For those who want to expand their business horizon about 21st Century Business Trends, I will be sharing adapted, succinct key notes from MBA training on Strategy and Business Models.

Objective:
• Help you turn your idea into a workable business model prototype
• Contribute towards strategic creativity and innovation

The 21st-century business environment has evolved to a point where continuous change is the norm.

A different mindset, tools and approach are required to solve 21st-century business challenges and create new opportunities.
The traditional type of approach to strategy formulation has become nonsensical, based upon how close you were to your long-term projections, which were contained within long, detailed plans.

Now we are in the 21st century, the speed of market changes has accelerated at an unprecedented pace and it is now very difficult to predict the future with any certainty based on current market conditions.

The rules of doing business have changed; we have moved away from the era of mass production, when efficiency and scale drove businesses. In this digitally connected world, the need for efficiency is dwarfed by the need for speed, innovation and change.
The path to creating value has shifted towards responding to new opportunities with speed and precision. Those who need to do so, however, are often at the bottom or edges of traditional hierarchical corporations.

The likes of Amazon, Google, Facebook etc. will tell you – we pursue innovation through the use of technology, create new business models, find strategic partners and embrace a ‘disruption-ready’ strategy of new trends, policies and processes.

THE WAY TO GO – BUSINESS MODELS
The new currency of transacting strategy in the 21st century is business models. They are the key tool to assist you when creating new projects in the face of extreme uncertainty.

This is because business model frameworks allow anyone to demonstrate how their new concept could be commercialised within a hypothetical business model.

They can test and validate a new idea’s assumptions and work out whether it is scalable and profitable. They can do this rapidly, at a low cost, and before vast amounts of capital or other resources have been committed to it (…to be continued)/

SUCCESSFUL ORGANISATIONAL STRATEGY WITH BUSINESS MODEL THINKING

Today, we will identify how business models have become successful in 21st-century business. In this case, we will be looking at a successful business model: Nespresso.

All businesses either explicitly or implicitly employ a particular business model. A business model describes the design of all the component parts of your business that work in combination to create, deliver and capture value for your customers and stakeholders (Alexander Osterwalder, author of Business Model Generation, together with Yves Pigneur et al., 2010, Wiley).
Being able to conceptualise your new growth opportunity within a business model framework will help you do this. It will also aid organisational decision makers not only to receive, understand and help develop your idea, but also to act upon it.

Case Study: Nespresso - “Restaurant Quality Espresso at Home”
Nespresso is one of the most amazing stories spanning 4 decades, demonstrating the power of business models. It has been the case study used in multiple start up hub weekend bootcamps and corporate business model workshops globally.

Nespresso is the brand name of Nestle Nespresso S.A an operating unit of the Swiss food giant Nestle Group. Nespresso machines brew espresso from single serve coffee capsules. The single-use capsules contain a portion of ground coffee and flavourings to deliver a “restaurant quality espresso at home”. Nespresso is an example of a breakthrough innovation that launched a whole new industry around pod and machine technology. Its successful business model pattern is called a “Razor and Blade” business model.

METHOD
Case Study: Nespresso “restaurant quality espresso at home”

The question that is often asked is how did Nestlé build such an innovative and successful business model for the Nespresso product? In the past, they had a dominant position in the transactional business of selling granulated coffee with their Nescafé brand, selling it indirectly through third-party distributors in retail outlets. But with Nespresso they used their expertise, resources, patents and business partners to create a vast recurring revenue base, selling proprietary coffee pods at six to eight times the price of granulated coffee. For the first time, they sold coffee directly to affluent consumers through direct mail (and then their own boutique retail outlets and online channels) rather than through third-party retail outlets. The revenues from this product alone for the Nestlé Group have grown at around 30% per annum since 2000 and represent around CHF 4 billion in annual revenues from a single product line.

Success Via 3 Different Business Models[b][/b]
1970–1976: The most interesting thing is that Nespresso’s coffee-pod technology was actually invented in 1970 and patented in 1976. The Nespresso system was designed as a pod-and-machine unit that could conveniently produce restaurant-quality espresso coffee onsite. There were a few early attempts to use the technology (for example, in single-serve coffee cups and also by selling it to restaurants), but these attempts were unsuccessful.

1986–1988: In 1986, the same technology was used again in a different business model whereby the system (machine and pod) was sold to the office market. But again, by 1988 that model was abandoned as it failed to meet its objectives. But with high inventories of expensive pods, Nespresso’s management undertook an overhaul of the entire business model.

