The value proposition lies at the center of your business model.  Even with all the variations of what academia calls a “business model” it typically is the center piece and rightly so.  The value proposition ties all the components of the model together.  What is a value proposition? It is what your business offers that creates value for your customer by fulfilling some need or desire, whether initially recognized or not.   This offering is the means by which your customers achieve their goal.  It is rarely the value in and of itself but is the tool to achievement (e.g. Advertising is not value but the customers obtain, brand recognition, etc. are the value while ads were the tool).

There is another important aspect to the offering.  It must also be the tool by which the business’ need is fulfilled.  In this instance, the need of the organization ought to be defined in its core purpose, i.e. the mission, vision, and values.  This is best served beyond simple monetary compensation.  One “hot” area in business today that demonstrates this openly is the socially-conscious enterprise. For example, an organization trumpeting solar energy may have a goal to minimize pollution, save the planet, etc.  So, in this case, the offer must be the tool by which the planet is saved through them.  If it is not, it will not last within the model.  A proposition that offers money alone is unsustainable.  For long term business success, the business must define its core purpose and do so with some social goal in mind, something greater than themselves and their financial success.

The indirect benefits of doing so are substantial as well.  These include customer loyalty and buy-in, powerful brand development, and product/service differentiation.  Your cause or goal can become part of the value proposition.  Again with our example, customers may buy not simply because your product solves their initial need for power or even sustainable power but they buy for your core purpose of saving the planet as well.

Start by identifying your business core purpose, then work with the possible offerings and customer needs to find those that best align.  Which offers the most upside potential, scalability, etc. while meeting our standards within our purpose? Define the customer needs you are striving to fulfill.  Now identify the characteristics of your offer that meets the criteria.  This is the beginning of your business model.

Well, I’ve done some radio shows and podcasts in the past and recently decided its time to start the Entrepreneur Pulse Podcast.  I’m looking forward to it and want to share a little on what to expect!

The show will be a 15 min. to-the-point weekly broadcast to start, with the following focuses:

• Recent interesting news, articles regarding entrepreneurship
• Gadget and technology for entrepreneurs
• Book recommendations
• Things to look for with the show, Business Blueprint, and other stuff
• and more!

We’ll see how 15 min. goes and work from there.  The purpose is to have it be something you can listen to on your commute to the office or while mult-tasking, short, to-the-point, and useful information!  Let me know if there is anything you’d like to hear! Expect the first show by April 9th!

Many entrepreneurs I run into on a regular basis are extemely “fly by the seat of their pants” type business owners.  They are “movers and shakers” and go from “zero to hero” rather quickly.  These types tend to grow faster than most and also run into substantial problems faster than most.  Growth is a “double-edge sword” if you are not ready for it… (wow, enough buzz phrases yet?).  I work closely with one that has built up and nearly lost it all several times!  Granted, the economy played some tricks on this person but how necessary was it? During the hot times, enough money was flying out of the business on hair-brained ideas to have likely floated the business through some rough waters if a more strategic approach had been taken.  The challenge faced by most of the “entrepreneurial faith” is when to say no to an opportunity or the next “shiny object” that will apparently make business double in no time. I’ve taken this bait enough times to be bigger than Deloitte if it were true. We tend to spread ourselves, our organizations, and our budgets too thin.

So what is the secret?

Well, it is important to first setup your business’ set of core values, mission, and vision. These are meant to be guiding lights within the organization and decision making processes.  Without real parameters, it is difficult to know when to say no.  But these alone can be difficult to judge by as each scenario is different.  Well, if they are built into a model-of-sorts that can almost decide for you, life gets much easier.

Enter the Business Model…

I would venture to guess that more than 9 out of 10 businesses have not put together a business model.  Now, naturally you have one (however poor it may be) just by doing business.  The fact remains that most entrepreneurs think through aspects of their business model but in a compartmentalized fashion, never putting all the pieces together in a more holistic approach. This model is meant to take most key aspects of your business and put them together to make sure they play well. It is also key to keep it relatively simple otherwise it becomes nothing but a fun, theoretical exercise in your final year of graduate school (fun being loosely defined).  The process of thinking through it will definitely bring a certain level of clarity but having a model you can use will transform the way you do business and make decisions.  It has also been said that a great entrepreneur with a mediocre model will fail while a mediocre entrepreneur with a great model will gain phenomenal success.

