Business Models For Dummies E-Book

Jim Muehlhausen

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 566

Veröffentlichungsjahr: 2013

Beschreibung

Write a business model? Easy. Business Models For Dummies helps you write a solid business model to further define your company's goals and increase attractiveness to customers. Inside, you'll discover how to: make a value proposition; define a market segment; locate your company's position in the value chain; create a revenue generation statement; identify competitors, complementors, and other network effects; develop a competitive strategy; and much more. * Shows you how to define the purpose of a business and its profitability to customers * Serves as a thorough guide to business modeling techniques * Helps to ensure that your business has the very best business model possible If you need to update a business model due to changes in the market or maturation of your company,Business Models For Dummies has you covered.

Leseprobe

Business Models For Dummies®

Published byJohn Wiley & Sons, Inc. 111 River St. Hoboken, NJ 07030-5774www.wiley.com

Copyright © 2013 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Trademarks: Wiley, the Wiley logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book.

Limit of Liability/Disclaimer of Warranty:The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional person should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Website is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Website may provide or recommendations it may make. Further, readers should be aware that Internet Websites listed in this work may have changed or disappeared between when this work was written and when it is read.

For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax [phone].

For technical support, please visit www.wiley.com/techsupport.

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Control Number: 2013935679

ISBN 978-1-118-54761-8 (pbk); ISBN 978-1-118-61252-1 (ebk); ISBN 978-1-118-61267-5 (ebk); ISBN 978-1-118-61275-0 (ebk)

Manufactured in the United States of America

10 9 8 7 6 5 4 3 2 1

About the Author

Like most entrepreneurs, Jim Muehlhausen has an eclectic background, ranging from CPA to franchisee, attorney, business owner, consultant, franchisor, public speaker, university professor, and book author.

While still attending the Indiana University School of Law, he became the youngest franchisee in Meineke Discount Muffler history (1987–1991). After successfully selling that business, Jim founded an automotive aftermarket manufacturing concern. During his nine-year tenure with that business, the company achieved recognition from Michael Porter of the Harvard Business School and Inc. Magazine in the IC 100 Fastest Growing Businesses.

Fifteen years ago, he found his true passion, serving as a consultant, business coach, and advisor to hundreds of businesses. During his 5,000+ one-on-one consulting sessions with business owners around the globe, Jim realized that while all business issues look unique, they rarely are. Most businesses are working to seize the same opportunities and overcome the same obstacles. To help business owners share best practices and stop learning from the “School of Hard Knocks,” he wrote the well regarded book The 51 Fatal Business Errors and How to Avoid Them (Mulekick Publishing).

His ongoing research led to the discovery of fatal business error #52: You can’t outsmart, outhustle, or outmaneuver a weak business model. The more he studied business models and worked with business owners, the more convinced he became that business models were the key to a great business.

In 2009, he founded the Business Model Institute, which is devoted to the innovation and study of business models. Jim writes several articles for the Institute each year as well as contributing to publications such as Inc., The Small Business Report, Entrepreneur, BusinessWeek, and various business journals. He also speaks to associations, groups of business owners, and corporations about business model assessment and innovation.

Dedication

This book is dedicated to my clients who have graciously shared their businesses with me over the years. Without their candor, support, and great depth of business knowledge, this book would not be possible. I am honored to work with these talented men and women who openly share their business experience, skills, and vast knowledge with me. Much of these experiences are included in this book and I cannot thank them enough for the honor of being included in their lives. Thank you for the privilege of working with you.

Author’s Acknowledgments

When you read a book it’s easy to assume it’s the brainchild of the writer. Nothing could be further from the truth. It takes a village to raise a child and it takes a small army to write a book. This book is no different. A talented army of people made this book possible.

This book tackles dozens of theories, constructs, and concepts. Jak Plihal, Huss Sadri, and Michael Jones all contributed ideas and input toward the book. Any publishers looking for the next great business book should contact Merryck Leigh and Steve Shaer. Both of them served as brainstorming partners, sounding boards, and trusted confidants during the creation of this book. I cannot thank them enough.

