Part Two: Design Your Business Model
Now that you have a basic business model put together, you do not want to accept that design as the best one automatically. Your goal is to find the best business model. The one that will set you apart from your competitors, deliver the most value, and offer the best revenues and profits. The business model canvas allows you to design alternative models easily by changing the data points in the individual modules and create an entirely new business model.
There are many, many examples of this design process. For example, Walmart changed the design of its business model several times before arriving at its current model. They had to reframe the definition of a big-box retailer. Even today, they are continuing to change their model with the economy, customer characteristics, and technology.
Another example is Southwest airlines. They were bankrupt trying to use the traditional hub and spoke business model of all the other airlines. They decided to redesign their business model and fly direct from San Antonio to Dallas or Houston and land at the suburban airports with far fewer gate fees. Passengers loved it as well as the suburban location was preferable because most of the business occurred in the suburbs. They also added some “viral marketing” like stewardess dressed in hotpants and great food and drink, Today, they are the only airline that has been profitable every year, since they redesigned their business model.
These examples point out three important things to remember when you are designing your business model (per Alexander Osterwald);
The product is essential, but not sufficient; you need a business model that makes it work
You can’t just copy the business model used by a competitor
A business model design is not proof it will work. It is a hypothesis and, therefore, a risk, and has to be tested and verified.
New products and services are opportunities that seem to get everyone excited. But, innovative business models also offer great opportunities. How could you redesign your business model to increase your value proposition?