, Business Model

Alliance Networks Coherence

Key Resources

ValuePropositions

TargetCustomers

CostStructure

RevenueStreams

Key Activities

Influence

Channels

CustomerRelationships

Alliance

Alliance is an agreement between firms for achievement of defined goals and building mutual interdependence while remaining separate entities.

The two alliance structures are as follows:• Transient Alliance• Strategic Alliance

Types of AllianceAlliances can exist between a firm and its suppliers, distributors,

competitors and non-competitors. Some types of alliances are as stated below:• Preferred Suppliers• Co-Marketing• Licensing• Joint Production• Coopetition• Minority Investments• Multi-Partner Consortia• Joint Research and Development• Outsourcing• Equity Joint Venture

The Place of Alliance

Alliance provides opportunities for leveraging external capabilities so as to evolve value, especially where outright acquisition may be unnecessary or premature.

Key Activities

This represents the major work concentration of a firm in order to produce well-defined value proposition. Ascertainment of key activities gives room for mapping aggregate work requirements and ancillary projections.

Coherence

Coherence is a cultural thrust that provides effective connectivity for all the components of business model, fusing them together in characteristic intimacies, and facilitating uniform drive onto specified goals and objectives.

Key Resources

These are the resources required for producing a particular value proposition.

The four types of resources are as follows:• Material Resources• Physical Resources• Financial Resources• Intellectual Resources

Value Propositions

Value propositions represent the whole sets of values which a firm lays out to its customers, in order for them to find consummate worth therein.

Value Propositions stand as the pivot of business intent.

Value Propositions give room for development of interdependencies between a firm and its customers.

Customer Relationships

This deals with identification and inventory of the diversity of relationships which a firm should nurture with its customers. Where the customers are segmented, relationships may vary from one segment to another. If the customers are not segmented, then the ensuing relationships would be undifferentiated.

Goals of Customer Relationships

• Customer Information Services• Customer Acquisition• Customer Retention• Cross-Selling• Up-Selling• Price Optimization• Continuous Value Propositions Realignment

Influence

This is the active strength that affects a person’s opinion, thereby inducing action in a particular direction.

It provides productive link to customers.It’s operability depends on pedestals of

acceptance and belief.

Types of Influence• Social Influence• Brand Influence• Consumer Influence• Religious Influence• Economic Influence• Environmental Influence• Influence Predicated on National Pride

Channels

Channels are paths through which a firm moves its value proposition to target customers, by means of designated sales points, distributors, and effective communication.

Target Customers

These are the particular set of customers that a firm intends to be offering the right value proposition for their identified needs or wants.

Customers can be segmented, aggregated or selected with specificity in the form of a niche.

Cost Structure

The cost structure of a business model highlights profiles of incurable costs and the ratio of fixed costs to variable costs.

It facilitates identification of cost-containment method that would be deployed.

It allows for identification of cost management techniques to mitigate effects of identified cost drivers.

Types of Cost Structures

• Cost Leadership • Value Maximization• Integrated Cost Leadership & Value

Maximization

Revenue Streams

These are applicable means of obtaining revenue from customers as a measurable and deserved return for values delivered.

Testing a Business Model

Elijah Ezendu, Business Model

Dr. Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise in HR, OD, Competitive Intelligence, Strategy, Restructuring, Business Development, Sales & Marketing, Interim Management, CSR, Leadership, Project & Programme Management, Cost Management, Outsourcing, Franchising, Intellectual Capital, eBusiness, Social Media, Software Architecture, Cloud Computing, eLearning & International Business. He holds proprietary rights of various systems. He is currently CEO, Rubiini (UAE); Hon. President, Worldwide Independent Inventors Association; Special Advisor, RTEAN; Director, MMNA Investments Limited. He had functioned as Chair, International Board of GCC Business Council (UAE); Senior Partner, Shevach Consulting; Chairman (Certification & Training), Coordinator (Board of Fellows), Lead Assessor & Governing Council Member, Institute of Management Consultants, Nigeria; Lead Resource, Centre for Competitive Intelligence Development; Turnaround Project Director, Consolidated Business Holdings Limited; Lead Consultant/ Partner, JK Michaels; Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles), Fortuna, Gambia & Malta; Director, The Greens; Chief Advisor/Partner, D & E; Vice Chairman, Refined Shipping; Director of Programmes & Governing Council Member, Institute of Business Development, Nigeria; Member of TDD Committee, International Association of Software Architects, USA; Member of Strategic Planning and Implementation Committee, Chartered Institute of Personnel Management of Nigeria; Adjunct Faculty, Regent Business School, South Africa; Adjunct Faculty, Ladoke Akintola University of Technology, Nigeria; Editor-in-Chief & Chairman of Editorial Board, Cost Management Journal; National Executive Council Member, Institute of Internal Auditors of Nigeria; Member, Board of Directors (Several Organizations). He holds Doctoral Degree in Management, Master of Business Administration and Fellowship of Several Professional Institutes in North America, UK & Nigeria. He is an author & widely featured speaker in workshops, conferences & retreats. He was involved in developing Specialist Master’s Degree Course Content for Ladoke Akintola University of Technology (Nigeria) and Jones International University (USA). He holds Interim Management Assignments on Boards of Companies as Non-Executive Director.

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