Successful business models all follow five basic rules: entering the high-profit zone, eliminating "fatal shortcomings", occupying the commanding heights of the industry, building competitive barriers, and surpassing user value, and most of those failed business models deviate from the above rules in one or more aspects.
This article combines the cases of alibaba, Nokia, Kodak, ITAT and many other well-known enterprises, and uses the combination of theory and practice to explain the importance of business model to the rise and fall of a company.
Enter the high profit zone
A successful business model must enter the high-profit zone, and continue to operate there, to solve the pain of customers, to create irreplaceable value for customers at the same time, to achieve the value of the enterprise.
Figuratively speaking, profit zones are like the soil on which business models depend. Profit zones directly affect the decisions of the industry, product and business links that the enterprise is engaged in, and these decisions determine the profit space and development space of the enterprise.
What industry the enterprise chooses, or which link in the industry value chain to operate, is essentially to find the most suitable and profitable development space for the business model.
High-profit zones are often hidden in areas where industrial bottlenecks are also intersections of industrial development trends. The reason why Alibaba, Taobao, Alipay, Ant Financial and other enterprises have entered the high-profit zone is that on the one hand, they have found the bottleneck problem that restricts the development of the industry, and at the same time, they have found that solving this problem is the premise of the healthy development of the industry and the inevitable trend of industrial development.
So when a business finds and goes into a high-profit zone, where it continues to operate, it's the first law of business model success, which I call the "high-profit zone rule."
Eliminate the "fatal short board"
The second rule of business model success is to build a complete business model closed loop and eliminate the "fatal short board" in the business model gene, which I call the "closed loop law" or "fatal short board law".
If the health of each gene of the business model is evaluated on a five-point scale, then each gene of a successful business model must reach more than three points, that is, above the industry average; if a gene is lower than the industry average, this gene becomes the "fatal shortcoming" of the business model.
The "fatal short board" of the business model not only seriously affects the ability of the business model to create value, becoming the bottleneck gene in the closed loop of the business model, but also in serious cases, the entire enterprise may become the martyrdom of the "fatal short board" gene.
Nokia was once the boss of the mobile phone industry, and its business model has multiple genes occupying the commanding heights of the industry and has a strong competitive advantage. However, the fundamental reason why this giant in the field of mobile communications collapsed in just a few years is that some genes of its business model have "fatal shortcomings".
Nokia's "fatal shortcomings" are two, one is the product gene, and the other is the operator gene. With the development of mobile Internet, the function of mobile phones as telephones is less and less important, and even becomes a side function of mobile multimedia terminals, and the Symbian operating system used by Nokia mobile phones, its fatal weakness lies precisely in the lack of multimedia functions, such an operating system, obviously can not meet the needs of consumers for smart phone multimedia functions, product function defects, that is, Symbian operating system has become Nokia's "fatal board".
Another "fatal flaw" in Nokia is its operator, former CEO Elop. When everyone was looking forward to Nokia's launch of Android mobile phones, Elop actually insisted on using its old owner Microsoft's immature WP7 operating system, so that Nokia once again missed a good opportunity to win back a round, and finally Nokia was powerless to return to heaven and was sold to Microsoft, and people suspected that Elop was Microsoft's inner ghost.
It can be seen that if the business model is to be sustainedly successful, each of its genes cannot have a "fatal shortcoming".
Occupy the commanding heights of the industry
According to the traditional management theory, what is the criterion for measuring the success of an enterprise? Is it market share, market leadership, profit scale and profit margin? Or is it brand awareness and reputation, corporate value, or an attractive corporate culture?
Both and neither.
Because these indicators are all outcome indicators.
That is to say, whether you are doing it right or not, whether it is good or not is difficult to predict before the results are produced, such indicators may have some value for evaluating the effectiveness of enterprise operation and management, but it is useless for how to guide enterprises to design, innovate and improve their business models, and may even be counterproductive. When it is not clear what kind of business model companies need to build, the pursuit of product market share, profit margin, management efficiency, brand reputation and popularity will go astray.
Nokia mobile phones, Kodak Film and Sony Electronics, which were once very successful companies, are pursuing these indicators, but they are also in the pursuit of these indicators, which shows that these indicators can not be used as a measure of the quality of business models.
