Business Model – The virtuous example of Start-Ups
The strategy of a company is a fundamental element used to express a competitive advantage in the market, however, when we ask ourselves how to make this advantage lasting and economically sustainable over time, we end up talking about the business model.
When we refer to a business model, in essence, we are referring to a set of (ideally long-term) assumptions and hypotheses on which companies in every industry plan their revenues. These assumptions reflect notions about client preferences, the role of technology, regulation, costs and market competitors. Companies often (wrongly) consider these assumptions untouchable, until someone comes up with new assumptions that work better.
It has been a reality of recent times that business models have become less ‘durable’ than before. In the past, business models and value propositions were fixed for years, and the company was required to perform the same processes better than their competitors. Today, however, business models are subject to rapid change and sometimes outright destruction. The common denominator of this change of pace has been the advent and pervasiveness of digitalisation, that enabled companies to build new tools to increase competition within all markets.
Today, if companies want to survive, they must be able to create business models that are based on accurate assumptions, supported by objective data and therefore able to change as the market in which they operate changes. Iterate to innovate is the mantra to adopt in order to build a business model capable of navigating the complexity of the contemporary economic system and build a competitive advantage that is durable.
One category that has the possibility of approaching the market in this virtuous manner are start-ups, companies that have not yet found the right fit around their business model and that by their nature are prone to experimentation and iteration and keen to test the market. This mix represents an advantage over companies already established in the market, because the effort to embrace the iteration process aimed at innovation can be built by design from day 0. This approach saves time, resources and minimises the risks associated with investing in an inadequate business model by making timely changes.
The most important component remains market analysis. Testing a business model means that starting with a BM idea is
- Declined the BM idea into a main proposition (for monetisation) and build on this other minor propositions
- Launched the BM on the market
- Collected feedback from potential customers and partners on the main and minor proposition.
The main proposition is the main assumption on which the business model is built. In the case of a computer repair shop, the main proposition will be the sale of emergency computer repair services. With regard to the minor proposition, it refers to ancillary services that characterise the computer repair but do not define it; in this sense, the shopkeeper might try to set a different price if it is a hardware or software problem, he might sell spare parts for replacement instead of repairing them, or implement the sale of useful accessories (such as mice or speakers) to be sold after the repair. These characteristics describe the main activity, which is to provide an emergency service for computer repair, and help the trader to understand what the ‘taste’ of the market is and how the main proposition should be declined in order to give it the greatest competitive advantage (measured in terms of revenue over competitors).
Start-ups represent a segment that, out of necessity, finds itself adopting a method that is as effective for its needs as for those of more mature, established companies. Adaptation of the business model based on user feedback and data collected from the market is the key to adopting a more solid growth trajectory and securing a lasting presence within one’s sector.
Graduated in Business Administration at the University of Rome Tor Vergata with a thesis on “How blockchain technology can enable the creation of new business models for companies”. Go to Profile
