Seven powerful tools to help you build a competitive business model

Editor's note: This article is from Strategyzer, the Chinese version is compiled by Heaven Zhuhai Branch Rudder. in today's world, it has become increasingly difficult to differentiate this card from a competitor's long-term differentiation of products/services. But if you can design a business model that is better than your competitors, the situation is different. Here's how Stategyzer provides you with 7 ways to enhance your business model's competitiveness in crossing.

The only reason a business can survive is if there is a value proposition that a customer needs. But if you have just a good value proposition, it's just enough to get you out there and compete (far from being able to stand out from the competition ).

A strong business model often combines multiple business model mechanisms to enhance business competitiveness, and the use of good words can make your career unbreakable. Here are some of the 7 business model mechanisms that you'll bring to strengthen your business model.

1. Switching costs

This business model mechanism is mainly through a variety of means to improve your customer's switching costs, in my previous article, "Locking the customer's six strategies: teach you how to switch costs embedded in the business model" has done a detailed description, so here will not repeat, crossing you moved the article to read.

2. Recurrent income (recurring revenues)

Ask yourself, do you need a fresh effort to complete every business you've finalized? Or is this all a result of (automatic) follow-up marketing (follow-up sales) and revenue.

What you may not be aware of is that many of your purchases involve follow-up marketing. For example, when Amazon sells you a Kindle, it's clear that you'll soon be back with them to buy the content, product or ebook, which is the embodiment of follow-up marketing.

A more typical example of recurrent earnings is the subscription of newspapers and magazines. In today's software-based media industry, we can see that the current subscription model is moving from a previous sale of serial numbers through transactional sales (transactional sales) to a new way of subscribing to monthly or yearly subscription-based business models of recurring earnings.

A special part of this business model of recurrent revenue is the very impressive amount of subsequent sales or customer acquisition costs that the first business brings. In previous trading models, each new business required a new and costly cost of sales support.

If you're still in the business model of a lot of other businesses when you sneak up on recurring revenue, check out the examples of "Amazon Premium membership Services" and "Xiaomi" that we've analyzed in other previous articles.

3. First make money vs. pay first

Dell introduced this business model mechanism in the 90 's and revolutionized its application to PC production and sales. The previous practice was that PC makers would spend money on producing computers (which would result in large production costs), and then hand them over to the sellers and finally sell them to the end-users in the store. These computers will stay in these stores for a period of time, and as time goes by, these computers will slowly depreciate. So in this business model, PC makers are spending a lot of money on a long period of time before they get a penny in their pockets.

Dell has revolutionized the old business model by introducing a "make money first" business model mechanism. The idea is to take orders directly from the end user and to assemble and ship the computer as soon as the customer pays. They continuously optimize the production practice of "zero inventory" to ensure a smooth transition between receipt and delivery. Compared to the traditional business model above, Dell does not need to throw a large sum of money into computer production before making any money, while avoiding the depreciation of large inventories.

4. Change the cost structure of the game rules

This is the success of Nike invented the "shuttle (Flyknit)" Technology for sneakers. Before the shuttle appeared, sweatshops needed to sew 30-40 pieces of material together to make a pair of running shoes, a labor-intensive and costly task.

Then Nike invented the process now known as the "subtle engineering (Micro-level Precision engineering)". In this process, one software instructs a knitting machine to knit a shoe's upper with just one piece of material. While this new technology minimizes labor costs, it can also lead to a result: because it is no longer a labor-intensive task and no longer needs to be handed over to sweatshops, these tasks can be handed over to factories closer to the sales market, resulting in more cost savings. What is the final result? As a result, Nike's Flyknit sneakers are less expensive and lighter and better than other rivals.

Another example is India'sBharti Airtel, the first in the world to outsource the entire telecoms network, turning the cost of building and maintaining a huge network infrastructure into variable costs. Skype, in the same industry, is revolutionizing the market by offering completely free VoIP, because Skype is a fully software-based OTT business model that does not have to bear the cost of the telephone network at all.

5. Let the customer help you (free) to work

During the 50 's and 60 's,Tupperwareturned housewives, their target customers, into their direct sales armies. This well-known kitchenware company uses this group of users for word-of-mouth marketing, and allows these customers to sell their products to other housewives at the "Tupperware Party" campaign they are advocating. With this strategy, Tupperware has dramatically boosted their turnover by not paying for the extra marketing staff at all.

Facebook's business model is more reliant on content generated by its users than any other factor. On this level, in fact, Facebook is a super workforce with more than 1 billion free employees to publish information, images, and other content. Without this free labor, Facebook would be worthless.

Another example of a free service for customers is IKEA. Customers (more or less because of passion ) buy back parts from them and assemble them themselves, and assembling the task should be something Ikea has to offer.

Or take credit card companies for example. In their business model, businesses and buyers actually do most of the work for them, and the credit card companies themselves only need to run their trading platforms.

6. Extensibility

Those who have already considered their products in their business models in the first place have a huge advantage over enterprises that are scalable to a large number of users/customers, and those that need to adjust frequently because of changes in user volume.

Take Uber for example, an application platform that connects taxi drivers and passengers together. Regardless of whether the number of customers using this platform is 5,000 or 50,000,uber, there is no need to reset any of the business models. Even more surprisingly, the more taxi drivers and passengers use their platforms, the more attractive the Uber value proposition is because both the passenger and the driver have more options.

So the digital platform is, of course, one of the most scalable business models. WhatsApp, for example, can serve more than 400 million users with only 60 employees before it sells to Facebook for $ more than 10 billion.

Of course, the business model of a solid business can also become more scalable. For example, the food and beverage industry's scalability is really bad until McDonald's has significantly increased its scalability by joining the store. In general, licensing is a highly scalable business model, and it can be applied to a variety of business models.

7. Barriers to competition

This last point is the culmination of these mechanisms, which integrate all of these business model mechanisms mentioned above, so that you can protect yourself against the threats of your competitors.

Apple, for example, is the world's top smartphone maker, but its products are not masks. For example, you might think that other smartphones on the market are better than the smartphones offered by Apple. But Apple's business model has its own deep moat, and it is hard for other rivals to cross the chasm to pull it off the altar.

Apple's AppStore, for example, connects countless iOS users with countless software developers, providing countless apps for users to search for and use. Apple's moat is so deep, not that its technology is so hard to surpass, but that its ecosystem is hard to replicate. Even if you have the best technology, you can hardly share under Apple's nose. Today, only Google with its Android operating system, can be abruptly outside the Apple's moat to kill a crowd, and create a stand-alone confrontation of the ecological system to contend with.

Finally, we invite you to put your business model on the table, to conduct a careful review. You can do this, as long as your business model satisfies one of the above mentioned business model mechanisms, you can add a point to your business model and eventually you will be able to evaluate your business model's competitive health well.

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Seven powerful tools to help you build a competitive business model