6 elements of the business model

as a Product Manager , we are designing a product, we need to know his business model, what is the business model? The so-called business model is essentially a transaction structure between stakeholders , which consists of 6 major elements, which are described in detail below.

As the saying goes: everything starts hard.

a product, from 0 to 1 of the process is really frustrating. The root of this toss-up is in the final analysis the need for mischief.

Product managers through market research, industry analysis, to tap the market demand. But how to design a series of corresponding business models around satisfying this demand.

And what is it about the business model?

I think as a product manager, the first theory of knowledge should be it. Because it supports the whole product design and planning, determines how far a product can go.

What is a business model?

There is no standard answer to this question, and there will be a lot of answers to this question in the online search, and there are many famous economist theories.

And in the course of my study, I feel that there is a theory, I personally agree with the answer to this question. This theoretical analysis was presented by two professors from Tsinghua University, and in my opinion, they define precisely the nature of the business model.

definition of business model:

The business model is essentially a transaction structure between stakeholders.

There are two keywords in the definition, one is the stakeholder and the other is the trading structure.

stakeholders, divided into external and internal.

External may have: operators (that is, the enterprise itself), the upstream and downstream enterprises, partners, suppliers, agents, distributors, consumers and so on, simply said that the role of the supply chain;

Internal may include: Chairman, manager, employee, partner, etc.

The structure of the transaction refers to:

A method or approach by which various stakeholders are involved in the exchange of trading activities.

As we mentioned above, the need to dig out (i.e. , the pain point of the industry or the user/ consumer) is a problem that the user or the market needs to face.

What stakeholders do they need to solve these problems? What is the solution? How to meet demand? What is the method and path of getting paid between them after satisfying the requirements? These are some of the finer questions that business models need to answer.

And two professors, summed up these questions to summarize a set of systems.

In this routine, the business model system is divided into six major elements, including: positioning, business system, key resource ability, profit model, free cash flow structure and enterprise value.

as shown:

Let's use a word to concatenate the six elements together, so it's easy to understand:

your " " What is it?" What's the building? " business system " " key resource capabilities " " profit mode " " free cash flow structure " " enterprise value "

Let's take a brief look at the 6 elements below.

I. Definition of positioning

Positioning is the way enterprises meet the needs of users.

Note that this sentence, the point is " Way " two words. The positioning in this routine is focused on the positioning of the business model .

Positioning, in fact, is to think and answer three questions:

· What is the business of a business?

· who is the target customer?

· What characteristics of the product or service is provided?

so I summed up: positioning can be split into strategic positioning, marketing positioning and business model positioning, business positioning, customer positioning and product positioning.

Enterprises to restructure their business according to the needs of the target customers , by developing a good method provide a specific product or service to the target user.

Second, the business system

A collection of business activities between an enterprise and an internal and external stakeholder.

Business activities consist of workflow, information flow, physical flow and capital flow.

iii. key resource capabilities

Refers to the relative importance of the resources and capabilities needed to make the business model run.

Note There are two key points: one is the resource, the other is the ability.

There are many resources and abilities of the enterprise, and different classifications can be summed up a lot.

resources include: property, ability, competitiveness, organizational procedures, corporate identity, information, knowledge, etc.

The main resources of enterprises are the following categories: financial resources, physical resources, human resources, information, intangible resources, customer relations, corporate network (Relationship network), strategic real estate.

capacity includes: organization ability, material ability, transaction ability, knowledge ability.

Four, profit model

Profit model mainly refers to the profit source and way of the enterprise.

The mode of profit is as follows: fixed income, surplus income, divided into income.

This is also easy to understand:

Way One:

A shopping mall, like rent is a fixed income for real estate developers, and the merchant removes rents for utilities such as the rest for its residual income. If the two cooperate to engage in promotional activities, then divide.

Way Two:

· entry fee (eligibility for consumption): such as membership fees, subscription fees, buffets, one-time sales.

· tolls (number of purchases): such as search ads by the number of clicks, the number of fitness cards charged, coin laundry.

· parking fee (length of consumption): If online games are charged on time, mobile phone calls on time

· fuel Charge (consumption value): Price by cost, online game sales props, piece positioning price

· sharing fee (value creation): Join fee, investment fund

v. Free cash flow structure

The cash flow structure is the manifestation of the cash inflow and outflow of the enterprise in the time series.

What kind of business model has a capital flow structure.

You can be a one-time investment, one-time income, or disposable investment, multi-sex income.

Such as:

· The bank makes installment mortgage for the buyers. Multiple inputs, multi-year cash inflows;

· the cash flow structure of manufacturing enterprises, utilities, infrastructure projects is often the initial large-scale investment, follow-up small-scale maintenance input, decades more stable or even incremental franchise income.

Most manufacturing enterprises, construction enterprises business model is usually the first production, after sales, to earn product spreads. Its cash flow structure is usually expressed as " pre-production, after-sales back payment ", one-time investment one-timeincome.

If the lack of bargaining status in the industrial chain, often form a purchase must be paid in cash, sales are formed accounts receivable, the company's slow return, cash flow pressure.

vi. value of the Enterprise

The investment value of the enterprise is the discounted value of the free cash flow that the enterprise expects to generate in the future.

The above, is the six main elements of this routine to define its definition. Wei Zhu business model model, defines the six elements of business model, it includes: positioning, business system, key resource ability, profit model, free cash flow structure and enterprise value. They influence each other and form an organic business model.

Source: Everyone is a product manager

6 elements of the business model