In the Kinesis Innovation program, we have helped multiple companies fine-tune their business models. This type of development aids businesses in generating value for their customers and converting that value into profits. Additionally, we have seen the significance of ongoing innovation and the impact of leadership in promoting innovation within an organization.
When discussing business models, the first thing that comes to mind is the Business Model Canvas, and its nine building blocks. BMC is a powerful tool, but our experience in the Kinesis-program has shown that companies’ business models can be even more straightforward, if needed.
An even simpler business model helps the company to understand the basic principles behind the business model design. When the key components of the business model are identified, the discussion around finding new opportunities and product or service concepts gets easier within the company.
The four key elements of any business model
A successful business model can be divided into four key elements that work harmoniously to deliver value to customers, differentiate from competitors, and drive profitability. Understanding and optimizing these components is crucial for businesses’ lasting success and growth.
Key components of business models
- Value Proposition pertains to the distinct offerings a company delivers to its clients, setting it apart from its rivals. It emphasizes the specific advantages and solutions customers can anticipate from the organization’s products or services.
- Resources and Processes (Value Creation): This component encompasses the resources (such as materials, staff, and technology) and processes (like manufacturing, marketing, and sales) that a business employs to produce value for its customers.
- Customer Needs: Recognizing the unique needs and demands of the target market is essential for businesses to create products or services that effectively address these requirements.
- Revenue Generation (Value Capture): The business model must detail how the organization will produce revenue and profit from the value generated for its customers. This involves the pricing strategy, distribution channels, and cost structure.
The four key components in practice
Let’s take an electric scooter-sharing company’s core business model as an example. The value proposition of the business is to offer an eco-friendly, affordable, and convenient transportation solution for urban dwellers. Customers can quickly locate, unlock, and rent electric scooters for short distances through a mobile app.
The company’s resources include a fleet of electric scooters, charging infrastructure, local maintenance teams, and the mobile app. The company partners with local businesses for charging and parking stations.
The electric scooter-sharing company targets environmentally conscious urban dwellers who seek convenient and affordable transportation alternatives for short distances. They address the need for a flexible, on-demand mobility solution that helps them avoid traffic, save time, and reduce their environmental impact.
Revenue is generated through a pay-per-minute pricing model with an initial unlocking fee. The company also offers subscription plans for frequent users, including a fixed number of monthly rides.
Understand and develop your business model
Businesses must comprehend and refine their business model to create and capture value effectively. Companies should concentrate not only on technology but also on the ongoing innovation of future business models. Leadership is instrumental in nurturing an environment that supports innovation and acknowledges failure as a part of the learning journey.
By analyzing business models from various perspectives, companies can pinpoint areas for enhancement and devise strategies to guarantee long-term success.
Companies participating in the Kinesis program, funded by the Häme ELY Centre and the European Social Fund, develop their innovation activities and move towards their full potential with the support of Haaga-Helia’s experienced experts.