1989: It wasn’t until 1989, and still under patent protection, that Nespresso re-thought the entire business model and took some highly innovative and bold moves away from their traditional business-to-business (B2B) food manufacturing and consumer marketing business and industry.

Case Study of the Nespresso Business Model Canvas from Business Model Generation (See attached image).

It’s a lot of information, so please work through it via the following list below.

Steps to overhaul the Nespresso business model:
1. New customer segment. Nespresso management changed the target market from solely offices to consumers in affluent households.

2. New value proposition. The offer separated the machine (one-off purchase) from the pods (recurring purchase) and delivered a ‘restaurant-quality espresso experience at home’.

3. New channels. They sold coffee (as ‘pods’) directly to consumers via their own multiple new channels – first by direct mail and then via their own boutique coffee salons (investing in marketing and sales training of staff), as well as online. This was the first direct-to-consumer product for Nestlé. The sale of machines was facilitated through their excellent third-party retail distributor relationships.

4. New customer relationships. Creation of the ‘Nespresso Club’ – this was the only way to obtain Nespresso coffee capsules for use in Nespresso machines, making switching costs to an alternative extremely high.

5. New revenue streams. Separated machine revenue (one-off purchase) from pod revenue (recurring purchase).

6. Key resources. While the logistics were different from those of the traditional granulated coffee markets, they could use their strengths – for example, relationships with distributors and coffee suppliers, well-developed scales of production and distribution, extraordinary marketing capability and branding (as the largest food company globally). Additionally, the entire system was protected by patents (which initially prevented fast followers or cheap imitations).

7. Key activities. They were well versed in marketing and branding, as well as producing the coffee pods, but the B2C direct infrastructure was new (boutiques, salons, online, call centres and mail order for Nespresso Club activities, etc.).

8. New strategic partnerships. Outsourced machine manufacture to a third party (Delonghi).

9. Cost structure. Costs associated with distribution and sales, marketing and manufacturing were all familiar territory for Nespresso.

Developing a Business Strategy for Your Business-

Below are Business Formulation Queries you need to answer.

1. Where are we now?
2. Where will we compete?
3. How will we compete?
4. How will we win?

It can be difficult to be strategic, and executives often dread coming up with new strategic ideas. So, how can you become more strategic in your thinking?

Seven Characteristics of a Strategic Thinking Perspective

1. Get to the heart of the matter. See the relationship between key elements of a problem and look at things from a different perspective.

2. Search for something unusual or different by suspending strongly held assumptions. Resist the urge to let a decision dictate or forecast a future decision (this is the opposite of thinking that cutting losses early is too costly).

3. Focus on value creation and challenge assumptions around existing value propositions, so that when strategic plans are eventually developed, they target these opportunities.

4. Be able to determine the fundamental drivers of a business and challenge conventional thinking about them.

5. Get buy-in and support by engendering a collaborative approach to uncovering new opportunities.

6. Make connections between seemingly unrelated details and manage the dynamic tension between conflicting opportunities. Articulate how they could be addressed in concrete terms.

7. Be focused on the future and have an awareness of what has not yet taken shape. This is often considered having foresight.

LEAPING IN TOO FAST – THE BIGGEST PITFALL

[b]Objective: [/b]To learn how to avoid and solve the problems that arise when discussing an initial new product strategy.

CONCEPT
Many businesses spend a lot of time building things that people don’t want or need.

Has this ever happened to you or someone you know? You may have been involved in a high-profile initiative or product that failed just as it reached customers, or maybe your product idea got lost in a confusing brainstorming discussion before it even developed.

The first tell-tale sign that you may be on this track is the initial conversation about the new business idea. It is the meeting where people jump straight to executing the business model – like exclusively focusing on pricing a product (monetising the offer) or costing (infrastructure) before the idea has been discussed from a customer and stakeholder value creation standpoint.

It can be difficult to draw the conversation back to where it needs to be.

METHOD
It is really important to ultimately test your proposed new business ideas on real potential customers, to understand if they have a need for it and determine whether you are solving an actual customer problem. Even at the initial idea stage, however, productive brainstorming can map out a basic process surrounding a potential business model for your new idea to see whether it is realistic to start developing a product or service around it. This can assist implementation, as you are more focused on the critical information required to make your new product or service a success.

To avoid having the conversation about a new business idea derailed, try asking, or seek answers from your general discussion to, the following questions:

1. What is the customer problem that you are trying to solve?[/b]
Customers care about whether you are helping them solve their problem (need, required outcome or job to be done) with your product or service more effectively than the current alternatives. They don’t necessarily care about your solution – no matter how many features you are planning to include. Think about benefits, not product features.