I’m a business thinker, not a writer. Laurie Davis was instrumental in turning my thoughts into well punctuated, readable content.

The entire team at Wiley is due immense credit. Stacy Kennedy saw the need for this book and made sure it got published. Jennifer Moore helped craft the initial chapters and I can’t thank my editor, Sarah Faulkner, enough. Sarah was a joy to work with on all the tough edits — pushing to make the book its best with a deft and likeable manner.

Thanks to my team at the Business Model Institute for all their work behind the scenes. Huss Sadri and Sue Lee researched facts and stories for the book. Stefanie Keffaber and Christopher Loch deserve praise for helping get the Institute off the ground in its early days. Without their hard work, there would be no Business Model Institute.

Many clients and business owners I have met in my travels provided real-world examples to make concepts come to life. Thanks to them for opening up their businesses to me. Without this real-world content, I would not have had the opportunity to create the concepts and principles in this book.

Thanks to my family and friends for the support and patience provided as I wrote this book on a tight timetable. The greatest thanks go to my wife Beth who always has been the wind beneath my wings. Her intellect, insight, and patience have been vital to my success. Thanks sweetie!

Publisher’s Acknowledgments

We’re proud of this book; please send us your comments at http://dummies.custhelp.com. For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax [phone].

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Vertical Websites

Project Editor: Sarah Faulkner

Acquisitions Editor: Stacy Kennedy

Assistant Editor: David Lutton

Editorial Program Coordinator: Joe Niesen

Technical Editor: Rita Gunther McGrath, PhD

Senior Editorial Manager: Jennifer Ehrlich

Editorial Manager: Carmen Krikorian

Editorial Assistants: Rachelle S. Amick, Alexa Koschier

Art Coordinator: Alicia B. South

Cover Image: © iStockphoto.com / VOLODYMYR GRINKO

Composition Services

Project Coordinator: Patrick Redmond

Layout and Graphics: Jennifer Creasey, Joyce Haughey

Proofreaders: Barbara Arany, John Greenough

Indexer: Steve Rath

Special Help: Jennifer Moore

Publishing and Editorial for Consumer Dummies

Kathleen Nebenhaus, Vice President and Executive Publisher

David Palmer, Associate Publisher

Kristin Ferguson-Wagstaffe, Product Development Director

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher

Composition Services

Debbie Stailey, Director of Composition Services

Business Models For Dummies®

Visit www.dummies.com/cheatsheet/businessmodels to view this book's cheat sheet.

Table of Contents

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Part I: Getting Started with Business Models

Part II: Creating a Winning Business Model

Part III: Dealing with Change

Part IV: Business Model Innovation

Part V: The Part of Tens

Icons Used in This Book

Where to Go from Here

Part I: Getting Started with Business Models

Chapter 1: What Is a Business Model and Why Does It Matter?

History of Business Models

Business Models Are a Hot Topic

Who Needs a Business Model?

