BizNet May 2017: Business Modelling for the Rest of Us
This article was contributed by Ryan Foster – Business Reporter, pictured left.
On Monday afternoon the NTBT hosted a presentation by Lenz Gschwendtner titled “Business Modelling for the Rest of Us” at NMIT. Lenz has helped in the founding of hundreds of businesses and currently runs several online companies including iwantmyname, a domain registry, and 0.ventures, a startup coaching venture.
Clarity & Adaptability
The presentation was begun with an outline of two primary components of any successful business model: Clarity and Adaptability. Clarity was defined as the ease of understanding all of the separate pieces of a business model which is essential to understanding how any business works. Adaptability is the ability of a business model to change according to market conditions and technological innovations.
Business Model Canvas
To demonstrate, Lenz provided an explanation of the Business Model Canvas created by Alexander Osterwalder. The Canvas is a simple, one page summary that outlines the nine basic components of any business model on a single page. The purpose of the system is two-fold. The first is to allow simplification and ease of understanding, i.e: to provide clarity. The second is to enable the viewer to alter one or more basic parts of the business as a form of brainstorming to either pivot an existing business or to potentially find a workable model for a new business. The overall purpose is generally to allow for fluid thought while still keeping the process within the constraints of a business mindset.
The presentation of the Business Model Canvas was followed by 2 examples of large multi-national businesses that have completely changed one or more of their business models: Nespresso, of Nestle’ and the German firm Preussag AG.
Nestle’ had been trying to sell their capsule based coffees for decades through traditional business channels before a new CEO, Jean-Paul Gaillard, rearranged the business model for the product. The first step was to identify the target market segment, in this case, those consumers with disposable income: the upper middle class. Upon isolating the target marked, Nestle’ realized that the product was not selling due to the perceived unattractiveness of the machines used to process the capsules. Once this was realized, Nestle’ licensed the production of the machines to other firms which were well known for their stylish home appliances. The company could then concentrate on marketing the primary product, the capsules, and sales took off.
Preussag AG had originally started as a mining corporation in the 1920s. As fossil fuel production in Europe became less profitable in the 1940s, they began to move into steel where they became a leader until the 1980s. Then, as steel production became less profitable, the company moved into logistics by acquiring Hapag-Lloyd in the 1990s and building it into a global leader in shipping. As the markets for shipping tightened, Preussag AG pivoted once more, this time into the tourism industry. Now the company is known as TUI and is the largest tourism operator globally. This example was given to demonstrate the need for adaptability in changing markets. Had the company remained in coal, steel, or logistics, it would likely not be as profitable as it is today, if it existed as all.
Lenz then conducted a group exercise using the Ostenwalder business model canvas to pivot a “typical” Nelson area café into a Starbucks franchise and to demonstrate the utility of the canvas in illuminating how a different approach to one area of business operations, in this case direct sales vs. franchising, can drastically alter the rest of the business in unexpected ways.
Business models should be fluid
The final takeaway from Lenz’s presentation is that business models should be fluid, especially in a world that is rapidly changing due to technological and artificial intelligence innovations. With the ability to adapt, any business should not only survive into the future, but retain the ability to grow and prosper.
As a final note for the evening, Sarah from NTBT and Lenz gave a promotion of local.foundation, a local group of business minded individuals who meet weekly to discuss anything business related including hacks, new ideas, and to share stories. The group typically meets on Wednesday at the Prince Albert Backpackers at 5:30pm.