6 min read
The opinions expressed by collaborators are personal.
The most common misperception of entrepreneurship is that what makes a business successful is the idea of a unique product: that if you have that great idea that no one else has had before, a type of product that no one has created, then you can win lots of money and the world is at your feet. ship as a great idea is a good story, but it is only as good as a story, because the story is fantasy. And if you trust fantasy rather than reality, chances are you will fail.
The truth is that what makes a product great is not the idea of it or what it can do, but the way it is positioned . Business positioning is not about the competitive search for a niche, like Michael Porter's Five Forces or the VRIO framework . It is about finding the right business model.
A business model describes the rational way in which the company creates, delivers and captures value. Put simply, it is the way a business makes money. This includes figuring out what the product is, who your end customer is, and what the business value proposition is. You have to create an engaging story, but you also need the numbers to support that this story makes sense in financial terms.
I have found it very helpful to think of the business model in terms of the product, the customer, and the value. It is an iterative thinking process that should lead you to decipher the product you can offer, what is the best customer base for this product, and how much they are going to value it (which means you have to figure out what they value about the product). All this is interrelated, but depends on one another, so it is practically impossible to decipher these three points without going back to the first, and then to the second, and then deciphering the third again. But is it worth it.
Having a great business model means that these three points are well aligned. You know the product you are going to offer, which fits almost perfectly with the market segment you identified because these are the people who value the product. And your product offers exactly what they want, nothing more and nothing less. This means that you have a good chance of succeeding. But this is almost certain to fail if you don't have a good business model, or a well-thought-out one.
The choice should be obvious, because there really is no choice: You need to have a good business model. Here we leave you four questions that you need to solve to improve yours.
1. Who can I serve?
This doesn't sound like an easy question to someone who wants to be their own boss, but it should be. The real boss in your startup is your client, because they are the ones who decide if they buy from you or not. The first question after considering the option of starting a business should be: Who can I best serve? Regardless of what your product is, where you are, or if you can offer 24/7 service, what type of person (market segment) benefits from what you can do?
2. How can I serve you?
You may have a product, or even an entire business, in mind, but erase that idea from your head because it will not work unless you put your customer first and discover how you can serve them. This means designing and developing a product that corresponds exactly to what they would value having. And or overdo it, offering more features or tools does not mean having more value. Focus on the feature or tool that is most valued.
3. What is the value?
Value is not a monetary amount, but the satisfaction that someone feels when using your product. Yes, this implies that the value is merely subjective. It is as it is. The fact that we like a product has nothing to do with the way in which it is produced or the materials with which it is made, but with the experience of using it. It all has to do with what we experience when using it, and we buy something hoping to live that experience. And most importantly, we are willing to pay a price based on that experience . The better the experience, the higher the price can be.
4. Are you doing it for them?
This is probably the most difficult question because it requires you to seriously analyze what is not but could be while imagining yourself in someone else's shoes. Unless you already know who your customer is and the type of product they might value, there is no way to answer this question. Sometimes seemingly small tweaks can create great customer value, like when Netflix went from shipping DVDs to streaming online, or when Volvo thought customers would rather subscribe to a car than buy it .
A business model has to do with understanding that your business is your customers, and that you must personalize it for them. To do so, you must be who they are and what they may want. What are your dreams? What problems do they have? What can you do to make their lives easier? It's not about meeting them halfway, but about giving them an experience they truly value, one they can't resist. And it is the job of the entrepreneur to figure out what that experience would be.