Value of a Business Model

Future of Business Models

Increased sophistication

More virtual goods

Intellectual property protection

Leveraging transparency

The power of efficient operators

Chapter 2: Business Models Defined

Following the Recipe for a Successful Business Model

Your secret sauce for making money

Same industry, different business models

How your business model sets you apart from the competition

Comparing Business Models to Business Plans

The elements of a good business plan

Business plans don’t cover everything

Augmenting the business plan

Creating a business model plan

Considering your competitive advantage

Obtaining your competitive advantage

Enhancing your competitive advantage

Chapter 3: Business Models Come in Many Different Forms

Common Aspects of All Business Models

Business Models in Their Simplest Form

Examples of Business Models

Chapter 4: Your Business Success Depends Upon Your Business Model

Trying (And Failing) to Succeed without a Superior Business Model

Good news: Business models are fluid

Case study: Kodak versus Fujifilm

Equating Hard Work with Results — As Long As the Business Model is Solid

Redefining hard work

Avoiding indentured servitude to a bad business model

Case study: New Pig

Experimenting Your Way to a Great Model

Even venture capitalists win one-third of the time

Letting the market determine how smart you are

Refusing to rely on dumb luck

Part II: Creating a Winning Business Model

Chapter 5: Using Tools to Design Your Business Model

Examining Traditional Business Model Design Methods

Back of the napkin

Imitation

Falling into the model

Discovering Problems with Traditional Methods

Too many things to remember

Complex interplay

Not all factors carry equal weight

Designing a Business Model by Using a Structured Process

Business Model Canvas

Four-box business model

Business model wheel

Chapter 6: Finding the Most Attractive Markets to Create a Powerful Offering

Gauging the Target Market

Determining Industry Attractiveness

Finding the best industry

Working in unserved or underserved markets

Case study: Software versus airlines

Looking for Niche Attractiveness

The power of a good niche

Unlimited niches exist

Markets have a habit of splitting

Find unserved or underserved markets

Checking Out Customer Attractiveness

Finding Your Place on the Industry Value Chain

Chapter 7: Completing Your Offering with a Unique Value Proposition

Building a Unique Value Proposition

Comparing a Unique Selling Proposition to a Unique Value Proposition

Defining unique selling proposition

Defining unique value proposition

Making the comparison

Maximizing Product Potential

Building Marketability

Summing up your unique value proposition in one sentence

Being first to market

Creating a new USP when yours gets crowded

Making your value proposition matter to customers

Creating a Powerful Brand

Your brand in the eyes of your customer

Other brand considerations

Chapter 8: Making Money with Your Business Model

Building a Profitable Revenue Model

Generating exceptional margin

Creating a product with superior margin

Gaining staying power from proprietary margin

Winning big by creating proprietary revenue streams

Watching out for potential drags on margin

Assessing Your Competition

Good competitors

Bad competitors

Indirect competitors

Generating Enough Total Margin Dollars

Turning margin into profits

Creating the right product mix: Gasoline, cigarettes, and soda

Creating a Meaningful Cost Advantage

Economies of scale

Smart use of technology

Better value chain management

Creating Valuable Recurring Revenue Streams

Repeating revenue lowers sales cost

When recurring revenue really isn’t

Avoiding Pitfalls

Making sure you own the customer

Getting creative with accounting

Technology: Killing margins fast

Chapter 9: Monetization through Sales Performance

Closing the Deal

Obtaining customers for an unreasonable cost

Underestimating sales difficulty

