incremental and iterative models
creation, delivery and value capture
Much is said about business models, however, little is said about how to create and evolve business models in practice. In this document we deal with this process, assuming that business modeling is an activity that involves a series of decisions to be taken to define such a business model.
For many specialists, this is an activity carried out a priori, before starting the business and that serves as a guide for all business actions going forward. But real life is very different: businesses are fluid, living organisms that need to adjust to context in time, all the time.
In strateegia we propose a set of essential questions to be continuously debated by the team of business people in such a way that the business modeling takes place in a continuum of deciding and acting, reprogramming the business model as it perceives the context, if adapts to it and often modifies it, depending on the innovative potential of the business.
people, business and benefits
A first big challenge for business modeling is creating these benefits. First of all, it is necessary to know the people to whom the business proposes to offer products and services. Although it seems obvious, many businesses have a distant view of these people and choose to infer, or in simpler language, guess, their expectations.
In the phygital context, we know more and more about people, the evolution of people, their desires and the context where this happens over time. Observing and understanding people’s behavior changes, especially from large databases, changes the ability of businesses to realize expectations and potentially create appropriate benefits in people’s time, space and scale.
Therefore, a good business model should start by knowing and understanding people to, from them and not the other way around, create benefits to be offered through the products and services of the business. But even if you start to create offers without knowing –in the slightest- who the people and their demands are. It won’t happen.
the benefits, the people and the business
Having defined the benefits [value] that we intend to deliver to people, it is necessary to model the resources, costs and partnerships necessary to ensure this delivery.
In business modeling, one of the essential questions to be answered is what are the resources [people, technologies, knowledge, equipment, services, etc.] needed to deliver the promised value.
Based on the necessary resources, it is still necessary to assess which of them will be internal to the business and which will be the result of partnerships with third parties. Identifying these partnerships, especially in the digital market, is a way to reduce risks, increase agility [depending on the choices] and optimize the delivery of value in the business’ products and services.
Finally, by knowing the necessary resources and defining the partnerships, it is possible to assess the costs that will be incurred to carry out the delivery. And note that the concept and reality of what we call “delivery” here is not just about getting the product to the customer [and being used or consumed], but much more than that.
It is always important to remember that you need to look at resources, partnerships and costs in the present, at the initial point of publication of products and services, and in the future, as products and services evolve, they scale.
the business, the benefits and the people
“What benefits [value] does the business capture from its products and services?” is the key business modeling question. Here it is always good to remember the popular claim that there is no such thing as a free lunch, someone is always paying the bill.
In the phygital context, we use an acronym that defines in three letters what needs to be articulated to model the capture of value in business: ARM [Attraction – Retention – Monetization] are not just the initials of the three highlighted words, but the sequence through which the value capture process takes place in the fig business.
The first effort to capture value in a phygital business is to understand and define strategies to attract people to your surroundings, even more specifically to your products and services. And the range of people to attract transcends customers and users.
But attracting people alone is not enough; after they are part of the business context, it is necessary to retain people and business modeling in the phygital context demands defining mechanisms to keep people connected, associated with the business.
It is only after having people connected to the context, products and services that businesses can monetize customers. In this case, it is always good to remember that there are countless forms of monetization in the phygital context, and it is necessary to identify in the relationship business, benefits and people, the most appropriate way[s] for this.
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This text was written by the professors Silvio Meira and André Neves.
[tds.company] is the home of strateegia, a theory of practice for strategic transformation, about which we wrote a long, illustrated sentence, which is available in pdf, at the link [http://bit.ly/TDSCsat]. Our strategic enablement work is done on a digital platform that can be tested for free at the link [http://strateegia.digital].