So what is a Business Model?

Well, it is define as follows by Alexander Osterwalder, in his book “Business Model Generation“:

A business model describes the rationale of how an organization creates, delivers, and captures value.

Their are a few key elements to consider when putting together your model.  I will list these here as they are the next step in your own design. Define these elements for your business.

• Value Proposition – what you offer to your customer, your product or service that creates value.
• Customer Profiles – ideal customer
• A revenue model – how you make money
• Distribution Methods – from value proposition to customer directly
• Fulfillment Process – from your business to value proposition
• Cost Structure
• Competition, competitive strategy
• Resource Management
• Value Network position – recognition of position in overall value network, i.e. from raw materials provider to partners to end users.
• Key Partnerships
• Core Purpose defined – mission, vision, and core values or principles.

I will elaborate on these points in future posts and unveil the construction of the model itself.  For now, begin working through the above mentioned points, defining them for your own idea or business. Once you have a workable model, you will be able to forge ahead with more confidence and surety that you are making wise business decisions.

The major key to sustained success is connected innovation.  That is, continual innovations and improvements to products and practices based on research, feedback, and general connectedness with the serviced demographic.  Innovation is a key characteristic of the entrepreneur.  Every day, entrepreneurs start businesses, have success, and fail.  One of the main factors in this lack of sustainability is not their entrepreneurial spirit but their inability to translate that into an organization.  They either are completely unable to transition from small startup to larger organization or in that transition, lose what made them successful in the first place and allow inefficient, ineffective bureaucracy to infiltrate based on old assumptions of “the way to do it”.  The transition to growth is crucial for sustained success just as the connected innovation that generated the business idea in the first place.

So how do you maintain that power within an organization of 10, 50, 100, 1000, or even 10,000?  An effective organization will be made up of two types of people: Entrepreneurs and Intrapreneurs.  You’re likely familiar with entrepreneurs but what is an intrapreneur? The popular Wikipedia includes this entry:

Intrapreneurship is the act of behaving like an entrepreneur, except within a larger organization… In 1992, The American Heritage Dictionary acknowledged the popular use of a new word, intrapreneur, to mean “A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation”. Intrapreneurship is now known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques that are more traditionally thought of as being the province of entrepreneurship.

Entrepreneurs will be found at the head of the organization as owners, key executives, and department heads. Intrapreneurs will essentially make up the rest of the organization.  The key to success, therefore, is instilling the responsibility, trust, respect, and expectations of entrepreneurship throughout the organization and within each position.  

As any regular reader will know, two of my most popular topics or themes are entrepreneurship and congruent with that, innovation.  Well, I want to share a theory of mine regarding innovation.  I don’t know if “theory” is the right word but it works for me.  It is a concept that I think a fair amount about.  It is the solution to many of our society’s and planet’s problems. And, guess what… it includes innovation!!

Common discussions in today’s society include efficiency, uses of limited resources, care of the environment, and related topics.  This are concerning and critical issues but one piece of the discussion that is often missing is the opportunities that lie ahead.  This includes innovation, technology, and more.  Many of the discussions are in a closed box as though we will never innovate or improve again and are left to find improved efficiency with what we have.  The result is always lackluster performance with incremental influence and essentially no solution to today’s issues.  Take examples such as cap & trade.  Scientific evidence suggests little, if any, measurable improvement by such enacted measures.  So why do we, as a society, interest ourselves in the wasted resources (in this case, increased economic costs), for little result? Again, the discussion and solution are discovered within the closed box and the supporting groups and individuals feel doing something is better than nothing, even without favorable result.  So what happens when we up top the box? Welcome to the key of societal development.