Assuming repeat sales will come easily

Marketing Beats Sales

Creating a Proven and Repeatable Sales Process

Chapter 10: Making Your Business Model Last

Creating Meaningful Competitive Advantage

Leveraging intellectual property

Establishing a financial advantage

Sustaining Your Competitive Advantage

Defensive tactics

Offensive tactics

Gauging Competitive Advantage by Using Porter’s Five Forces Model

Chapter 11: Sustaining Your Business Model: Innovating and Avoiding Pitfalls

Maintaining the Strength of Your Model with Innovation

Understanding your innovation factor

Remembering that you need to innovate

Avoiding Pitfalls

Excessive trend riding

Overreliance on a few customers

Susceptibility to forces beyond your control

Chapter 12: Cashing In

Considering the Next Owner: The Best Business Models Have Transferability

Undermining the worth of your business model

Breaking away from a personal brand

Taking lessons from Oprah

Selling Your Business Isn’t the Only Exit Strategy

Selling your business versus becoming CEO Emeritus

Comparing the financial benefits of exit strategies

Improving Your Ability to Gracefully Exit

Relying on systems instead of people

Focusing on enterprise value — not just profits

Selling at the right time

Chapter 13: Analyzing Your Business Model

Comparing Live Business Models and Theoretical Business Models

Using the Business Model Framework

Working from the inside out

Answering questions about your business model

Scoring Your Business Model

Quick-version scoring

Professional-version scoring

Part III: Dealing with Change

Chapter 14: Knowing that All Business Models Erode

There’s No Shame in a Weakening Business Model

Why companies miss threats

Lessons from Apple and IBM

Be Proactive and Be Rewarded

Annual business model planning

Start over every five years

Example: Sony

Chapter 15: Looking for Signs that Your Business Model Is Weakening

Decreasing Margins

Great margins paint a target on your back

Product lifecycles and your business model

When decreasing margins are tolerable — and when they aren’t

Example: Memory chips

Prolonged Minimal Profits

The fine line between almost turning the corner and stupidity

Don’t become an indentured servant to a bad business model

Nobody wins the war of attrition

The try-easy plan

Flat Sales Trend

General Dissatisfaction

Chapter 16: Detecting Hidden Problems and Adapting before It’s Too Late

Fixing Your Business Model to Make Other Problems Disappear

Examining Some Disguised Issues

Disguised issue: The need for more sales

Disguised issue: The need for a 26-hour day

Ignoring Business Model Issues Only Extends the Pain

Considering the Consequences of Not Adapting

Your model is eroding, but how fast?

Change always seems risky

Not changing may be worse

Part IV: Business Model Innovation

Chapter 17: Figuring Out Where to Begin the Innovation Process

Adjusting Your Old Model Rarely Works

Looking forward, not backward

Example: McDonald’s global business model

Predicting the Future

Gazing into the crystal ball

Overcoming the fear of being wrong

Practicing trend extrapolation with a dose of creativity

Failure Can Be Your Friend (As Long As It’s Cheap and Fast)

Redefining failure

Examples: Failure as the first step toward success

Staying viable with business model versioning

Chapter 18: Starting the Innovation Process

Comparing Marginal Innovation and Quantum Innovation

When you need each

Benefits of marginal innovation

Benefits of quantum innovation

Discovering the Correlation between Craziness and Innovative Genius

Differentiating crazy ideas from genius

Knowing that patience is a virtue with innovation

Keeping the Creative Process on Track

Bringing in outsiders

Using tools during the process

Chapter 19: Using Disruptive Innovation

The Disruptive Innovator Usually Wins

Lessons from the innovator’s dilemma

How to benefit from disruptive innovation

Most of Your Existing Model Works Fine: Don’t Throw Out the Baby with the Bathwater

