Analyze Your Business Model

Aim for … Breakthrough Growth Audio Book 212 Module B5B 1 Krishnan S. Rajan Analyze Your Business Model Audio Book 212

CoGrow Systems, Inc. offers distinctive solutions for growing small businesses into smart businesses. Its MAESTRO Business Academy educates and counsels business owners to orchestrate their business like a MAESTRO. Its Innovation Division guides the business owners in their industry and technology research, innovation and growth. Krishnan S. Rajan is President of CoGrow Systems, Inc. With advanced education in Management and Computer Science, he has wide experience working with large and small businesses in their business transformation and growth. © 2003-7 Unauthorized copying or distribution is not permitted www.cogrow.com e-mail: rajan@cogrow.com ®

Develop your Research & Development Competencies. Formalize your Research & Development Processes. Implement a System for Seeking Opportunities for Growth.

Learn our distinctive

methodologies for:

Critical Issues Resolution.

Ongoing Research and

Innovation.

Seeking Opportunities for

Growth.

Establish ongoing Research

& Innovation as your core

competency and strategy.

Develop new products and

processes using your internal

resources; or through out-

sourcing, where appropriate.

Create measurements to

manage your Research &

Development functions.

Identify emerging

opportunities & threats,

e.g., technologies and

competition.

Develop and leverage

the core strengths of

your business for more

profit and wealth.

Create new business

models and strategic

plans to achieve your

business vision.

We guide you in your … Research, Innovation & Growth CoGrow/Innovation ® Solutions for a smart business.

Breakthrough Growth Module B.5.B Part 1 Analyze Your Business Model Krishnan S. Rajan Krisalis ™ ®

In order to grow anything consciously, you need to clearly understand the concepts of its inherent nature and structure … and the forces that control and influence its behavior. But, understanding or interpreting things is not universal. Everyone interprets things in a limited way based on their individuality. 2

You may have heard of the six blind men and an elephant? 3 Wall – Spear – Snake – Tree – Fan - Rope

In order to grow your business consciously, first, you need to have a clear definition of how a business is structured, called a Business Model. There are many schools of thought in defining a Business Model, similar to the earlier story! Now, you will learn our distinctive and clear way of defining a Business Model. 4

You need to view your Business from many sides: Rational or operational aspects of your business Economic or financials of your business Emotional or feelings about your business. Each view has a number of components, e.g., Economic View has investment, profit, etc. 5

Our distinctive Business Model will empower you to visualize your business systemically … understanding your business components and the inter-connection between the components. You can aim for distinctiveness in making use of the components and exploit opportunities. That will give you a competitive edge! That’s growing strategically! 6

The systemic view of Business Model empowers you to strategically visualize your business growth. 7 Rational View 1 Spiritual Base Economic View 2 Emotional View 3

Thus, our distinctive Prismatic Business Model is: - Systemic, - Strategic, and - Spirituality-based. 8

(Line of Business) Lines of Business of an Organization A Business Organization may consist of one or more Lines of Businesses (Profit Centers). Each Line of Business has its own Business Model. 9 Internal Forces’ Strengths & Weaknesses External Forces’ Opportunities & Threats

We can consider a Business as a System of certain interconnected components, with a purpose to provide value to its stakeholders. The Business is not ‘static’ … in other words, there are many internal and external forces act on a business, making it to function dynamically. However, for our study purposes, we will take a ‘snapshot’ at a particular point in time, and construct a “Model’ of its structure comprised of its components. For example, when you want to study your Business as it exists now, build a Business Model based on Systems Thinking. This will expose the underlying patterns and forces that are balancing or reinforcing each other. You will be able to understand the constraints that inhibit growth … as well as the hidden leverage points and ‘emergent values’ that may be used for future growth. That’s the Power of the Krisalis ™ : Prismatic Business Model. Krisalis ™ : Prismatic Business Model 10 Rational View Economic View Emotional View

Your Potential (Competencies & Resources) Your Market Needs Your Purpose (Innovative Ideas) Your Business Model starts with your Core Business Idea. Your Core Business Idea represents your Purpose (that utilizes your Potential to serve your Market) From the Economic View, it is the value or return on your investment. From the Emotional View, it is your Passion to realize your Vision and Dreams. C A B 11

Your Potential Competencies & Resources (People) (Property) Your Products Your Processes & Activities Your Capabilities & Business Activities Your Capabilities comprise of your People, Property, & Processes. From the Economic View, it is your Wealth or investment in your business. From the Emotional View, it is your Mindset or core values that influence your potential. Your Processes are the activities that are repeated either by design or by habit, in producing the Products. From the Economic View, it is the cost of your business operations. From the Emotional View, it is your Willingness to Learn and take actions promptly. ( Note : ‘Innovation’ advances your Capabilities) Your Purpose (Innovative Ideas) C A B 12

Your Products Your Positioning Strategies Your Strategies Your Strategies are to focus your business activities toward your objectives by positioning your business to gain competitive advantages in the market. From the Economic View, it is the Profitability of your business. From the Emotional View, it is your Winning Attitude in running the business. Your Market Complementors Competition C A B 13

Components of a Business Model (Rational View) Note : Through the Rational View, you gain the perspective of the connection or the ‘means’ between the ‘cause’ and the ‘effect’ (result). A B C A B 14 Purpose Potential Processes Products Positioning Prospects Emotional View Rational View Economic View

