Folks who follow my writings on Business Modeling will know that I think they are fundamental to success in pretty much every enterprise today—whether it is a new, for-profit business or a NGO, Charity or Not-For-Profit. For a profit-making business, the Biz Model simply ensures that the harder you work the more money you make. It also speaks to the sustainability of your enterprise—making sure you start an enterprise that: a) can outlive its founder (i.e., you) and b) develops some type of differentiated value that creates a concession or franchise for you.
Another factor I stress is designing the Biz Model to become part of a wider business eco-system. If your business can survive long enough to achieve that, it becomes a very hard entity to destroy. Take, for example, the major Hollywood Studios. It has always amazed me that organizations with such brainy people in them can make so many bad films. If you and I did that even once, we would NEVER get a second chance. Executives and Studios that fail and fail again and again are either given further opportunities or recycled elsewhere in the industry.
Part of the reason these studios or poorly performing executives are so hard to kill off is that they are part of a much wider, deeper and more intricate business ecosystem; one that has developed deep roots laid down like ancient limestone over eons (as measured in, say, dog years, hockey years or Internet years). Once you are part of that ecosystem of actors, directors, producers, deal makers, studios, agents, publicists, screen writers, special effects houses, reviewers, gofers, hangers on, high profile media types, celebrity hosts, musicians, composers, animators, production designers, directors of photography, makeup artists, casting directors, art directors, storyboard artists, costume designers, camera operators, CEOs, COOS, executive producers, accountants, location supervisors, union bosses, etc., you practically can’t be dislodged.
The NHL family is the same—that’s why you see coaches and GMs recycled so often. It’s a pretty close-knit community.
If you graduate from being a simple supplier to a South Korean Chaebol to being a full-fledge member of same, you have it made in that country. You’ve become a part of a business eco-system and it is likely that your five, ten, even 25-year survivorship chances have just increased a lot.
You can plan for this if you think carefully about your business model. On one side, you have your clients and on the other side you have your suppliers. Most people think about what do my clients want or what do I expect from my suppliers? But that isn’t good enough—you need to look at least two dimensions deep on either side—what do the clients of my clients want and what do the suppliers of my suppliers have to offer. If you can manage it, try 3-D or more.
I was speaking to one of my students recently, a terrific young person who has started her own promotions business: Jennifer Lee Productions. We are working toward a biz model for her that cements Jennifer Lee Productions (JLP) in a business eco system and, hopefully, places her at or near the centre of that eco system. I think she can do it.
Now this is not easy for a promotional products biz. There is a lot of competition and differentiated value and ‘pixie dust’ are hard to come by. Building some pixie dust into her biz model would be a big help to JLP.
Most sales people from that industry call you up and rather timidly ask you: “Do you need any promotional products for next year?” Or if they are clever, they call you up and say: “How many branded pens or calendars do you want for next year?”
They get the phone slammed down on them a lot.
It’s a pathetic approach really.
We are working on a different approach for JLP some of which is proprietary and can’t be discussed here. But one simple idea can be—JLP is working on a t-shirt order for a Not-For-Profit group that is focused on building a colossal scale monument to the Stanley Cup. It’s a small order but it could lead to big things if JLP analyses the situation in (at least) 2-dimensions.
OK, this is how it’s done—first, ask the question: who are the clients of my client? Answer, the Stanley Cup Monument Group needs a number of key sponsors to fund this statue and its ancillary works. One of those founding sponsors is likely to be a Canadian Chartered Bank. Now ask the second question: what do the clients of my client want? Well, the Bank wants more customers to go to their branches and to use their online services too. How can JLP help with that? Why not suggest to the Stanley Cup Monument Group and the Bank that people should be able to go to every Bank branch as well as their online properties and make a donation and, for donations of more than $x they get a fabulous t-shirt (or some other branded promotional item like, maybe, a Sidney Crosby (youngest man to Captain a Stanley Cup winner) bobble head doll) produced by JLP under license.
The t-shirts (or other product) are also open to the idea of cross-branding so the Bank can co-promote other founding sponsors (and vice versa) who are likely to be an oil company, a major athletic shoe company, a clothing company, a postal company and so forth.
So this answers a third question: what do clients of my client want from each other. (For more about co-branding, see: http://www.eqjournalblog.com/?p=571.)
If you have the patience, you should explore these functions at least into the 2nd dimension and maybe even to the third or fourth level. It will make your business model smarter and give you MUCH better odds of becoming a long term part of that eco system.
Prof Bruce
Postscript: Another example I use is a Spa. Who are the clients of a Spa? Mostly women. Who are the clients of the Spa’s clients? Mostly men. What do the clients of the Spa’s clients want? Gifts for Xmas, anniversaries and special occasions. How to satisfy that demand? With gift certificates that men buy in droves, of which up to 30% are never redeemed. You can really improve your profitability and, hence, your sustainability, if you think in these terms.
Postscript 2: How do you think about the supply side of the equation in this way? Suppose we return to the spa business. Who are their suppliers? Well, if you are sharp, you might say: their hair stylists, manicurists, massage therapists, pedicurists, physiotherapists, hair colouring specialists and so forth. These are the true suppliers of services.
And what do the Spa’s suppliers want? Great hair care products, skin products, tools of the trade, vitamins, makeup and nail polish They may also want to sell grooming aids, jewelry, clothes, towels, bathrobes, travel kits, etc.
And what do the supplier’s of the Spa’s suppliers want? They want to increase their market share and, hence, they might be induced to pay the Spa—volume bonuses (which can be a huge source of profitability. Remember, nothing is sustainable unless it is economically sustainable and that goes for environmental initiatives too.) So here is a case where someone on the supply side of your business might pay you instead of the other way round. The only way to discover this is through 2-D or 3-D biz modeling or by years of (profitless) trial and error. Remember too, that your new enterprise is highly vulnerable to error—you need to be right almost all the time to successfully start and run a business that will survive longer than a few years. So at least begin with a sound business model.
Your suppliers’ suppliers might also be encouraged to provide free round trips to London for the spa’s suppliers (e.g. their hair stylists or colour specialists) to do top-level courses with world-renowned experts in their field. That in turn might help the spa keep their top stylists from being poached by other shops and attract others, both good for customer satisfaction and the bottom line.