Comparing under-innovation and over-innovation

Knowing what parts of your model to keep and what to throw out

Chapter 20: Crowdsourcing as Advanced Business Model Innovation

Crowdsourcing Is Here to Stay

Ten Things You May Not Know Were Crowdsourced

Your Business Model Can Benefit from Crowdsourcing

Crowdsourcing is 1,300 times faster

Crowdsourcing creates a new meritocracy

Crowdsourcing can generate superior ideas

Crowdsourcing lowers costs

Crowdsourcing simply works better sometimes

Potential Downsides of Crowdsourcing

Chapter 21: Utilizing Virtualized Sales Processes

Understanding How the Internet Changed the World of Sales

Don’t sell like it’s 1985

The curse of the invisible prospect

Falling on the sword

These problems present opportunities

Considering the Benefits of Sales Virtualization

Examining the Foundations of a Virtualized Sales Process

Giving up on outdated methodologies

Leveraging quid pro quo

Educating early in the process

Using a mutual opt-in mindset

Walking through the Sales Virtualization Process

How to create a virtualized sales process

Sales virtualization process example: Franchise sales

Chapter 22: Profiting from the Dynamics of Insurance

Defining Insurance

Understanding the Core of Insurance Profitability

Accurately assessing risks others can’t

Capitalizing on misconception of risk

Denying Your Customers Insurance Is Costing You

Charging Insurance in Creative Ways

When an hour isn’t an hour

Example of creative insurance: Enron

Worksheet: Creating an Insurance Program

Part V: The Part of Tens

Chapter 23: Ten Terrific Business Models

Build Once, Sell Many

Create a Must-Have Brand

Get Customers to Create Goods for Free

True Competitive Advantage as the Low-Cost Provider

Extraction of Natural Resources

Valued Intellectual Property with Legal or Practical Protection

Technological Destruction of Existing Model

Gold Plating the Current Gold Standard

Playing to Customers’ Ever-Increasing Sense of Self

Ultra Niche Player

Chapter 24: Ten Signs You May Have an Issue with Your Business Model

You Have a Strong Desire to Sell the Business

You’re Underpaid

Scenario #1: Charlie Cheapskate

Scenario #2: Habitual Harriet

You Need to Constantly Borrow Funds in Order to Grow

You Feel You Need to Hire Sales Superstars to Fix Your Sales Issues

You’re Unbankable

Your Margins Are Lower Than Your Competitors’ Margins

You Put Up with Lousy Customers Instead of Firing Them

You Feel There is No One to Whom You Can Delegate

Your Best Performers Often Leave for Better Opportunities

Your Customer Base is Stagnant or Declining

Chapter 25: Applying Ten Sources of Business Model Innovation

Business Books

Competitors

Consultants

Great Companies Outside Your Industry

The Crystal Ball

Employees

Products or Services You Buy

Travel to Other Countries or Hotspots

Daydreaming

Salespeople

Chapter 26: Ten Things a Venture Capitalist Never Wants to Hear About Your Business

I’ll Figure Out How to Monetize This Later

It’s Kind of Like Groupon, Except . . .

I Used to Work for a Company That Did the Same Thing

My Business Plan Calls For . . .

I’ll Make It on the Back End

Everybody Needs This Product

I’ll Make it Up In Volume

We Need to Get Only One Percent of the Market

I’ve Been Working on This Big Sale for a Year and It Will Close at Any Time

What’s a Business Model?

Cheat Sheet

Introduction

I’ve enjoyed the privilege of working with hundreds of business leaders, from both big and small companies, on an intimate level. These business leaders have shared their hopes and dreams, successes and failures, and the inner workings of their businesses with me.

Through the course of these interactions I came to discover there wasn’t necessarily a correlation between education, intelligence, or hard work and success of the businesses. I found many successful business owners who were quite lazy. I found high school dropouts who created highly successful businesses. I also found intelligent, well-educated, and hard-working business leaders who failed to translate these qualities into business success.

I asked myself, “If these traits aren’t the foundation of business success, what is?” The answer is the business model. Education, intelligence, and hard work are all applied to a business model. Applying these qualities to a weak or failing business model is like throwing good money after bad in the stock market.

After the realization that the strength of the business model is at the core of a business’s success, I began to focus on this vital area. After years spent collecting real-world case studies, I created both a business model framework and a business model evaluation tool. I share both of these items with you in this book.

By the end of this book, I hope you’ll agree that I have demonstrated the importance of your business model as well as provided you with the necessary tools to create and innovate the best business model possible.

About This Book

The purpose of Business Models For Dummies is to demonstrate the importance of a business model, show you how to create a structured business model, recognize when it needs a tune-up, and innovate your model via proven methods.

At this point, it may seem like an overwhelming task. Don’t worry. By the end of this book you’ll have a variety of tools to assist you in constructing or redesigning a business model.

My goal for this book is to add the concept of business models into the strategic discussions of all businesses. To me, the business model is at the core of profitability and should be at the core of strategic planning discussions and business plan documents. I hope the conversations and tools provided in this book give you the opportunity to do just that.

Much of the mystery surrounding business models is due to the lack of discussion surrounding business models. This book aims to increase the body of work in the area of business models, adding structure and process, so that businesspeople can better understand the role of the business model.

This book should be used as a reference. You don’t need to read the chapters in order from front cover to back, and you aren’t expected to remember everything. The book is created in module format, so you can read only one chapter or jump from chapter to chapter.

Conventions Used in This Book

All For Dummiesbooks employ similar conventions for a sense of continuity and familiarity. This book includes the following conventions:

Web addresses appear in a typeface called monofont. If the URL wraps to a second line of text, type the address exactly how it’s presented. Hyphens are inserted only when they’re included in the web address.

Bold text indicates keywords, phrases, or concepts.

When a new term is introduced, it appears in italics and is followed by an explanatory phrase or sentence.

Because businesses sell both products and services, I refer to the product or service being sold as product for simplification’s sake.

