Donald Mitchell

Craft an Optimal Business Model for Profitable Growth and Success

Most organizations fail to have a good business model. As a result, they have limited opportunity to grow and profit. This article looks as the minimum case for a good business model and how to create an optimal one.

A good and effective business model provides benefits to all of its stakeholders more effectively than existing competitors or new entrants can. Here are six frequently used ways to provide a greater array and volume of stakeholder benefits:

1. Help your customers add customers faster than their competitors.

2. Stimulate industry growth through providing more benefits and fewer drawbacks at the current price level.

3. Reprice your offerings to encourage using more of them.

4. Reduce the resources needed to provide and use these offerings.

5. Reinvent the resources generated by your business model to provide even more benefits and fewer drawbacks in the future, faster than your competitors can.

6. Fairly share excess resources with the stakeholders who have supported and provided the business models success in a predictable way, so that no other organization can offer these stakeholders as much benefit now or in the future.

But you shouldn't stop there. Let's consider why.

For new products, becoming just good enough can be the enemy of greatness. The pressure to get to market will often cause a new product to provide fewer benefits than it might have. If getting to market is the key issue, providing fewer initial benefits is a good decision.

You can always put more benefits into a "new, improved" version down the road. But, if you lose sight of what should be in that new product as soon as possible, someone else will make the improvements and take some of your customers away.

Business models operate in much the same way. Even a small lead can create substantial rewards for getting to market sooner. Yet, without a clear sense of "what comes next?" what comes next will be "nothing," or worse--a drawback.

In developing optimal business models to help your business reach its fullest potential, my research shows there are another four elements to add to the basics required for a good business model:

1. Your business model opens new windows of opportunity for you, while closing those and other important windows for current and potential competitors.

2. You find ways to provide more helpful benefits for more types of stakeholders with each round of business model improvement.

3. You serve stakeholders who would normally not be able to meet your minimum standards to become lenders, shareholders, employees, suppliers, partners, or customers.

4. Your business model improvements expand your capability to make more types of business model innovations more rapidly in the future.

Good examples of optimal business models can be found by studying companies like Business Objects, Ecolab, Iron Mountain, and Paychex.

Copyright 2008 Donald W. Mitchell, All Rights Reserved

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