Compared with those that fail, one of the most prominent features of successful business models is to gain an absolute advantage or maintain a leading position in one or more genes, and occupy the commanding heights of the industry in one or more fields. This is the third law of business model success, also known as the "commanding heights rule".
Build barriers to competition
Competitive barriers are indispensable genes of business models, and the lack of strong competitive barriers is the root cause of many enterprises' difficulties after a short period of glory, and the failure of Fuyunquan is a typical case of the lack of competitive barriers.
Fuyunquan was once the first wild jujube juice brand in the Beijing market. At one time, it occupied more than 50% of the market share in the Beijing market and once created a myth of 200,000 yuan of daily sales.
Lucky Spring's success is due to the fact that it built a sound business model in the early days of its listing. It cut into the blank of consumer demand, consumer demand is quite strong; advertising is distinctive, with the folk minor style of "wild sour dates dripping slippery circle, Fuyun Spring pure natural" advertising words are popular among the population, household names; the distribution channels in the early stage of listing are also doing well, there is a relatively high shelf rate; in terms of operation, Fuyun Spring strictly follows the process of soaking the jujube juice through 100 ° C drinking water. This shows that Fuyunquan occupies many commanding heights such as value carrier, value transmission, and value creation.
However, the glory of Fuyunquan is only a flash in the pan, and in less than two years, the company has suffered losses for 11 consecutive months, with a total loss of 5 million yuan and is on the verge of bankruptcy. There are many reasons for the difficulties of Fuyunquan, there are reasons for the high price of products that affect sales, and there are channel reasons for the shrinking of distribution channels due to the meager profits of distributors, but the most fundamental reason is that Fuyunquan has not established strong competitive barriers under the siege of counterfeit and shoddy products.
Industry standards should have been the strongest competitive barrier for Fortune Springs, but Lucky Springs did not take up the weapon of industry standards and protected itself with the help of the power of the media and industry supervision. "Brand" is also a weapon that Fuyun Spring can use, Fuyun Spring could have turned the popularity of the brand into the reputation of the product, so as to create a brand image of "truly pure natural, additive-free, and trustworthy for consumers". However, these competitive barriers have not been established, resulting in a dilemma under the siege of counterfeit and shoddy products.
Business models die out without the protection of competitive barriers, and similarly, if they stand out in terms of competitive barriers, they can quickly drive the success of business models.
It can be seen that when designing business models, if you ignore the design of value protection genes - competitive barriers, it is very difficult to design a good business model and achieve rapid success.
Exceed user value
A successful business model must not only create value for users, but also must realize the harmonious unity of user value, social value and enterprise value, which is the fifth law of business model success.
The importance of user value is obvious, but many companies blindly pursue the uniqueness of the business model and ignore or even ignore the user value of the business model, resulting in the business model falling into trouble.
Since 2007, ITAT has been designed with a nearly "perfect" business model, which has been sought after by the business community, academia and investors, and has received up to $120 million in venture capital, which has made many clothing companies envious. However, the user value that must be highly valued as a sustainable and healthy business model has been forgotten by ITAT.
Clothing creates nothing more than the four values of identity, fashion, affordability and convenience for users. In contrast, the clothing operated by ITAT has low brand recognition and is difficult to meet the customer's value demand for identity; the positioning of its business model is to a greater extent to solve the inventory problem of the manufacturer, so the product fashion is greatly discounted; the channel design and location of ITAT are not at all from the convenience of the target customer, on the contrary, most of them are inconvenient transportation, the flow of people is not large, the market is not very prosperous and difficult to rent the shopping mall, the convenience value of shopping can not be talked about at all; the entry enterprise in order to reduce the risk of insufficient popularity, It is inevitable to increase the price of the price, making it difficult for customers to meet their demand for affordability. ItAT sells goods that cannot even be achieved by ordinary people's pursuit of identity, fashion, affordability and convenience, and it is not surprising that its door is snubbed.
Business models that cannot create value for users, no matter how sought after by capital, will sooner or later be short-lived and spurned by society. Sure enough, ITAT's two listing hearings were rejected, and this once popular business model was finally put to rest.
Therefore, realizing the economic value of the business model is the end of the business model design. This requires that a good business model must have the ability to generate profits, not just play with concepts and draw cakes for investors.