I’ve tried to mix use of gender terms throughout this book. If I haven’t done so evenly or appropriately, my sincere apologies.

There’s no effective synonym for business model. I’m sure the phrase business model is repeated many times throughout this book. To some extent, it can’t be helped. However in many situations I’ve shortened “business model” to simply “model.”

CEO, owner, businessperson, business owner, and entrepreneur are used interchangeably throughout the book.

A direct, sometimes sarcastic style. I’ve found business leaders to be a direct, no-nonsense group. My style is very similar. Sometimes you may find my style to be a little “in your face.” My apologies if it’s too much so. This direct style has served me well with business leaders.

I also enjoy a good laugh, and my humor can take on a sarcastic tone every now and then. I enjoy the humorous side of business and don’t have a problem poking fun at certain aspects of it. Like anyone making jokes, sometimes they fall flat. Sorry if my humor isn’t as funny as I think on some occasions.

What You’re Not to Read

The main text is full of relevant and helpful tips, ideas, lists, and specifics for creating and improving your business model, so don’t miss a word. I believe that businesspeople learn best through relevant examples and case studies, so I’ve tried to include lots of them. If you’re one of those people who doesn’t need case studies, feel free to skip them because you’ll probably have learned what you need from the previous text.

The sidebars — those gray shaded boxes containing information — are supplementary and relevant, but not absolutely imperative to the business-model discussion. You can skip these bits of information without missing any key points.

Foolish Assumptions

Business models are such a broad topic that I had to make several assumptions in order to keep the book at a lean 360 pages. I assume that

You’re a person looking to create a new business model or improve an existing one.

You have a basic understanding of general business concepts such as marketing strategies, pricing, operations, management, human resources, and the many other aspects of running a business.

You’re looking for a leg up on the competition via a better business model.

You’re a creative thinker. After all, you were creative enough to focus on your business model.

You’re an innovator. You’re ready, willing, and able to innovate your business to incorporate the business model improvements I discuss in this book.

You can be objective about your own business model. It’s very difficult to see your own model objectively, but in order to get the most out of this book you’ll need to recognize the strengths and weaknesses of your model so you can improve it.

You realize that business model innovation is a process, not an event.

How This Book Is Organized

Business Models For Dummies is organized into five parts. Each part can be easily read by itself, and you’ll feel fully informed on that topic without any other background. Check out the following overview and then dive in wherever your individual interest may be.

Part I: Getting Started with Business Models

Part I of this book discusses the business model in general. What is a business model? Why does your business model matter? How do you define a business model? What’s the difference between a business model, a business plan, and competitive advantage?

This portion of the book gives you an understanding of a business model on the conceptual level. As you move through the different sections of the book, you dive into greater detail and begin working on creating your new business model.

Part II: Creating a Winning Business Model

Part II gets down to the nuts and bolts of a business model. I show you several tools you can use to brainstorm and structure your business model. Using the business model framework from the Business Model Institute, I divide a business model into three overarching areas: offering, monetization, and sustainability.

These three areas are broken down into eight distinct components:

Market attractiveness: Picking the best market to sell your product to.

Unique value proposition: Creating a unique product with powerful benefits that’s highly differentiated in the marketplace.

Profit model: Creating innovative ways to maximize revenues and profits from your differentiated offering.

Sales performance model: Even the better mouse trap needs to be sold. Creating a proven and repeatable sales process to complement your strong offering.

Ongoing competitive advantage: Creating a business model that keeps competitors at bay and your profits high.

Innovation factor: Every company needs to innovate. This area rates your model’s ability to innovate versus the competition’s.

Pitfall avoidance: Many great business models have been destroyed by overreliance on one customer, government regulations, lawsuits, or freaks of nature.

Graceful exit: This component affects only mid-size and small businesses but is vitally important. Far too many small businesses create a model that’s overly dependent upon the owner. These business models are difficult to exit. Designing a business model that allows for a significant payday or graceful exit is imperative.

