Business Model

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Business Model

What's this for?

This is the point where you draw together the insights from your market segmentation and industry analysis, and begin to decide what shape your business will take and how it will enter the market.

What to use when:

1. Teece Matrix - if you've pinpointed your most attractive market segments, value chain and IP options, the Teece Matrix is a powerful tool for understanding your most likely market entry routes and your negotiating power. We recommend it especially for technology or innovative product ideas. In his research ‘Profiting from Innovation’, David Teece set out to understand why technology inventors don’t always profit financially from their ideas. Bart Clarysse's Entrepreneurial Strategy matrix goes a step further  by looking at additional factors that determine the shape of your business (See Chapter 7 of The Smart Entrepreneur).

2. Blue Ocean Strategy is useful for mature industries which don’t appear to offer much market growth opportunity (e.g. the wine industry), and proposes a method to create new market spaces within an existing industry by creating a new product concept to attract a new segment of previously overlooked customers. However, this analysis does not add value to all business ideas - only use it if you fall into the above category.

3. Finally, revenue models (e.g. selling, renting, subscription, etc.) and pricing are an important component of a business model, based on your target market’s needs and priorities.

4. In the end, you also want to make sure that your business model is not just strategically compelling but financially viable. For this, use the slide deck on Financial Viability.

Recommended easy reading for context and more ideas: Chapter 7 of The Smart Entrepreneur for market entry strategies; Chapter 9 pages 167-170 for pricing.

Goal

To devise a viable market entry strategy and business model: the process by which your venture will make money (and/or achieve other goals).

 

Suggested steps

1. Click the links to access the Learning Manuals: IE&D Teece Analysis and IE&D Pricing and IE&D Financial Viability.

(1a. Optional reading depending on your industry: IE&D Blue Ocean Strategy)

2. Reconsider your value chain (and the complementary assets required) and the level of protection available for your idea/venture.

3. Use a Teece analysis to see which quadrant you are in or the Clarysse matrix to see which strategy you might choose.

4. Determine a business strategy that fits with your quadrant in the Teece model, and how to overcome difficulties if your business is situated in a problematic quadrant: to what degree can you develop your own operations? To what degree must you depend on partners? How much value will you have to give away?

5. Consider a suitable revenue model and pricing system for your business, depending on the demands of your market segments and value chain players.

6. Do a preliminary check on the likely financial viability of this model. It is important that you do this at some stage of your project, before you attempt a full-blown financial plan.

• Articulate how and where you will enter the market. Will you enter a market for products or for technology?

• How will you structure the business to enter this market?

• Describe your pricing model or how you will realise a return?

If you need to print out a copy of the learning manual(s) for offline use, please follow these steps:
    - Click the "Create PDF" button at the top right hand corner of the page.
    - Scroll to the "Attachment" section (at the end of the last page).
    - Click on the paperclip icon next to the manual.