[b]2. Are they currently paying for an alternative to your proposed product?
If they are currently paying for an alternative solution, then it is more likely that they have a real problem to be solved. If not, the chances of your business idea succeeding will look slim.

3. What is the distinctive value proposition for the purchaser of your new product that would make them choose your product over the next best alternative?
[/b]Or, to put it another way, how will this product or service solve their problem (need, required outcome or job to be done) more effectively than the alternatives already in the market? What are the current alternatives in the market? How big is the potential market for your assumed customer? How can you get some initial data to support this assumption of market potential?

[b]4. How will this product or service be delivered to customers and in which manner?
Here you are trying to understand the choice of sales channel and how customer interactions will take place. Will you need other strategic partners to be involved? There will be cost implications for your choices, so keep track of realistic options.

5. What are the combinations of capabilities, assets and resources we require?
If we don’t own these assets, how will we gain access to them? Is this something we have done before? Do we have the systems, processes, people and culture that could support this new product or service idea?

6. What is the profit model of this proposed product?
This is getting to cover areas such as the type of revenue that a particular customer segment is prepared to pay for an associated value proposition from your proposed product. For example, will pricing be one-off purchase, subscription, single-use, or freemium based? What are the key costs associated with producing, delivering, marketing and sustaining this product or service? Will the value that we can obtain over the period that the customer is with us be greater than the cost of acquiring them in the first place?

7. Taken all together, should we make this product or service?
Given all the hypotheses or assumptions that we have made above, what are the riskiest parts of the business model that we need to test first? Is it potentially profitable, scalable and repeatable? How will we test the answers to these questions?

Case Study – Segway – The Importance of Learning About Your Customers’ Needs

The Segway personal transporter (2001) is a two-wheeled, self-balancing electric vehicle invented by Dean Kamen. It was one of the most hyped technological products in decades, but flopped on release. It failed to gain market acceptance as there was no clear customer need for it (people found walking perfectly acceptable and healthy and were in no need of a very expensive substitute). Put simply, it didn’t solve a relevant problem for consumers. Without a customer need, there were no clear target markets.

It turned out to be more of an invention with patent protection than a product innovation, and part of the problem was that there was no customer feedback involved in its development. The perception was that it was a foolish, expensive scooter – not the high-tech, environmentally friendly and ‘cool’ personal transport alternative that the inventor assumed it to be.

Thankfully, more than a decade later Segway’s self-balancing battery technology has been used in other vehicles and applications. Also, Segway eventually discovered the key problems they could solve for their customers – for example, to help sightseeing tourists cover more territory and reduce fatigue from walking distances; to help less able-bodied people move around more freely; and to achieve the greater speed required by law enforcement officers at large stadiums.

Understanding A Business Model

A business model is, at its core, a conceptual representation of a whole business, not just its financial elements. It describes a system of how the strategy of the organisation and its business components fit together to make a profit. It covers non-traditional items that would not usually be analysed in a strategy review (which typically defines the company’s market and customers and determines a value proposition) and also includes considerations around infrastructure, core capabilities and finance.

It demonstrates the logic of the business architecture, and provides data and other evidence on how a business creates and delivers value to customers. It also details costs and revenues in delivering that value. A business model is a more broad description than a conventional business plan.

So, the essence of a business model is the way in which it delivers value to customers, attracts them to pay for that value (a so-called ‘unit of business’) and converts those payments into profit. We will base our business model analysis on a tool called the Business Model Canvas, which was created by Alexander Osterwalder.

Very large corporations globally (such as GE, Nestlé and Procter & Gamble) use the Canvas to manage their strategy across their portfolios of business models, create new growth opportunities, or improve their existing business configuration. Start-ups use the Canvas when they are searching for a product to commercialise their idea or concept for a new business.

Finally, any business model can be summarised further into four key areas: customer, offer (the product or service and associated value proposition), infrastructure and finance.

We usually are requested to make plastic prototypes with highlight effect, which requires master worker with rich experience in subsequent processing in a high level. In order to improve the quality of each prototype, the master in KAIAO, one of the top rapid prototyping companies in China will use at least three kinds of sandpaper to process on the prototype model surface until it’s polished. The more smooth it is polished, the higher the brightness.

HOW CAN STAKEHOLDERS VALUES AFFECT AN ORGANISATION’s STRATEGY

click here for the complete details https://www.nigerianpricing.com.ng/how-can-stakeholders-values-affect-an-organisations-strategy/

Good post! In fact, I'm now more and more studying the subscription based model, which is so popular and works great for businesses large and small. I think that it has its drawbacks, but the advantages are just great