Within each of these eight components, I discuss the following:

How to best design your model with the component in mind

Advantages and pitfalls

Case studies relevant to each area

Relevant personal insights

By the end of this part you should have a clear understanding of the strengths and weaknesses of your business model by using the quick and easy scoring mechanism I provide.

Part III: Dealing with Change

There’s only one thing needed to turn a good business model bad — time. Just like water eroding a rock, time will erode your business model. Don’t worry. This part discusses how to spot an eroding business model as well as how to fix it. You discover how many everyday business problems are really symptoms of an underlying business model issue. I show you that business model erosion is a reality and how to use innovation to not only rectify this erosion but also improve your business model.

Part IV: Business Model Innovation

Part IV dives into the innovation process. I show you where and how to begin the innovation of your business model as well as discuss several proven innovation techniques. You find out about the power of disruptive innovation and how to leverage it for the benefit of your business model.

For the brave at heart, I include chapters on advanced business model innovation and discuss my most profitable tricks. Certainly one size does not fit all, but if you can implement one of these advanced business model innovation techniques, you could make millions. After all, these aren’t my tricks; they’re the tricks I’ve observed my clients putting to work. These clever businesspeople innovated their business models over decades to come up with powerful tactics like crowdsourcing, virtualized sales processes, and offering insurance to your customers.

Part V: The Part of Tens

Every For Dummies book contains this part, which features a few entertaining and informative lists of tens. Turn to Chapter 23 to gather inspiration from the success stories of other businesses as well as some humorous takes (at least I hope they’re humorous) on everyday business situations.

This part includes lists of highly successful business models, signs your business model may be in trouble, unique sources of innovation, and phrases you should never use with a banker or venture capitalist.

Icons Used in This Book

If you peruse Business Models For Dummies, you’ll see little pictures, or icons, in the margins. These icons spotlight the following helpful information and key ideas:

This icon indicates the presence of a specific opportunity to improve your business model knowledge or your business model itself.

Don’t skip over this icon. It indicates you’re about to discover some pearls of wisdom designed to keep you from making costly mistakes.

With the last name like Muehlhausen, you can imagine what my nickname was as a kid — Mule. I have a direct, in-your-face style that works for many businesspeople. I also can be a bit of a contrarian. When you see this icon, I’m sharing a bit of contrarian wisdom or perhaps getting in your face a bit.

When I have the opportunity to make a point by using an actual example learned in the trenches of real businesses, I do so. Businesspeople tend to learn best from examples that closely tie to their own businesses. When you see this icon, you’ll find a real-world case study illustrating the concept.

This icon calls your attention to concepts you want to remember. With so many moving parts to a business model, I want to make sure you catch the most important parts.

Where to Go from Here

If you feel like you have a good understanding of the business model concept, jump straight to Part II where I discuss the breakdown and scoring of a business model. To me, Part II is the most important section of the book. Because the study of business models is relatively new, you probably don’t have a business plan template or an outline of a strategic plan. In the business-model world you’re stuck doodling on the back of a napkin. Part II fixes this problem by giving you a structure for your business model and a quick scoring mechanism.

Ultimately, I believe you’ll benefit from reading the entire book because your business model will be in need of innovation at some point. You’ll need to know how to sniff out weakness in your model and fix it before your competitors can exploit the weakness. Parts III and IV show you exactly how to do this.

I hope you’ll incorporate business models into your ongoing business planning and strategy sessions. Ten years from now this tactic will be commonplace; by incorporating the business model as a core strategy today, you’ll be ahead of the game.

Part I

Getting Started with Business Models

For Dummies can help you get started with lots of subjects. Visit www.dummies.com to learn more and do more with For Dummies.

In this part . . .

Find out what a business model is and why it’s important. Understanding the business model concept — and how it differs from a business plan — gives you the best chance at success.

Discover how business models interrelate with other business concepts, such as business architecture and profit formula.

Look at examples of companies that use various business models. Learn lessons from the successes of companies like Amazon and Starbucks and from the trials of companies like Kodak and Blockbuster.

Ditch the traditional business plan in favor of a business model plan. A great business model is always a winner.

Chapter 1

What Is a Business Model and Why Does It Matter?