Welcome to the Business Model Generator, BMG
This is a free service provided by a research group of volunteers from the Telfer School of Management at the University of Ottawa and the Sprott School of Business and Faculty of Engineering and Design at Carleton University in Ottawa, Canada.
We believe that sound business models are an essential, even fundamental, building block for new and established enterprises. For startups, a good business model can mean that the harder you work, the more money your enterprise will make, an obviously important consideration for new entrepreneurs. For existing businesses, even mega corporations, they need to continually update and revisit their business models to ensure that they are changing and responding to evolving conditions in their marketplaces. Business models are not only important to for-profit businesses but also for NGOs, Not-For-Profit Corporations, charities, even government departments and Crown Corporations. For example, most donors are concerned about the efficiency of the organizations they support, preferring that the great bulk of the funding actually goes to help the intended beneficiaries. Business models assit in that regard.
Sam Palmisano, Chair of IBM, in an interview with BusinessWeek (April 3rd, 2006), put a great deal of emphasis on the importance of Business Model innovation. Mr. Palmisano is quoted in the article as saying:
"...with product innovation, it's a certainty that your competition is shortly going to copy what you have done. With business-model innovation, though, if you can come up with a unique way of doing things, it's much tougher to react to."
A business model is the engine of the enterprise; it describes (preferably on one page and in a diagrammatic fashion) how product and services flow from suppliers to the business, how these products and services are transformed in a value-added process by the business and then transmitted or transferred to its clients and customers. It then follows how money flows in the opposite direction back from client and customers to the business and its suppliers. Furthermore, there is an orthogonal dimension which describes how the business finds and keeps customers and clients; i.e., how the business markets its products and services to its customer base. One thing we have learned is that if you need heroic measures to find and keep your first customer, your second customer, ..., your nth customer, your business is probably not viable. You must be able to acquire clients in a cost-effective way. Guerrilla marketing and social marketing are tools used by entrepreneurs to help them achieve this. (Social marketing consists of using the free and nearly-free tools of the Internet: Blogging and Social Networking to reach your audience.)
The BMG will take you through a number of steps including: testing your ECQ (Entrepreneurialist Culture Quotient) Score (are you ready to be an entrepreneur), helping you understand how you can use guerrilla marketing and bootstrap capital in designing your business model, learning and discovering what the 'pixie dust' or differentiated value is in your business model (i.e., what are the factors that really make your business work), generating a schematic diagram of your business model, scoring your business model and, finally, comparing your business model score with other enterprises.
For more about business models, please read: The Complete Business Model and the Nine Things that You can Do for the First Time in Recorded History Because of the Internet.
Remember that no amount of testing can replace or predict real life success or failure. When Fred Smith created Fed/Ex, he created a new category of business and he needed to create a new market with it, one that wanted overnight package delivery. Fed/Ex's original business model scores only 55% on our test because it needed huge amounts of capital to start, because it could not sign up customers and clients in advance, because it needed heroic efforts to find its client base and for a lot of other reasons.
Yet Fed/Ex is a huge success so a low score from the BMG does not mean that the new enterprise will fail. However, for every Fed/Ex that worked with a BMG score of 55%, we believe there will be many, many that won't work: they will run out of money long before they reach critical mass.
We believe that entrepreneurship is the key to pulling people out of poverty around the planet; that it is a force for effective, sustainable use of the planet's resources and that entrepreneurship gives people more control over their working lives, an important consideration in a rapidly changing global economy where real security comes from what you have learned, studied and created for yourself.
Here are some of the ten most important things you need to think about when creating a new enterprise:
1. Select the right idea for your next startup (please read Ten Things Startups Forget to Do: http://www.eqjournal.org/?p=335);
2. Create business models for the 21st Century that produce great results so that the harder you work, the more money you make and so you can compete effectively with hard charging entrepreneurs from China, India and other Tigers by having a business model that can not be easily duplicated or dislodged and gives you a lasting, sustainable competitive advantage and concession or franchise. Understand not only your clients and suppliers but the whole network or ecosystem- clients of your clients and suppliers to your suppliers. Becoming part of your business ecosystem is one of the keys to longterm sustainability for your enterprise.