A . Purpose : The Purpose of a business is its Mission, implying a sense of direction set forth by its owner, in using its capabilities to create on-going income and wealth. Your business mission (purpose) is the source for generating innovative ideas for meeting the needs of your customers. B . Processes : Business Processes are the activities that people in the business actually do, transforming inputs into outputs. They are used in translating competencies, assets, and other inputs into value for customers (value chain). C . Positioning : This is the strategy as to how the business competes in the marketplace to position itself in the minds of the customers, in order to maximize and protect its profitability. AB . Potential : At least in the short term, the growth of any business is limited by its Potential, i.e., the core competencies of the owner and his/her people (employees and alliances) as well as the resources available to the business. BC . Products : Products and services are the means by which you satisfy or solve the needs of the customers. CA . Prospects : Prospects are your potential customers in the competitive marketplace. The business exists to serve the customers and will be profitable so long as it meets the needs of its customers. You need to know whom you are competing against. Components of a Business Model (Rational View) 15

Components of a Business Model (Economic View) * GEMS: Growth Evaluation Metrics System Note : Through the Economic View, you gain the perspective of the ‘effect’ (result) in financial terms. A B A A B B C 16 Cost Wealth Profit Revenue Value Proposition ROI (Owner’s Motivation) Revenue Model Profit Model Cost Model Wealth & Cashflow Models Pricing Model Financial View (GEMS *) Rational View Emotional View Economic View

A B C A B A B Components of a Business Model (Emotional View) 17 Whole-hearted Passion Winning Attitude Willingness to learn & act Mindset Great Pride of your Products Empathy for the Market Needs Vision Rational View Economic View Emotional View

Rational View Economic View Emotional View Purpose Potential Processes Products Positioning (Strategy) Prospects ROI Wealth Cost Revenue Profitability Value Proposition Wholehearted Passion Mindset Willingness to Learn & Act Great Pride for Your Products Winning Attitude Empathy for the Market Needs A AB B BC C CA Components of a Business Model 18

Market Needs (Top View)

What changes are taking place in the market?

What are the unmet needs of the market?

What are their frustrations?

What are your competitions/substitutions &

complementors doing? What are they not doing?

How can you adapt non-traditional ways to meet

the market needs?

How do you make money?

What are the alternative ways to make money?

Purpose & Potential (Bottom View)

What changes are taking place in Technology?

What innovations in other industries that you

could adapt?

What opportunities would open up if you view

from your competencies rather than products?

How do you reduce your cost while improving

the quality of your products and fulfillment?

How can you improve your competencies to

innovate?

The main purpose of the Business Model is to Seek Innovative Ideas for your Business Growth. Demand-driven (‘Stretch Growth’) Supply-driven (‘Breakthrough Growth’) 19 Business Model Supply Demand

Objective # 1: Gain an Insight into the Current Business Model as to its Profitability Potential . Preliminary Questions? Is your Business Model a Service Business or Product Business? Pre-requisites of exponential growth for a … Service-Business Model? Product-Business Model? What are the Profitability Leverage Points? We will discuss this topic further in another Module. Insight and Evaluation of the Current Business Model 20

Objective # 2: Gain an Insight into the Current Business Model as to the causes and influences that are Limits to Growth. Insight and Evaluation of the Current Business Model

Also, inquire into the following status:

How are the Capacity Utilization and the State of Readiness or Obsolescence?

Do you have spare capacity to expand with; and how much?

Do you need to Advance our Capabilities, specifically what areas?

What Quick Fixes could you undertake? Costs & Benefits?

21

The Organization and Business Models are the tools for smart business leaders. The Models empower you to ask comprehensive questions about your business, its strengths, weaknesses, opportunities and threats that your business is facing. The answers you get depend on your awareness of your industry; your own business situation and your mindset or culture. The process of building the Models based on Systems Thinking makes you to be ALERT: A sking (Inquiring) the right questions to the right people; L earning (Reflecting) with an open-mind (thinking outside the box); E valuating the facts and assumptions and corroborating them; R isk-taking consciously (decision making) at the right time; T aking prompt actions toward the expected results (focus). Of course, we are not talking about analysis/paralysis; but to make you realize you are not the business; you own it. It is to make your business model support your core strategy of being distinctive in order to gain and sustain your competitive advantage. Systems Thinking … applied to Business Modeling Remember : The Systems Thinking Method addresses the Causes and Influences of the business model components; their Interrelationships ; Leverage Points ; ‘ Emergent Values ’ and Dynamic Forces impacting your business, internally and externally. In order to gain proper insight, you need to work with your Management Counselor. 22

The systemic view of Business Model empowers you to strategically visualize your business growth … through Inquiry & Reflection. Most importantly, the Spiritual Base! 23 Emotional View Economic View Rational View Empathy for the Market Needs Prospects Products Revenue Great Pride of your Products Value Proposition ROI Willingness to learn & act Whole-hearted Passion Winning Attitude Profit Cost Process Purpose Positioning Spiritual Base Mindset Potential Wealth C A B C C B A

1. Study the Business Model Business Model Questionnaire 2. Reflect on the Prismatic View Understanding the Limits to Growth & Quick Fix 3. Reflect on the Systemic View # I Seeing the Reinforcing & Balancing Forces 4. Reflect on the Systemic View # II Understanding the Leverages 5. Reflect on the Systemic View # III Meeting the Market Needs: Supply & Demand 6. Reflect on the Systemic View # IV Guiding your long-term Vision 7. Reflect on the Systemic View # V Aligning with MAESTRO Management Principles Business Model Current Insight Strategic Insight (Mindset, Capabilities & Trends) Situation Analysis (New Look) Steps for understanding your Current Business Model Education & Right Counseling 24

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