3. Add differentiated value, innovation and 'pixie dust' to your business models;
4. Create a compelling value proposition and learn how to clearly demonstrate it for one customer or client; (see examples of demonstrating the value proposition: Value Proposition of a Residential REALTOR, the spreadsheet, Value Proposition for a HR Professional, the spreadsheet);
5. Self-capitalize (bootstrap) the new enterprise so that you end up owning it and not a VC firm or other investors or partners (please see Bootstrap Capital, the Last Word: http://www.eqjournal.org/?p=1162);
6. Use smart marketing (guerrilla marketing and social marketing) so you can acquire customers and clients cost effectively (please read Guerrilla Marketing Basics: http://www.eqjournal.org/?p=643);
7. Mass customize products and services using the Internet so that, for the first time in history, you can get custom outputs from standard inputs as well as reverse out some of the work to your clients, customers and suppliers using the Internet so that you create a scalable enterprise that can produce more value than if you had a JOB; (download the PPT file: "Entrepreneurship in the Age of the Internet");
8. Find pre-launch and launch customers and sell, sell, sell (as Ben Affleck said in the film Boiler Room: 'ABC' always be closing); make sure you have a cash conversion cycle that enables you to surive and grow: it is no use having fast revenue growth if it takes too long to get paid, you will need to create a business model that generates cash faster than you use it or you will be at the mercy of banks, VCs, angel investors, vulture investors or others to finance your growth;
9. Execute expertly, show leadership and become a trusted member of your community and business ecology;
10. Make your own rules and set and achieve your goals!
We have also created a Marking Grid for our students who compete annualy in the University of Ottawa Telfer School of Management/Exploriem.org Business Model Competition. You may wish to study it for clues on what we believe will help make new business models successful. Our students have the option of either creating a Personal Business for Life (PB4L) or a larger scale business, one that provides more value than if they simply went out and took a JOB.
You should also compare your Business Model Scoring test result with some of the results we have obtained so far, which include scores for some large, well known firms.
Some student startups include:
A successful PB4L by Ryan North: Qwantz.com and Project Wonderful.
Mathew Lafrance, Allan Ghosn and Christian Ste. Marie's GradeATechs.com.
Geoff Waddington and Richard Isaacs: Real Decoy.
Image Search by Kris Woodbeck, a software application that allows searching by image and grouping like images (Incogna.com).
Craig Schoen's UCoursePack.
For more about how student entrepreneurs are building Personal Businesses for Life, please see: Should Everyone on the Planet Have a Personal Business for Life?
To view some of the research work done by students in preparing and presenting their business models, you can look at:
MyPinBoard.ca (http://dramatispersonae.org/BusinessModelCompetition/BusinessModelForMypinboard.doc and http://dramatispersonae.org/BusinessModelCompetition/mypinboard_valueproposition.xls).
Gaming Flicks, (Mike Stewart, Osh Mendis and Matt Karam) an online forum where gamers may share tricks, videos, and information. Users post information or videos, and other users rate how useful this information is, flicking it to the top or bottom of the page. (Business Plan, Financials, Slide Presentation, Sample Video.)
Online Sales Force, (Andrei Z., Adam Moede, Celine Tacniere, Kristaps Kuplais) is a website that allows companies to attract the public to sell their products/inventory online. Individuals sign up to become the selling force and earn a commission from the sales. The companies would earn money from the sales. The website would allow anyone to earn extra income.
Boite a Pizza, (Niroshan Rajakone) which introduces advertising capabilities to the inside of the pizza box. Because the boxes are being sold at a cheaper price than the market, the profit made will be double as compared to a usual pizza box retailer. Selling this concept to advertisers and marketing companies greatly increases the profit of this project. (Power Point, Plan D'Affaire, Modele Enterprise, Value Proposition, Spreadsheet.)
Best of luck,
The BMG Group,
September 7th, 2004
Copyright. Dr. Bruce M. Firestone, Ottawa, Canada. 2011.
(Works best using IE)
Preliminary results so far.
Draft Media Release